Southern California home prices keep rising, up nearly 8% in June

Southern California home prices rose nearly 8% in June from a year earlier, marking the fourth straight month values hit an all-time high.

The average home price in the six-county region now stands at $876,280, up 0.4% from May, according to data from Zillow.

Prices rose in all counties, including Los Angeles County, where the typical home costs $892,304.

In Orange County, the average is $1.16 million.

The increases represent another hit for prospective home buyers struggling to afford a home in an expensive region at a time when interest rates are the highest they’ve been in more than 20 years.

Only 14% of L.A. County households could reasonably afford a median-priced house in the fourth quarter, according to the California Assn. of Realtors. In the Inland Empire, the situation is better, but still fewer than 30% of households in Riverside and San Bernadino counties can afford a median-priced single-family house.

While affordability is the worst it has been since the 2000s housing bubble, some relief could be on the way.

Economists say home values are rising because of a shortage of homes for sale, though that is easing somewhat.

In June, the number of homes for sale in L.A. County rose 22% from a year earlier, the third consecutive month supply has risen. Other counties saw similar increases.

When mortgage interests rates surged in 2022, home prices fell as buyers pulled away and inventory swelled. But prices started rising again last year as homeowners increasingly chose not to sell, unwilling to give up rock-bottom mortgage rates on loans taken out before and during the COVID-19 pandemic.

Now, economists and real estate agents say homeowners increasingly believe rates in the 6% to 7% range are here to stay and are deciding a new home is more important than keeping a 3% mortgage.

In theory, if the supply of homes for sale increases enough, home prices would fall. But many economists cite several reasons they believe that won’t happen.

California has long built too few homes relative to demand, the economy is growing and many homeowners will still choose to hold on to their ultra-low-rate mortgages.

A more likely scenario, according to experts, is home values will rise less than they have been, providing an opportunity for incomes to catch up.

That might already be happening.

June’s nearly 8% annual price increase is less than the 9% gains posted in recent months and the lowest since January.

Richard Green, director of the USC Lusk Center for Real Estate, said it’s too early to tell if home price growth is really starting to slow, or if the deceleration Zillow shows is noise in the data.

That said, he does expect a slowdown to come.

“Prices can’t go up 8% a year forever,” Green said.

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