Los Angeles Home Sales Fall 24%

Los Angeles home sales fell 24% in September, bringing housing market activity down 11% for the year, compared to 2017, according to research from Pacific Union International. The fall in housing activity is a supply issue, with few for-sale options. In September, while housing sales declined, the supply showed no improvement and homes sales continued to rise, up 20%. In addition to the supply issues, rising mortgage rates and pricing pushed some homebuyers out of the market. This could help to rebalance the scales between home buyers and home sellers.

“Sales slowed due to several factors. One is spike in mortgage rates since last year, which combined with increase in home prices raised cost of ownership by about 20-25%,” Selma Hepp, chief economist and VP of business intelligence at Pacific Union International, tells GlobeSt.com. “Also, sentiment that we have reached the top of the home price growth caused some buyers to pull back because they don’t want to buy at the top of the market. Also, the overall inventory in this area has not seen much improvement, especially in more affordable neighborhoods thus buyers are looking at very few options and facing a strong competition.”

The supply issues are pushing pricing up, even as home sales fall. In the third quarter, sales activity slowed in all price ranges, and for homes priced above $1 million, sales activity is now trending on par with 2017 activity. “It comes to basic law of supply of demand,” says Hepp. “We have been facing continually declining supply in light of strong employment growth and more millennials coming of age when they are looking to buy their own homes.”

With some buyers abandoning their home search, the market could be transitioning into a more balanced market, which could push housing prices down in the long term. “I think we are looking at a more balanced market between buyers and sellers, which is a positive development following a period of unsustainably strong home price growth and continually falling inventories,” says Hepp. “Sellers’ desire to sell at the moment if they perceive the market being on top will help relieve some of the pressure that was built over the last year. We are looking at much healthier market going forward.”

Even with a rebalancing between buyers and sellers, the Los Angeles housing market is going to remain highly active well into the future. “I think L.A. market will remain solid as long as we continue to see strong local economy and employment and wage growth,” says Hepp. “Those are the ultimate drivers of buyer demand. Housing experts do believe that mortgage rates will continue to raise and may increase another 100 basis points over the next year. With that in mind, buyers need to consider how that will impact their budgets.”