46% sales slide is historic low

Southern California homebuying remains on ice with sales nearly halved in a year to a record-breaking slow pace.

Buyers closed 13,201 sales of existing and new single-family houses and condominiums in April, down a stunning 46% in a year, according to CoreLogic. It was the third biggest, year-overyear drop in records dating to 1988.

The local housing market continues to be throttled by high mortgage rates, suffering its slowest-selling April in 35 years. It also was the 18th worst sales total of any month over that same timeframe.

Consider how widespread this cooldown runs across the region's six counties in terms of April's one-year sales drop. San Bernardino was off 68%, Ventura 59%, San Diego 52%, Los Angeles 39%, Orange 35% and Riverside 39%.

Please note that my trusty spreadsheet tells me this slump was no short-term dip.

In the year that ended in April, 182,593 Southern California homes sold the lowest 12-month total since the 2008 market crash. Only seven other 12-month periods — all during the 2007-08 market crash — had fewer sales in the past 35 years.

So why so few sales? Let's look at five reasons behind the drastic dip. • No. 1: Too costly. Home prices — at least as measured by the median selling price — remain stubbornly high.

April's six-county median was $735,000 — up 4.3% in a month. It's only down 2% in a year and off 3% from the record high of $760,000 set in May 2022.

Consider April's oneyear dips by county: San Bernardino was down 8% to $455,000, Los Angeles down 7% to $800,000, Orange down 6% to $988,000, Riverside down 4% to $549,500, Ventura down 4% to $774,000 and San Diego was down 2% to $805,000.

• No. 2: Pricey mortgages.

In March 2022, the Federal Reserve started its efforts to use pricey financing to chill an overheated economy. So mortgage rates skyrocketed.

Think about what that means to a typical homebuyer's house payment.

April's pricing equals a $3,655 monthly cost, assuming the average 6.34% mortgage rate and a 20% downpayment. That's up 14% from a year ago when rates were 4.98%, and a budget-busting jump of 88% from December 2020 when rates hit the historical low of 2.67%.

• No. 3: Low affordability.

Surging costs have pruned the number of people who qualify to buy.

A Southern California household in the first quarter needed to earn $178,400 annually to buy a median-priced, singlefamily house, according to the California Association of Realtors affordability index. If that eye-catching estimate of local homebuying's income requirement isn't painful enough, consider this: it's up 22% in a year.

As a result, only 19% of Southern Californians can afford to buy — down from 24% a year ago and 29% in 2021. And put an eyeball on affordability, county to county: Orange (12%), San Diego (15%), Los Angeles (17%), Ventura (17%), Riverside (22%), and San Bernardino (30%).

• No. 4: Little to buy. House hunters have few options for a host of reasons.

Many homeowners aren't selling because they can't afford another house or don't want to give up the low mortgage rate they got during the Fed's cheap money days of the pandemic era. Or owners decided to rent out a home they might otherwise have sold.

Thin inventory, as measured by a Realtor supply index, equals Southern California with 2.5 months' worth of single-family houses for sale for every house bought — 34% below average since 2008.

San Diego's supply shrunk the most, down 54% from the norm. Then came Ventura and Orange off 50%, Los Angeles off 37%, Riverside off 36% and San Bernardino off 28%.

• No. 5: Building bust. Builders' inventory of ready-to-sell houses was gobbled up in the winter, so developers are scrambling to catch up with demand.

Across Southern California, just 1,038 new homes sold in April, a 39% drop in a year. New homes remain a small slice of what's bought — with just 7.9% of all sales for the month, down from the 8.6% share averaged in the past 10 years.

That slip was true everywhere but in Riverside County where new homes' 14.3% share in April was up from its 13.7% 10-year average.

Elsewhere, Orange County's 10.2% share was below its 11% average, San Diego's 7% was down versus 7.7%, San Bernardino's 8% versus 10.3%, Los Angeles' 3.8% versus 4.8% and Ventura's 3% versus 5.4%.

Bottom line

Southern California homebuying continues to run extremely chilled.

Closings are running at a historically lethargic pace because demand has crashed.

First-time buyers are financially challenged. The “move-up market “— current owners seeking a new place — have too many reasons to stay put. And investors are on the sidelines thanks to pricey financing and iffy appreciation opportunities.

This dynamic won't change anytime soon.

Think about pending sales, a solid yardstick of future closed sales counts. In April, 11,682 sales contracts for existing homes were signed in the six-county region, according to Zillow. That's 19% below a five-year average.

And remember, this is supposedly prime homebuying season.