Southern California Home Prices Hit All-Time High, Rising Nearly 8% in June

Southern California Home Prices Hit All-Time High, Straining Prospective Buyers

Southern California home prices have reached a new peak, with values rising nearly 8% in June compared to the previous year. This marks the fourth consecutive month that home prices have hit an all-time high in the region, according to data from Zillow.

The average home price in the six-county area now stands at $876,280, representing a 0.4% increase from May. Prices have risen across all counties, with Los Angeles County seeing a typical home cost of $892,304 and Orange County averaging $1.16 million.

These price increases are putting additional strain on prospective home buyers who are already struggling to afford homes in an expensive market. This challenge is exacerbated by the fact that interest rates are currently at their highest levels in over two decades.

According to the California Association of Realtors, only 14% of households in L.A. County can reasonably afford a median-priced house, while in the Inland Empire, fewer than 30% of households in Riverside and San Bernardino counties can afford a median-priced single-family home.

While the current affordability situation is reminiscent of the housing bubble in the 2000s, there may be some relief on the horizon. Economists attribute the rise in home values to a shortage of homes for sale, although this shortage is beginning to ease.

In June, the number of homes for sale in L.A. County increased by 22% compared to the previous year, marking the third consecutive month of rising supply. Similar increases were seen in other counties as well.

Experts suggest that homeowners are holding onto their properties due to the belief that mortgage rates in the 6% to 7% range are here to stay. This reluctance to sell is contributing to the limited housing inventory and driving up prices.

While some economists predict a potential slowdown in home price growth, they also note that California has historically built too few homes relative to demand. This, coupled with a growing economy and homeowners holding onto low-rate mortgages, may prevent a significant decrease in home prices.

Despite the challenges, there is a glimmer of hope as the annual price increase in June was slightly lower than in previous months. Richard Green, director of the USC Lusk Center for Real Estate, anticipates a slowdown in price growth, emphasizing that prices cannot continue to rise at the current rate indefinitely.