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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