Southern California home prices have been falling. Are the drops over?
Last year, rising mortgage interest rates chilled the previously hot Southern California housing market. Buyers backed off, sales plunged and, for the first time in a decade, home prices underwent a sustained slide. By one measure, prices in the six-county region fell 13% from the peak last spring. That might be as low as they go. In recent months, there have been growing signs home values may have resumed their climb, potentially dashing the hopes of first-time buyers holding out for cheaper housing in the months or years ahead. What exactly is happening? According to several data trackers, home prices ticked up in the last few months. In April, the median sales price for an existing single-family house in Southern California rose 2% from a month earlier to $785,000, according to the California Assn. of Realtors. That was the third straight month prices climbed from the prior month. Similar increases can be found in data trackers from mortgage company Black Knight and real estate brokerage Redfin. But not all sources show prices rising across the board. According to Zillow, the typical price in the combined six-county Southern California region continued to fall in April, but the decline was the smallest since values turned negative last year. Why is this happening? Essentially, buyers have been more willing than sellers to return to the market this spring. A decline in mortgage rates from above 7% into the 6% range brought some buyers back, real estate agents say, as did a belief among buyers that rates wouldn’t fall much more if they continued to hold out. Some agents said they’ve seen mostly first-time buyers return. “Why pay high rent?” Ramon Sanchez, a Whittier-based agent, said. “They would rather see if they can qualify to buy.” Jeff Tucker, an economist with Zillow, said first-time buyers may also be “bursting at the seams in their apartment” as their families grow, another reason “a lot of interested first-time buyers are not in a place where it’s easy to wait.” At the same time, many homeowners are waiting, unwilling to list their homes and trade their sub-3% mortgages to borrow at 6%. Since the start of the year, the total number of homes for sale in Southern California has dropped 21%, according to data from Redfin. Despite fewer options, sales increased 34%. “Inventory is just very low,” Tucker said. “There are enough folks who can afford prices at this height that they are still bumping into each other getting into a little competition.” If I am looking to buy a home now, what should I know? Well, there is a little more competition. Compared with a few months ago, open houses should be busier and there’s a greater chance you’ll need to bid against others. Tracy Do, a Coldwell Banker agent who specializes in the highly sought-after neighborhoods of northeast L.A., said that once again, some homes are selling for more than $100,000 over asking. In southeastern Los Angeles County, Sanchez isn’t seeing jumps as big, but the last three properties he listed had multiple offers and either sold, or are in escrow, for more than the list price. “We got more buyers in the market than we have sellers,” Sanchez said. Although the market is more competitive, it’s nothing like the pandemic housing boom. In March 2022, buyers paid more than list price in 76% of home sales in Los Angeles and Orange counties, according to Zillow. Fast-forward to March 2023, that percentage was 42%. Do said buyers — compared with early 2022 — are also more likely to get away with leaving in contingencies, or convincing the seller to pay for repairs. Pricing is also lower. According to the California Realtors, though April’s median in the combined six-county Southern California region was up $15,000 from March, it was $52,000, or 6.2%, below April 2022 levels. In Los Angeles County, the median was 8% less than a year earlier and 17% lower than when prices topped out in the county last September. In Orange County, April prices were 8% from that county’s peak; in the Inland Empire, 5% below the peak; in Ventura County, 7% below the peak; and in San Diego County 5% below the peak. Will home prices drop further? What ultimately happens will be influenced by a variety of factors including the direction of mortgage interest rates and whether the economy enters a recession. But Tucker, the Zillow economist, said the most likely scenario is home prices rise from here on out, because high mortgage rates should keep many homeowners from listing their homes. Jordan Levine, chief economist with the California Assn. of Realtors, also predicts rising prices, but like Tucker at a more modest level than during the pandemic. Levine said still-high mortgage rates and a slowing economy are likely to damp demand enough to keep prices from soaring. Other experts stressed that values could again turn negative. “Home prices are still well out in front of what underlying incomes today would support at today’s interest rate levels,” said Andy Walden, vice president of research at Black Knight. “There is still potential price risk out there.” BY ANDREW KHOURI | LOS ANGELES TIME
