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Home prices are forecast to decline 8.8 percent in Los Angeles

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Home prices are forecast to decline 8.8 percent in Los Angeles and around the state this year, according to the California Association of Realtors, but that’s not a big reason to cheer for those looking to enter the home-buying market.

Median home prices remain unaffordable for about 80 percent of Californians, according to a recent statement from the residential broker trade group.

In a study released last week, CAR found that only 17 percent of Californians could afford a median priced home of $790,000 in the fourth quarter of 2022. The number of Californians able to afford a median priced home was 18 percent in the third quarter of 2022 and 25 percent in the fourth quarter of 2021.

A median income of $201,200 was required to make monthly payments of $5,000 for principal, interest and taxes on a 30-year fixed-rate mortgage at a 6.8 percent interest rate, according to study authors.

The outlook for the condominium market was better. About 26 percent of California home buyers were able to purchase a $610,000 median priced condo. A minimum income of more than $155,000 was required to make a monthly payment of $3,880.

Jordan Levine, CAR’s chief economist, does not think California and Los Angeles’ housing market is going to change much for the rest of 2023. The biggest reason was rooted in a basic supply and demand issue.

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“We can expect some modest price adjustment in L.A.,” Levine told TRD. “Even with business cycles that go up and down, we have an economy that is so underhoused, it means affordability is a persistent challenge.”

Inventory has long been tight for many areas of Los Angeles and surrounding markets. However, the bonanza market of 2021 and 2022 has kept expectations high for many sellers, said Cyrus Mohseni, founder of The Keystone Team, a brokerage based in Huntington Beach which has closed deals from North San Diego County to West Los Angeles.

Mohseni said residential agents are being pulled in two directions in this market.

“You have a bunch of sellers who want the value of the last two years. You have a bunch of buyers who can’t pay the value of the past two years because of interest rate hikes,” he explained.

But there is opportunity in a tight market. Mohseni said that many homes are priced incorrectly, and their listings expire. He recommends Keystone Team agents dig through MLS for expired listings. Contact sellers of the expired listings and pitch them on listing their homes at an ask more in tune with the market.

Mohseni forecast an increasing number of California agents will drop out of the market because it is not as easy to close a deal as it was in the recent bonanza market. But those agents who remain will be able to take market share from those who exit.

Home Sales Surged 14.5% in February

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Existing-Home Sales Surged 14.5% in February, Ending 12-Month Streak of Declines
Largest monthly percentage increase since July 2020
March 21, 2023Media Contact: Troy Green 202-383-1042
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Key Highlights
Existing-home sales jumped 14.5% in February to a seasonally adjusted annual rate of 4.58 million, snapping a 12-month slide and representing the largest monthly percentage increase since July 2020 (+22.4%). Compared to one year ago, however, sales retreated 22.6%.
The median existing-home sales price decreased 0.2% from the previous year to $363,000.
The inventory of unsold existing homes was unchanged from the prior month at 980,000 at the end of February, or the equivalent of 2.6 months’ supply at the current monthly sales pace.
WASHINGTON (March 21, 2023) – Existing-home sales reversed a 12-month slide in February, registering the largest monthly percentage increase since July 2020, according to the National Association of REALTORS®. Month-over-month sales rose in all four major U.S. regions. All regions posted year-over-year declines.

Total existing-home sales,1 – completed transactions that include single-family homes, townhomes, condominiums and co-ops – vaulted 14.5% from January to a seasonally adjusted annual rate of 4.58 million in February. Year-over-year, sales fell 22.6% (down from 5.92 million in February 2022).

“Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said NAR Chief Economist Lawrence Yun. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”

Total housing inventory2 registered at the end of February was 980,000 units, identical to January and up 15.3% from one year ago (850,000). Unsold inventory sits at a 2.6-month supply at the current sales pace, down 10.3% from January but up from 1.7 months in February 2022.

“Inventory levels are still at historic lows,” Yun added. “Consequently, multiple offers are returning on a good number of properties.”

The median existing-home price3 for all housing types in February was $363,000, a decline of 0.2% from February 2022 ($363,700), as prices climbed in the Midwest and South yet waned in the Northeast and West. This ends a streak of 131 consecutive months of year-over-year increases, the longest on record.

Properties typically remained on the market for 34 days in February, up from 33 days in January and 18 days in February 2022. Fifty-seven percent of homes sold in February were on the market for less than a month.

First-time buyers were responsible for 27% of sales in February, down from 31% in January and 29% in February 2022. NAR’s 2022 Profile of Home Buyers and Sellers – released in November 20224 – found that the annual share of first-time buyers was 26%, the lowest since NAR began tracking the data.

All-cash sales accounted for 28% of transactions in February, down from 29% in January but up from 25% in February 2022.

Individual investors or second-home buyers, who make up many cash sales, purchased 18% of homes in February, up from 16% in January but down from 19% in February 2022.

Distressed sales5 – foreclosures and short sales – represented 2% of sales in February, nearly identical to last month and one year ago.

According to Freddie Mac, the 30-year fixed-rate mortgage(link is external) averaged 6.60% as of March 16. That’s down from 6.73% from the previous week but up from 4.16% one year ago.

Single-family and Condo/Co-op Sales
Single-family home sales soared to a seasonally adjusted annual rate of 4.14 million in February, up 15.3% from 3.59 million in January but down 21.4% from the previous year. The median existing single-family home price was $367,500 in February, down 0.7% from February 2022.

Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 440,000 units in February, up from 410,000 in January but down 32.3% from one year ago. The median existing condo price was $321,000 in February, an annual increase of 2.5%.

“Owning a home provides a path to long-term financial security and is a vehicle by which to transfer wealth to future generations,” said NAR President Kenny Parcell, a REALTOR® from Spanish Fork, Utah, and broker-owner of Equity Real Estate Utah. “REALTORS® deliver expert guidance, objectivity and professionalism to consumers during the complex process of purchasing a home.”

Regional Breakdown
Existing-home sales in the Northeast improved 4.0% from January to an annual rate of 520,000 in February, down 25.7% from February 2022. The median price in the Northeast was $366,100, down 4.5% from the previous year.

In the Midwest, existing-home sales grew 13.5% from the previous month to an annual rate of 1.09 million in February, declining 18.7% from one year ago. The median price in the Midwest was $261,200, up 5.0% from February 2022.

Existing-home sales in the South rebounded 15.9% in February from January to an annual rate of 2.11 million, a 21.3% decrease from the prior year. The median price in the South was $342,000, an increase of 2.7% from one year ago.

In the West, existing-home sales rocketed 19.4% in February from the prior month to an annual rate of 860,000, down 28.3% from the previous year. The median price in the West was $541,100, down 5.6% from February 2022.

The National Association of REALTORS® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics.

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