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January 17, 2020

Buyer competition fuels 16% jump in Southern California house sales

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A recent rebound in the Southern California housing market took off with a vengeance in December, thanks to the double whammy of low mortgage rates and a drop in the number of homes for sale, new data from the California Association of Realtors shows.

Sales jumped 32% in Orange County from year-ago levels and rose between 12-15% in the rest of the region, CAR economists reported Friday, Jan. 17. Regionwide, transactions increased 15.6%.

Big percentage gains were attributed to a sales rebound from low demand a year ago when 30-year mortgage interest rates were close to 5%. Rates have been at or below 3.75% for the past 2 ½ months, boosting a home shopper’s buying power and bringing more homebuyers back into the market.

But December also saw unseasonably high price gains as Southern California listings fell to their lowest level in two years.

The median price of a Los Angeles County house — or price at the midpoint of all sales — hit $641,340 last month, the county’s third-highest level on record. In Orange County, the median totaled $840,000, second-highest on record.

San Bernardino County’s median house price hit $320,000, its highest price since the housing bubble in June 2007. Riverside County’s median house price was $420,000 in December, CAR figures show.

The regionwide median increased 10% from December 2018, the biggest gain among in California.

“With housing supply dropping, … California experienced an unusual jump in its median price at the end of the year when the market is supposed to cool down,” said CAR Chief Economist Leslie Appleton-Young.

Low mortgage rates already spurred a rebound in the state’s housing market during the summer.

But in the past year, Southern California’s for-sale inventory fell to 2.8 months – meaning it theoretically would take 74 days to sell all the homes on the market, versus 123 days in December 2018.

Last month’s “surge in price is a byproduct of the imbalance between supply and demand as market competition continues to heat up,” Appleton-Young said.

Statewide, sales increased 7.4 percent in December, to almost 398,000 transactions, down 1.2%. It’s the second year in a row of sales declines.

The median price of an existing California house rose 10.3% in the past year to $615,090, the second-highest statewide median on record, CAR figures show.

For 2019 as a whole, California’s median price was up 4% from 2018; Southern California’s 2019 median was up 3.7% from the year before.

Falling mortgage rates and increased demand also triggered a nationwide jump last month in housing starts, new federal figures released Friday show.

The U.S. Commerce Department reported construction starts jumped nearly 41% last month, climbing to a seasonally adjusted annualized rate of 1.6 million new homes.

That’s the highest rate of construction since December 2006, commerce department numbers show.

Construction of single-family homes rose 29.6% from December 2018 levels to an annual rate of 1.06 million homes last month, while apartment construction fell 2.3% from year-ago levels.

For the year as a whole, builders started work on 1.29 million homes. That’s up 3.2% from the previous year and was the best showing since 1.36 million homes were built in 2007, during the housing boom.

Applications for building permits, an indicator of future activity, rose 5.8% year over year to an annual rate of 1.42 million, commerce department figures show.

— The Associated Press contributed to this report.

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