Southern California home prices jumped 11% in November and sales increased by 19% from last year's levels as a robust market streak continued to defy the coronavirus pandemic that saddled the region with high unemployment, a new housing report shows.
Ultra-low mortgage rates, a pandemic-induced desire for bigger homes and an increase in population entering their homebuying years were the main reasons for the six-month home buying binge, housing experts said. By the end of the month, 2020 will cap eight years of steadily rising home prices.
The median price of a Southern California home — or the price at the midpoint of all sales — was $603,000 last month, up 10.8% from November 2019, DQ News reported, based on figures from real estate data firm CoreLogic.
That's the third highest median in records dating back to 1988.
November sales increased 18.9% to 21,777 transactions, the highest tally for a November in 14 years.
"These numbers are not surprising at all given tremendous demand that has grown substantially since May," said Steve Thomas, author of Reports on Housing. "The low interest rate environment has fueled this wave of activity. Today's 2.67% rate increases buyers' purchasing power and make real estate a lot more affordable."
Freddie Mac announced Thursday the 30-year fixed mortgage rate hit its 15th record low of the year. Economists predict rates will go no higher than about 3.25% over the next one to two years.
Millennials also are entering the age when people typically buy their first home, said Jeff Tucker, senior economist for Zillow. Today's low rates are causing more renters in their early 30's to buy a home earlier than they otherwise might have.
"The mortgage rates tipped the scales toward making owning more affordable compared to renting," Tucker said.
With the number of homes for sale at the lowest level since mid-2005, bidding wars continue unabated, with homes priced under $1 million typically selling within two weeks, one agent said.
"Homes still are selling very quickly, especially for this time of year," Tucker said. "It's a barometer of how much more demand there is."
Just under 22,000 Southern California homes were on the market as of last week, compared with 34,555 listings a year earlier, according to Reports on Housing. Inventory remains low even though more homeowners are putting their properties on the market. Thomas reported a 15% increase in new listings in Orange County last month.
"Even with the recent surge in COVID-19 cases, homeowners are still being lured into selling their homes," Thomas wrote.
After the pandemic put the brakes on the traditional homebuying season last spring, demand shifted until later in the year and "extended all the way through November," Zillow's Tucker said.
CoreLogic Deputy Chief Economist Selma Hepp said November numbers are a continuation of trends seen since sales resumed over the summer.
"Encouragingly, while November sales do show a seasonally expected decline from October, the decline is consistent with previous years and thus suggest that there is not an obvious slowdown in sales yet," Hepp said. "Also, pending activity suggests that we will continue to see sales exceed last year's levels into 2021 and are even likely to pick up pace as mass vaccinations become available and more sellers put their homes on the market."
Price and sale gains occurred last month in all six Southern California counties, with double-digit sales gains across the board.
With residents able to work from anywhere, home shoppers flocked to more affordable markets in the Inland Empire. San Bernardino County had a sales gain of 25.7% last month, the biggest increase in the region. Riverside County had the third-biggest gain with sales up 20.1%.
The Inland Empire also had some of the region's highest price appreciation: Up 14.3% in San Bernardino County and 12.3% in Riverside County.
"It has a lot to do with (home shoppers wanting) their own sense of personal space," said Baron Bershaw, an agent with Re/Max Terrasol in Huntington Beach. Families want "more space, bigger lots and bigger houses. If you're going to do everything at home, and you're not spending your entertainment budget to go out, they can afford to put a little more into their house."
Los Angeles County still had a high appreciation rate at 12.2%, buoyed by double-digit price gains in communities like El Segundo (up 14%, according to Zillow), San Fernando (up 13.9%) and Inglewood (up 13.4%).
"Looking into the future, this kind of double-digit price appreciation can't go on forever," Tucker said.
For example, if 30-year mortgage rates turn around and rise back to 3.25%, that would decrease a home shopper's buying power by 7%.
"If rates were to rise again, that would cause price appreciation to cool off," Tucker said. "Even rising to 3.25%, even that would cool price appreciation a little bit — especially for a market like L.A., where prices are so high relative to incomes."
