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.