The evidence is in. It appears that higher mortgage rates of nearly 5% and overheated home prices in the Southern California area have led to a slowdown in sales in one of the hottest markets in the country.
The number of new and existing condominiums and homes sold during the month of September dropped by nearly 20%, according to Corelogic, compared with the year before. This was the slowest pace of sales in September in Southern California since 2007.
Home sales in Southern California have been dropped on the annual basis for most of the year. But this was the biggest drop annually for all months in eight years. It also was double the annual drop that was seen in August.
Financial and mortgage experts say the double whammy of high prices and increasing mortgage rates has priced some buyers out of the market and has prompted other people to wait to see if rates will drop.
Looking at things from a monthly basis, sales of homes in the area fell by 22% in September compared to the month before. Sales usually drop 10% or so from August to September.
Sales of homes that were newly built in Southern California are suffering much more than the selling of current homes. It is likely that there are not as many houses being built compared with building patterns in the past. Newly built homes always come at a higher price. Sales of homes that were newly built were 50% below the average from September going all the way back to 1988. Sales of current homes were 22% below their average for the long term.
The median price of a house that was sold in this part of California was $505,000 in September, but still was almost 4% higher than last year. This was the lowest yearly gain for any more month in more than 36 months.
Real estate experts in the state say the price growth is dropping with slower sales and more listings in multiple markets. Experts say this will be welcome news for possible homebuyers and many are still facing a very daunting problem with a higher monthly mortgage payment, and these have been pushed up much more with mortgage rates around 5%.
Many experts do think that home buyers in California who want to buy a home should consider doing it sooner than later. The reality is with strong economic growth over 3% this year, strong job growth of 250,000 this month, rising wages, it is likely that mortgage interest rates are going to keep climbing. If there is a slight downturn in prices in Southern California, it is possible a good time to go ahead and buy.
The US economy outlook is bright, and it is not expected that interest rates will go to anywhere near 4% in the near future. So, this could be the best time to get a house in Southern California before rates climb higher.