Los Angeles, the land of sunshine, celebrities, and iconic beaches, also boasts a housing market that is equally famous – and competitive. Fuelled by a vibrant economy and perennial allure, the City of Angels attracts a steady stream of residents seeking a slice of the California dream.
The Los Angeles housing market, a scene long dominated by headlines of skyrocketing prices and fierce bidding wars, seems to be entering a new chapter. While it’s certainly not a buyer’s paradise yet, some recent trends suggest a potential shift. Let’s dive into the data and see what’s brewing.
Trends in the Los Angeles Housing Market
Nationally, rising mortgage rates, the highest since late 2023, have cast a bit of a chill on the housing market. This translates to a slowdown in sales activity across California, with the median number of homes sold dipping slightly year-over-year.
Los Angeles: Prices Up, Sales Up (But Not By Much)
Los Angeles County, however, defies this national trend to some extent. Here, the median sale price of existing single-family homes continues to climb, reaching a new high of $811,610 in May 2024 (C.A.R). This represents a healthy increase of 9% year-over-year. Interestingly, sales activity also ticked up slightly compared to May 2023.
Los Angeles Housing Supply Statistics
Generally, a balanced market will lie somewhere between four and six months of supply. Inventory is calculated monthly by taking a count of the number of active listings and pending sales on the last day of the month. If an inventory is rising, there is less pressure for home prices to increase. With 2.6 months of supply left, it is still short of what economists say is needed for a balanced market. Hence, the Los Angeles County housing market will continue to see upward pressure on home prices.
Months Supply of Inventory (SFH) for Los Angeles County is now 2.7 months.
Months Supply of Inventory (SFH) for the Los Angeles Metro Area is 2.8 months.
Months Supply of Inventory (SFH) for Southern California is 2.7 months.
So, What’s Going On?
There are a few possible explanations for this apparent disconnect. One possibility is that Los Angeles, with its ever-present allure and limited housing stock, remains a seller’s market. While there might be fewer buyers actively searching due to higher rates, those who are in the market are likely still facing competition, pushing prices upwards.
Another factor could be the nature of the sales data itself. The figures we’re looking at represent homes that closed escrow in May. These homes likely went under contract a month or two prior, when mortgage rates were slightly lower.
Southern California: Similar Story
Looking at the broader Southern California region, we see a similar trend. The median home price reached $880,000 in May 2024, reflecting a 10% increase year-over-year. Sales activity also showed a modest increase compared to the previous year.
Is This a New Normal?
The big question remains: is this a temporary blip or a sign of a more sustained shift in the Los Angeles housing market? It’s still too early to say definitively. However, with rising interest rates likely to persist for some time, it’s possible that we’ll see a continued slowdown in sales activity alongside a more moderate pace of price appreciation.
What Does This Mean for You?
If you’re a potential buyer, this could be a time to be more patient and strategic in your search. While competition might still be present, you might have a bit more leverage when negotiating offers.
For sellers, the market might not be quite as frenetic as it was in the past year, but Los Angeles real estate remains a valuable asset.
The Bottom Line
The Los Angeles housing market is simmering, not boiling over. Prices are still rising, but the pace might be moderating. This could be a sign of a more balanced market in the future, but for now, it remains a seller’s game with a cautious eye on rising interest rates.
How Much Does a Home Cost in the Los Angeles Housing Market?
Los Angeles, the City of Angels, beckons with sunshine, beaches, and a vibrant energy. But for aspiring homeowners, the City of Dreams can also raise a big question: how much does it actually cost to buy a house in LA?
Whether you’re looking for a cozy one-bedroom or a spacious four-bedroom home, understanding the costs involved is crucial. This guide provides an in-depth look at the current market conditions, interest rates, and pricing for different types of homes in Los Angeles as of May 2024.
Current Interest Rates
The current interest rate for home mortgages in Los Angeles is 7.06%. This is a slight increase from last year’s interest rate of 6.99% and a more significant rise from last month’s interest rate of 6.43%. These fluctuations can significantly impact your monthly mortgage payments and overall home affordability.
