Southern California home prices rise nearly 7% in January as market heats up

Southern California home prices shot up in January from a year earlier, as buyers fought over a meager supply of homes for sale across the six-county region.

The area’s median price — the point at which half the homes sold for more and half for less — clocked in at $533,000, DQNews said Monday. That was 6.6% higher than a year earlier. It’s the latest indication that the housing market is heating up after muddling through much of 2019.

“We are definitely settling into a seller’s market,” San Fernando Valley real estate agent Moe Verma said. “Last year, things seemed a lot calmer.”

Economists attribute the change, seen across the country, to falling mortgage rates, the easing of recession fears and a stark shortage of homes for sale. In Southern California, depending on the county, there were 17% to 28% fewer homes on the market in January than a year earlier, Zillow data show. Similar declines were reported in December.

In late 2018 and early 2019, interest rates had shot up and economic uncertainty was high — two factors that caused buyers to pull back. At the same time, Zillow economist Jeff Tucker theorized, some sellers, worried the market might turn and wipe out some of their equity gains, listed their homes. Homes sat and inventory swelled.

Since then, mortgage rates have plunged and — though worries have grown over the effects of the coronavirus — the economy is considered far healthier. Owners are less likely to list their homes for sale and construction is subdued.

Despite the decline in listings, sales in the six-county region rose 17.8% in January from a year earlier.

According to Freddie Mac, the average rate on a 30-year fixed mortgage was 3.49% last week, down from 4.35% a year earlier. The decline would save $210 on a monthly mortgage payment for a $533,000 home.

When factoring in the decline, as well as a rise in income, some data show that housing is actually more affordable than last year, a welcome shift in a region grappling with a crisis over housing affordability and related homelessness.

In the fourth quarter, 27% of L.A. County households could reasonably afford the median-priced single-family house, compared with 24% a year earlier, according to the California Assn. of Realtors.

Home prices and sales rose in all six counties compared with a year earlier:

• In Los Angeles County, the median sale price rose 6% to $615,000, while sales climbed 14.1%.
• In Orange County, prices rose 6.7% to $747,000, and sales climbed 20.3%.
• In Riverside County, prices rose 4% to $390,000, and sales climbed 18.3%.
• In San Bernardino County, prices rose 12.5% to $360,000, and sales climbed 16.7%.
• In San Diego County, prices rose 7.9% to $585,000, and sales climbed 22.8%.
• In Ventura County, prices rose 3.2% to $588,500, and sales climbed 18.8%.

Though the spring home-buying season hasn’t yet kicked off, real estate agents say open houses are busy.

Verma, the San Fernando Valley agent, said more than 45 families strolled through a Chatsworth open house he held over two days this past weekend. The three-bedroom was listed at $629,900 and, after multiple offers, Verma said the home is now in escrow for more than $20,000 above the asking price.

Despite the uptick in demand, Tucker said the number of owners listing their homes this year is less than in 2019.

“It could be that people are forward-looking,” the economist said. “They think, ‘I don’t want to miss out on further price gains.’”

Many economists expect prices to keep rising, but a surer picture of the market’s trajectory will emerge in coming months. Tucker cited the cheap cost of borrowing and a shortage of homes for sale in predicting this spring would be busier than last. But given how high prices have risen, he thinks there is a ceiling to how crazy it will get.

“This shopping season is unlikely to be as frenzied as a few years ago,” he said.