The Los Angeles real estate market has shifted considerably over the last 12 – 18 months. A major reduction in inventory has turned L.A. into a sellers’ market, where properties sell quickly and often for the full asking price.
Home prices are still in the red when measured annually, but improvements can be seen month to month. The same goes for condo prices.
Here are the latest numbers coming out of the L.A. real estate market.
Condo and Home Prices are Up, Monthly
The latest release of the S&P/Case-Shiller Home Price Index was published on August 28. It included data through the end of June 2012. According to the report, L.A. real estate prices are improving at the monthly level. Prices rose by 2.2% from April to May, and 1.7% from May to June of this year.
While the annual numbers are still negative, they also seem to be improving. This time last year, the year-over-year price change was -3.4%. In May of this year, the annual return was slightly better at -2.0%. In June, the annual return improved again to -0.6%.
The next Case-Shiller report will be released on September 25, and will contain data through July of this year. Based on recent trends within the Los Angeles real estate market, we will likely see a positive annual return in L.A. home prices — for the first time in months.
Bear in mind the Case-Shiller report is limited by a two-month lag. More recent data shows positive price trends, even when measured annually. Trulia’s website, for example, shows a year-over-year improvement in the median sale price for this metro area. Additionally, a recent report by real-estate data provider DataQuick shows a 3.1% increase in the median price, from July 2011 to July 2012.
Condo prices in L.A. have mirrored home-price trends, for the most part. Both indicators are still negative when measured year over year (using the Case-Shiller numbers), with positive gains in the more recent months. Condo prices rose each month from March to June, reaching late-2003 level.
The Los Angeles condo market has fallen 40% from its July 2006 peak. Despite the recent monthly gains, condo prices will probably never reach that peak level again. Nor should we expect them to. What’s noteworthy here are the monthly gains and the increasing stability of the market as a whole.
Fewer Homes for Sale, Year Over Year
The number of homes for sale in the L.A. metro area has declined sharply over the last year or so. According to Realtor.com, the total number of listings dropped by 29% from July 2011 to July of this year. This allows homeowners to set — and justify — higher asking prices when listing their homes. The median list price for this market rose 6.43% during the one-year period mentioned above.
Currently, real estate conditions in Los Angeles appear to favor the seller over the buyer. In fact, this metro area was recently ranked as one of the top ten sellers’ markets in the United States. In July, the real-estate information company Zillow ranked the top buyers’ and sellers’ markets in the U.S. The comparison group included 50 of the largest metro areas in the country. According to that report, Los Angeles was the #8 sellers’ market in the country. This means homes are selling fast, and often for the full list price.
The median age of inventory for the L.A. metro area dropped by nearly 10% over the last year, according to Realtor.com. This comes as no surprise, given the reduction in inventory and other market conditions.
The L.A. Real Estate Market in 2013
The Los Angeles housing market will likely strengthen in 2013, but improvements will be modest. The weak job market will continue to limit demand for housing. The unemployment rate in L.A. neared 12% in July, according to the Labor Department. That’s well above the July national average of 8.3%.
Low mortgage rates will continue to attract buyers. The benchmark 30-year mortgage rate is expected to hover below 4% through at least the first quarter of next year (disclaimer below). This, combined with the prospect of rising home prices, will pull many home buyers off the fence and into the market.
Inventory will be a primary driver of the L.A. real estate market, well into 2013. If the number of homes for sale continues to drop, as it has since last summer, we could see a modest but consistent rise in home prices. Time will tell.
Disclaimers: This story contains forward-looking statements about the Los Angeles housing market, home prices, and other economic factors. These statements were made based on current market conditions, and these conditions may change over time.
This information has been provided for educational use only and does not constitute a guarantee about future economic conditions. Please do not make any financial decisions based solely on this report. We encourage all home buyers to seek the assistance of an experience real estate agent.