Southern California Home Prices Soar as Mortgage Rates Hit Record Highs
Southern California Home Prices Soar to Near Record Highs Amid Sky-High Mortgage Rates
Southern California home prices are reaching near-record highs, creating a double blow to housing affordability in the region as mortgage rates continue to rise. In October, the average home price for the six-county region climbed to $831,080, just 1% below the all-time high reached in 2022, according to data from Zillow.
Nicholas Uribe, a 31-year-old property manager in the San Fernando Valley, expressed his frustration, saying, “I don’t understand how people are affording these insane mortgages.” Despite making more money and seeing his home value increase, Uribe feels stuck in his current townhome due to the rising prices and interest rates.
The surge in home prices and mortgage rates has made homeownership increasingly unaffordable for many in Southern California. The monthly payment on a typical L.A. County home was $4,830 in October, compared to nearly $900 less in June 2022 when prices peaked and rates were lower.
Experts do not anticipate a significant drop in prices or mortgage rates in the near future, leaving potential buyers like Uribe in a difficult position. With interest rates now double what they were in 2019, Uribe struggles to afford a comparable townhome, let alone a single-family home.
The trend of declining affordability is not unique to Southern California, as experts attribute the current housing market conditions to under-building, pandemic trends, and federal monetary policy. The surge in demand during the pandemic, coupled with a shortage of homes for sale, led to skyrocketing prices.
While there was initially a decline in prices as mortgage rates rose, the flow of homes hitting the market slowed down significantly. Homeowners chose not to sell to avoid giving up their low mortgage rates, further exacerbating the supply shortage.
Despite the challenges, some well-heeled buyers have returned to the market, driving prices back up. Zillow predicts that home prices in Los Angeles and Orange counties will dip slightly over the next year, while prices in the Inland Empire counties of Riverside and San Bernardino are expected to rise.
Affordability remains a significant concern, with only 11% of households in Los Angeles and Orange counties able to afford the median-priced house in the third quarter. Experts believe that while affordability levels are unsustainable, it does not necessarily mean prices will fall.
In the meantime, potential buyers like Shawna Jamison in San Diego are left waiting for the right opportunity to buy a larger home. The combination of personal and market factors has kept her in her current condo, unable to find a suitable home within her budget amidst the current market conditions.
As the housing market continues to face challenges of affordability and supply shortages, experts suggest that it may take years for conditions to improve. In the meantime, prospective buyers like Uribe and Jamison are left navigating a challenging housing market in Southern California.