L.A. Housing Market Picks Back Up After 15 Months of Decline

The Los Angeles housing market is rebounding. According to research from Pacific Union, the home sales increased 1% in April after 15 months of declining sales. Lower priced homes lead the activity. Home sales below $1 million increase 2% after 19 months of consecutive declines, while homes priced between $1 million and $2 million were up 8%. Activity for homes priced above $2 million continued to decline.

“For-sale inventory is higher on a year-over-year basis for the first time in at least last four years,” Selma Hepp, chief economist and VP of business Intelligence at Compass, tells GlobeSt.com. “For example, in the area we are covering, there were 10,816 properties for sale in April. Last year, there were 9,830 available at the same time. The year-over-year increase was largest among affordable homes, those priced below $1 million, which was falling since May 2017.” While inventory is increasing compared to 2018, it is still lower than years prior to 2018.

At the same time, consumer confidence has returned to the market after a volatile end of the year, and interest rates declined compared to last year. “I think consumer confidence returned back into the market after very negative rhetoric at the beginning of the year, rapid stock market decline, government shutdown,” says Hepp. “Very importantly as well, interest rates declined from last year’s highs making today’s purchase more affordable than at the same time last year. Coupled with almost no price appreciation in some areas, buyers are seeing this springtime as a better opportunity to buy a home.”

Interest rates specifically have fueled activity. Likewise, prices have remained flat, and as a result, median mortgage payments have declined. “Interest rates are very important psychological factor for buyers thus seeing the rates fall and expecting they would rise again has probably nudged them to jump in,” adds Hepp. “Many blame Fed’s aggressive hikes last year for rapid increase in mortgage rates, which is a longer discussion, but nevertheless, more restrained attitude from the Feds has helped calm the markets bringing mortgage rates down.”

This is likely just the beginning. Hepp expects activity to remain strong through the end of the year, assuming no major political or economic changes. “Absent any political maneuvering that may upset the current economic conditions, I think we’ll continue to see solid demand from buyers and increased sales activity compared to last year,” she says. “Again, two things we didn’t have last year were inventories and rates and buyers were very competitive. This year, the competitive bidding has died down and buyers have more options to chose from.”