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Southern California Home Sales Crash in Warning to Rest of Nation

Southern California Home Sales Crash in Warning to Rest of Nation
(Mark Plumley/Dreamstime)

By    |   Wednesday, 25 July 2018 08:04 AM

Southern California home sales reportedly plunged in June, falling to the lowest reading for the month in four years.

Sales of both new and existing houses and condominiums dropped 11.8 percent year-over-year, as prices shot up to a record high, CNBC reported, citing CoreLogic.

The median price paid for all Southern California homes sold in June was a record $536,250, according to CoreLogic, a 7.3 percent increase compared to June of 2017, CNBC reported, citing CoreLogic.

In the past, California, one of the largest housing markets in the nation, has been a predictor for the rest of the country. 

The weakness was especially apparent in sales of newly built homes, which were 47 percent below the June average. Part of that is that builders are putting up fewer homes, so there is simply less to sell, CNBC reported, citing CoreLogic.

Home prices have been rising everywhere, amid a critical housing shortage. Prices usually lag sales by several months, and sales are beginning to crumble, even as more inventory comes on the market.

Earlier this week, it was announced that U.S. home sales unexpectedly fell in June, posting their third straight monthly decline as a persistent shortage of properties on the market drove house prices to a record high.

The report from the National Association of Realtors added to last week’s soft homebuilding data in suggesting that the housing market lagged an apparent acceleration in economic growth in the second quarter.

While supply constraints have accounted for the weak sales streak, there are growing concerns that the higher house prices and rising mortgage rates will cause demand to slow.

“The overall economy is in great shape, but there are a few cracks in the armor,” said Newsmax Finance Insider Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “The key housing market is suffering from a major case of agita,” he told Reuters.

Existing home sales slipped 0.6 percent to a seasonally adjusted annual rate of 5.38 million units last month, the NAR said. May’s sales pace was revised down to 5.41 million units from the previously reported 5.43 million units.

Sales are being stymied by an acute shortages of homes on the market. Rising building materials costs as well as shortages of land and labor have left builders unable to bridge the inventory gap, pushing up house prices.

The median house price increased 5.2 percent from a year ago to an all-time high of $276,900 in June. That was the 76th consecutive month of year-on-year price gains.

The 30-year mortgage rate is around 4.52 percent, according to data from mortgage finance agency Freddie Mac. In contrast, annual wage growth has been stuck below 3 percent.

Growth estimates for the April-June period are as high as a 5.2 percent annualized pace. The economy grew at a 2.0 percent rate in the first quarter, with residential investment contracting. The government will publish its snapshot of second-quarter GDP growth on Friday.

“Residential construction won’t add much to second-quarter GDP growth,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “Thankfully, there are still plenty of other cylinders - consumers, businesses and exporters - to fuel this economy amid turbo-charged fiscal policies.”

Housing supply is especially tight at the lower end of the market, with sales dropping 18 percent in June from a year ago.

(Newsmax wire services contributed to this report).

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Economy
Southern California home sales reportedly plunged in June, falling to the lowest reading for the month in four years.
corelogic, southern, california, home, sales
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2018-04-25
Wednesday, 25 July 2018 08:04 AM
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