Southern California Housing Market Continues to Cool, Sees Yearlong Price Decline
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Southern California’s housing market experienced a continued slowdown in December, marking the end of a year-long skid that saw average home values fall by over $7,000 across the six-county region. The latest data signals a significant shift in the market dynamics, impacting both buyers and sellers.
According to data from Zillow, the average home price in Southern California fell to $854,993 in December. This represents a 0.1% decrease month-over-month and a 1.3% decline year-over-year, landing home values at their lowest point since March 2024.
Factors Contributing to the Downturn
Several factors are converging to dampen the Southern California housing market. High mortgage rates remain a primary obstacle for potential buyers, while a rising inventory of homes for sale is giving buyers more options and reducing competitive pressure. Adding to the complexity is broader economic uncertainty, fueled in part by ongoing tariffs and geopolitical concerns.
“The market is noticeably downshifted,” one analyst noted, highlighting the confluence of these challenges.
The current decline follows a brief period of price increases in late 2023. Until recently, July 2023 was the last time year-over-year prices had fallen. At that time, rising mortgage rates were already beginning to sideline potential buyers. A temporary surge in values occurred when the number of homes for sale plummeted as existing homeowners, reluctant to relinquish their historically low mortgage rates secured during the pandemic (around 3% or lower), chose to stay put.
Shifting Seller Sentiment and Buyer Challenges
However, real estate agents are now observing a change in seller behavior. Increasingly, homeowners are prioritizing life changes and deciding to move, even if it means giving up those advantageous mortgage rates.
“Homeowners are increasingly wanting to take the next step in their lives and are deciding to move,” a real estate agent stated.
Despite this increase in inventory, many first-time buyers remain effectively locked out of the market due to a lack of accumulated equity. This creates a challenging dynamic where sellers are willing to list, but a significant portion of the potential buyer pool is unable to participate.
The possibility of a recession, potentially triggered by policies from the Trump administration, further complicates the outlook. Some economists warn that home prices could experience even more substantial declines if the economy falters.
Los Angeles County Market Snapshot
In Los Angeles County, the holiday season saw a notable pullback from sellers. The number of homes listed for sale decreased by 9% in December compared to November, totaling 16,655 properties. New listings also experienced a significant drop, falling 19% to 3,520 homes.
Looking Ahead: Zillow’s Forecast
Despite the recent downturn, Zillow is currently forecasting that the economy will avoid a recession. The real estate firm anticipates a modest increase in home prices over the next year, projecting a 1.2% rise both nationally and specifically in the Los Angeles area.
Rental Market Trends
The rental market in Southern California is also experiencing shifts. In December, the median rent in Los Angeles dropped to $2,167, the lowest level since January 2022. Rents have now declined for five consecutive months, with the downward trend most pronounced across Los Angeles County. However, Orange and Ventura counties have bucked the trend, experiencing slight year-over-year increases in rental rates.
The Los Angeles Times’ Real Estate Tracker will continue to provide monthly updates on housing prices, mortgage rates, and rental costs, offering insights into the evolving real estate landscape of Los Angeles and surrounding areas. Readers can access previous reports to gain a comprehensive understanding of market trends. “.
