Southern California home prices dipped in October for the third straight month, but values remain near all-time highs and unaffordable for most households.
Housing Market Trends
The average home price in the six-county region was $864,586 last month, down 0.4% from September and 1% below the record reached in July, according to data from Zillow.
Though prices have now fallen for three consecutive months, that doesn’t mean they will keep doing so. It’s not uncommon for home prices to fluctuate month to month, or dip starting in the late summer and fall due to seasonal patterns. Home prices are still nearly 4.5% higher than a year earlier in October 2023.
That said, the rate of home price growth is slowing, something many economists expected to happen given the mismatch between incomes and prices.
Home price growth peaked at nearly 9.5% in April and has declined every month since.
Housing Shortage
Helping to moderate price growth is a housing shortage that, while not going away, is getting slightly less severe.
In recent months, the number of homes listed for sale has steadily grown. Real estate agents say homeowners who once balked at giving up their ultralow mortgage rates from the pandemic and prior are increasingly choosing to move, deciding a larger home is more important than low borrowing costs.
In October, the number of homes on the market had risen in all six counties over the prior year, ranging from a 25% gain in San Bernardino County to 49% in San Diego County. In Los Angeles County, inventory climbed 33%.
Housing Prices by Cities and Neighborhoods in L.A. County
Average Home Price
$750k | $881k | $1.32M
Mortgage Interest Rates
Mortgage interest rates are another factor hammering affordability. Borrowing costs fell through the summer, but have been on the rise since October. As of Nov. 14, the rate on the popular 30-year fixed mortgage averaged 6.78% as of Nov. 7, up from 6.08% at the end of September, according to Freddie Mac.
Experts have attributed the rise to an economy that has been stronger than expected, as well as the policies former President Trump may institute upon taking office.
Expert Insights
Some experts have said they don’t expect home prices to decline in the near future unless there’s a recession. That’s because while inventory is improving, it’s still low historically. Prices, however, should climb more slowly, or remain relatively flat, giving incomes a chance to catch up.
However, Richard Green, director of the USC Lusk Center for Real Estate, cautioned it’s difficult to say what comes next, because it’s unclear which of Trump’s proposed policies will become a reality.
Explore Home Prices and Rents for October
Use the tables below to search for home sale prices and apartment rental prices by city, neighborhood, and county.
Rental Prices in Southern California
In the last year, asking rents for apartments in many parts of Southern California have ticked down.
Experts say the trend is driven by a rising number of vacancies, which have forced some landlords to accept less in rent. Vacancies have risen because apartment supply is expanding and demand has fallen as consumers worry about the economy and inflation.
Additionally, the large millennial generation is increasingly aging into homeownership, as the smaller Generation Z enters the apartment market.
Prospective renters shouldn’t get too excited, however. Rent is still extremely high.
In October, the median rent for vacant units of all sizes across Los Angeles County was $2,069, down 1.7% from a year earlier but 7.5% more than in October 2019, according to data from Apartment List.
Conclusion
Southern California home prices may have dipped, but they remain near all-time highs and unaffordable for most households. The housing shortage is easing, but mortgage interest rates are on the rise, further hammering affordability. It remains to be seen what the future holds, but experts caution that prices are unlikely to decline unless there’s a recession.
FAQs
Q: What is the average home price in Southern California?
A: The average home price in the six-county region was $864,586 in October.
Q: Why are home prices still high?
A: Home prices remain high due to a mismatch between incomes and prices, as well as a housing shortage that is slowly easing.
Q: Will home prices decline in the near future?
A: Some experts expect home prices to climb more slowly or remain relatively flat, giving incomes a chance to catch up. However, it’s difficult to predict what will happen, as it depends on the policies of former President Trump and other economic factors.
Q: What is driving the decline in rental prices?
A: The decline in rental prices is driven by a rising number of vacancies, which have forced some landlords to accept less in rent.
