Los Angeles Real Estate Market Update - JUNE 2023

Higher mortgage rates and low housing inventory restrained California home sales in April: The market had another rough month in April in terms of sales, as the sales-pace remained below the 300,000-units for the seventh consecutive month. The number of homes sold dipped both from the prior month (-4.7%) and from the same month of last year (-36.1%), while supply remained tight and mortgage rates stayed elevated. Closed sales, however, should see a bounce back in May as more transactions opened escrow in April. Meanwhile, market competition continues to heat up and applies upward pressure on home prices. The statewide median price climbed back above $800k for the first time in six months and is expected to increase further in May and June as the market enters its typical summer homebuying season.

Despite the decline in home sales, the statewide median home price in April climbed to $815,340. This reflects a 3.0 percent increase from March but remains 7.8 percent lower than April 2022. It is important to note that the decline in the median price compared to last year is due, in part, to the surge in prices seen in early 2022 as buyers rushed into the market before interest rates increased.

The increase in market competition, with homes spending less time on the market and a higher percentage of homes selling above asking price, has contributed to the rise in the median home price.

The housing market in Los Angeles faced several challenges in April. The lock-in effect, which has tightened housing supply, discouraged potential sellers from listing their homes for sale. This resulted in a significant 30 percent year-over-year drop in new statewide active listings, the largest decline since the May 2020 pandemic shutdown.

Based on the current market conditions, C.A.R. has revised its 2023 Housing Market Forecast. The forecast now projects a decline in existing single-family home sales, estimating 279,900 units to be sold in 2023, an 18.2 percent decrease compared to the 342,000 units sold in 2022.

Despite the decline in sales, the median home price in California is expected to remain relatively high. The increase in market competition, with homes spending less time on the market and a higher percentage of homes selling above asking price, has influenced the rise in median home prices.

According to Zillow, there are several major areas where home prices are projected to rise by 2024:

Areas where prices will rise by 2024:

Los Angeles, CA: The forecast predicts a steady increase in home prices, with a projected rise of 2.7% by April
2024.
Riverside, CA: Home prices in Riverside are expected to experience significant growth, with a forecasted increase of 3.7% by April 2024.
San Diego, CA: The forecast predicts a notable rise in home prices in San Diego, with a projected increase of 3.3% by April 2024.

Source: CAR - California Association of Realtors & NoradaRealEstate.com