Southern California home sales dipped in the month June, falling to the lowest reading for the month in the last four years. According to real estate analytics company CoreLogic, sales of both new and existing houses and condominiums dropped by 11.8 percent year-over-year.
The drop in sales bucked a historic trend of a 6% gain from May to June as sales fell by 1.1 percent. Contributing to the lackluster sales was less supply provided by homebuilders–as such, the sales of newly built homes was 47 percent below the June average.
“A portion of last month’s year-over-year sales decline reflects one less business day for deals to be recorded compared with June 2017,” said CoreLogic analyst Andrew LePage. “But affordability and inventory constraints are likely the main culprits in last month’s sales slowdown, which applied to all six of the region’s counties and across most of the major price categories.”
With the latest interest rate spikes by the Federal Reserve, the blame in sales could also be allocated to rising mortgage rates according to LePage. Higher rates equal to higher mortgage payments for a Southern California real estate market that is already pricing out would-be homebuyers.
Median prices in Southern California have risen to $536,250 in June–up $6,250 from the previous month.
“Sales below $500,000 dropped 21 percent on a year-over-year basis, while deals of $500,000 or more fell about 3 percent, marking the first annual decline for that price category in nearly two years,” said LePage. “Home sales of $1 million or more last month rose just a tad – less than 1 percent – from a year earlier following annual gains of between 5 percent and 21 percent over the prior year.”
History shows that California, one of the largest housing markets in the United States, has been a reliable predictor of the nation’s housing market in general. As a result of a constriction in housing supply, home prices have been rising throughout the U.S. According to data from the National Association of Realtor, the supply of homes up for sale increased annually in June for the first time within the last three years.
Real Estate ETFs Decline
Meanwhile, if slumping sales in Southern California are indeed a barometer for real estate in general, then real ETFs responded accordingly. Three of the largest real estate ETFs with respect to total assets were down as of 2:30 p.m. ET–Vanguard Real Estate ETF (NYSEArca: VNQ) was down 0.61%, Schwab US REIT ETF (NYSEArca: SCHH) was down 0.72% and iShares US Real Estate ETF (NYSEArca: IYR) was down 0.59%.
For more ETF trends in the real estate sector, click here.