Sales Plunge in Southern California

Despite mortgage rates at historic lows, affordability has remained a pressing issue for brokers, agents and those trying to buy or sell a home alike. Sure, some improvements have been made throughout the year, but since the price surge of last spring and summer, many would-be buyers have struggled to afford a new home.

Unfortunately, things may continue to go downhill in upcoming months, as a new study has found that home sales plunged across southern California this July, a drop which could ultimately stunt the region’s economic growth.
According to research firm CoreLogic DataQuick, buyers scooped up 20,369 new and resale houses and condos in the six-county region last month, down 12.4% from a year earlier. Similarly, home sales last month were 19.4% below the 26-year average for July.

The drop in sales could have economic repercussions. When someone buys a home, they often splurge on items such as new furniture, fresh paint or new carpeting. Then there are real estate agents, mortgage brokers and moving companies to pay.

“The housing multiplier effect is very significant, because there are so many things that happen with a home purchase,” said Leslie Appleton-Young, chief economist for the California Assn. of Realtors. “That is dampened when you have lower home sales.”

The pain is especially acute for brokers, who depend on commissions.

“There are a lot of hurting agents right now,” said South Bay agent Leo Nordine, who said his volumes have been roughly flat this year. “There are too many agents and not enough sales.”

And if demand for homes remains subdued, builders aren’t likely to ramp up construction to historic levels, further blunting housing’s economic impact.

The steady declines come despite more homes on the market compared with last year. With prices sharply higher, there are simply fewer buyers able to afford them.

Changing demographics are also playing a role, experts said. Surveys show most young adults still want to own a home, but significant barriers exist for that large demographic group.

Has your business been impacted by this drop in sales? What are your thoughts?

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  • Jamie L.

    I didn’t notice such a huge drop this past month, but my business has definitely been hurting this year compared to last. Low mortgage rates may be helping some buy homes, but there are still too many out there who are being denied loans. Hopefully things will turn around soon!

  • It would be great if the Fed or States could put something together to
    cause lenders to not consider student debt when considering the risk factor of lending to qualified young professionals with desire to become homeowners. There is a big pool of potential buyers who are graduates of our colleges across the country who are burdened
    with student debt making it impossible for them to become homeowners at the current moment in time. If there could be some way of drawing them to home ownership
    the 19% gap I believe could be closed with young working professionals who
    unfortunately are strapped with billions of dollars in student debt. Role the student
    debt into the home loan mortgage maybe so that its paid off immediately? Extend the time in which student debt needs to get repaid and give no weight to it in the loan process? Give substantial subsidy to the young professional who qualifies? Just a few idea’s off the top of my head.

  • My company sells homes in the upscale communities of Calabasas and Conejo Valley. I witnessed significantly reduced sales activity in July. Everyone is speculating why.

    The fundamentals for a healthy real estate market are in place. While affordability has taken a hit, affordability does not stop people from buying homes. Affordability only causes buyers to change their expectations about how much home they will purchase.

    Here are my thoughts on this dreadful July, in no particular order.

    1. Schools in our market went back early this year. Therefore vacation time was in July rather than august. After a difficult recession, with employment on the rebound, people are taking those long awaited vacations en masse.

    2. We are in a recovering real estate market. We will have corrections. The road to recovery is never a straight line. The market needed a breather. This is one of those minor corrections.

    3. The wars in the Ukraine and Israel have a sobering effect on Americans. I don’t think Americans like uncertainty. These wars are disconcerting and cause would be buyers and sellers to pause.

    The market will be back in late August and we will see our usual seasonal sales activity between now and Thanksgiving. The sky is not falling.

  • Mary Young

    Roger you are on the money. Our market has been crazy since this President. The unrest in the world is really bothering people and their decisions to purchase homes. However one thing for sure Americans have short term memories and can rebound as fast as they retract. I am afraid that one of the largest factors in the lower income neighborhoods is NO JOBS. Now that can stop the loan process might quickly. Our job market is not in good shape despite the stats we get from Washington. The jobs are in the fast food and service industries and those folks just don’t qualify to purchase homes. Now by raising the hourly wage for food handlers they have assured that there will be fewer jobs there too.
    Mary Young