One-Bedroom Homes
# Homes for Sale: 615
Median Price: $550,000
Monthly Payment with 20% down: $3,578
Down-payment with 20% down: $110,000
Monthly Payment with 3% down: $4,203
Down-payment with 3% down: $16,000
Two-Bedroom Homes
# Homes for Sale: 2,176
Median Price: $750,000
Monthly Payment with 20% down: $4,879
Down-payment with 20% down: $150,000
Monthly Payment with 3% down: $5,732
Down-payment with 3% down: $22,000
Three-Bedroom Homes
# Homes for Sale: 3,327
Median Price: $930,000
Monthly Payment with 20% down: $6,049
Down-payment with 20% down: $186,000
Monthly Payment with 3% down: $7,107
Down-payment with 3% down: $28,000
Four+ Bedroom Homes
# Homes for Sale: 4,667
Median Price: $1.85 million
Monthly Payment with 20% down: $12,034
Down-payment with 20% down: $370,000
Monthly Payment with 3% down: $14,139
Down-payment with 3% down: $56,000
Understanding Monthly Payments
The monthly payments for a home depend on several factors including the down-payment amount and the interest rate. A larger down-payment reduces the loan amount, thereby lowering monthly payments. For instance, a 20% down-payment on a one-bedroom home priced at $550,000 results in a monthly payment of $3,578. Conversely, a 3% down-payment for the same property increases the monthly payment to $4,203 due to the higher loan amount.
Conclusion
The Los Angeles real estate market remains competitive with a wide range of homes available. As of May 2024, there are a total of 10,785 homes for sale across different categories. The market’s dynamic nature, influenced by interest rates and economic factors, makes it essential for buyers to stay informed and plan their finances accordingly.
Buying a home in Los Angeles requires careful consideration of current market conditions, interest rates, and personal financial capability. By understanding the costs associated with different types of homes and the impact of interest rates on monthly payments, potential buyers can make informed decisions. Whether opting for a small one-bedroom or a large four-bedroom home, being prepared with the necessary financial information is key to a successful home purchase in Los Angeles.
Is Los Angeles a Seller’s Real Estate Market?
When it comes to the real estate market, one crucial factor to consider is whether it favors sellers or buyers. A seller’s market indicates that there is more demand from buyers than the available supply of homes. While home prices remain high, data suggests a buyer-friendly environment emerged in May 2024.
Though median listing prices reached $1 million, a 7.8% year-over-year increase (Realtor.com), a key indicator points towards a buyer’s market: the sale-to-list price ratio. In May, homes sold for roughly the asking price, signifying a balanced market rather than a situation where sellers have the upper hand.
Further evidence comes from homes sitting on the market longer. The median days on market reached 37 days, a trend that indicates a slight slowdown compared to previous months. This could be a sign that buyers have more options and time to negotiate.
Malibu continues to reign supreme as the priciest city with a median listing price of a staggering $6 million. On the other end of the spectrum, Hi Vista offers a more affordable option with a median listing price of $449,900.
Overall, the Los Angeles housing market in May 2024 presents a potential opportunity for buyers. With a wider selection of properties, more time for consideration, and prices hovering around asking values, those looking to snag a piece of the California dream may find themselves in a favorable position.
Is Rent Going Down in Los Angeles?
The median rent for a one-bedroom apartment in California stood at $2,035 last month, reflecting the overall trend in the region (Zumper).
Rent Prices in LA Metro Cities Sorted from Most to Least Expensive
The Most Expensive
Beverly Hills & Santa Monica tied for the city with the most expensive rent with one-bedrooms both priced at $3,000.
West Hollywood ranked as the second priciest with rent at $2,750.
Irvine was the next most expensive with rent at $2,740.
The Least Expensive
San Bernardino was the most affordable city with one-bedrooms priced at $1,380.
Riverside & Long Beach tied for the second least expensive with rents both at $1,800.
Santa Clarita & Inglewood were tied for third with rents both at $1,850.
Year-Over-Year Rent Price Changes in LA Metro Cities
The Fastest Growing (Y/Y%)
Oxnard had the fastest growing rent, up 10.9% since this time last year.
Fullerton saw rent climb 3.4%, making it the second fastest growing.
Burbank ranked as third with rent increasing 2.3%.
The Fastest Growing (M/M%)
Ontario had the largest monthly rental growth rate, up 5.7%.
Oxnard ranked as second with rent increasing 5.6%.
Inglewood was third with rent climbing 2.8%.
