Impact of Rising Mortgage Rates on Southern California Housing Market
The red hot housing market that has been dominating headlines for the past few years has finally started to cool down. This shift comes after mortgage interest rates for a 30-year fixed mortgage more than doubled over the last 12 months to about 7%.
According to Oscar Wei, the deputy chief economist for the California Association of Realtors, this increase in mortgage rates has had a significant impact on the housing market. “That definitely affected the housing market in terms of sales,” Wei said. “Also maybe actually slowing down price growth quite a bit.”
Data from CAR shows that the typical price for single-family homes across Southern California is now about $743,000. While this is down about 8% from a peak in May, it is still up about 2% from last year. The most expensive county in the region is Orange County, where the typical home costs $1.2 million as of October.
An analysis by real estate company Redfin found that the annual salary needed to afford a typical mortgage in Anaheim would be more than $254,000. This is significantly higher than the typical annual household income in Anaheim, which is about $77,000 according to Census data.
Wei noted that there are areas within Southern California that are more affordable than others, such as Riverside and San Bernardino. However, data from the California Association of Realtors shows that just 13% of those living in Orange and L.A. Counties can afford a typically-priced home.
For first-time homebuyers, Wei warned that it may be even harder to afford a home as existing homeowners can use their equity to buy. He also advised potential homebuyers to consider property taxes and home insurance when purchasing a home.
Looking ahead, Wei said that people should not expect a significant drop in mortgage rates until late 2023 or early 2024. The cooling of the housing market may continue to impact buyers and sellers in the coming months.
Copyright © 2024 KABC Television, LLC. All rights reserved.