Southern California home prices hit another all-time high in December, capping a year of sharp growth that left many first-time buyers frustrated while homeowners counted their equity gains.
The six-county region’s median sale price reached $697,500 last month, up 16.3% from a year earlier, real estate data firm DQNews said Friday. It marked the 10th time the median set a record in 2021, a frenzy driven by low rates, millennial buyers and a desire for more living space during the pandemic.
Some economists forecast that prices will rise again this year, but the increases are expected to be smaller as affordability — already an issue for many — becomes an increasing barrier to homeownership.
Whether that happens is another question.
Inventory is at rock-bottom levels, meaning buyers still must fight to get into a house even as the market has cooled a bit in recent months.
According to L.A. County data from Redfin, although fewer offers faced bidding wars last month than in December 2020, 59.7% of offers still had competing bids in the final month of 2021.
Economists and real estate agents blame the supply shortage on a variety of factors, including a lack of new construction and homeowners who have locked in low mortgage rates and don’t want to move in a competitive housing market.
Investors are also eating away at inventory, accounting for about a quarter of Southern California home sales, according to John Burns Real Estate Consulting.
In all, there were nearly 30% fewer homes for sale in Los Angeles and Orange counties last month than a year earlier, Zillow said in a report Thursday.
“I put two listings on this week and looks like both will be in multiple offers,” said Tregg Rustad, an L.A. real estate agent at Rodeo Realty.
One factor that could slow the housing market is rising mortgage interest rates as the Federal Reserve dials back its easy money policies to combat inflation.
Historically low rates are one reason buyers have been able to bid up the cost of housing so much in the last year. As rates rise, people can afford less.
This week, the average rate on a 30-year fixed mortgage was 3.56%, up from 3.22% two weeks prior, according to government-backed mortgage company Freddie Mac.
For a buyer of a median-priced house in the region with a 20% down payment, the difference in rates means a monthly payment that will now be $105 higher than just two weeks ago, according to a mortgage calculator from Redfin.
For now, any slowdown is tough to see clearly.
Southern California home sales, as tracked by DQNews, fell 10% from a year earlier.
The decline isn’t a reflection of waning demand, said Selma Hepp, an economist at real estate data firm CoreLogic. Rather, inventory has dropped, and last month’s numbers are compared with December 2020, when there was an unusual number of sales because spring lockdowns pushed demand into later months.
Hepp noted that last month’s sales were still up 10% from December 2019 levels.
CoreLogic forecasts L.A. County home-price growth will slow to the low single digits in 2022. Hepp said if inventory doesn’t meaningfully rise, that prediction may not pan out.
“We may instead see the extension of this double-digit rate,” she said.
Rustad, the L.A. agent, said he has noticed demand pick up after the holidays. There are more new listings as well, but it’s not “enough to move the needle.”
“There were so many buyers and so few houses all of last year and that’s still happening now,” he said.
Here is how home sales and price figures broke down by each county in December, compared with a year earlier.
- In Los Angeles County, the median home price rose 15% to a record $805,000, while sales fell 5.8%.
- In Orange County, the median home price rose 17.6% to a record $935,000, while sales fell 17.5%.
- In Riverside County, the median home price rose 20.4% to a record $550,000, while sales fell 7.7%.
- In San Bernardino County, the median home price rose 21.4% to a record $485,750, while sales fell 10%.
- In San Diego County, the median home price rose 15.2% to $743,000, while sales fell 11.5%.
- In Ventura County, the median home price rose 15.5% to $751,000, while sales fell 23.1%.