Southern California house prices logged their biggest gains in seven years in March, as buyers trying to lock in historically low mortgage rates competed for a limited supply of homes for sale.
The average gain for an existing single-family home sold in March was 8.8% in Los Angeles County, 10.2% in Orange County and 15.6% in the Inland Empire, according to the latest CoreLogic Home Price Index, released Tuesday, May 4.
Those are the biggest one-year percentage jumps since the spring and summer of 2014.
The average year-over-year gain for the previous two years was in the 3-6% range.
The HPI home-price appreciation rates are down considerably from CoreLogic numbers reported two weeks ago that were based on median home prices, or prices at the midpoint of all sales. The earlier report showed house-price gains ranging from 12-23%.
Unlike the research firm’s median price report, the HPI is based on comparisons of a home’s sale price to its prior sale price. Same-home comparisons are considered more reliable because they weed out irrelevant variants like changes in the mix or size of homes sold.
Nationally, March home prices increased 11.3% from March 2020 levels, the biggest one-year percentage gain since March 2006.
This year’s busy spring “homebuying season” should be stronger than in the past few years thanks to rebounding consumer confidence and rising employment, CoreLogic’s report said.
Low mortgage rates also continue to motivate homebuyers. The 30-year fixed-rate mortgage rate averaged 2.8% in February, when most of March transactions went under contract, compared with the average rate of 7.9% during the previous 49 years.
“With mortgage rates near historical lows, some homebuyers are willing—and newly able—to pay a premium to secure their dream home,” a CoreLogic blog post said last week. “As a result, more than half of homes were sold at or above list price in February 2021.”
Millennials led the homebuying charge, the report said, with older millennials seeking move-up purchases and younger millennials entering peak homebuying years.
Price gains are expected to moderate in the second half of 2021 as more homeowners, freed from COVID-19 fears, put their homes up for sale and as homes become increasingly unaffordable, dampening demand.
CoreLogic predicted home prices will be just 3.5% higher by next March.