Decrease in Demand and Decrease in Supply

Even with a decrease in demand, the Los Angeles Area housing market lines up in favor of Sellers due to the persistent lack of supply.

The looming recession has buyers on the edge of their seats fully aware that the housing market has slowed considerably. From the flood of online news articles describing the real estate slowdown to the countless YouTube and TikTok videos detailing in only a few minutes how housing is about to crash, many buyers are convinced that the Los Angeles County housing market is on the brink of collapse. Homes are taking a lot longer to sell. The number of price reductions has surged higher in the past couple of months. As a result, many buyers sit on the sidelines waiting for prices to plunge. They are waiting for a deal, a total bargain.

Demand, a snapshot of the number of new escrows over the prior month, increased from 4,121 to 4,222 in the past couple of weeks, adding 101 pending sales, or up 4%. It was the largest two week increase since the mid-March. It is still the lowest demand reading for this time of the year since tracking began back in 2012, but a surprising, sudden shift in the Los Angeles County housing market. The increase in demand is due to mortgage rates trending lower ever since reaching 6.28% in mid-June. In fact, according to Mortgage News Daily, they nearly hit 5% several times so far in August, considerably lower than the recent highs. As mortgage rates drop, the pool of potential buyers increases, enabling demand to rise. When the economy slows, mortgage rates almost always decline. Expect demand to not change much over the coming months, only slowly drop for the remainder of the Summer and Autumn Markets, from now until Thanksgiving. If rates drop further, demand could rise. Carefully watching mortgage rates will indicate the direction of demand for the remainder of the year.

Last year, demand was at 6,292, 49% more than today, or an extra 2,070. The 3-year average prior to COVID (2017 to 2019) was at 5,734 pending sales, 36% more than today.

With the rise in supply slowing to a trickle and demand jumping higher, the Expected Market Time (the number of days to sell all Los Angeles County listings at the current buying pace) decreased from 79 to 78 days in the past couple of weeks. At 78 days, it is a Slight Seller’s Market (between 60 and 90 days) where sellers get to call most of the shots, there are fewer multiple offers and home values are not appreciating as fast as they have been over the past couple of years. The market is no longer instant and properly pricing is crucial to find success. Last year the Expected Market Time was at 41 days, substantially faster than today. The 3-year average prior to COVID was at 70 days, slightly faster than today.