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High prices are hitting the Southern California housing market hard, reversing the sales gains over the past few months.
Sales fell 6.9% in June compared with May and were down 8% annually, according to CoreLogic. That is the slowest June pace since 2014. Historically, sales usually gain an average 5.8% from May to June.
Sales have been falling on a year-over-year basis for 11 straight months, but the drops had been shrinking in April and May. Mortgage rates also fell more than 50 basis points over the past three months, making the decline in sales even more surprising.
"Thanks to lower mortgage rates, many home shoppers face slightly lower monthly mortgage payments than they would have a year ago. Despite that and a healthy economic backdrop, the market was sluggish, suggesting many would-be buyers remained priced out or concerned about buying near a possible price peak," wrote Andrew LePage, a CoreLogic analyst, in a release.
LePage noted one caveat — that there was one less business day in June compared with a year ago. Even with that adjustment, however, sales would have come in 5% lower annually.
The culprit is clearly prices. The median price for all Southern California homes sold in June rose to a record $541,250, up 1.2% compared with a year ago. That is the smallest June gain since 2011.
Over the past six months, the annual price gain has been pretty small, from 0.3% in March to 1.3% in January. Price appreciation nationally had been slowing this year, as more homes came on the market and supply gained. That supply, however, is turning lower again now, and re-heating prices.
Sales of newly built Southern California homes in June were nearly 47% below their historical average for the month. That is due to far lower housing starts and available new homes for sale. The single-family homebuilding business has still not recovered, despite strong demand for housing.