Housing Market and Stock Market Forecasts

Los Angeles Housing Market Forecast

Los Angeles Housing Market

Fall home buying season might look like the spring housing market.  August’s home sales were the best in 14 years as a  number of factors continue to drive interest in home buying in 2020.  And with fewer homes on the market, it’s a sellers market.

In Los Angeles buyers are willing to pony up more money to buy from a selection of fewer homes for sale. Buyers will want to learn more about the overall housing market forecast and where the economy will go in 2021 before buying.

 

Much is being said about the exodus of people from California, however the bigger trend that’s affected the summer real estate market is the move to buy houses.  Houses and other types of low rise property with extra rooms are in keen demand for those who are working at home, or who simply want out of high density districts.

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 economy, stimulus aid payments, and perhaps on the election on November 3rd.

 

A Wild Year for Real Estate

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.

In fact, Zillow forecasts the medium house price in Los Angeles county will climb above $1 million by next August.

Southern California Home Prices

California Housing Market Stats August. Screenshot courtesy of CAR.org.

 

Home Sales and Prices August

August home sales in August were surprising. With everything against the market, median house prices in greater Metro Los Angeles actually rose $25,000 above July’s sales price.  Sales however dropped 1.7% from July likely due only to dwindling housing supply. Active listings dropped in Southern California by 12,500 units.

California Housing Market Snapshot August. Screenshot courtesy of CAR.org.

 

California Housing Market Home Inventory Timeline. Screenshot courtesy of CAR.org.

 

Southern California Housing Market Sales Timeline. Screenshot courtesy of CAR.org.

August 2020 Sales Stats Summary

Luxury Home Sales Soars

California Housing Luxury Housing Market August. Screenshot courtesy of CAR.org.

 

California Home Sales History Timeline. Screenshot courtesy of CAR.org.

Los Angeles Condo Prices

Condo prices in LA County rose $9,000 from July and are up $44,000 since last August. Sales were up 5% since last month and are actually down .6% from August 2019.

California Condo Sales and Prices August. Screenshot courtesy of CAR.org.

 

Will the Los Angeles Housing Market Crash?

Will there be a housing crash in LA this fall if a second wave appears?

California Recession Factors to consider:

  1. housing construction continues to fall
  2. housing permits way down and may not come back this year
  3. tax base has been seriously eroded and property tax might have to rise highly
  4. buyer credit ratings go down
  5. buyer income down
  6. unemployment up sharply
  7. recession could last 3 months or 6 months
  8. Californians leaving reducing the tax base
  9. end of bail out funds and loans
  10. 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.

This is the same issue in San Francisco Bay Area, San Diego, SacramentoFlorida, DenverChicago, and Seattle where buyers simply can’t afford the lower end of the detached housing market.

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.

Infographic Courtesy of CAR.org – LA Buyer Profile

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.

Home prices by type. Screenshot courtesy of Trulia.

Home Prices by Type. Screenshot courtesy of Trulia.

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 US economy will pick up steam and Californians will be buying a home again even if they have 1 hour+ commutes, higher interest rates, and out migration to remote towns.

Check out the top housing factors below affecting housing prices in discover a better homes for sale search process.

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.

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.  

Malibu Coastal. Photo courtesy of marisolmalibu.com

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?

The situation may become worse than what San Francisco, Vancouver, and Toronto have been through, and what Miami, New York, and Boston may be into now.

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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

  1. Housing Demand – High overall demand – “all cash bidding wars” in some cases
  2. Housing Supply – Throttled, supply is far from what’s needed
  3. Mortgage Rates – Continuing Low, especially in light of global economic slackening
  4. Down Payment and mortgage rules – Banks are withdrawing FHA loans however some were offering down payments as low as 3%
  5. Regional Employment – Very low and remaining low
  6. Buyer Income – low and not rising much
  7. Home Prices – High and rising – out of reach for many buyers – many consider LA homes grossly over-priced
  8. Demographics – Millennials coming into family and home buying years and LA millennials have had the lowest rate of home buying (pent up demand)
  9. Number of Renters – increasing fast
  10. New Home Construction: slow (100k to 140k per year)
  11. Economic-Foreign Trade – Trump expected to reduce US deficit
  12. Election Year – Voters uncertain of what Trump will create
  13. Taxes on Sale of Home – Tax situation is great for sellers

Historical Data

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.

Home Price Trends courtesy of S&P Corelogic Case Shiller

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.

Realtors: Check out other posts providing realtor tips, prospecting strategies, social media strategy, and tactics used by top flight luxury realtors and even lead generation companies.

See additional housing market reports on New York NYC, San Diego CA, and San Francisco CA.

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Housing Market Forecast – copyright Gord Collins

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