Experts predicted that the American economy would continue to grow, along with demand, competitive mortgage rates, and more affordable home prices, through 2015. But the Southern California housing market has illustrated that this favorable trajectory may already have come to an end.
At the tail-end of 2016, home prices in Southern California jumped to a nine-year high — up by 6.8% from just a year earlier — and some economists are predicting that the pricing trend will continue to rise.
Back in January of 2015, the median sales price for California homes came in at around $393,000. Southern California is one of the more expensive areas in the state, and the median prices vary widely from county to county. In Los Angeles County, the median home price in December of 2016 rose 4% from a year prior to $520,000. Home prices in other counties rose even more, ranging from 4.2% to 8.7% over the last year. Orange County homes are among the priciest, coming in at a $665,000 median cost.
There is a bit of good news for hopeful homebuyers in Southern California. Although prices are expected to keep increasing, it may not be as substantial as it has been in recent years. This is due largely to the fact that household incomes haven’t kept their pace with rising home prices. In addition, mortgage rates have increased overall since the presidential election in November, which many economists believe will level off. However, since the job market is becoming more favorable and there are now fewer homes on the market in general, it’s probable that prices will increase for at least the immediate future.
The current demand for homes is pretty substantial, too. The California Association of Realtors reported that Los Angeles and Orange Counties had only a 2.6-month supply of homes on the market. In other words, if sales were to continue at their current rate and no new listings came on the market, there would be no more properties available for sale after that length of time. In comparison, realtors estimate that a six-to-seven-month supply represents a market that is equally favorable to both sellers and buyers.
Still, home sales across Southern California were particularly strong throughout 2016 and were, in fact, the best they’d been in a decade. While sales of previously owned homes slightly decreased in December, it seems that increasing home prices may not be a total deterrent for eager area residents.