Southern California home prices hit a record in March amid sky-high mortgage interest rates, a combination that’s creating the most unaffordable housing market in a generation.
The average for the six-county region reached $869,082 in March, according to Zillow. That’s up 9% from a year earlier and 1% higher than the previous all-time high in June 2022.
With rates hovering in the upper 6% range, the mortgage payment on the average home now tops $5,500 — if you can put 20% down.
“It’s bananas,” Tommy Kotero, a 43-year-old refinery worker, said last weekend after touring a dated, $899,000 house in north Torrance with visible cracks in the ceiling and walls. “The asking prices for what we are getting is crazy.”
How home prices hit a record despite the high cost of borrowing is a tale of too few homes for sale, combined with a wealth gap that has equipped some buyers with reams of cash that negate the effect of high rates.
When interest rates first soared in 2022, buyers backed away en masse, inventory swelled and home prices dropped.
Then potential sellers all but went on strike, with many deciding they didn’t want to move and trade their sub-3% mortgages for a loan at more than double that rate.
Inventory plunged and enough buyers returned to send home prices back up. Many of these buyers are well-heeled first-timers who aren’t ditching a low-cost mortgage.
Others are holding on to their old home and buying another. Still more are selling their old home and turning their considerable equity into hefty down payments well over 20%.
“People who have cash are not paying too much attention to interest rates,” said Alin Glogovicean, a real estate agent with Redfin who specializes in northeast L.A.
He estimates that in about one-third of his deals a buyer is paying all cash. Another third put down at least 50%, with a mortgage on the rest.
At least two-thirds of the buyers with down payments of at least 30% aren’t investors but people who want to live in the home, he said. They are professionals such as architects and Hollywood types who have saved, liquidated stock portfolios, built up equity or received help from family.
Some are willing to dip into retirement savings — a strategy many financial experts advise against.
Nationally, similar trends are afoot, according to a Zillow survey, with the share of home buyers putting at least 20% rising, as well as those who received help from family and friends.
In all, 23% of L.A. County homes sold in February were bought with all cash, up from 16% in 2021, according to Redfin.
For those without access to a spare half-a-mill, times are tougher.
According to the California Assn. of Realtors, only 11% of households in Los Angeles and Orange counties could reasonably afford the median-priced house during the fourth quarter, the smallest number since the housing bubble of the mid-aughts.
At that time, risky lending practices allowed people to buy homes they couldn’t really pay for. Today, lending standards are far tighter, which economists say should prevent a similar collapse in prices if there’s another recession.
Across the region, home prices have now set records in Orange, San Bernardino, San Diego and Ventura counties. In Los Angeles and Riverside counties, prices are less than 1% from their all-time highs.
Agent Alicia Fombona of United Real Estate Pacific States works across the Southland — from the coast to the Inland Empire. Amid high rates and high prices, she said, one strategy that’s growing more popular is co-borrowing: family and friends coming together to buy a house or duplex to keep payments somewhat affordable.
“Everybody needs a place to live and there is not enough housing for everybody,” Fombona said.
More homes are starting to come onto the market, but inventory is still tight and expected to remain so, according to forecasters. Rates may drop somewhat but are expected to remain elevated.
That combination could create a scenario in which prices don’t soar but also don’t drop 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,” said Orphe Divounguy, a senior economist with Zillow.
If rates fell considerably, it would immediately make homes more affordable, but a new crop of buyers probably would flood the market and could put even more upward pressure on prices.
To help housing truly become more affordable, Divounguy said, there must be continued income growth and more housing construction.
“The way out of this is not going to come from mortgage rates,” he said.
In California, construction headed in the wrong direction in 2023, with building permits falling from the previous year, though lately there are signs of a rebound in single-family construction, which is mostly for-sale homes.
Some Californians, however, are on a timeline.
Kotero, the buyer looking in Torrance, currently rents a house in the city with his wife, Rikah, and their four children. But he said they need to find a new place by summer because the landlord is moving back in.
They’d like to buy and stay in Torrance for the schools but so far have struck out — even though Kotero makes $160,000 as a manager at a local oil refinery.
He said he and his wife were recently outbid, despite stretching their budget to offer $1 million for a house listed for $900,000.
Unlike others, the Koteros don’t have hundreds of thousands in cash to meaningfully offset high rates. Instead, Rikah, who currently stays home with the children, is thinking of looking for a job.
“If we are realistically looking to buy a home in Torrance, there’s no way around it,” Kotero said.
NEWBURGH, N.Y. — More than 20 people were forced from their homes following a fire in Newburgh on Tuesday, and one of the families credits their young son for getting them out before the flames took over.
Walls covered in ash, personal belongings destroyed, holes in the roof — that is what’s left of a family’s Newburgh apartment after a fire tore through two multi-unit homes.
“I came outside and I was like oh no,” neighbor Ashalya Geter-Robenson said.
Nine-year-old Anthony Trujillo tells us he was up late watching TV Monday night and fell asleep in the living room when he heard yelling from the apartment down below.
“I hear them downstairs saying, oh, there’s a fire,” he said.
The fourth grader quickly alerted his family.
“I got up. I rushed to my mom’s door and I slammed on her door, so and then I woke her up, and then my dad was like, ‘What happened?’ And then I told them it was a fire,” Anthony said.
“Do you feel like a hero, that you woke the family up?” CBS New York’s Zinnia Maldonado said.
“A little bit, yeah,” Anthony said.
Anthony’s grandfather, Jose Trujillo, tells CBS New York the fire started in the house next door along Carter Avenue and quickly spread to their home.
“It’s sad, you know, because we are struggling with this and the way it is, they lost everything — house, clothing,” Trujillo said.
Both buildings have been condemned, which means the families will need to find new homes.
City officials say the cause of the fire remains under investigation but is not considered suspicious. This marks the second fire in this neighborhood in just a little more than a week.
“It’s strange, too much stuff happening at one time,” a neighbor said.
On Easter Sunday, more than 30 people were forced from their Newburgh apartments after a raging fire spread from house to house on nearby Lutheran Street.
“What a coincidence — a fire around the corner, three houses, and then over here. That’s crazy,” a neighbor said.
Back on Carter Street, Geter-Robenson witnessed huge flames bursting from the back of one of the buildings.
“They said it was spreading, so there’s trees and vines growing to the house, so I knew if it got over here, it would be bad over here, so I started grabbing my stuff, putting it on the side,” she said.
Everyone on the block is just glad nobody was hurt.
“Everybody is fine. We can continue with our life, you know,” Trujillo said.
Newburgh officials report more than 20 people were displaced. The Red Cross is assisting some victims, while others say they are now staying with family as the search for a new home begins.