In 2020, the real estate industry thrived despite pandemic lockdowns thanks to historically low mortgage interest rates. Three years later, the pendulum has swung in the other direction.
According to the Orange County Register, home sales in Southern California have plummeted by nearly half in the last two years, primarily due to mortgage rates soaring above 7 percent. With prices on the rise and fewer homes available, realtors are facing a significant downturn in their business. Real Data Strategies reveals that the average real estate agent has experienced a decrease in business between 19 to 29 percent in the last year, and over 5,100 agents reported not making a single sale in the last 12 months.
They’re not the only ones feeling the pinch–the ripple effect of the slow market is reaching all corners of the real estate industry, including home inspectors, escrow officers, and mortgage brokers. At the recent California Association of Realtors (CAR) conference, several companies, including home inspectors, home warranty providers, and even suppliers of for-sale signs and lockboxes, reported a decline in business ranging from 20 to 40 percent.
CoreLogic figures show that only 97,197 homes were sold in Southern California during the first seven months of this year, marking the lowest January-to-July total on record. This represents a staggering 41 percent decrease compared to sales figures from two years ago, prior to the rise in mortgage rates.
The California Regional Multiple Listing Service reported a decline of $114 billion in gross revenue from sales during the 12 months ending in June. The "CLAW MLS" in west Los Angeles and the MLS system serving the Coachella Valley experienced a substantial decrease in revenue, with figures plummeting by $33 billion and $5.2 billion respectively.
Though those figures may be bleak, there could be some relief in sight.
On September 20th, CAR released a housing and economic forecast predicting that slower economic growth and cooling inflation will bring down mortgage rates in 2024, creating a more favorable market to stimulate California home sales.
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