Housing Market Update Los Angeles 2019
The California Association of Realtors reports a surge of single-family home sales in July. Total home transactions totaled 411,630 (+ 5.6 percent from June and up 1.1% from July 2018), highest since April 2018.
Across California, pending sales surge to the highest level in over 2 years. That’s a big change in a market that had sunk 5% year to date. The statewide median home price was $607,990, down 0.4% from June yet up 2.8% from July 2018.
Los Angeles Inventory Up and Sales Up
Inventory is up and sales are suddenly up too with Los Angeles real estate prices continue rising. Stephen Kotler, CEO of Douglas Elliman Western Region, believes the Los Angeles lagging housing market is victim of economic uncertainty and the impact of the new tax law. Yet, the recent sales jump might show a reawakening.
In Los Angeles, year to date sales are up 4% and average detached home prices have risen $5000 in July to $550,000 an almost 1% rise for the month. Home prices are up $15,000 over last July. Condo prices fell $100 to $439,900 on average. Flat prices don’t bring much hope to those wanting to buy a home in LA.
Another new issue for buyers is that institutional and large real estate investors may be in the market to buy to rent. With LA rental prices rising fast, rental property income is attractive. Those with the funds to buy luxury homes are finding plenty of available listings. In Q2 2019, high-end single-family homes had price drops of 6.8% to a median price of $9.32 million as inventory dipped 2.6% according to Mansion Global.
Construction is rising: Curbed LA reports that 9,400 units of housing on the way in the second half of 2019 is higher than the number of units constructed in all of 2018. This is far short of Gov. Gavin Newsom goal of 3.5 million new homes by 2025.
The greater LA housing market jumped last March as single family sales rose 37% and prices were up 2.4% over February. LA homes values rose $12000 and condos were up $6500 what they were selling for in February.
The market is picking up despite lower active listings. Listings are up from last year however. Sales in Orange County jumped over 50% from February’s numbers and Riverside saw its sales jump 32.7%.
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.
That’s spawned growth in the condominium markets where more affordable units can be found. The average price for townhouses and condos in California rose almost $15,000 from February yert are still down 12% from last March.
Los Angeles Home Prices Flatten Out for Now
Los Angeles Metropolitan Area saw home prices rise to $$550,000, a rise of $5,000 over June. Single Family home sales however grew 2.3%. Contrast that with the amazing price growth of $132,000 or 8.8% in San Franciso and and 13% or $185,000 in Santa Clara, and perhaps LA’s situation is kind of mild?
Median single family home prices in the Bay Area grew 46% or $73,000 last month. It’s an astonishing increase that few are talking about. Condo prices in LA rose $6500. Prices are down 14% but how many weeks will it take to get back to record high prices?
Zillow forecasts LA home prices will moderate for the next 12 months.
Southern California Condo Prices – July 2019
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.
Last year, home prices in LA rose 7.8%. That’s a fairly strong ascent to just snap out of, so we’re left wondering what really is the outlook is for the 2017 to 2020 period? With prices high and rising, it makes sense that the number of buyers will dwindle (preferring to rent) and a leveling off would occur. It seems however, this is more of a guess by forecasters not really backed up by a solid consideration of all the factors that will be in play during the next 4 years – defeated regulations, growing economy, and reduced immigration.
Home Sales Volume Chart: Los Angeles
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 downpayments 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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