Source: Zumper
Los Angeles Housing Market Predictions 2024
The Los Angeles housing market has been a consistent source of head-scratching moments and heart-pounding decisions for both buyers and sellers. While the market has historically favored sellers, with homes flying off the shelves in a matter of days, recent trends suggest a potential shift. Let’s break down the data and see what it tells us about the future of this coveted coastal market.
The Los Angeles-Long Beach-Anaheim Metropolitan Statistical Area (MSA) encompasses Los Angeles, Orange, and Ventura counties. It is one of the most significant housing markets in the United States, characterized by its substantial size and considerable economic influence.
Home Prices on the Rise (for Now)
The average home value in the Los Angeles-Long Beach-Anaheim area sits comfortably at $961,667. That’s a solid 8.8% increase over the past year, which is great news for sellers looking to cash in. Homes are also selling quickly, going into pending status in an average of just 13 days. This fast pace indicates continued high demand, keeping the pressure on affordability for buyers.
A Cooling Market LA Housing Market?
While the frenzy of the past few years might be simmering down, there are signs that the Los Angeles housing market could be entering a period of more moderate growth. Zillow’s 1-year forecast for Los Angeles County predicts a slight 0.5% decrease in property values by next spring, a significant slowdown from the growth we’ve seen recently. This could be due to several factors, including rising interest rates, increasing inventory levels, or a combination of both.
What Does This Mean for You?
So, what does this all mean for you if you’re considering buying or selling in the Los Angeles area? Here’s the breakdown:
Sellers: If you’re thinking about putting your house on the market, it might still be a good time to act. While the market might be showing signs of a slowdown, demand is still high, and homes are selling quickly. However, don’t expect the bidding wars and skyrocketing prices of the past year to be the norm.
Buyers: If you’re a buyer, take a deep breath. The lightning-fast pace of the market might be easing up, giving you a little more time to find the right house without facing multiple offers. This could translate into more negotiating power and potentially a better deal on your dream home.
Here are some additional factors to consider:
Interest rates: Rising interest rates can significantly impact affordability. Keep an eye on this metric as it can affect your buying power.
Local market trends: The Los Angeles market is vast and diverse. Prices and trends can vary greatly depending on the specific neighborhood you’re interested in.
This graph of Zillow illustrates the growth of home values in the region over the past year, along with a forecast suggesting this trend will likely continue for the next year.
Should You Invest in the Los Angeles Real Estate Market?
Los Angeles has historically been a sought-after real estate market due to its desirable location, diverse economy, and strong demand for housing. Here are some key points to consider:
Market Stability
Los Angeles has a relatively stable real estate market with a history of consistent, long-term appreciation in property values. This stability is driven by factors such as the city’s status as an economic hub, its thriving job market, and the limited supply of land for new construction. However, it’s essential to note that like any market, there can be fluctuations, and past performance is not indicative of future results.
Property Appreciation
Over the long term, Los Angeles properties have typically appreciated in value. While there can be short-term fluctuations, investing with a long-term perspective can allow you to benefit from the city’s overall property value growth.
Rental Income Potential
Los Angeles has a strong rental market, with a high demand for both single-family and multi-family rentals. This presents an opportunity for investors to generate rental income. However, rental income potential can vary depending on the neighborhood and property type.
Consideration for Property Type
Investors in Los Angeles can choose between single-family and multi-family properties. Single-family homes often provide more predictable rental income and potential for appreciation, while multi-family properties can offer multiple income streams but come with added management responsibilities.
The Housing Shortage Dilemma
Los Angeles is no stranger to the housing shortage dilemma. As its population continues to grow, driven by a robust job market and desirable lifestyle, the housing market struggles to keep pace. The consequences are multifold, affecting both renters and potential homeowners. High demand has led to escalating rental costs and home prices, making housing less affordable for many.
Investor’s Paradise: The Demand-Supply Gap
For real estate investors, this gap between demand and supply represents a significant opportunity. The housing shortage has created a strong demand for rental properties, offering the potential for attractive rental income and return on investment. Here’s why Los Angeles is an investor’s paradise:
Rental Income: High demand for housing has driven up rental rates, providing investors with the prospect of steady rental income.
Property Appreciation: Despite the challenges, Los Angeles properties have shown a history of appreciating in value over the long term.
Population Growth: Los Angeles continues to attract new residents due to its economic opportunities and lifestyle. This demographic growth fuels the demand for housing.
