The Coronavirus pandemic and shutting the whole world down have affected many activities, a lot of businesses, and our lives like none of us have ever experienced before. No question about it, the California economy was hit hard, including the Los Angeles housing market and the investors, realtors, and home buyers and sellers.
Los Angeles Real Estate Market & Investment Overview 2020
So, while the sales of homes dropped over the last few months, the asking prices for houses stayed in place, and lo and behold, home sales have rebounded. In the Los Angles metroplex, there has been an increase of 12% that brought the average home price at $550,000. Sales are up almost 50%, in L.A. County, with an increase of over 37% in May.
The California real estate industry is still lagging, but it balances out as the market keeps shifting. Housing inventory still tight, and nobody will be surprised to see sellers backing out with Covid-19 cases surging again. in the Covid-19 cases, sellers may back out again to further decrease the listings. So, what does this mean for the future California real estate industry?
Los Angeles Housing Market Overview:
Los Angeles Housing Market Prices & Trends 2020
What are the latest trends and news for the Los Angeles real estate market? How is the median home inventory and pricing looking? Will the economy and growth affect all of these things in Los Angeles neighborhoods? What is the local Los Angele real estate market, the country's hottest real estate market, looking like today, and where is headed into the future? Just how big of an impact did COVID-19 have on one of the country's top ten percent real estate market?
Impact of COVID-19 on the Los Angeles Housing Market
Los Angeles home prices reached an all-time high two years ago. In 2018, house prices were climbing higher than any year before the Great Recession. Los Angeles and Orange counties' historical data shows that the year-over-year price increases hit a mountain top at just over 8% in April of that year, then started declining every month afterward. By October 2018, the same two counties saw an increase of almost 6% over the year before.
Some experts say that potential buyers are progressively priced out. Though, real estate agents say that the number of those that could buy has decided to wait on pulling that trigger. Los Angeles home values are up just under three percent from last year, and with a steady escalation, those home prices are tapering off now. In December, median prices for Los Angeles County homes were over $580,000, and by January, that had dropped to under $579,000.
Compared to last year's same time, there was an increase of less than 3 percent, and prices rose eight percent between January 2017 and January 2018. Most of 2018 saw house prices increase, but in the last quarter, they began dropping. A year later, in the fourth quarter of 2019, prices were slightly back up. FRM interest rate increase in 2018 decreased the principal amount homebuyers can borrow, yet their mortgage remained the same.
With almost 4 million residents in Los Angeles County, Los Angeles is considered a relatively walkable city. Los Angeles Metropolitan Area is a 5- region, including Los Angeles, Orange, Riverside, San Bernardino, and Ventura. Information from the California Association of Realtors, home sales in Southern.
Median priced homes in Los Angeles county dropped half a percent in March 2020, and sales saw a drop by fifteen and a half percent. Existing homes in Los Angeles city with median pricing went up by half a percent to over $800,000 but saw a drop in sales over 48%.
The number of home single-family homes sales for June 2020 in Los Angeles County declined over 19% compared to the same month last year. Active listings saw a 45% drop compared to last year while the median price reached over $600,000 and increased over almost 2%.
Credit: car.org
Latest Los Angeles Real Estate Market Forecast 2020 – 2021
What does the real estate market for Los Angeles look like when 2020 comes to an end? Since 2015, according to Zillow, the price trends of median homes in Los Angeles are appreciated by approximately 38%. That is, prices from the mid $500,000 went up to the mid $700,000. The past twelve months alone saw prices rise by almost 6%, making last year the seventh consecutive year of home price gains.
The latest forecast for the Los Angeles real estate market indicates that home prices are not going up. If anything, they may drop less than one percent over the next 12 months. The impact of the pandemic ongoing could be to blame, even for the short term, continuing to impede the nation's real estate sales activity, not just Los Angeles county.
A quick forecast for the Q3 20201 Los Angeles housing market is increased home prices by as much as 78% over the quarter. If this holds accurate, this will be higher pricing for Q3 2021 than Q3 of 2018 saw. Los Angeles market's most mediocre annual change in home values was a negative 23% for 12 months that ended in Q4 of 2008.
In the future, the question is what happens if the numbers will be positive or negative will depend on if you are the buyer or the seller. Home sales have significantly impacted the ongoing pandemic and stay-at-home orders, all of which frozen the real estate market this past spring. Sellers were pulling out, and in April, Los Angeles home sales had a sharp drop compared to March and for the year.
The real estate industry has adapted to using technologies with e-signatures and virtual showings with the current environment, helping both buyers and sellers with their real estate needs. The bad news, as the economy started opening up again, California has seen a surge in COVID-19 cases, forcing the state to impose restrictions once again. The forecast for the economy is a gradual recovery, but it will be sluggish for a few months as the pandemic threat lingers for the real estate market.
