Review of Local Market update during Week 5 of Covid19 for ALL of LA County
Like the rest of “daily life,” the housing market has not been spared from the sweeping effects of sheltering in place. Supply and Demand: A low supply is confronted with low demand. Life has changed.
Now that it has been more than four weeks of virus suppressed demand, the Los Angeles County demand readings are a true depiction of the number of pending sales that will take place under the “stay at home” circumstances. The current reading is an accurate indicator of the current market until the economy begins to reopen down the road. There is a broad housing market interruption due to the Coronavirus that has had a major impact on the velocity of the market, demand, and the supply of homes, the active inventory. Both have been impacted significantly. Yes, demand is at ultra-low, anemic levels, but so is the active listing inventory. Buyers are not writing that many offers, and fewer homeowners are pounding FOR SALE signs in their front yards. As a result of everyday life grinding to a halt, demand dropped by 50% in the past month, from 3,441 pending sales to 2,479. These demand levels were last seen amid the Great Recession. Since the “stay at home” order on March 19th, the number of homes placed on the market dropped by 49% compared to the prior 5-year average. That is 3,866 fewer homeowners entering the fray. Consequently, the active inventory has only grown by 387 homes in the past four weeks, a 4% rise, and the inventory now sits at 9,037 homes. While demand may be at Great Recession levels, the inventory is not growing like it did in 2006 through 2008 when it reached nearly 32,000 homes and here is the data to prove this.
The active listing inventory increased by 503 homes in the past two-weeks, up 6%, and now totals 9,037. In the past four-weeks, 49% fewer homes were placed on the market compared to the prior 5-year average. Last year, there were 12,889 homes on the market, 3,852 more than today, or an extra 43%.
• Demand, the number of pending sales over the prior month, decreased by 962 pending sales in the past two weeks, down 28% and now totals 2,479. In the past 5-years, demand has increased an average of 2%. The drop is due to the Coronavirus. Last year, there were 5,530 pending sales, 123% more than today.
• The Expected Market Time for all of Los Angeles County increased from 74 days to 109, a Balanced Market (between 90 and 120 days). The increase is due to the Coronavirus. It was at 70 days last year, much better than today.
• For homes priced below $750,000, the market is a slight Seller’s Market (between 60 and 90 days) with an expected market time of 67 days. This range represents 42% of the active inventory and 70% of demand.
For homes priced between $750,000 and $1 million, the Expected Market Time is 104 days, a Balanced Market. This range represents 15% of the active inventory and 15% of demand.
• For homes priced between $1 million to $1.5 million, the Expected Market Time is 177 days, a deep Buyer’s Market (greater than 150 days).
• For luxury homes priced between $1.5 million and $2 million, in the past two weeks, the Expected Market Time increased from 167 to 254 days. For homes priced between $2 million and $3 million, the Expected Market Time increased from 197 to 400 days. For luxury homes priced between $3 million and $4 million, the Expected Market Time increased from 345 to 1,055 days. For luxury homes priced above $4 million, the Expected Market Time increased from 616 to 1,088 days.
• The luxury end, all homes above $1.5 million, accounts for 30% of the inventory and only 7% of demand.
• Distressed homes, both short sales and foreclosures combined, made up only 1.2% of all listings and 1.7% of demand. There are only 69 foreclosures and 39 short sales available to purchase today in all of Los Angeles County, 108 total distressed homes on the active market, down 1 in the past two-weeks. Last year there were 164 total distressed homes on the market, a bit more than today.
• There were 3,942 closed residential resales in March, down 3% from March 2019’s 4,910 closed sales. March marked a 21% rise over February 2020. The sales to list price ratio was 99.2% for all of Los Angeles County. Foreclosures accounted for 0.6% of all closed sales, and short sales accounted for 0.5%. That means that 98.9% of all sales were good ol’ fashioned sellers with equity.
WARNING TO BUYERS: There is very little price movement within the overall Los Angeles County housing market; do not expect a deal. From the real estate trenches, some prospective buyers are expecting values to drop 10%, 20%, or even 30% like they did during the Great Recession. The current Expected Market Time for Los Angeles County is 109 days, a Balanced Market, a market that does not favor buyers or sellers and values are not changing much at all. During the Great Recession the Expected Market Time climbed to nearly 400-days for all of Los Angeles County. Only at those levels will values drop substantially.
WARNING TO SELLERS: Until the shelter in place order is lifted expect meager buyer activity, showings, and offers. Even with real estate being reclassified as an essential service, it really has not moved the needle in terms of demand. Expect demand to remain at its current, inherent levels and the active inventory to continue to slightly grow, ultimately slowing the market further until the economy is unlocked. Across the board, the broad housing market has been interrupted and the disruption will continue. Even when the governor opens economic activity, it will not be a light switch flipped to “on;” instead, it will be more like a dimmer. Demand will slowly thaw as more homeowners opt to place their homes on the market. It will be a slow, gradual evolution and there will not be a sudden spike in either supply or demand.
Activity for individual cities before Covid and Now.
This is the number of active listings and SOLD as of 4/20/20
Over all activity per County.
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