Southern California home prices dipped from October to November, the first decline in nine months.
The average home price in the six-county region clocked in at $829,557 in November, down 0.1% from October, according to data released by Zillow this week.
All counties saw drops except Orange County, where values rose slightly.
Nicole Bachaud, a senior economist with the real estate website Zillow, said the small price declines across much of Southern California can be attributed to two things: Fall is typically a slower time of the year for home sales and buyers are struggling with high prices and high mortgage rates.
“It’s really challenging,” she said.
According to the California Assn. of Realtors, only 11% of households in both Los Angeles County and Orange County could afford a median-priced house during the third quarter; that measure stood at 19% in Riverside County and 25% in San Bernardino County.
When mortgage rates first surged last year, home prices fell in response as buyers pulled away and inventory swelled. But prices started rising again this year as homeowners increasingly chose not to sell, unwilling to give up their rock-bottom mortgage rates on loans taken out before or during the pandemic.
In most counties, home prices are near their all-time peaks despite November’s small decline. In Orange County, prices are setting records.
Prospective buyers received a sliver of good news in recent weeks. Mortgage interest rates have fallen from a high of 7.79% to the low-7% range, giving them a bit more buying power.
But experts don’t expect a significant improvement in affordability.
Bachaud said mortgage rates are likely to remain high, which will keep inventories tight as many existing homeowners choose to stay put. At the same time, those high rates should also keep prices from surging, since they limit how much people can afford, Bachaud said.
Overall, Zillow expects home prices over the next year to rise 0.1% in the Inland Empire counties of Riverside and San Bernardino. Across Los Angeles and Orange counties, prices should fall 1.6%. In San Diego County, prices are expected to remain flat, while in Ventura County they should drop 2%.
When it comes to the rental market, prices are also dropping slightly. Experts say that’s because the number of vacancies is rising as apartment supply expands and consumers worry about the economy and inflation.
In November, the median rent for vacant units of all sizes across Los Angeles County was $1,900, down 1.9% from a year earlier, according to data from Apartment List.
If the Federal Reserve’s actions to tame inflation push the economy into recession, home values and rents could drop further. However, there’s growing optimism that the country will avoid an economic downturn.