Southern California's housing market is displaying early indicators of cooling off, as home prices experienced a modest decline for the third consecutive month, according to recent data from Zillow. Despite this slight downturn, prices remain near record levels and continue to challenge affordability for most potential buyers.
The six-county region recorded an average home price of $864,586 in October, marking a 0.4% decrease from September and sitting 1% below July's peak. While prices have softened recently, they still stand 4.5% higher compared to October 2022.
A key factor in this market shift appears to be an improving inventory situation. All six Southern California counties reported increased housing stock compared to last year, with San Diego County leading at a 49% rise and San Bernardino County showing a 25% increase. Los Angeles County experienced a 33% boost in available homes.
The market is seeing more homeowners willing to list their properties, even if it means giving up their low pandemic-era mortgage rates. This shift suggests that for many sellers, the need for different housing now outweighs the benefit of maintaining lower borrowing costs.
However, affordability remains a major hurdle for buyers. Mortgage rates have climbed since October, reaching 6.78% for 30-year fixed mortgages as of November 7, up from 6.08% in late September, according to Freddie Mac data.
Market experts suggest that without a recession, home prices are unlikely to see substantial declines. The current trend points toward slower price growth or stability, potentially allowing incomes to gradually catch up with housing costs.
Richard Green from the USC Lusk Center for Real Estate notes uncertainty in future market predictions, particularly given potential policy changes that could affect inflation and mortgage rates.
This evolving market landscape presents both opportunities and challenges for buyers and sellers as they navigate changing conditions in Southern California's housing sector.
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