PRICES DEFY `BRUTAL YEAR'
Sales fell to the lowest level in records dating back to 1988, according to the latest CoreLogic figures
Although 2023 was real estate's slowest year in decades, homes somehow held their value.
While Southern California home sales fell to record lows, prices defied expectations and resumed their climb last year.
Housing economist Ralph McLaughlin called 2023 “a year for housing like no other.”
Home prices have “been resilient in 2023 because the Fed has nailed the landing,” said McLaughlin, chief economist for Haus.com. “There wasn't a recession and people weren't forced to sell their houses.”
While buyers saw prices soar further out of reach, and homeowners moved only at the peril of facing higher loan rates, those most impacted by 2023's sales slump “were those professions who rely on transactions,” he said.
December housing numbers released this week were emblematic of the market malaise buyers, sellers and professionals had been dealing with for the past 12 months.
Home sales fell to 12,012 transactions in the six-county region, housing data firm CoreLogic reported Wednesday.
That's Southern California's smallest tally for a December in records dating back 36 years — and the fifth-lowest for any month in that period.
For the year as a whole, just 163,753 Southern California houses, condominiums and town homes changed hands in 2023, also the lowest in CoreLogic records dating to 1988. That's fewer sales than in 2007 and 2008, when the housing market crashed.
Meanwhile, the median price of a Southern California home — or price at the midpoint of all sales — was $720,000, up 5% from December 2022 levels.
“2023 was a clear departure from the pandemic-fueled speed seen in housing in 2021,”
Nicole Bachaud, a senior economist with Zillow, said in an email.
“Home sales declined
both because of slower demand, ... but also because of low (for-sale) inventory as sellers were feeling lockedin to their low rates.”
Slowest year since 1982
At the dawn of 2023, the California Association of Realtors predicted both lower sales and falling prices.
Like most other forecasters, CAR economists missed the mark.
CAR predicted 333,000 homes would sell last year, a 7% drop from 2022. Statewide, sales actually fell 25%, dropping to fewer than 258,000 transactions. That's the state's smallest sales tally since 1982, and well below the yearly average of 400,000 home sales.
Prices, the CAR forecast added, would drop by almost 9%. Instead, the statewide median for an existing house was almost even with 2022, down a mere 0.6%.
The price collapse that was expected “didn't come true,” McLaughlin said. “What was most surprising was how quickly price growth came back.”
High mortgage rates were behind last year's contorted housing market, driving down both the number of buyers and the number of homes for sale.
After falling to all-time lows during the pandemic, the average rate for a 30year fixed mortgage rose to 6.8% in 2023 as a whole, Freddie Mac figures show. That's the highest annual average since 2001.
`No inventory'
With rates so high, fewer owners wanted to sell and trade their lower rates for higher payments. As a result, for-sale inventory plummeted.
California's “unsold inventory” was lower or as low as 2023 in just six other years since 1990, CAR figures show. In the Los Angeles metro area, 2023 had the seventh-lowest number of homes for sale.
In December, active listings in Southern California fell to a 12-year low of 36,449 homes for sale, according to online brokerage Redfin.
The decrease in sales made 2023 “a brutal year” for agents, said broker Michael Grady, Venice and South Bay managing partner for The Agency.
“There was no inventory. (Mortgage) rates moved so high,” he said. “We had agents who typically do five to six deals (a year) doing two or three deals. Everyone was off 30-50%.”
Kama Burton, brokerowner of CMB Realty Services in Moreno Valley, said 2023 was “challenging for buyers, sellers and all the way around for brokers.”
Home shoppers who had been “on the fence,” hoping for price drops, were disappointed when that didn't happen, she said. And owners who wanted to move often couldn't because their current interest rate was too good to lose.
“We were at a gridlock, making it harder to get transactions to come together,” Burton said. “There were a lot of deals that fell apart.”
The withdrawal of home insurers from the California market also confounded
some buyers and sellers. Burton had one condo deal fall apart because the homeowners association didn't have enough insurance. Other buyers pulled out of deals because the cost of insurance was too high for the home they were buying.
Now that 2023 is history, the market is showing signs of picking up, Grady and Burton said. January so far “has been nonstop busy,” he said.
Thirty-year mortgage rates have dropped by more than a percentage point since
October. Zillow's Bachaud noted that buyers who balked at 6.7% rates when interest was rising now find them attractive.
“Expectations have a huge impact on consumer behavior,” she said. “Now that we have seen 8% mortgage rates, the highest in two decades, rates ending 2023 between 6.5% and 7% didn't seem quite as scary to people.”
Price growth in 2024 should be closer to historical norms, she added, “not the extreme highs we saw just a few years ago or the roller coaster of ups and downs for prices we saw in 2023.”
That's not good news for priced-out buyers praying for a return to more affordable terms.
McLaughlin said wages need to rise and other economic conditions need to favor buyers before they can get their foot in the door. When that happens is anybody's guess, but a rough estimate shows it could be a while.
“It could be 15-16 years before we see conditions ease up for first-time homebuyers,” he said.