The following is a quick review of important events that took place this year which affected the Real Estate Market.
Market cools as mortgage rates soar.
Southern California home prices fell in November, marking the fifth time in six months that prices declined amid a slowdown in the housing market. Rates have more than doubled in the last year and topped 6% for the first time since 2008. The steep rise in borrowing costs adds more than $1,000 to the monthly payment for a median-priced home of $777,5000 — a cost many can’t afford.
Given strong demand in early 2022 — before rates jumped — home prices are also higher than this time last year. That, along with higher mortgage rates, means housing is much more expensive compared with winter 2021.
Here is how home prices changed last month in each of the six Southern California counties.
- Los Angeles County’s typical home price fell 0.5% from October to $842,752 last month. Prices are now 6.3% lower than the county’s peak reached in May.
- Orange County’s typical home price fell 3.4% from October to $1,014,194 last month. Prices are now 8.6% lower than the county’s peak reached in May.
- Riverside County’s typical home price fell 0.5% from October to $599,428 last month. Prices are now 4.6% lower than the county’s peak reached in June.
- San Bernardino County’s typical home price fell 0.6% from October to $523,830 last month. Prices are now 3.5% lower than the county’s peak reached in June.
- San Diego County’s typical home price rose 0.1% from October to $877,278 last month. Prices are now 7% lower than the county’s peak reached in April.
- In Ventura County, the typical home price rose 1.2% from October to $837,891 last month. Prices are now 3.9% lower than the county’s peak reached in May.
Innovation doesn’t pay the bills
This year also saw the capitulation, for the most part, of iBuyers, who thought algorithmically driven instant home buying would revolutionize the process. The pitch was: Want to sell your home? We’ll use machine learning to make a fair, instant offer and guarantee a quick closing, in exchange for fees of between 6 and 10 percent.
Companies like Opendoor, Zillow, and Redfin got in on the act, with Zillow CEO Rich Barton going as far as to call iBuying an “existential threat” to his business and saying that Zillow risked becoming obsolete if didn’t get with the program. Then, reality hit: Zillow lost $900 million on iBuying and quit the game late last year as its stock took a beating. Last month, Redfin followed suit. Opendoor and Offerpad are still standing, but look out on their feet.
It was the best of times, it was the shortest of times. The rise of crypto led to the emergence of a buyer pool that made so much money so quickly that it became a boon for developers, particularly in crypto hubs Miami, New York, and Los Angeles.
Then came the November collapse of Sam Bankman-Fried’s FTX, the second-largest cryptocurrency exchange. Its rapid and spectacular demise rocked the industry and is being called “crypto’s Lehman moment.” It remains unclear how developers will untangle any in-process crypto deals being processed through FTX. And cryptonaires who held much of their net worth in digital currencies may find they no longer have the budget for real-world real estate.
Sources: LAtimes.com, Therealdeal.com, Ocregister.com.