Thanks to a combination of high mortgage rates and decreased affordability, the Southern California housing market has taken a hit with the number of home sales, new and existing, dropping to a level not seen in over a decade.
Based on data from real estate analytics company CoreLogic, the number of new and existing homes sold during the month of September fell by 18% compared to the same time a year ago. Not since September 2007, when the after-effects of the financial crisis were bubbling over, has home sales fallen by this much.
Data from the National Association of Realtors show that the Quarterly Housing Affordability Index has been dropping thanks to a rise in median home prices.
Affordability is even more out of reach with respect to the Southern California housing market with the California Association of Realtors saying that the median home price topped $600,000 during the summer–its first time ever.
“You can blame the Bay Area and other red hot high-cost areas for the increase,” said Capital Public Radio News contributor Drew Sandsor in an article. “There are now five counties out of the nine-county Bay Area where the median price is above a million dollars. And that could go higher looking at demand, which has led to many bidding contests”
Rates Up, Affordability Down
Since hitting a peak in January, the housing affordability index has been on a downward trajectory, which could go even lower as the Federal Reserve continues its rate-hiking path, which is expected to run through the end of the year and possibly most of 2019. Just last month, the Fed increased the federal funds rate for a third time this year by 25 basis points, bringing it to 2.25.