ANAHEIM, Calif. — Home sales across Southern California have plummeted by as much as 38% year-over-year as the once hot real estate market continues to slow amid a looming recession.
According to a Redfin report released Monday, in July, home sales in Orange County, Los Angeles and Riverside have fallen by 38%, 32% and 32%, respectively, year-over-year.
Redfin officials said higher and more volatile mortgage rates and high home prices are affecting affordability and economic uncertainty is to blame for the drastic drop.
Nationally, home sales had dropped nearly 20% from the previous year — its lowest level since the beginning of the coronavirus pandemic, when the market stood still, Redfin reported.
“Buyers backed off amid high mortgage rates and economic uncertainty,” wrote Dana Anderson, a data journalist at Redfin. “New listings were also down, with some prospective sellers staying put as price growth slowed.”
The new report comes as the real estate market cools as the Federal Reserve continues to increase interest rates to combat historically high inflation.
While the Federal Reserve has no direct say in mortgage rates, each time the central bank raises rates influences it.
Higher mortgage rates impact a prospective home buyer’s affordability and buying ability.
According to the National Association of Realtors, pending home sales declined for the second consecutive month in July and for the eighth time in the last nine months.
“In terms of the current housing cycle, we may be at or close to the bottom in contract signings,” said Lawrence Yun, chief economist at NAR in a news release Wednesday. “This month’s very modest decline reflects the recent retreat in mortgage rates. Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”
The NAR reported that housing affordability in June fell to its lowest level since 1989.
In Orange County, prospective home buyers with a 20% down payment and a 30-year fixed-rate mortgage of 5.8% for a median-priced home of $980,000 are paying an average of $5,400, more than $1,100 more from the previous year. Last July, the 30-year mortgage rate was 3.3%.
“Home prices are still rising by double-digit percentages year-over-year, but annual price appreciation should moderate to the typical rate of 5% by the end of this year and into 2023,” Yun added. “With mortgage rates expected to stabilize near 6% alongside steady job creation, home sales should start to rise by early next year.”