“Payment Pulse” is about the realities of home finance in Southern California: It’s really about the monthly check to the lender, not the headline-grabbing median sales price.
Buzz: A record 40% increase in home payments in Southern California has helped push home buying to the lowest sales tally for any May since 2011, minus the pandemic-frozen 2020.
Font: My Confidence Spreadsheet looked at the frustrating monetary combination of higher home prices (using DQNews’ monthly median) and rising mortgage rates (Freddie Mac’s 30-year average fixed-rate deals). We track a hypothetical monthly home loan payment from a median paying buyer, assuming a 20% down payment, with no property taxes, association fees, or insurance.
Clock rate: The 30-year three-month average loan for May was 4.79% vs. 4.3% the month before and 3.03% a year before. That rate increase crushed a borrower’s purchasing power. In one month it fell 5.6% and in one year it fell 19%. It is the second largest drop in 12 months since 1988.
Estimated May mortgage payments for the region soared to an all-time high of $3,188 at the record average of $760,000.
In one month, the payment increased by $178, that’s an additional 5.9%. In one year, payments increased by $918 or 40%. (Note that the median price alone is up 13% in 12 months.)
And don’t forget that this math assumes a down payment of $152,000, or 20%, a finance charge that has grown $18,000 in a year.
The spreadsheet also found some painful math within each of the counties, with all of May’s estimated home payments setting news records…
The Angels: A payment of $3,607 is needed to get the $860,000 median home. In the month, that payment goes up $181 or 5.3% more. In one year, it’s up $982 or 37%, as the median increased 11% in 12 months. And that 20% down payment is $172,000, an increase of $17,000 in a year.
Orange: Payout of $4,423 at a record average of $1,055 million. For the month, it’s an increase of $264 or 6.4% higher, and for a year it’s an increase of $1,391 or 46%. The average price has risen 18% in 12 months. And that 20% discount is $210,900, an increase of $31,900 in a year.
Bank: $2,510 payout at peak $598,500 median. For the month, it was up $173 or 7.4% more. Year promotion? $810 or 48%. Median? up to 19% in 12 months. And 20% down is $119,700, an increase of $19,300 in a year.
Saint Bernardine: Payment of $2,181 at the maximum point $520,000 median. In the month, up to $123 or 6% more. Year promotion? $718 or 49%. Median? up to 20% in 12 months. And 20% down is $104,000, an increase of $17,600 in a year.
San Diego: Payment of $3,565 at the maximum point $850,000 median. For the month, it was up $238 or 7.2% more. Year promotion? $1,109 or 45%. Median? up to 17% in 12 months. And 20% down is $170,000, an increase of $25,000 in a year.
fortune: Payment of $3,331 over the median of $794,250. In the month, up to $111 or 3.5% more. Year promotion? $960 or 40%. Median? up to 13% in 12 months. And the 20% discount is $158,850, an increase of $18,850 in a year.
Consider these sky-high costs in a historical context and the extreme pressure they are putting on home hunters.
Regionally, the estimated home payment increase for the year (40%) is the largest since 1988. The May increase was also No. 1 in Orange, Riverside, San Diego and Ventura counties. The San Bernardino jump was number 2 and the Los Angeles jump was number 5.
Those kinds of cost increases make the 16% drop in Southern California sales in the last year not very surprising. It was the 58th largest 12-month drop since 1988 (or worse only 14% of the time).
The 12-month decline in purchases, by county: Los Angeles (16% off), Orange (24% off), Riverside (12% off), San Bernardino (9% off), San Diego (18 % discount) and Ventura (19% discount).
Also, the 5% decline in purchases from April was a rarity: Since 1988, sales have dropped in this 30-day period only 18% of the time. A typical May sees a 5.4% sales increase from April.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]