SoCal Home Sales in May: Worst Slowdown Since 2020 Amid Rising Interest Rates

Homes in Lake Forest, Calif., on June 6, 2019. John Fredricks/The Epoch Times

Real estate experts are saying a slowdown in Southern California home sales—by double-digits for the first time in two years—is the result of recent hikes in interest rates for home loans, indicating a cooling in the market.

Sales dropped by 14.3 percent in May, while the median home price increased by 11.9 percent compared with a year ago, according to the latest data released by the California Association of Realtors (CAR).

CAR President Otto Catrina said in the report that the housing market is now “more balanced”—with “fewer homes selling above list price and homes remaining on the market a little longer than in previous months.”

“What this tells us is that there is slightly more supply, fewer and less-intense bidding wars, and those who have experienced “buyers’ fatigue” may now have a window of opportunity,” Catrina said.

Among all Southern California counties, Orange County experienced the biggest decline in May, with home sales dropping by 22.6 percent from May 2021. Los Angeles County was the least affected by the rising interest rates, with its year-over-year home sales being down by 11.2 percent.

Homes await buyers in the city of Irvine, Calif., on Sept. 21, 2020. John Fredricks/The Epoch Times

In May, Los Angeles County sold 4,445 single-family homes with a median home price of $930,000, whereas Orange County only sold 1,882 homes with a median price of $1.2 million, according to data released by CoreLogic.

Across the country, the fixed interest rate for a 30-year mortgage averaged 5.23 percent in May, up from 2.96 percent in May 2021. The average interest rate for a 15-year mortgage has nearly doubled, up from 2.23 percent to 4.38 percent, according to the Federal Home Loan Mortgage Corporation.

With interest rates expected to surge past 6 percent nationwide by the end of the year, more potential homebuyers could face affordability challenges, CAR Vice President and Chief Economist Jordan Levine said in the report.

As the demand for homes is leveling off, nearly one in five U.S. home sellers dropped their price in May, according to a May 26 market update by real estate brokerage firm Redfin.

“The picture of a softening housing market is becoming more clear, especially to home sellers who are increasingly turning to price drops as buyers become more cost-conscious under higher mortgage rates,” said Redfin’s chief economist, Daryl Fairweather.

Is it a good time to buy a home now?

CAR’s monthly Consumer Housing Sentiment Index went down by 9 percent in May, indicating that more consumers became pessimistic about the housing market in terms of home affordability, among other aspects.

The index report showed that approximately 87 percent of the 1,000 people surveyed in California believe that it isn’t a “good time” to buy a home. On the other hand, 68 percent believe that it’s a “good time” to sell a home, and more than half think home prices won’t rise in the next 12 months.

Harry Zhu, a real estate agent at eXp Realty, told The Epoch Times that home prices may drop because the interest rate may rise again soon. He recommended that potential homebuyers wait for the market to cool down.

“There are always more home buyers than sellers. I don’t think this is the best time to buy a home,” Zhu said. “Homebuyers are facing a lot of challenges. As the interest rates continue to go up, I expect the home prices to plateau soon.”