Southern California Home Prices Reach Record High Amid Sky-High Mortgage Rates

Southern California home prices have hit a record high in March, reaching an average of $869,082, according to Zillow. This surge in prices comes despite sky-high mortgage interest rates, making the housing market in the region the most unaffordable in a generation.

The combination of rising home prices and mortgage rates hovering in the upper 6% range has created a challenging environment for potential homebuyers. The average mortgage payment on the average home now exceeds $5,500, assuming a 20% down payment.

The increase in home prices can be attributed to a shortage of homes for sale and a wealth gap that has allowed some buyers to have significant cash reserves, offsetting the impact of high interest rates. Many buyers are well-heeled first-timers who are not deterred by the high cost of borrowing, while others are leveraging their existing equity to make hefty down payments.

Despite the high prices and rates, some buyers are turning to creative solutions such as co-borrowing with family and friends to make homeownership more affordable. However, inventory remains tight, and forecasters predict that prices are unlikely to drop significantly in the near future.

While there are signs of a rebound in single-family construction in California, building permits have fallen from the previous year. The tight inventory and high prices are expected to persist, creating a challenging environment for prospective homebuyers in Southern California.