Southern California home sales plunged in November as prices stayed flat, continuing a cooling trend that started this summer.
But experts expect a jolt in prices soon.
Home prices “will start rising again in the spring, because that’s when demand heats up,” said Christopher Thornberg, founding partner at Beacon Economics.
The regional median home price, $385,000 in November, has stayed essentially the same since June after a rapid run-up in prices in the first half of this year, according to San Diego research firm DataQuick. Most economists expect prices to rise again next year, though at a slower pace. Mortgage rates are also expected to rise next year, especially if the Federal Reserve pulls back on its stimulus program.
Both trends could add up to higher costs for home buyers, who already have been priced out of many local markets. Higher interest rates could temper prices slightly, but aren’t likely to curtail demand much, said Leslie Appleton-Young, chief economist for the California Assn. of Realtors.
“People are kind of used to it and expecting it,” she said.
A recent string of positive national economic data has also boosted optimism that the housing market will move toward a more sustainable recovery. Many economists now forecast that the nation’s economic growth rate will rise to 3% in 2014, compared with a 2% average annual pace for the last 41/2 years.
“A stronger economy equals more jobs, which equals more household formation, which equals more potential home buyers,” Appleton-Young said.
For now, the housing market is muddling through the traditionally slower fall season. Many buyers put off their home search around the holidays.
November prices remained essentially flat for the fifth straight month, inching up just 0.3% from October, DataQuick said Monday. But the median is still 19.9% higher than last year because of rapid price gains last winter and spring, driven by low supply and high demand, particularly from investors.
The current slowdown has been partly seasonal. Buyers scooped up 17,283 new and resale condos and houses in November, down 14.2% from October. But sales were also 10.4% below November 2012.
Sales were 19.8% below average for November, DataQuick said.
Sales were held back by waning investor demand and a continuing shortage of homes for sale, particularly at the lower end of the market. The partial government shutdown in October may have also hurt November real estate closings, the research firm said.
Absentee buyers — mostly investors as well as some second-home buyers — purchased 26.1% of Southland homes last month, down from 27.1% in October and 28.7% in November 2012. Higher prices have made those investments less attractive. The declining availability of distressed properties has also given investors fewer options.
Foreclosed-on homes constituted 6.3% of resales in November, down from 15.4% last year, DataQuick said. Short sales — or sales for less than the amount owed on the home — also declined.
Even if prices start to rise again next spring, the market will be more tame than last spring, with fewer cash buyers and bidding wars, economists said.
“It will be a calmer experience for buyers, but of course a more expensive one,” said Jed Kolko, chief economist with real estate firm Trulia.
The California Assn. of Realtors forecasts that the number of listings will expand next year. An increasing number of owners will list homes for sale because they no longer owe more on their mortgages than their homes are worth, the trade group said.
The increasing supply is one reason that the group expects the statewide median price, based on its data, to rise 6% next year, compared with 28% in 2013.
“It’s going to be a slower price appreciation,” Thornberg said. “That is a good thing.”
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Times staff writer Shan Li contributed to this report.
