Stephen Jackson has lost more than a dozen properties as House prices surged during the pandemic housing boom. He finally canceled his search in 2021 when someone outbid him for a $25,000 Tarzana condo — and paid in cash.
“I was like, ‘I’m never going to have a home here,’” the 31-year-old human resources director said.
Last year, mortgage rates skyrocketed, making sky-high prices even less affordable and driving down home sales.
When his roommate decided to move out in October, Jackson opted to look again, this time in search of offers swirling in the riptides of the real estate fallout.
Last month, he made an offer on a two-bedroom condo in downtown LA that had been languishing on the market for 72 days. At $20,000 below the list price of $450,000, his offer – the only one – was accepted.
“All my friends were shocked that I bought a house right now, and I was like, ‘Why wouldn’t you? ‘” Jackson said.
Demand for homes is a far cry from the peak of the pandemic housing boom, but Southern California real estate agents and mortgage brokers say they’ve seen more and more people like Jackson dip their toes into the market to enjoy momentary moments. opportunities.
Mortgage rates – while high – slipped off their highs of 7% and house prices fell as sellers struggled to secure offers.
In LA County, in the four weeks ended Feb. 5, the number of purchase contracts signed was 42% lower than the same period last year, according to data from real estate brokerage firm Redfin. Still, that’s an improvement from the 51% decline seen in early December.
“The temperature in the room is still cold,” said Taylor Marr, economist at Redfin. “But it’s not frozen.”
It is unclear whether the modest rebound will hold. Returning buyers may need to adjust quickly to what they can afford.
Over the past two weeks, mortgage rates – heavily influenced by inflation – have resumed their ascent following economic reports indicating that inflation will be harder to bring down than expected.
The average for a 30-year fixed mortgage rose to 6.32% for the week ended Wednesday, from 6.09% two weeks earlier, according to Freddie Mac, the government-backed mortgage buyer. A daily tracker from industry publication Mortgage News Daily puts the average even higher: 6.8% on Friday.
A mortgage broker said he noticed a “huge drop” in demand as rates rose last week, while other brokers and agents said they saw buyers moving forward undeterred.
For potential buyers paying 20%, the monthly mortgage payment on an $800,000 home would cost about $100 more with an interest rate of 6.32% than with 6.09%. But the 6.32% payout is $322 lower than the 7.08% payout, where rates peaked in the fall, according to Freddie Mac.
Falling home prices help offset some of the pain caused by high rates.
Overall, LA County home prices have fallen 3% to 14% since peaking in prices last year, according to a review of various platforms that track prices in different ways. Also, with less competition, sellers are more likely to pay for repairs or cover a buyer’s closing costs. Some will redeem a buyer’s interest rate.
Tressa Pope, founder of TPG Mortgage Lending in Burbank, said people using down payment assistance programs have also been lucky. When competition was fierce, sellers often refused to consider these buyers, fearing that paperwork would bog down transactions.
Not everyone can or wants to jump into the market now.
Dana Robinson, a 46-year-old freelance writer, and Scott Rowden, a 44-year-old video editor, rent an apartment in Sherman Oaks and want to buy a house in the neighborhood to build up equity and give their 2-year-old daughter a garden .
But with nearby homes typically listed at over $1.5 million, the dream is out of reach. The couple hope to start looking late this summer or early fall. By then, prices will ideally have come down enough for them to stretch their buying budget.
“If it’s not, we’ll push it back,” Robinson said.
These ongoing affordability challenges are a key reason some experts predict that home prices in Southern California will continue to decline.
Although mortgage rates fell 7%, they remain above 6%, about double the level that helped push home prices to all-time highs.
“Affordability still looks very bad at 6%,” said Rick Palacios Jr., research director at John Burns Real Estate Consulting.
The consultancy expects rates to average around 6% for the remainder of 2023. By the end of the year, it predicts LA County home prices will have fallen as a percentage of a ‘high number’ from December 2022 – a time when the company’s home price index had already recorded a 5% decline from the peak.
Jeff Tucker, an economist at Zillow, said it’s possible house prices have already bottomed out. Inventories are very low and a slight increase in demand could be enough to push prices up, he said.
On the other hand, higher mortgage rates could crush what was a modest rebound.
In the week ended February 10, applications for mortgages in the United States – precursors to home sales – fell from the previous week as rates rose, according to the latest data from the Mortgage Bankers Assn.
“Potential buyers remain quite sensitive,” Joel Kan, an economist at Mortgage Bankers Assn., said in a news release announcing the data.
Given the uncertainty, potential buyers have a lot to think about. If they buy now and prices continue to fall, they might not have enough equity to sell and could be vulnerable to foreclosure if they lose their jobs.
Jeff Lazerson, president of Mortgage Grader in Laguna Niguel, said he believes buyer nervousness is the reason many deals fall apart in receivership.
“They’re worried,” Lazerson said of the buyers. “It’s, ‘If I wait six months, will the price be lower?’”
Los Angeles Times
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