With California housing markets having decidedly shifted since the summer, the looming question is what comes next. Since 2014, Pacific Union has partnered with John Burns Real Estate Consulting to forecast the market for the upcoming three years. At our November 2017 forecast, we suggested that...
From our company chief economist, Selma Hepp
- Sales of affordable homes in Los Angeles further declined in March from a year ago, while higher-priced sales picked up by 20 percent to 28 percent.
- While there is no clear impact from the tax-reform package, tech stock volatility, or rising mortgage rates, Silicon Beach saw slower sales in the first quarter compared with last year.
- Foothill and East Valley communities had almost 50 percent fewer homes for sale below $1 million in the first quarter compared with last year, which represents almost 1,000 fewer properties.
- Homes generally sold in 30 days, down from 36 days last year. But in a few communities, home sold in less than 20 days: Eastern communities, 16 days; South of 210, 18 days; and Silicon Beach, 18 days.
- Almost half of homes sold over the asking price, compared with 38 percent last year, with competition increasing the most in South L.A. and Downtown from the month before.
- The median home price across greater Los Angeles jumped by 14 percent from last March to $910,000, with West Side communities posting even higher appreciation.
Still, spring sales in some neighborhoods are off to a promising start. In particular, more expensive areas between Beverly Hills and Santa Monica and the Hollywood Hills and Malibu saw solid growth in March on an annual basis, with activity increasing by about 8 percent. Sunset East and the North Valley also saw increases of 5 percent and 8 percent, respectively. Other Los Angeles neighborhoods saw slower sales when compared with last March.
Generally, sales of homes priced between $2 million and $3 million were up by 20 percent, while sales priced above $3 million were up by 28 percent in March compared with last year. Neighborhoods that drove the increase in higher-priced sales include more expensive West Side neighborhoods, but also increases in sales of homes between $2 million and $3 million in East Valley and Foothill communities. Both neighborhoods experienced some weakness in higher-end sales over the last year, thus the recent improvement is a welcome turnaround. Among homes priced below $1 million, sales continued the falling, down by 17 percent year to date, as inventory is rapidly disappearing.
Again, the first quarter does not suggest that the tax reform, mortgage rates, or stock-market volatility are driving forces in the current market. Nevertheless, Silicon Beach did see a notable 26 percent decline in sales in March, with drops in most all price ranges. For the quarter, Silicon Beach sales were down by 14 percent, mostly due to lower sales of homes priced below $2 million. Taken together, it may be a marginal impact of tech market volatility seen through March. However, a persistent downward trend would need to be more obvious to relate it to changes in homes sales in tech-driven communities.
Figure 1 summarizes March's year-over-year change in total sales across three price ranges, below $1 million, between $1 million and $2 million, and above $2 million. In the Beverly Hills area, sales of homes priced below $1 million increased by 67 percent, however that was an increase from three to five homes. Thus, it is important to keep in mind the relative size of the individual markets when examining percent changes.
Furthermore, new listings available in March, which is a good indicator of forthcoming sales activity in spring months, do not indicate future improvements, with total new listings down across all neighborhoods and most price ranges. There are a few areas where there is a slight increase in the number of new listings of higher-priced homes.
Figure 3: Inventory in four L.A. regions for all homes
Homes continue to sell faster than they did a year ago or last month. While homes generally sold in 30 days, this is a decrease from the median of 36 days last March. Neighborhoods where homes sold at the fastest rates, generally in less than 20 days, include Eastern communities,16 days; South of 210, 18 days; Silicon Beach, 18 days; South L.A., 21 days; and Northeast Los Angeles, 21 days. Those neighborhoods also saw days on market drop on average by 8 days from last March.
Lastly, home prices in greater Los Angeles continued increasing at double-digit percent rates in March, with the median price at $910,000, an annual gain of 14 percent. Figure 4 ranks neighborhoods by year-over-year change in median home price. Malibu ranks on top with a 59 percent increase, however, prices there generally range widely, as the inventory of homes for sale varies greatly. Thus, the March increase could be driven by a couple of very high-priced sales.
Selma Hepp is the Chief Economist and Vice President of Business Intelligence for Compass. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.
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