'People waiting for prices to come down will be disappointed': San Diego home price rises for 2nd month
San Diego County home prices are rising again after months of declines. Pictured: Homes in the San Elijo area north of the intersection of San Elijo Road and Elfin Forest Road in south San Marcos. (The San Diego Union-Tribune) San Diego County home prices are rising again after months of declines. Pictured: Homes in the San Elijo area north of the intersection of San Elijo Road and Elfin Forest Road in south San Marcos. (The San Diego Union-Tribune) San Diego County home prices in April rose for a second month after nine months of declines— and it is happening with very few sales. The median home price rose 1.9 percent to $805,000, said CoreLogic data released Tuesday. It is still down 1.8 percent for the year as rising interest rates slowed the red-hot pandemic real estate market. San Diego's recent price climb is happening with very few transactions. There were 2,408 home sales in April, down 53 percent from the year before. It also marks the second-lowest sales figure for an April in records dating to 1988. Mark Goldman, a real estate analyst with C2 Financial Corp., said homeowners don't see the point in selling now, considering they will likely face much higher interest rates at a new home, and a lot of competitive buyers. While interest rates might have priced some San Diegans out, he said the group of buyers hunting for homes now are fighting it out for limited supply — pushing prices up. Open the interactive version of this graphic "The market's active but there's just a lot less available supply," he said. "In a market where people were getting 10 offers on their house, and now they are getting five, it is still a seller's market." There were around 2,825 San Diego County homes listed for sale in April, said the Redfin Data Center, the lowest in 13 months. It's a far cry from less than a year ago, in August, when there were nearly 6,000 homes for sale. Goldman said we are now entering the busy summer buying season and he didn't see a lot of reasons why the number of homes for sale would change much. "People who are waiting for prices to come down will be disappointed," he said. Chris Anderson, a San Diego County real estate agent for more than three decades, said the homes she is listing are getting multiple offers over the asking price. She put a 1,125-square-foot, two-bedroom townhouse in Santee on the market for $539,900 in late April and had five offers, two over the asking price, in less than two weeks. Anderson also had a three-bedroom $550,000 townhouse, at 1,498-square-feet, that got an offer over the asking price almost instantly and was off the market in two days. Both properties are in escrow so final prices are not yet public. Anderson said the sellers of properties were both moving out of state. The Santee seller was going to Missouri, she said, and the Ramona seller was heading to Colorado. She is also working with buyers and seeing how tough things are from the other side. Anderson said she has a military family that has written 28 offers since January with no success. Because they are using a VA loan, it is difficult for the young couple, with a newborn, to compete. Unlike conventional loans, VA loans require appraisals and termite clearances, which most buyers they are competing against are waiving. San Diego County's median — the point at which half the homes sold for more and half for less — combines resale and newly built single-family homes, condos and townhouses. Here's how the different home types fared in April: Resale single-family: Median of $900,000 with 1,416 sales, up from $880,000 last month. Down from its peak of $950,000 in April 2022. Resale condo: Median of $651,000, with 777 sales, up from $650,000 last month. Down from its peak of $663,000 in May 2022. Newly built: Median of $798,000 with 168 sales, down from $801,000 last month. This figure combines single-family homes, townhouses and condos. It is down from the peak of $890,500 in August 2022. The price of a typical San Diego County home has jumped significantly with higher interest rates. The interest rate for a 30-year, fixed-rate mortgage was 6.34 percent in the last week of April, said Freddie Mac, up from 5.1 percent the year before. The monthly cost of an $805,000 San Diego home (assuming 20 percent down) would have been about $3,780 with last year's interest rates, compared to around $4,290 in April. Here’s a look at the median prices across Southern Californian markets for April: Los Angeles County: Monthly rise of 0.1 percent to $800,000; down 7 percent for the year. Orange County: Monthly rise of 0.3 percent to $988,000; down 5.9 percent for the year. San Bernardino County: Monthly drop of 6.3 percent to $450,000; down 9.1 percent for the year. San Diego County: Monthly rise of 1.9 percent to $805,000; down 1.8 percent for the year. Ventura County: Monthly decrease of 0.1 percent to $774,000; down 3.6 percent for the year.
