10 Trends Behind Southern California’s Hot Homebuying
Southern California homebuying went from its slowest-selling spring in the record books to the fastest summer sales pace in 14 years.
Few slices of the economy show how coronavirus whipsawed the economy better than the remarkable comeback for the homebuying business. The market’s fuel is a complex combination of historically low mortgage rates, generous loan forbearance programs, a short supply of homes to buy, and the need for larger living spaces in the pandemic era.
Any recovery would have been welcome from the dismal spring when “stay at home” orders designed to slow the pandemic’s spread made daily life — not to mention homebuying — a challenge. But my trusty spreadsheet tells me that the speed of the summer’s rebound — not to mention sharp hikes in selling prices — is kind of off-the-charts even for a market known for its rollercoaster ebbs and flows.
So here are 10 things to know about local real estate’s toasty summer — more precisely, 2020’s third quarter — with historical twists found in my review of quarterly sales patterns in the DQNews database of transactions that dates to 1988.
1. A buying binge. The summer’s 68,838 closed sales for all transactions, existing and new homes, in the six-county region was the second-highest highest count for any quarter since the Great Recession — topped only by the spring of 2017. It was also the fastest-selling summer since 2006.
2. Yes, that swift of a rebound. Sales jumped an eye-catching 57% from spring to summer. That’s the second-largest three-month swing since ’88. The biggest rebound happened in the spring of 2014, another period in which inventory was in short supply.
3. Seasonal switch. Homebuying usually cools in summer after a springtime rush. So this year’s peak selling season seems delayed by a few months. Historically speaking, summer sales fell from spring’s pace in 21 of the previous 32 years. And compare this summer’s 57% gain to what normally happens after spring: a 2% drop in sales, on average.
4. Still catching up. The spring market crater has yet to be fully repaired. The summer rush put 2020’s sales count at 161,798. That’s still 5% below last year — and the slowest first three-quarters of a year since 2011.
5. Big finish ahead? To beat last year’s total, 67,222 homes have to sell this autumn — what would be nearly the summer’s pace and the best close to a year since 2006. Is it possible? That pace is a 15% jump above 2019’s fourth quarter. The region’s pending sales, a yardstick for future closed deals, are growing at a 34% annual pace in mid-October, according to ReportsOnHousing.
6. Buyers pay up. The median home price jumped 10% from spring to summer, the second-largest three-month swing since ’88. The only time it was bigger? Spring of 2013, again, another tight-inventory market. (Caveat: The shortage of lower-priced homes to buy and the urge for bigger homes probably skewed the median upward this year.)
7. New peaks. The summer saw the six-county region set a new high price with a median of $612,750 in June. The median for each of the six counties also set new records at some point during the three-month period. Those new pinnacles include Riverside and San Bernardino counties topping peaks last set before the Great Recession.
8. Lots of new peaks. SoCal’s high price is the second consecutive record-breaker for a quarter; the fourth new top in six quarters and eighth in 13 quarters. Before the summer of 2017, the previous record high was set in the spring of 2007. Yes, 10 years between new highs — a reminder of the pain created by the bursting of the easy-money era’s bubble.
9. Rare double-fisted surge. On a year-over-year basis, sales were up 8.5% as prices gained 15.3%. Since ’88, only eight quarters had gains in both sales and price that topped summer 2020’s 12-month advance. You could argue this summer was the ninth-best quarter in the record books.
10. Cheap money matters. The summer’s 2.95% average 30-year mortgage rate is a steep fall from the recent peak of 4.78% at the end of 2018. Since then, the region’s median price has risen $100,000 — a 19% jump. But thanks to historically low financing costs, the estimated monthly loan payment, assuming average rates and 20% downpayment, actually fell — yes, fell — by $2.
Let’s chat if you’re thinking about buying, selling, or investing.
Source: OC Register