In the aftermath of the wildfires of 2018, houses for sale in Los Angeles are in short supply while developers are trying to keep pace.
Last summer, the LA forecast was positive for sellers with very high demand. At that time, the average price of a home was $690,000. However, the level of affordability is lessening as only 30% of L.A. County residents own a home, as reported by Gord Collins.
As many analysts have also pointed out, examining only the percentage of income spent on housing can be skewed since high-income earners can afford to spend a larger share of their salaries on housing.
“It’s the markets that experience more exuberance that will then be the first to slow down,” comments Skylar Olsen, Zillow’s director of economic research and outlook.
Olsen continued by saying, “It’s the markets that experience more exuberance that will then be the first to slow down. We think a big part of it is basically demand exhaustion, people can’t just outbid each other anymore.”
The average price of a typical LA home transitioned from $512,000 to $500,000 even. Gord Collins reports that home sales declined 8.3% but emphasize that real estate market experts believe that the housing market will flatten rather than tank.
Reports indicate that residents are concerned about a housing bubble as an effect of the ever-growing sales prices.
Essentially, a housing bubble is credit-fueled and composed of two phases. At first, the price of homes rise dramatically and are then followed by a steep decrease.
The situation is even more apparent in L.A.’s luxury market, which Douglas Elliman defines as the top ten percent of all of its listings.
Fewer high-end homes were sold in January, which ultimately further deflated the region’s median price, according to CoreLogic analyst Andrew LePage.
LePage continued by saying that buyers will become more enthusiastic as long as mortgage interest rates remain at relatively low levels.
When examining which neighborhoods were most affected, Malibu stands as one of several L.A. neighborhoods that showed signs of dramatic declines.
The Real Deal reports that sales dropped from 39 percent to 25 homes, while inventory rose 73 percent to 26 homes.
L.A. neighborhoods that showed an increase in closed sales include Pacific Palisades, Hollywood Hills, Westwood, and Bel Air, as reported by Zillow.
Neighborhoods, where the number of homes sold decreased, include Venice, Mar Vista, Beverly Hills, Santa Monica, and West Hollywood.
When examining demographics, reports indicate that millennials coming into the family and home buying years and Los Angeles millennials have had the lowest rate of home buying.
According to Zillow, home prices will rise $24,000 by Dec 2020. In October alone, the average price of a home in LA was $687,000 which translates to a 7.7% increase YoY.
Predictions indicate that they’ll continue to rise to 5.8% in the coming year.
When comparing the prices of homes listed versus sold, the price of homes listed is reportedly much higher.
Gord Collins reports that the median price of homes listed in Los Angeles is $795,000, while the median price of homes is $713,400.
The 2018 wildfire season, which was the most destructive wildfire season on record in California, had a total of 8,527 fires that spanned 1,893,913 acres, according to the California Department of Forestry and Fire Protection and the National Interagency Fire Center.
As a result, the Los Angeles real estate market took a major hit. In effect, the destruction from the fires reduced the availability of homes for sale and substantially raised prices.
Several housing analysts predicted that the Los Angeles market would cool off in 2019, which is also evident in Zillow’s most recent L.A. report which indicates that the cooling trend in the market will continue through 2019.
On a micro level, the median list price per square foot is $523, which is higher than the Los Angeles-Long Beach-Anaheim Metro average of $430.
In the coming months, realtors and home buyers are hoping that the cooling period remains the same, while the prices of homes flatten or drop to be in a more affordable range.