Higher density, more SROs and a controversial new state law: What’s in San Diego’s sweeping new housing proposal
San Diego Mayor Todd Gloria is proposing a sweeping package of incentives and regulatory changes that aim to boost construction of housing for middle-income residents, college students and people facing homelessness. One proposal would make San Diego one of the few cities in California to embrace controversial Senate Bill 10, new legislation that allows as many as 10 housing units on a single property if it’s located near transit. Other proposals include looser rules for housing developments on public land and on underutilized commercial sites, incentives for building new single-room-occupancy hotels and a policy accelerating conversion of sites hosting businesses like scrapyards into housing. Critics, including many community leaders in neighborhoods dominated by single-family homes, say Gloria’s proposals are reckless, ignore the need for supportive infrastructure and would damage the quality of life for many residents. Supporters say the proposals are measured and sensible efforts to address the city’s glaring lack of affordable housing, which they say puts San Diego at risk of losing residents and businesses to other regions. They also note that the package protects many low-income San Diegans with a policy that gives residents displaced by new housing projects a leg up on securing subsidized units within new developments in their neighborhood. Gloria is characterizing the wide-ranging plan as a follow-up to a package of city housing reforms approved last year, which featured seven new incentives, including one allowing businesses to build on-site housing for their workers. The mayor is calling the new package, which the City Council could consider approving as soon as July, his “Housing Action Package 2.0.” The proposed reforms come three months after a contentious 5-4 City Council vote to spur housing by softening existing rules for taller apartment buildings and backyard units when a property is near mass transit. The change allows the taller apartment buildings when the transit line is as far as 1 mile away, instead of half amile. Danna Givot, who lives in the College Area, was more blunt. “SB 10 would randomly drop 10-unit apartment complexes in single-family residential zones,” said Givot, a member of Neighbors for a Better San Diego, a group of most single-family homeowners that lobbies against loosening rules for dense housing. Heidi Vonblum, the city’s planning director, said the decision to restrict SB 10 to less than one-third of the city means it’s not random. She stressed that state law would allow SB 10 in more areas than the city plans, but officials are being strategic. “These are areas that are largely located near transit and have the opportunity to provide increased housing capacity,” she said. Vonblum said the impact of SB 10 on single-family areas is being exaggerated, contending that only a small number of property owners will use the new opportunity. “Ten units are not going to drop onto every single-family zoned parcel,” she said. “Many people will choose not to develop, as with most of our regulations, and others will have physical site constraints that limit the number of units.” Vonblum also noted that no height restrictions are being removed, so most SB 10 development in single-family areas won’t be taller than three stories, meaning they will likely be townhomes instead of mid-rise and high-rise buildings. Another key reform in the package is targeting businesses like scrapyards and other environmentally hazardous businesses for conversion to housing. The policy would apply only in the promise zone in southeastern San Diego and only on land zoned residential. The policy would set a deadline for the existing business to cease operations so that the land could be converted. Some critics question whether the policy would violate property rights, but VonBlum said it would help achieve multiple goals — both adding housing and eliminating environmental hazards from mostly residential areas in a low-income part of the city. No decision has been made on how long such businesses could keep operating before being forced to close. Vonblum said residents have lobbied for a shorter deadline, while the affected businesses want more time. The package also includes incentives for private housing developments near college campuses,eliminating the need for agreements with the nearby school and allowing more flexibility on the bonus units developers can build if they make some units rent-restricted. There are also incentives for construction of new single-room-occupancy hotels, widely considered the lowest rung on the housing ladder above homelessness. Development across downtown in recent decades has shrunk the number of remaining SRO units in the city from roughly 14,000 in the late 1980s to less than 3,000 today. In the new package, the individual proposal getting the most attention is Gloria’s decision to embrace SB 10, a state law that cities can ignore, fully adopt or adopt in a tailored way. Essentially, SB 10 allows property owners to replace a single-family home with up to 10 units depending on the square footage of the lot, with one unit allowed for every 1,000 square feet. San Diego has chosen to allow SB 10 developments only in the city’s designated sustainable development area — the nearly one third of the city that is characterized by proximity to transit or the presence of quality jobs and educational opportunities. Critics say that SB 10 would apply to a much larger portion of city acreage that can actually be developed. They note the city includes in its total calculation thousands of acres that can’t be, such as Mission Trails Regional Park. The Community Planners Committee, an umbrella group for neighborhood leaders from across the city, recommended last month that SB 10 be removed from the package because of its potential negative impacts on single-family neighborhoods. The group also said that if SB 10 remains in the package, city officials should require more subsidized housing units from property owners who take full advantage of the law by building 10 units on a site. The state law requires one of the 10 homes to be subsidized. The Community Planners Committee recommends the city require three. Other critics have been more aggressive and vocal, including some who staged a citywide protest in early May against Gloria’s housing package and the possibility of the city embracing SB 10. “Our city officials have been rolling out one high-density housing initiative after another, without regard to the supporting infrastructure that would be needed, the negative impacts on the environment, delayed fire and safety response times, lack of police protection, impaired traffic circulation and decreased quality of life for existing residents,” said Bonnie Kutch, who lives in University City, one of the neighborhoods the city has targeted as a growth center. “Our city government will be unraveling the very fabric of San Diego that everyone here knows and loves, while destroying it for the next generation.” Additional incentives in the package focus on encouraging developers to build large projects on public land or commercial land that is not considered well used, such as large parking lots. The city would also implement locally AB 2097, a state law that bans cities from requiring developers to include parking spots in projects within a half-mile of transit. The city three years ago eliminated such parking requirements in many parts of the city, but this would increase the acreage in the city with no parking requirements by more than 30 percent, said Seth Litchney, the city’s housing policy program manager. Andrea Schlageter, chair of the Community Planners Committee, said that while members of her group mainly objected to SB 10, they were generally less than enthusiastic about the whole package. “The general thought seems to be that this is overkill,” she said. “There’s already so many density incentives in place, and we’ve already upzoned enough to meet our state housing goals.” The number of homes being built in San Diego each year must accelerate significantly for the city to meet a state-mandated goal of 108,000 more units between 2020 and 2029, but critics say existing city housing legislation already allows for far more than that. Supporters say the housing crisis is so severe that the city needs to provide developers and property owners as many incentives as possible.
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