Southern California home purchases showed a startling drop in May, raising the possibility that overheated bidding wars and record price increases have pushed potential owners out of the market.
According to DQNews / CoreLogic, another bizarre economic twist of the pandemic era was the sale of 23,956 new and existing homes in May. Traditionally the major home purchase months, those purchases in six rural counties fell by 8% from April.
According to my credible spreadsheet, May sales have averaged 5.4% above April since 1988, increasing in 28 of the last 34 years.
To be fair, the coronavirus also increased 95% last month from May last year when it blocked the market. May was also the highest price in 15 years. Also, consider that in the last 12 months, 269,746 homes have been sold across the region. This is 17% above the 10-year average.
But there is a remarkable “but” in mathematics. Why is it cold in May? Here are five questions to answer …
1. Is the price too high?
For now, politely say that Southern California house hunters seem to be willing to pay.
The median in May was a record $ 667,000, up 25% in 12 months. This is the eighth largest year-on-year increase in records up to 1988, and the seventh highest ever in 12 months.
In addition, the rate of increase far outpaced the increase over the last decade, averaging 9% per year.
Or think of profits this way. The median rose $ 132,000 in a year. That’s an average of $ 15 an hour jump over 12 months.
2. How affordable is it?
Historically low mortgage rates have provided house hunters with more economic nudge than recently wiped out.
The 30-year fixed rate mortgage rate averaged 3.03% in the three months to May, compared to 3.33% in the previous year. In other words, the purchasing power of house hunters will increase by 4%.
Now let’s see how a very high rating affects the buyer’s budget.
Even at lower rates, buyers who are down 20% will pay $ 2,259 per month for a median sales of $ 667,000 in May. A year ago, home payments were $ 1,881 with a median of $ 535,000.
Therefore, after 12 months, the median home payment will be 20% higher.
Do you know who has a 20% raise? Or is there an additional $ 26,000 to increase the down payment?
3. How tight is the market?
Due to the limited choice of house hunters, many have been forced to raise prices or give up searching.
According to Zillow, total listings in Los Angeles County and Orange County increased 2.4% from April, but fell 5.2% from last year. Housing in the two-county area will be completed in just 10 days from new listing to escrow. Also, in March, 46% of homes sold above list prices, compared to 27% in March 2020. This is the latest data available.
Inland Empire, inventories have increased by 4.3% since April, but have decreased by 35% in a year. Homes were on the market for just eight days, 49% of which were sold above the March asking price, compared to 17% in March 2020.
Some real estate experts claim that limited supply is holding back sales. Others claim that the fast buying pace is holding back the list.
4. Will the builder rescue you?
Most developers are basically sold out and only accept orders with deadlines months in advance.
Southern California builders finished selling 2,062 new homes in May — up 47% annually. Its relatively modest growth means that builder’s share of all sales fell from 11.4% in the previous year to 8.6%.
The median value for new homes was $ 606,750. It increased by only 11% in 12 months as construction moved to a cheaper inland community.
Builder sales are expected to skyrocket in the coming months. According to new home tracker Zonda, contracts to buy from builders in Los Angeles County and Orange County increased 60% year-on-year, and inland Empire increased 9%.
5. Are there any bargains left?
Binge eating has hit all market niches.
The most popular option, single-family homes, reached a median regional selling price of $ 727,000, up 30% in 12 months. Despite the surge, 16,367 homes were sold, an increase of 90% annually.
For low-priced condos, the median rose 24% to $ 559,000. Still, sales across the region continued to grow by 142% in 12 months.
Let’s take a look at the feeding frenzy by county …
Los Angeles: Sales were 7,800, an increase of 117% in 12 months, the busiest May of 15 years. The median reached a record high of $ 775,000 after a 25% year increase.
Orange: 3,491 were sold, up 113%, the busiest in three years. The median hit a record $ 895,000 after a 19% increase.
Riverside: Sales increased by 4,358, 82% — the busiest in 12 years. The median reached a record $ 502,250 after a 23% increase.
San Bernardino: Sales 2,960, up 61% — Busiest in 12 years. After a 17% increase, the median is $ 432,000.
San Diego: Sales were 4,222, up 82%, the busiest in eight years. The median reached a record high of $ 725,000 after a 23% increase.
Ventura: 1,125 sold, up 129% — the busiest in 15 years. After a 21% increase, the median is $ 701,500.
Jonathan Lansner is a business columnist for Southern California NewsGroup.He can reach at email@example.com
May’s homebuying dip raises 5 questions for Southern California – Press Enterprise Source link May’s homebuying dip raises 5 questions for Southern California – Press Enterprise