Forget sky-high mortgage rates — Southern California buyers flush with cash have pushed home prices to an all-time record.
The price for a typical home across the six-county region in March was $869,082, a 9 percent increase from a year earlier, the Los Angeles Times reported, citing figures from Zillow.
That’s 1 percent higher than the previous record in June 2022.
With interest rates clocking in the upper 6 percent range, the monthly mortgage payment on the average home now tops $5,500, after a 20 percent down payment.
Home prices hit a record high despite the high cost of borrowing because of too few homes for sale and a wealth gap with some buyers holding bags of cash who can bypass the soaring rates.
When interest rates first spiked in 2022, buyers retreated, inventory piled up and home prices fell. Then the would-be sellers stalled, with many deciding they didn’t want to move and give up their sub-3 percent mortgages for costly loans.
Inventory plunged and enough buyers returned to send home prices back up, according to the Times. The new buying pool: wealthy first-timers who aren’t forsaking a low-cost mortgage.
Others are keeping their old home and buying another.
Or they’re selling their old home and shoving their considerable equity into down payments well over 20 percent.
“People who have cash are not paying too much attention to interest rates,” Alin Glogovicean, an agent with Redfin who specializes in northeast L.A. He estimates a third of his deals include all-cash buyers, with another third plunking down at least 50 percent to launch a mortgage loan.
At least two-thirds of the buyers with down payments of at least 30 percent aren’t investors, he said, but people who want to live in the home — often professionals such as architects who have saved, liquidated stock portfolios, built up equity or received help from family.
Some are willing to break retirement nest eggs, an ill-advised strategy, according to financial experts.
Some 23 percent of Los Angeles County homes sold in February were bought with all cash, up from 16 percent in 2021, according to Redfin.
Across the region, home prices have set records in Orange, San Bernardino, San Diego and Ventura counties. In Los Angeles and Riverside counties, prices are less than 1 percent from their all-time highs.
Only 11 percent of households in Los Angeles and Orange counties could afford a median-priced house during the fourth quarter, the smallest number since the housing bubble of the mid-2000s, according to the California Association of Realtors.
While the number of listed homes has risen, inventory is still tight and expected to remain slim, according to forecasters. Rates may dip, but are expected to remain elevated.
Going forward, that may mean prices won’t soar but also won’t fall much — if at all, especially because incomes for many households are growing.
“We are going to continue to see robust price growth, but nothing near where we were in the pandemic,” Orphe Divounguy, a senior economist with Zillow, told the Times.
If interest rates plunge, homes would become more affordable, but a new wave of buyers could flood the market and put more upward pressure on prices.
To help housing truly become more affordable, Divounguy said, there must be housing construction and continued income growth. “The way out of this is not going to come from mortgage rates,” he said.
Across the state, home construction fell last year, with fewer building permits from the previous year, according to the Times, though there are signs of a turnaround in single-family construction of for-sale homes.
— Dana Bartholomew
