After months of escalating prices that pushed median home values to record heights, Southern California’s housing market experienced a notable correction in August 2024. The region saw home values decline month-over-month across multiple counties, marking a shift in a market that had seemed impervious to cooling despite rising interest rates and declining sales volumes.
The August Decline: County-by-County Breakdown
The median price for Southern California homes fell in August, retreating from the record highs reached in July. This represented one of the first significant price corrections in a market that had been climbing steadily despite warning signs of buyer exhaustion and declining transaction volumes.
Los Angeles County, the region’s largest market, saw its median home price drop 2.2% from July to $875,000, though prices remained 4.8% higher than August 2023. The county recorded 4,921 transactions, down 0.3% from July and 2.2% year-over-year, reflecting the continued weakness in sales activity.
Orange County’s median price fell 1% from July to $1.175 million, though it still posted an impressive 8.8% year-over-year gain. Sales dropped more dramatically, falling 11.7% from July to just 2,047 transactions, representing an 8.2% decline from the previous year. The county’s substantial month-over-month sales decline suggested that even affluent buyers were pulling back.
Riverside County experienced a 2% month-over-month price decline to a median of $577,000, though prices remained 3% higher than in August 2023. Sales in the Inland Empire county fell 0.7% from July but showed surprising resilience with a 5% year-over-year increase, indicating that more affordable areas continued attracting buyers priced out of coastal markets.
San Bernardino County bucked the trend slightly with a 0.2% price increase from July, reaching a median of $510,000, up 3% year-over-year. However, sales fell 2.7% month-over-month and dropped 8.6% compared to August 2023, showing that even modest price increases were dampening demand.
A Year Headed for the Record Books
The August data represented part of a broader pattern that made 2024 one of the slowest years for real estate transactions in decades. During the first eight months of 2024, fewer than 119,000 properties changed hands region-wide, making it the second-slowest year in records dating back to 1988.
Regional sales in August totaled just 15,209 transactions, down 3% both from July and year-over-year. This continuing decline in sales volumes, even as prices softened, reflected deep structural challenges facing the market rather than normal seasonal variation.
The year-long sales slump affected everyone connected to real estate transactions. Real estate agents, mortgage brokers, title companies, inspectors, and related professionals faced significant income reductions as the number of deals plummeted. Many agents who typically closed five to six deals annually found themselves completing only two or three, representing income drops of 30-50%.
The Mortgage Rate Factor
Mortgage rates played a central role in both the August price decline and the year’s overall sales weakness. The 30-year mortgage rate averaged 6.5% in August, according to Freddie Mac data, substantially higher than the sub-3% rates available during the pandemic but lower than peaks reached earlier in the year.
Despite remaining elevated by historical standards, the slight decline in rates from earlier peaks helped reduce monthly payment burdens. The monthly payment for a median-priced Southern California home averaged $3,800 in August, down $246 from July. This modest improvement reflected both slightly lower rates and the month-over-month price declines across most counties.
However, compared to the pandemic-era market, affordability remained severely constrained. Buyers faced mortgage rates three times higher than the record lows of 2020-2021, dramatically limiting purchasing power even as nominal wages increased. This created a lock-in effect where existing homeowners with low-rate mortgages were reluctant to sell and take on new loans at significantly higher rates.
California Association of Realtors Chief Economist Jordan Levine noted that housing demand had been slowly improving in recent weeks, expressing cautious optimism that if mortgage rates remained at current levels or declined further, home sales should rise steadily toward year’s end. This perspective suggested that even modest rate relief could unlock pent-up demand.
Shifting Market Dynamics
Several indicators beyond prices and sales volumes suggested fundamental shifts in Southern California’s housing market dynamics. The balance of power between buyers and sellers was evolving as inventory constraints gradually eased and buyer enthusiasm waned.
According to Redfin data, Southern California homes for sale averaged one week longer on the market before going under contract in August compared to earlier periods. This represented a meaningful shift in a market where properties had routinely sold within days, often generating multiple competing offers.
The percentage of homes selling above asking price declined to 41% in August, down from 49% a year earlier. This drop of eight percentage points indicated that sellers’ pricing power had diminished considerably, forcing more realistic expectations about what the market would bear.
Active listings in Southern California rose to 53,725 in August, representing a 24% increase over August 2023. While still low by historical standards, this steady inventory growth throughout the year gave buyers more options and reduced the urgency that had characterized previous markets. Lawrence Yun, chief economist for the National Association of Realtors, observed that the rise in inventory implied homebuyers were in a much-improved position to find the right home at more favorable prices.
Regional Variations and Implications
The August data revealed important variations across Southern California’s diverse submarkets. CoreLogic figures showed San Bernardino and Orange counties had the biggest sales drops among local markets, while Orange and Los Angeles counties had the biggest year-over-year price gains despite monthly declines.
These variations reflected different buyer pools and market dynamics. Orange County’s luxury market, with its $1.175 million median price, faced different constraints than San Bernardino County’s more affordable $510,000 median. High-end buyers had more flexibility to wait for ideal properties and better terms, while first-time buyers in more affordable markets faced strict qualification requirements that limited their options.
The Inland Empire counties of Riverside and San Bernardino, which had been beneficiaries of pandemic-era migration as remote work enabled people to trade expensive coastal living for more affordable inland options, showed signs that this trend was moderating. Year-over-year sales increases in Riverside suggested continued appeal, but the overall deceleration indicated that the most motivated buyers had already made their moves.
What August’s Decline Signals
The August price decline represented more than a typical seasonal adjustment. It suggested that Southern California’s housing market was entering a new phase characterized by greater balance between supply and demand, reduced seller pricing power, and more measured buyer behavior.
For buyers who had been priced out or discouraged by intense competition, the August data offered some encouragement. Longer market times, lower percentages of above-asking sales, and month-over-month price declines all indicated improved negotiating positions. The increase in available inventory gave buyers more choices and reduced the fear of missing out that had driven decision-making in previous years.
For sellers, August served as a reality check. After years of rising prices and quick sales, the market was signaling that buyers had limits and alternatives. Properties that might have sold in days now required weeks, and prices that seemed achievable in July might prove optimistic in August. Successful sellers would need to price realistically and be prepared to negotiate.
For the real estate industry, August confirmed that 2024 would be remembered as a difficult year. Low transaction volumes squeezed commissions and related fees, while uncertainty about future market direction made planning challenging. Many professionals hoped that mortgage rate declines would stimulate activity, but cautioned that any recovery would likely be gradual rather than dramatic.
Looking Ahead
The August decline occurred against a backdrop of broader economic uncertainty. While employment remained relatively strong and wages continued growing, inflation concerns persisted and the Federal Reserve remained cautious about rate cuts. The trajectory of mortgage rates would largely determine how quickly the housing market could recover.
Pending sales data, contracts signed but not yet closed, showed some improvement in recent months, suggesting that the August price decline might not mark the beginning of a sustained downturn but rather a correction that could stabilize at more sustainable levels. If mortgage rates continued declining from August levels, the combination of improved affordability and growing inventory could support stronger sales activity even if prices remained flat or declined modestly.
For Southern California’s housing market, August 2024 represented an inflection point, a moment when the relentless price growth that had characterized the market for years finally paused. Whether this pause would evolve into a sustained correction or prove merely a brief interruption remained uncertain, but for buyers, sellers, and industry professionals alike, the market was clearly entering new territory.
