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Housing Market Outlook Los Angeles 2020
Some economists and housing experts feel Los Angeles housing market is in for a big hurt just like any other city. While some markets such as Dallas, Fort Worth and Houston might feel the mini recession impact due to low oil prices, Los Angeles might be back on track sooner than they realize.
The housing market in California continued on its upward path in February according to CAR. There were more sales month over some counties including San Francisco, San Diego, Santa Clara, Orange, Riverside, and Ventura.
However sales receded in many counties including Los Angeles, Napa, San Bernardino, Santa Barbara, Santa Cruz, and Kings. In some counties it was a steep drop so March’s number likely will be well down. See more below and please do share this post. The market will come back in the summer.
Home and condo prices saw moderate climbs, and sales of condos rose 13.7% overall. Home prices grew $4,600 while condo prices rose $13,000 on average. Homes in the upper price range sold better in February. Experts were looking forward to record prices in Los Angeles, but that won’t happen soon.
Steep Drop in Showings in March
Enter the Corona Virus shutdown and the market is frozen in Los Angeles. Since we’re not near the peak of the virus outbreak, it may be some time before prices pick up again. Those who are sure of their employment and whose debt to income ratio is hit, and who can pay more for the downpayment might get a bargain in April sometime.
Mortgage rates are on the rise again which could knock many hopeful buyers out of the competition. The LA situation is nothing in comparison to oil cities such as Denver, Dallas, Austin and Houston. The recession and crashing oil prices are creating a housing market crash there for sure. Will House Prices Fall a lot during the Covid 19 pandemic?
Will the Los Angeles Housing Market Crash?
Will there be a housing crash in LA? Experts noted the strength of the market in LA with 200 to 300 people turning up at showings. It’s a definite setback but Los Angeles and California should recover later by summer, and Californians may be enjoying very low fuel and transportation costs at that time too.
Recession Factors to consider:
- housing construction continues
- mortgage rates rising
- downpayment needed rising
- unemployment up sharply
- recession could last several months or more
- Californians may not leave the state creating more demand
- stimulus money defraying some of the economic damage
- price pressure was growing fast before virus hit
- governments desperate for tax money
- stock market crash hits the rich harder
CAR reports a steep decline in showings in March, and this may indicate a price drop is happening. If the Corona Virus shut down continues, and jobless claims and unemployment grow, most buyers will not be buying anytime soon. With house hunting virtually stopped, it will lower home prices, which is an outcome many buyers in LA were wanting.
The only group going to work are residential home construction workers who can keep on building.
Pending Sales grew strongly. People want a home.
The Coming Big Shift Downward in Sales
The slowing economy and stay at home work stoppage will bite harder each week it’s in place. Housing market experts are struggling to forecast sales and the effect on the long term economy but they’re likely working on that now. Bookmark this page and I’ll keep you updated on the future outlook.
Across California, listing prices surged to double digit growth for the first time in 3 years. Just as things we’re rolling, the virus has pulled the plug. Prices were accelerating hard.
Housing Market Southern California – Los Angeles Region
To get a better picture of home prices in and around the Greater Los Angeles region, we have Car’s latest housing chart for September. Similar to the California housing market as a whole, home prices are rising while sales have plummeted. That’s due to some buyer pessimism but mostly due to a severe lack of supply. The California housing crisis and homelessness are hot political issues.
Los Angeles Inventory Up and Sales Up
Los Angeles saw home prices fall about $37,000 or 6% but were still up 7.3% year over year. Mortgage payments dropped by 3% but down payments required rose 8.9% to $101,000 on average.
More sellers reduced their listing prices across the state.
An uneasy trend toward lower supply of homes and soon, lower demand will likely stagnate the housing market.
Mortgage Rates are on the Rise and Lending Will be Tighter for the rest of 2020
Although the volume of affordable homes available for sale remain constrained in LA County, mortgage payments have declined considerably potentially enabling more buyers to get into home ownership.
California Housing Market
Sales within the California housing market are slumping with the exception of the San Francisco region. However, sales are up strongly year over year. Buyers are finding some reprieve in prices.
