During the summer is usually the peak season for real estate sales, but this summer in Southern California, the real estate market is a bit “cold”. Adding to this, on Wednesday, the Federal Reserve raised interest rates by another notch, which could further worsen the situation in the real estate market.
Currently, the average contract interest rate for a 30-year fixed-rate mortgage for buying a house has exceeded 7%. According to senior real estate broker Gong Zhu Yun in San Diego, for a loan of $500,000, the monthly repayment amount would be $3,500. Many homes in the market require loans far more than $500,000, adding even more pressure on repayments.
Gong Zhu Yun noted that he has observed a rise in “short sale” properties on the market this year, where the bank agrees to sell the property for less than the outstanding loan amount. The number of short sale properties this year is significantly higher than in the past two years, and bank foreclosures are also on the rise, indicating that many people are still under significant economic pressure.
Real estate broker Huang Andi in San Gabriel Valley, Los Angeles County, mentioned that while it’s not the slowest summer in the past decade and there are still transactions happening, the market feels noticeably different compared to previous years. Open house events that used to attract large crowds at the sight of a new listing have become less common.
Miss Zhang, a senior real estate broker in Los Angeles County, also noted that sales have been declining since June this year. She stated that it’s currently a buyer’s market, where buyers can negotiate prices and sellers are willing to lower their asking prices, leading to an overall downward trend in the real estate market.
In San Diego, Gong Zhu Yun explained that there are fewer homes listed compared to last year, and there are also fewer buyers in the market. While prices in good neighborhoods are holding up, areas with less desirable living environments or school districts are seeing a general decline in housing prices.
Especially in the condo market, prices have been continuously dropping. Gong Zhu Yun attributed this to weaker purchasing power among condo buyers or young couples just starting out, coupled with high mortgage rates and expensive homeowner association fees that often exceed $500 per month. As a result, condos are becoming harder to sell.
Gong Zhu Yun further added that it’s become common for a $1 million property to be discounted by $50,000 if it hasn’t attracted any buyers after a month.
There has also been a shift in the real estate market where buyers from mainland China, once a significant presence in cities like California and New York during the peak of the market, are now rare. Gong Zhu Yun recalled that during the peak, Chinese buyers accounted for over 2% of total buyers in cities like California and New York. However, this year, he has hardly received any inquiries from Chinese buyers.
Data from the California Association of Realtors (C.A.R.) regarding the average prices of existing detached single-family homes show that in June, July, and August, there were significant monthly and yearly declines in both Los Angeles and San Diego counties, indicating a slowdown in sales.
In August, the median price for detached single-family homes in Los Angeles County was $946,900, higher than last year’s $930,700. In comparison, San Diego’s median price in August was $1.09 million, up from $1.025 million last year.
San Gabriel Valley, known as a residential area for the Chinese community, particularly Arcadia referred to as the “Beverly Hills for Chinese”. Huang Andi mentioned seeing a luxury home in Arcadia with an original listing price of around $4 million last year that has since dropped by $900,000. Many other houses that initially had no interest upon listing have gradually reduced prices by $100,000 to $300,000.
However, Chinese families generally prioritize school districts; properties in good school districts continue to hold strong prices. Huang Andi noted that homes in neighborhoods with good school districts continue to sell well. These homes are well-maintained, within mature communities, and attract a lot of buyer interest.
This trend holds true in San Diego as well. Gong Zhu Yun revealed that homes in good school districts, such as those in the 92130 zip code area, usually sell within two weeks with close-to-list sales prices, or even in bidding wars where the final price could exceed the listing price.