Southern California home prices were essentially unchanged in January, with high mortgage rates keeping a lid on values.
The average home price in the six-county region clocked in at $828,303 in January, up $28 from the prior month, according to data from Zillow. It was the first increase since October, but represented a gain of only 0.003%.
In Los Angeles and Ventura counties, prices fell slightly, while they rose slightly in Orange, Riverside, San Bernardino and San Diego counties. All changes were less than 0.3%.
Economists say home prices are more or less stuck in neutral. High mortgage rates have limited how much buyers can bid up the cost of housing, while tight inventory and a still-growing economy have kept prices from plunging.
The result is a stubbornly unaffordable housing market, but one that’s not getting that much more so.
According to the California Assn. of Realtors, only 11% of households in Los Angeles and Orange counties could afford the median-priced house during the fourth quarter, compared with 19% of households in Riverside County and 24% in San Bernardino County. Those figures are nearly identical to the prior quarter.
A major factor in today’s costly housing market is mortgage interest rates.
When mortgage rates first surged in 2022, home prices fell in response as buyers pulled away and inventory swelled. But prices started rising again last year as homeowners increasingly chose not to sell, unwilling to give up their rock-bottom mortgage rates on loans taken out before and during the pandemic.
In most counties, home prices are near their all-time peak despite some recent small declines. In Orange County, prices have never been higher.
In Los Angeles County, prices are 6.2% higher than a year earlier and 2.7% below their peak in June 2022.
Note to readers
Welcome to the Los Angeles Times’ newly launched Real Estate Tracker. This page will be updated every month with data on housing prices, mortgage rates and rental prices. Our reporters will explain what the new data mean for Los Angeles and surrounding areas and help you understand what you can expect to pay for an apartment or house.
Prospective buyers have received a sliver of good news in recent weeks. Mortgage interest rates have fallen below 7%, giving them a bit more buying power than when rates neared 8%.
Last month, the number of new listings that came on to the market in Los Angeles County was 7% higher than January 2023, the first annual increase since 2021. Similar gains were seen in other counties.
“At some point you have to make a move,” said Orphe Divounguy, a senior economist with Zillow. “I think that interest rate lock is starting to wear off.”
A better sense of where the market is headed will be clearer in coming months. Spring is usually a busy time to buy and sell a home, and part of the lack of recent price increases can be attributed to seasonal factors.
Richard Green, director of the USC Lusk Center for Real Estate, said what happens will depend on where mortgage rates go from here. If rates surge, which he considered unlikely, prices would probably fall again. If rates stay the same, prices should remain steady.
Perhaps the best case for buyers would be the following scenario Green put forth: Mortgage rates fall below 5%. Buyer demand surges, but it’s met with an equal surge of supply as homeowners with rock-bottom mortgage rates finally relent and sell.
“House prices stay the same and that lower mortgage rate should improve affordability a lot,” Green said.
But other scenarios could play out too. Falling mortgage rates could bring on more buyers than sellers, driving prices up.
The Mortgage Bankers Assn. also predicts the average rate on a 30-year fixed mortgage to end 2024 at 6.1% and to fall only to 5.5% by the end of 2025.
Overall, Zillow expects home prices in January 2025 to be 4.5% higher than last month in the Inland Empire counties of Riverside and San Bernardino. Across Los Angeles and Orange counties, prices are predicted to climb 2.6%.
Divounguy said Zillow’s price forecast reflects an expectation that a small drop in mortgage rates this year will bring out slightly more buyers than sellers, putting home price growth inline with its historic averages.
“We are not going to see big jumps up and down,” he said.
If the Federal Reserve’s actions to tame inflation push the economy into recession, home values could see a sustained drop as people default on their loans.
There’s been growing optimism that the country will avoid an economic downturn, but a hotter-than-expected inflation reading for January raised the prospect that the Fed won’t change course as quickly as some investors hope.
Explore home prices and rents for January
Use the tables below to search for home sales prices and apartment rental prices by city, neighborhood and county.
Rental prices in Southern California
In recent months, asking rents in many parts of Southern California have ticked down, providing at least some relief for those seeking apartments or rental homes.
Experts say the trend is driven by a rising number of vacancies in the region, which have forced some landlords to accept less. Vacancies have risen because apartment supply is expanding and demand has dipped as consumers worry about the economy and inflation.
The large millennial generation is also increasingly aging into homeownership, as the smaller Generation Z enters the apartment market.
Prospective renters may not want to get too excited, however. Rent is still extremely high.
In January, the median rent for vacant units of all sizes across Los Angeles County was $2,042, down 2.6% from a year earlier but 6.6% more than in January 2020, according to data from Apartment List.