Lack of Affordable Housing is Holding the Market Down
Low home affordability continues to depress buyers in Los Angeles and across California. After a lull in housing and economic activity, it looks like the spring market is starting strong. That’s likely due to a renewed confidence in the US and California economy and the health of Silicon Valley.
High cost of living and too high real estate prices have some businesses exiting for Arizona, Florida, Colorado, and Texas. That exodus may help ease keep home prices from running away again this summer.
Is it instinct or just common sense that California will continue as the most desired place to live on the planet? Does the climate in San Diego, Sacramento , Bay Area, and Los Angeles, high paying jobs, interesting geography, lifestyle and recreation, make California a magnet for people around the world. Price growth is predictable.
Houses for sale in Los Angeles County and Orange County are in short supply and new residential development is not keeping pace. It would take a market crash to stop the price rise and even then it would only be for a few years. For wealthy investors, a few years is well worth the wait. The question is where to get a realistic price? The hunt continues.
Sales volume actually increased 11.5% in the last month, so homeowners appear to be loosening up finally. Realtors
And real estate investors are hopeful they can find the right property in the right city or zip code. Zillow has forecast house prices in Los Angeles to rise throughout 2018 while CAR shows it moderating. A lot depends on the political climate and interest rates.
We should keep in mind that only 30% of Californians own a home so the door is wide open for opportunity and new sales, particularly with first time buyers. The problem is that homeowners don’t want to sell and buyers can’t afford the prices.
Why are Buyers Buying in California?
CAR’s 2016 survey showed only a small portion of buyers buy property as an investment. Only 13% are real estate investors.
Buyer Survey – Screen Capture courtesy of CAR.org
The Telling Stats about LA’s Forecast
If buyer’s are hoping for bargains in the next 4 years, they’re unlikely to find them. Despite a dip in September, prices for homes and condos are up $24k to $30k from one year ago. Are the Asian and Persian buyers pulling out of LA? The Trump instability and trade issue might be a pause before even more money pours into the reviving American economy. Make American Great Again, also creates excellent investment opportunities in California, paying out in $US.
- jobs being repatriated back to the US from Mexico and China
- employment already good and rising
- the end of Obamacare?
- the end of Dodd-Frank restrictions on lending
- general Federal easing of real estate development expected
- it will take some time for mortgage rates to rise
- still isn’t enough housing to house LA’s growing population (recession)
It’s the Los Angeles housing forecast that is perhaps one of the most interesting forecasts for the US for the next few years. California’s housing developers are hard pressed to build homes to house the population. We can speculate that homes will rise in price for the next 4 years. It’s not easy to predict though when people are talking real estate bubbles, NAFTA cancellations, Brexit, skyrocketing prices, vacillating oil prices, reduced immigration, and presidential elections.
Overall, the Los Angeles forecast was very good for sellers with plenty of demand and with the average price of a home hitting $690,000 last summer. Affordability is dropping though and only 30% of LA county residents own a home.
Given the nasty commutes Los Angeles workers are enduring, this housing crisis should be a top priority for the California state governor.
A few pundits are suggesting homeowners need to build granny flats in everyone’s back yard. Political battles are forming over the effect of regulations on LA’s and California’s home construction. Who will win? Will they battle Trump head to head to stop new development?
Save your Money on Auto Insurance Quotes in LA
Are you paying too much for car insurance in Los Angeles? Some zip codes and neighborhoods are subject to higher premiums. Are you okay with that? How about finding lower car insurance rates and making it a habit of shopping for auto insurance every year? 2017 is a good year to save:)
Here’s the Hottest Zip Codes in Los Angeles
LA Curbed’s list of hot zip codes: Los Angeles’s 90012 zip code is shaping up to be the 2nd fastest growing area in the nation at 8.8% growth, 2nd behind only Gilbert AZ. The 90012 zip code includes Chinatown, the Civic Center, Elysian Park, Victor Heights, parts of the Arts District and Bunker Hill, and most of Little Tokyo.
