Are we in a Housing Bubble? The topic of a…
Los Angeles Housing Market
California’s housing market is reviving in 2021, after a good start in January. Of course the major portion of California’s real estate market sales take place in the Greater Los Angeles, Riverside, Orange County and San Diego counties.
The statewide median hit $699,890 in January 2021, down from December’s $717,930, but gaining 21.7 percent from the $575,160 recorded last January. January home sales were up 22.5% from a year ago.
California Realtors Forecast
52.9% of California Realtors expected sales to grow, which is up from the week before and well above the levels reported in even November and December. Nearly 65% of CAR members have positive expectations of 2021.
You might say it drives the state despite the Bay Area economy and housing market. Although tech is strong in LA and San Diego, its economy and prospects are built on tourism, entertainment, biosciences. While Techsodus has hit the Bay Area hard, the high cost of homes in So Cal and the pandemic really hurt.
CAR’s 2021 housing market forecast is for existing single-family home sales should rise 11% this year and home prices should grow 8%.
Yet signs are showing the rebirth, and quietening the disaster outlooks. Still, home prices haven’t jumped year over year as they have in other US cities. California has a lot to overcome, but this state has so many strengths and resources that can be brought into play.
What drives the Southern California housing market is the desire to live in this beautiful climate. Surprisingly, and despite the congestion and cost of living in Los Angeles, people still flock to the city looking for homes. The pandemic, riots, and unemployment crisis sent many Californian homeowners and businesses off to Arizona, Texas, Nevada and Oregon. So Cal will regroup, recover and home prices will rise in 2021.
Buyers will want to learn more about the full US housing market forecast and what is driving the overall California housing market and the markets in San Diego, San Francisco, San Jose and Sacramento.
The Los Angeles Housing Market has slowed due to:
- shutdowns and lack of stimulus money
- business leaving for other lower tax states
- economic downturn
Why Will Home Prices Rise Strongly?
The end of the Covid 19 threat will see high-density renters and buyers return to metro LA. Restaurants, beaches, hotels, tourism, and small businesses will reopen. Some will reopen after bankruptcies.
The biggest factor for home prices is NIMBYism and the high cost of building. Even with the low likelihood of getting building permits, developers will find housing labor and materials climbing fast. NIMBY’s and anti-development regulations will stunt building new homes. With a limited supply, prices can only rocket across Los Angeles. And taxes must be paid, and they will be passed onto the buyers.
Home Prices Well Up Year over Year
Despite the pandemic surge, home prices continue to rise across California. Home sales grew 13.5% year to year, and prices rose 15% year to year. The market has only 1.9 months of housing.
The exodus may actually be helping to keep LA home prices under control. Home sellers want to know where the market is going in the next 3 months to 6 months. That depends on the economic restart and Fed stimulus aid payments.
California Home Price Growth
Los Angeles Home Prices
The record California wildfires this year, Covid 19, political squabbles, California government’s fiscal spending problems, and slow new housing construction are making buying a home an impossible dream for most. Yet for those with the funds, luxury home sales are rocketing. So someone believes in LA.
Los Angeles Condo PricesLos Angeles County condo sales rose 23.9 % over the last year. They sold at a median price of $490,000 which is up 27.2% from 12 months ago.
Could the Los Angeles Housing Market Crash?
Is California’s debt, tax problem, business exodus, regulations, and more simply too much for Californians to keep paying such lofty prices?
California Recession Factors to consider:
- housing construction continues to fall
- housing permits way down and may not come back this year
- tax base has been seriously eroded and property tax might have to rise highly
- buyer credit ratings go down
- buyer income down
- unemployment up sharply
- recession could last 3 months or 6 months
- Californians leaving reducing the tax base
- end of bail out funds and loans in May?
- trade with China ends
With the potential crash of the stock markets, before or after the elections, we’d have to expect luxury home sales and prices will also recede. Check more on the Stock Market Forecast predictions for 2021.
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.
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 – Demand from those with wealth for single family detached, and luxury homes
- 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
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