Construction Gap: Construction in Los Angeles hasn’t kept pace with population growth, intensifying the supply-demand imbalance.
Economic Diversity
Los Angeles is renowned for its economic diversity. The region’s economy spans various sectors, including entertainment, technology, aerospace, healthcare, and tourism. The presence of major corporations, such as those in the entertainment and tech industries, has been a key driver of job creation and economic growth. The city’s thriving tourism industry, centered around attractions like Hollywood and Disneyland, also plays a significant role in generating revenue and job opportunities.
Job Growth
Los Angeles has consistently experienced job growth, making it an attractive destination for job seekers. The city’s diverse economic landscape provides opportunities in various fields. It is a hub for creative industries, with Hollywood serving as the epicenter of the global entertainment industry. Additionally, the tech sector has witnessed substantial growth in Silicon Beach, an area on the west side of Los Angeles, home to numerous tech startups and established companies.
The presence of educational institutions, including the University of California, Los Angeles (UCLA) and the California State University, Northridge, contributes to research, development, and a well-educated workforce. The healthcare sector, with renowned institutions like the Cedars-Sinai Medical Center, further drives job opportunities.
Population Growth
The Los Angeles Metropolitan Area’s strong economy and job market have attracted a steady influx of residents. The population of the Los Angeles metro area is projected to be 12,598,000 in 2024, which is a 0.51% increase from 2023. However, the population of Los Angeles County is estimated to be 9,606,925 in 2024, which is a 0.58% decrease from the previous year.
The allure of the city’s lifestyle, cultural diversity, and range of amenities has made it a magnet for people from various backgrounds. The region’s population growth can be attributed to factors such as:
Job Opportunities: People move to Los Angeles in search of better job prospects and career growth.
Education: The presence of top-tier universities and educational institutions attracts students and faculty from around the world.
Cultural Attractions: The city’s vibrant cultural scene, including theaters, museums, and art galleries, appeals to those seeking a rich cultural experience.
Quality of Life: Los Angeles offers a pleasant climate, beautiful landscapes, and recreational opportunities that enhance the quality of life.
Entertainment Industry: The allure of the entertainment industry draws aspiring actors, musicians, and filmmakers to Los Angeles.
As the population continues to grow, the demand for housing and services surges, creating a dynamic environment for real estate investors.
How to Invest in Real Estate in Los Angeles?
Investing in real estate in Los Angeles involves several steps:
1. Research the Market: Begin by thoroughly researching the Los Angeles real estate market. Analyze historical property values, rental trends, and the performance of different neighborhoods.
2. Financial Preparation: Ensure your financial situation is in order. This may include saving for a down payment, understanding your credit score, and securing financing.
3. Property Selection: Choose the type of property you want to invest in, whether it’s a single-family home, multi-family building, or another type. Consider your investment goals and budget.
4. Location Matters: Location is critical in Los Angeles. Research neighborhoods and select areas with potential for growth and strong rental demand.
5. Property Management: Decide whether you’ll manage the property yourself or hire a property management company. This choice may depend on the number of units and your experience.
6. Legal and Tax Considerations: Understand the legal and tax implications of real estate investing in Los Angeles. Consult with professionals if needed.
Single-Family Rental vs. Multi-Family Investment
When considering whether to invest in single-family or multi-family properties, it’s essential to weigh the pros and cons of each:
Single-Family Rental:
Typically lower initial investment.
Easier property management.
Predictable rental income.
Multi-Family Investment:
Multiple income streams.
Potential for higher overall rental income.
More management responsibilities.
The choice between the two depends on your investment goals, budget, and willingness to manage the property. Both can be viable options in the Los Angeles market.
Maximizing Return on Investment
Investors looking to maximize their return on investment (ROI) in Los Angeles should consider the following strategies:
Location Selection: Carefully choose neighborhoods with strong rental demand and potential for property appreciation.
Property Type: Evaluate whether single-family or multi-family properties align with your investment goals and budget.
Property Management: Efficient property management can enhance ROI by reducing vacancies and maintenance costs.
Market Timing: Keep an eye on market trends and consider timing your investment to take advantage of favorable conditions.
Legal and Tax Considerations: Consult with legal and financial experts to ensure you’re optimizing your investment from a legal and tax perspective.
The post Los Angeles Housing Market 2024: Trends and Predictions appeared first on Norada Real Estate Investments.