Monitoring Southern California Home and Rent Prices
In a resurgence, Southern California home prices have rebounded after a decline in the latter half of 2022. Zillow’s data reveals that October witnessed an average home price of $831,080 across the six-county region, marking an increase of 0.12% from the previous month, marking eight consecutive months of growth. The downturn in prices last year was a consequence of soaring mortgage rates, substantially curbing buyers’ purchasing capabilities.
This revival in prices emerged as a consequence of an unforeseen outcome of these high rates: a severe shortage of homes available for sale. Many potential sellers opted to retain their residences, hesitant to swap their mortgages, hovering below 3%, for loans with rates that had doubled and more. Simultaneously, real estate agents noted an increased readiness among buyers—especially first-timers without mortgages—to re-enter the market, recognizing that postponing their home purchase might not yield lower rates.
The current scenario has elevated prices, albeit the market pace remains notably slower than the boom during the pandemic due to persistently high rates, presenting an obstacle for buyers. Despite the climb, October’s average home price in Southern California stands 1% below its peak in June 2022.
The trajectory from here hinges on various factors, chiefly the direction of mortgage rates and the broader economic landscape. Recent months have witnessed a surge in mortgage rates, breaching 7% in August and currently resting in the mid-7% range. Should these rates maintain or rise further, the resultant decline in demand could potentially deflate prices. However, a scenario where higher rates dissuade homeowners from listing their properties could sustain the upward momentum in prices.
Zillow’s recent forecast indicates a likely stagnation in home prices across Southern California in the coming year, attributed to affordability constraints constraining price escalation, while limited inventory acts as a price stabilizer. The rental landscape reflects a marginal decline in asking rents in Southern California, offering some respite to apartment seekers, a trend stemming from the increased vacancies. This spike in vacancies, a result of expanding apartment supply and softened demand amidst economic and inflationary concerns, is compounded by the transition of the millennial cohort into homeownership while Generation Z enters the apartment market.
However, prospective renters might find little solace in these trends as rents continue to remain substantially high. Across Los Angeles County, the median rent for vacant units in October stood at $1,920, marking a 1.6% decrease from a year earlier but a considerable 9.3% increase compared to October 2019, based on Apartment List’s data.