California is now the 5th largest economy in the world. Yes…the 5th largest economy in the world!
In order, according to the US Department of Commerce in 5/18, the top ranking economies in the world are
- United States
- United Kingdom
Knowing that CA is the fifth largest economy in the world, it makes sense that CA has one of the largest housing markets in the country. And since CA is one of the country’s largest housing markets, what happens in the CA housing market is often what WILL happen in the rest of the country’s housing markets.
So…the VERY BIG THING that happened in June 2018’s Southern California housing market is that new and existing sales of homes and condominiums in fell a HUGE 11.8% y/y, according to CoreLogic.
The Southern California counties included by Core Logic in its data analyses includes Los Angeles, San Diego, Riverside, San Bernardino, Ventura and Orange counties. Granted, Southern
California is not all of California BUT; it pays to pay attention here.
CoreLogic also tells us that the median price of all homes in Southern California came in at $536,250, a +7.3% increase over 6/17.
The most apparent sales weakness pointed to a drop of -47% in newly constructed homes. Granted, there was one less day in 6/18 to record sales than in 6/17 and builders are building fewer homes to sell so there is less to sell BUT…
According to CoreLogic analyst Andrew Le Page, “affordability and inventory constraints are likely the main culprits in last month’s sales slowdown.”
- Sales below $500,000 dropped 21% y/y
- Sales above $500,000 dropped 3%
- This drop marks the first annual decline in this price category in almost 2 years
- Sales of $1M and above rose fractions less than 1% BUT the annual gains in this category over prior years were between 5%-21%
Le Page targets rising interest rates over the past 6 months…rising interest rates translate into larger monthly mortgage payments. (Interest rates remained essentially flat for the last 4 weeks but, suddenly, rates are rising higher again this week of 7/25/18.)
Home sale prices are rising throughout the entire country amid a seemingly perennial, critical inventory shortage. Prices usually follow sales by several months but the problem here is that sales, according to the National Association of REALTORS®, fell for the third straight month even while inventory increased in June for the first time in 3 years.
Polish up your boots. It may be a bumpy ride.