A chill is settling over the once white-hot Southern California housing market.
Listings are up. Sales are falling. Price reductions are becoming more common.
Sales across the region plummeted nearly 18% in September compared with a year earlier, the largest drop in almost eight years.
With the economy still growing, experts don’t see any immediate prospect of home prices plunging, as they did in 2008 when they dropped nearly 30% amid the financial crisis. But real estate agents note that buyers are pulling back because housing has simply become too expensive — a situation made worse by the recent surge in mortgage interest rates. Some who can still afford a home are holding back because they don’t want to buy at the peak.
Prices have gotten ahead of themselves so it’s very possible the market is going to cool down for a while.
Which would be welcome news for many would-be buyers. The housing market has been on the upswing for more than six years. Prices surged in major markets across the nation as rock-bottom mortgage rates and an improving economy collided with a shortage of listings.
It’s especially true in California, where experts say opposition to development has long stymied companies from building enough homes for everyone who wants to live here. Million-dollar listings have popped up even in some working-class Los Angeles communities, as have yellow signs on which investors promise to buy your house fast with cash.
Now the housing market rocket appears to be sputtering. Mirroring a national trend, home sales in Southern California are falling, reaching the lowest level for a September since 2007.
More homes are being offered, increasing supply as demand weakens.
Also, the share of listings in the past two months whose prices have been cut is at multiyear highs — a sure sign that sellers are scaling back ambitions.
(Los Angeles Times)
Many economists believe that what’s coming is not a crash, but rather a cooling period caused by rising interest rates.
Interest rates are shifting up and it causes the market to pause and this is how it always works.
Many experts don’t expect home values to fall unless there is a recession, which they consider unlikely in the near future. Stock market gyrations aside, economic indicators remain strong and people who are buying homes can largely afford them.
Real estate bubbles are driven by overbuilding or overborrowing and you don’t have either one right now.
But we should expect a pull back even if prices only fall a little bit.