Snapshot credit by Zillow.com
Los Angeles, CA Homes For Sale
Is now the time to buy a house in Los Angeles – are buyers at an advantage? This question is the never-ending question that has no answer. Ask any buyer, and they'll say yes, it is a great time to buy a Los Angeles home, and the number of mortgage applications would support that statement. Then there are several unemployed due to the pandemic that tells us there are fewer buyers, bringing lower prices.
In Los Angeles, the 2020 housing market will likely remain neutral with a temporary drop in home sales, not affecting prices, unless the pandemic last long enough to create a significant drop price. Usually, the region is skewed to sellers. Instead, in this current cycle, the home prices are in favor of the buyers. In Los Angeles County, affordability is a huge issue, and only 1 in 4 residents can afford a median-priced home.
Where In Los Angeles Are The Best Investment Properties?
If you're looking in Los Angeles for an investment property, you may wonder if this is the right market right now. While California is the world's sixth-largest economy, and there are many points in favor of this market, one being the market's size, the economy right now is questionable.
Experts still believe and feel that the Los Angeles real estate market will have a strong rebound soon. Why? Because of the many market fundamentals that have always made the Los Angeles housing market, a good investment market is going to come back stronger.
Also Read: Moving To Los Angeles County Everything You Need To Know
How good is it to buy a Los Angeles investment property?
Many feel that Los Angeles homes are over-priced, and not all real estate investors want to enter into a competitive market that is grossly expensive, like the Los Angeles real estate market. Affordability is dropping off for buyers, with just thirty percent of L.A. residents owning their home because home prices are so high.
Other experts believe that even though Los Angeles homes' prices may be going up slightly in the next 12 months, there are still fair priced homes available. They believe that the housing demand is fueled by growing household formations, job creations, and increases in wages. There is still concern that with the resale inventory at a record-low though, and low building inventory because of supply-side constraints, the home prices will continue to be under pressure as interest rates persist at low levels.
Los Angeles Rental Properties Are Still Strong Investment Opportunities
Los Angeles still has a continuous and robust demand for apartment rentals. The result of low inventory, severe tenant competition, increased wages, and a strong economy. These things create a great rental income opportunity for investors for good cash flow, making a profitable income.
On the other hand, lousy cash flow means there isn't as much money in hand to pay debts. Therefore, the key to success in Los Angeles will be finding an excellent opportunity for estate investment. With wise investments in the Los Angeles real estate, an investor can secure their future, and right now, that is a cash flow rental property. The best tenants for that are retirees relocating to Los Angeles looking for properties to buy and make then a rental income.
Snapshot Credit by neighborhoodscout.com
Best Investment Properties To Buy in Los Angeles
The cheaper Los Angeles neighborhood may not be the best place to reside, and the factors that determine cheaper neighborhoods are:
- Overall Cost of Living
- Rent to Income Ratio
- Median Home Value to Income Ratio
Average real estate prices in Los Angeles are above the national average cost, so it depends on how much money you have to spend. Suppose you're looking for smaller investments or bigger deals like a duplex, triplex, multi-family. The inventory is minimal, but there are properties out there.
With new heights in Los Angeles home prices, real estate investors are still attracted to the area. First-time buyers are still challenged as real estate investors are competing for investment properties. Areas that are of most interest are:
West Hills, a neighborhood that is both commercial and residential, this western San Fernando Valley region has a high population 35 years old and over. The median home value of just over $730,000, and home values have increased by over 5% in the last 12 months. Home listings price drops, list-to-sale price ratio, and time-on-market have all made this a hot market.
Mid City West is a prime and appreciating neighborhood because of its safety factor for a quiet residential area. These are considered an actual L.A. experience. With the diversity this neighborhood offer, it reaches into West Hollywood, and the home prices have appreciated yearly since 2012. With median home value currently at almost $2,000,000, an increase of more than 10.0% the past year.
Central City is a Los Angeles affordable neighborhood for an investment property. The prices have appreciated every year since 2012, bringing the median value at almost $500,000, a 10% increase in 12 months. Right now, competition is low, so negotiating is hot and rental prices are up at an average monthly rent at $2,500.00.
In Conclusion
Combination of COVID-19 and record unemployment, buyers are still out there looking in the Los Angeles area. Houses are selling faster. The June numbers dropped after April, and May had a high number of days on the market. Houses sold in May four days faster and eight days faster than the same time last year, and cheap pricing wasn't why. The price of single-family homes steadily increased by approximately 4% to over $700,000 this year.
First-time buyers drive growth in sales, but existing homeowners are on the market for homes better suited for the COVID-19, like working from home. Home offices and big backyards focus on the low 30-year loan interest rates, all contributing to the real estate market growth.