Los Angeles, CA Real Estate Prediction: Will Prices Cool in 2018?

A new forecast for the Los Angeles housing market suggests that home prices could rise considerably slower over the next year than the previous 12 months, settling into a historically average rate of growth.

This prediction comes at a time when the L.A. real estate market is creating affordability issues for many residents. So perhaps a “market correction” would be a good thing at this stage.

Here are the latest trends, predictions and forecasts for the Los Angeles, California housing market in 2017 through 2018.

Los Angeles Real Estate Predictions Through Summer 2018

In July, housing analysts at the real estate information company Zillow issued a forecast for the Los Angeles housing market that extends through the summer of 2018.

By their estimation, home values will rise by a more modest 2.0% over the next 12 months. That would be less than one fourth of the year-over-year gain that occurred over the previous 12 months, suggesting that a cooling trend is on the horizon.

The median home value in L.A. had reached $629,900 when this article was published in July 2017.

In July, the company published the following statement on its website: “Los Angeles home values have gone up 8.4% over the past year and Zillow predicts they will rise 2.0% within the next year.”

Again, this real estate market prediction was issued in July 2017, which means it extends into the summer of 2018.

Housing Affordability Issues Plague L.A.

One of the reasons home prices are predicted to slow down over the coming months has to do with affordability – or the lack thereof.

The Los Angeles housing market is one of the most unaffordable in the country, when you consider the median home price in relation to the median household income in the area.

In fact, a recent study from the UCLA Anderson School of Management ranked L.A. as the most unaffordable city in the nation for both home buyers and renters.

According to UCLA economist William Yu:

“Even given his stronger economic recovery, California still has relatively limited housing supply because of its stringent regulations. That is largely why we have less affordable housing markets here””

The Anderson School of Management report also issued a forecast for the Los Angeles housing market extending over the next few years. The group’s prediction said that home prices in the area would continue to rise for the next few years, as population growth surpasses the available supply of homes.

Tight Supply Fuels Competition among Home Buyers

Forecasts and predictions for the Los Angeles real estate market suggest that home prices will continue to rise for the foreseeable future. But those gains will likely be smaller than what we’ve seen over the last couple of years.

Supply is a driving factor in these predictions for continued price growth. The Los Angeles real estate market currently has a below-average level of homes available for buyers.

According to MLS data and other sources, Los Angeles had only about a 2.1-month supply of homes in June 2017. That’s a shortage. Real estate experts consider a “balanced” market to have around six months of supply. So the L.A. area is still very constrained, in terms of inventory.

This continues to put upward pressure on home prices, in addition to giving sellers an advantage at the real estate negotiating table.

Disclaimer: This article includes various forecasts and predictions for the Los Angeles real estate market extending into 2018. These projections were issued by third parties not associated with our company. We have compiled them here as an educational service to our readers. As a standard practice, HBI does not make any claims or assertions about future housing conditions.