Southern California home prices still rising despite high mortgage rates

Southern California’s housing market continued rebounding in June, despite below-average sales and the highest mortgage rates in seven months.

With inventory at the lowest level for a June in a dozen years, even this year’s diminished demand exceeds the number of homes for sale, driving up prices.

As a result, the median price of a Southern California home — or price at the midpoint of all sales — was $730,000 in June, CoreLogic reported Wednesday, Aug. 2.

SEE MORE: Mortgage industry, homebuyers pinched by high rates, declining cash

That’s down just 0.7 of a percent, or $5,000, from a year earlier. It also follows four months of off-and-on price gains that brought the region’s median within $20,000 of the all-time high of $750,000 reached in April 2022.

Home prices in the six-county region were up 9% since the beginning of the year.

And prices were up by more than 3% in Orange and San Diego counties, CoreLogic figures show. In Orange County, the median home price hit a record high of $1.059 million.

“The continued imbalance between buyers and sellers continues to pressure home prices,” CoreLogic Chief Economist Selma Hepp said in a statement Tuesday. She added that four out of 10 U.S. home sales are cash transactions, making them immune from higher mortgage rates.

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Nevertheless, lower demand and reduced inventory limited home sales to 16,320 transactions in June, the smallest tally for any June in records dating back 35 years, CoreLogic figures show.

June home sales were down 24.3% from a year earlier and we’re 40% off June 2021 levels, when mortgage rates were less than half of where they are now and the homebuying frenzy was hottest.

It was also the 19th straight month that sales were down on a year-over-year basis, CoreLogic figure show.

The pattern is the same that has gripped the region’s housing market since the start of the year, with homeowners choosing to keep historically low mortgage rates rather than selling.

“Despite elevated interest rates, the demand for housing continues to outpace the availability of homes for sale as buyers slowly adapt to the new normal,” Jennifer Branchini, president of the California Association of Realtors, said last month.

Here are key takeaways from the latest housing market data:

— The region’s market contrasts with the nation as a whole. CoreLogic reported Tuesday that U.S. single-family home prices were up by 1.6% since June 2022 and by 4.8% since the beginning of the year.

Locally, the median price for a single-family home was $785,000, down 1.3% from June 2022.

— Home prices rose 2.1% from May to June even though the typical house payment for a median-priced home hit a high of $3,772 per month.

Thirty-year fixed-mortgage rates averaged 6.7% in June, according to Freddie Mac, boosting a typical Southern California house payment by more than 10% from a year earlier. June’s average was the highest since November.

SEE MORE: What the Fed’s July rate hike means for homebuyers and sellers

— Home prices are increasing despite lukewarm demand, figures from Redfin show. Redfin’s Homebuyer Demand Index, based on home tour and service requests, is down 3% from a year ago, the online real estate brokerage reported Thursday. In addition, mortgage-purchase applications are down about 23%.

— But inventory has dropped more than demand. For-sale inventory in the region fell steadily for the past 11 months to just over 25,000 listings in June. That’s the lowest number for June and the fifth-lowest for any month since February 2012.

— Rising mortgage rates and higher prices hit entry-level buyers even harder, especially in the region’s most affordable area, the Inland Empire. The minimum income needed to afford an entry-level home rose 7.5% to almost $105,000 a year in the Inland Empire, Redfin reported.

By comparison, the minimum income needed to buy a home rose 4.7% to $151,070 a year in Los Angeles County; 6.3% to $180,224 a year in Orange County; and 6.7% to $161,671 a year in San Diego county.

“There’s no such thing as a starter home anymore,” Redfin Senior Economist Sheharyar Bokhari said. “The most affordable homes for sale are no longer affordable to people with lower budgets.”

— While mortgage rates will probably stay elevated for several more months, they’re likely to start coming down before the end of the year, Redfin researchers said.

CoreLogic projected that U.S. home price appreciation will continue accelerating for the rest of 2023, reaching 6.8% by next January.

Here’s a county-by-county breakdown of median home prices and sales for June, with annual percentage changes:

— Los Angeles County’s median fell 2.4% to $830,000; sales were down 22.7% to 5,278 transactions.

— Orange County’s median rose 3.3% to $1.059 million; sales were down 16.6% to 2,296 transactions.

— Riverside County’s median fell 2.9% to $560,000; sales were down 25.7% to 3,278 transactions.

— San Bernardino County’s median fell 5.0% to $475,000; sales were down 28.7% to 2,269 transactions.

— San Diego County’s median rose 3.1% to $835,000; sales were down 24.5% to 2,581 transactions.

— Ventura County’s median rose 0.2% to $807,000; sales were down 35.6% to 618 transactions.