GREATER LOS ANGELES AREA MARKET UPDATE
Our team is committed to continuing to serve all your real estate needs while incorporating safety protocols to protect all of our loved ones.
In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.
As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.
– Kevin Gueco, DRE #01461677
Welcome to our newsletter. This month, we discuss the effects of increased single-family home inventory and lower buyer demand. We also dive into the larger trend of working from home and how that might affect the region. As the market ebbs and flows, we continue to provide you with the most up-to-date market information, so that you feel supported and informed in your buying and selling decisions.
In this month’s newsletter, we cover the following:
- Key Topics and Trends in September: We look at the trend toward more businesses encouraging remote work and how it could affect demand.
- September Housing Market Updates: Inventory remains higher than normal, which has not significantly impacted price thus far. The Days on Market (DOM) for condos, however, has increased dramatically as more and more condos come to market.
Key Topics and Trends in September
The pandemic tested the efficacy of large-scale remote work. Early in the pandemic, corporate giants, like Facebook and Google, announced that their employees would work remotely until at least summer 2021; a trend that many companies adopted. This has led to another “new normal” for companies: hiring employees from different parts of the country without requiring those employees to relocate near the office. As a result, companies, and employees are even less restricted by geographic location than they ever have been in the past.
Though remote work is making it possible for people to move to other areas, U.S. metro areas are not going through an abnormal population exodus; rather, fewer people are moving to cities due to job opportunities. Despite fewer people moving to major metros, demand remains steady in most markets. Renters who can afford to purchase houses and homeowners who want to move within a city are still in the market. We will review the impact on the Greater Los Angeles area in the following section.
September Housing Market Updates for Select Los Angeles Areas
In this newsletter, we break down three luxury areas in Los Angeles as follows:
- North Beach: includes the Pacific Palisades, Santa Monica, and Venice
- West Side: includes Beverly Hills, Brentwood, West Hollywood, and Westwood
- South Bay: includes Hermosa, Manhattan Beach, and Redondo
In August, single-family home prices rose in the South Bay on a month-over-month and year-over-year basis. North Beach prices have been fairly stable this year on an absolute dollar basis but fell year-over-year. The West Side, which tends to be more volatile, has seen a significant median price reduction since March, the start of the pandemic.
Luxury markets, with homes over $2 million, tend to show more price variance in general. We can see that with the year-over-year returns.
Note: June data removed from the median price change because it is not representative. June median price change for the West Side was over 200%
The inventory of homes for sale has increased across markets, but the North Beach area has shown the most consistent inventory growth since the early months of the pandemic. Over the last several months, supply has outpaced demand for North Beach and the West Side, which is reflected in the median price decrease. Lack of supply compared to demand typically buoys Los Angeles’s prices, but within the luxury market, demand is now lower than usual. The South Bay has shown only a small increase in properties when compared to August of last year.
To fully appreciate the rise in inventory, we must look at how sales behaved in 2020. During the initial months of the pandemic (March, April, and May), buyers and sellers hesitated to enter the market or entirely withdrew from it. Sellers began to reenter the market in May, increasing inventory from historic lows. Without the usual inventory, buyers have had fewer options to choose from causing lower than normal sales to continue into June. Sales in the South Bay have been strong over the summer months, which is an amazing recovery from the lows in May. We expect the number of new listings in these markets to taper until some of the excess inventory comes off the market. For buyers, the increased inventory gives them a larger selection and a greater ability to find the right home.
We can look to Months of Supply Inventory (MSI)—the measure of how many months it would take for all current homes for sale on the market to sell at the current rate of sales—as a metric to judge whether the market favors buyers or sellers. MSI has an average of three months in California, which indicates a balanced market. An MSI lower than three means that buyers are dominating the market and there are relatively few sellers, while a higher MSI means there are more sellers than buyers. In August, the MSI for single-family homes stayed below the three-month mark in the South Bay, indicating that the market favors sellers more than the other two areas. The MSI of North Beach and the West Side was not as tight and clearly favors buyers; however, North Beach is trending lower with the increase in sales.
The Days on Market (DOM) across markets is far lower than last August. Due to the higher level of inventory, working with an agent that can differentiate the property and create a winning selling strategy is even more important.
In summary, home prices in select Los Angeles luxury areas have shown to respond relatively well to supply and demand dynamics. Los Angeles, and California in general, tend to live in a constant state of undersupply, which elevates home prices. When we see supply increase at a higher rate, prices often will decrease. The high levels of inventory have made the market more favorable to buyers in North Beach and the West Side. We believe sales will continue to trend upward and bring the market closer to balance. The housing market has shown its resilience through the pandemic and remains one of the safest asset classes.
Moving forward, we anticipate new listings to slow until excess inventory lowers. Home prices will likely remain stable barring a continued influx in properties coming to the market.
As always, we remain committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals is happy to discuss the information we have shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home.