Here’s the LA Times hot zip code list:
Santa Monica 90402 – Average home price: $3,237,500
Hermosa Beach 9025 – Average home price: $1,693,500
Lincoln Heights/Montecito 90031 – Average home price $458,500 +14.6%
City Terrace 90063 – Average home price: $320,000 +18.5%
Marina Del Rey 90292 – Average home price: $2,157,500 +23%
Manhattan Beach 90266 – Average home price: $2,100,000 +10%
Compton – 90220 – Average home price: $285,000 +9.8%
Playa Del Rey 90293 – Average home price: $1,517,500 +26.5%
Toluca Lake Studio City 91602 – Average home price: $1,022,500
Read more on the best zip codes in the US for investors and homebuyers.
LA Home Prices Fully Recovered?
The Los Angeles home price graph below courtesy of Zillow shows how prices have almost returned to pre-recession values and are beginning to level off. To forecast prices and demand for the LA region, we’d have to examine the cause of the moderation and if it’s a fact. Here’s LA’s hottest zip codes.
Is there a Housing Market Bubble?
Do you believe we’re in a California housing bubble? According to a Harvard real estate guru, bubbles don’t burst until demand dries up — an increase in unsold inventory and that’s not what’s happening. Sales are strong and California home prices are predicted to rise further.
As you’ll see from the data in this post below, there is huge demand for property. Supply is the problem.
Factors Affecting House prices and Availability in LA
- Housing Demand – High overall demand – “all cash bidding wars” in some cases
- Housing Supply – Throttled, supply is far from what’s needed
- Mortgage Rates – Continuing Low, especially in light of global economic slackening
- Down Payment and mortgage rules – Banks are withdrawing FHA loans however some were offering down payments as low as 3%
- Regional Employment – Very low and remaining low
- Buyer Income – low and not rising much
- Home Prices – High and rising – out of reach for many buyers – many consider LA homes grossly over-priced
- Demographics – Millennials coming into family and home buying years and LA millennials have had the lowest rate of home buying (pent up demand)
- Number of Renters – increasing fast
- New Home Construction: slow (100k to 140k per year)
- Economic-Foreign Trade – Trump expected to reduce US deficit
- Election Year – Voters uncertain of what Trump will create
- Taxes on Sale of Home – Tax situation is great for sellers
This intriguing graphic courtesy of https://journal.firsttuesday.us/ reveals that home sales in Los Angeles is actually well down from historical levels. The likely reason for that is lower income buyers simply have even less income to buy and of course the high prices. Home ownership is lowest in California.
A complete recovery of around 110,000 annual home sales will likely occur in 2019-2020, as end user demand in Los Angeles County is buttressed by a Great Confluence of Baby Boomers (Boomers) and first-time buyers who are lured by further employment (needed to accommodate population growth of roughly 1% annually since the beginning of the Great Recession).
That’s a forecast growth of about 20,000 homes per year over current current 2016 levels.
Another interesting stat provided by firsttuesday is the very low rate of home ownership and how much it’s plummeted. It’s on the uprise now, and you’re left wondering whether Trump’s renewed emphasis of America First will encourage the growth of home ownership?
LA Economic Forecast – Very Rosy
The forecast for economic growth for the Los Angeles is optimistic at this point. Visit https://laedc.org/2015/09/30/new-2016-2020-economic-forecast-published-93015/ for the most recent info and their forecast up to 2020.
This Stat from CAR shows homes have been on a rollercoaster ride of sorts yet, 2016’s expected resale volume is still well down from 2011 and 2012’s highs. If incomes should rise in the LA area, it could have the effect of stimulating new housing construction and increase sales of homes. With the number renters skyrocketing, there’s a huge pool of potential buyers.
This graphic reveals the exceptionally high cost of renting in Los Angeles compared with other major centers. The housing availability problem isn’t isolated to California or LA, it’s a US wide issue. The high housing costs in the coastal California areas however may prevent many skilled workers from migrating to LA to work.
Startups for instance may be forced to leave San Francisco, Bay Area and LA because of the cost. San Diego County may be a better option for the short term.
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