Los Angeles is a sprawling city, where every neighborhood feels like somewhere new and different. From West Hollywood to Silver Lake, from Echo Park to Santa Monica, L.A feels more like 20 cities than just one.
Los Angeles is a city where the supply of real estate is high, due to the sheer amount of land the city is spread over. But the demand is just as high, making it one of the more expensive real estate markets in America. Like just about everywhere else in the world, Los Angeles’ economy has been heavily impacted by the COVID pandemic. The pandemic is also inevitably impacting the real estate market in L.A.
Before the pandemic, the market in Los Angeles was significantly more balanced. Currently though, according to a report by U.S News, it is a seller’s market in Los Angeles. This means an increase in demand is driving up the cost of real estate in L.A. This is evidenced by a 3.1% increase in the median price of home sales from May to June of 2020, where the price reached $655,000.
The reason for this is that much of the L.A metro area has been developed, primarily with single-family homes or smaller apartment buildings. L.A isn’t a city where there are a lot of tall condominiums spread throughout, so the land use hasn’t been maximized to increase the capacity capabilities.
The ability to work from home has also had a significant impact on the real estate market of Los Angeles. L.A is a city where traffic congestion is as bad as anywhere else in America, so for many people, minimizing their work commute is a significant factor when buying real estate.
With work from home becoming the new norm, and many companies planning to continue allowing employees to work from home beyond the pandemic, proximity to work isn’t as essential. Instead, people are focusing more on space.
According to the same report by U.S News, the post-pandemic world has increased people’s desire for a place to be outside. The claustrophobic nature of working from home and lockdown has created this desire. Because of this, people are searching for properties with larger backyards or a pool. In the case of condominiums, people are seeking out properties with a rooftop terrace or large balconies.
While people’s real estate needs have changed due to COVID, houses are still flying off the market at an abnormally fast rate. According to ABC7, the week of August 1st saw the median days of houses being on the market drop to a full eight days faster than the same week in 2019. Another reason that homes are being sold so quickly is that the government’s purchase of mortgage-backed security bonds has led to an extremely low-interest rate.
These changes explain why COVID has created such a seller’s market in Los Angeles. A fairly limited supply, due to the lack of large-capacity developments, combined with high demand. due to changing buyer desires and record low-interest rates, which have led to buyers being involved in bidding wars. This drives housing prices up and decreases the time that they spend on the market.
Los Angeles is an extremely diverse city, both culturally and geographically, with such a wide range of real estate options. COVID has complicated many things in people’s lives, but it has yet to adversely affect the Los Angeles real estate market.