Housing is Slowing
The Los Angeles County housing market has downshifted considerably since March.
Returning to their classrooms, kids are adjusting to their busy school calendars. Fall youth sports have also resumed with their demanding practice and game schedules. Upon entering the local grocery store, boxes of bright orange pumpkins adorn the entrance. Coffee shops are busy making their most popular seasonal latte, Pumpkin Spice. The sun is setting earlier and earlier by the day. That’s right, Autumn has arrived. It may not officially start until Sunday, September 22nd, but all the signs are here.
These changes also indicate that the start of the housing Autumn Market has arrived. The Autumn Market begins the moment kids go back to school at the end of August, a bit earlier than the fall equinox, and ends a week before Thanksgiving, the start of the Holiday Market. The best time of the year for housing is during the Spring Market. That is when buyer demand reaches a peak. Many people, especially families with children in school, prefer to isolate their home during the spring and close during the summer while the kids are on break. The inventory rises during the spring as well.
The second best time of the year for the housing market is the Summer Market. The market slows a bit due to all the distractions, including family vacations, summer camps, the beach, the community pool, and amusement parks. There is still plenty of demand, yet it is slowly declining. The inventory normally rises until it finds its peak between July and August and then gradually falls.
During the Autumn Market, the “prime time” season for real estate is now in the rearview mirror. Housing transitions to a slower time of the year. Typically, the inventory and demand decrease slightly at a very similar rate, and the Expected Market Time (the time between hammering in the FOR-SALE sign to becoming a pending sale) does not change much.
This year has not been typical at all. Since peaking in May with
4,021 pending sales, demand (a snapshot of the number of new pending sales over
the prior month) has dropped to 3,585, shedding 436 pending sales or 11%. On
the other hand, the active inventory has been on the rise all year. Since May’s
9,256 home level, the inventory has grown to 11,897, up a stunning 29% or 2,641
additional homes. With the supply of homes rising and demand falling, the
Expected Market Time has grown from 69 days in May to 100 days today.
What is occurring is that more homeowners are opting to sell this year, and they are accumulating over time. The extra sellers are competing against a dwindling buyer pool; thus, the market has been decelerating. Ask anyone within the real estate trenches, and they will attest to the downshift in the market and the fact that it is taking longer to secure a sale.
Since the start of the Autumn Market about four weeks ago, the Los Angeles County housing market has been rapidly cooling. The inventory has climbed from 11,495 in mid-August to 11,897 today, increasing by 402 homes or 3%. Demand has decreased from 3,906 to 3,585 pending sales, down 321 or 8%. The Expected Market Time has risen from 88 to 100 days in the past month alone. That is quite a jump when it typically is flat during this time of year. It is the highest mid-September reading since 2014, ten years ago.
This market slowdown comes when rates have been declining, improving affordability and allowing more buyers to enter the market. Rates eclipsed 7.5% in April and bounced around 7% from May through July. It was not until August, when the job market showed signs of cooling, signaling future Federal Reserve rate cuts starting this month, that mortgage rates began to fall materially. According to Mortgage News Daily, they have plunged from 6.9% at the end of July to 6.12% today, knocking on the door of rates dropping below 6% for the first time since August 2022, over two years ago.
This is the most buyer-friendly Los Angeles County housing market in years. With lower rates and pressure for them to continue to decline, a rising inventory, and falling demand, meaning less buyer competition, right now is a great time to be a buyer.
ATTENTION BUYERS: Do not wait for prices to plunge before purchasing. Buyers who attempt to time the market end up regretting the delay and often get burned. Since rates are forecasted to continue to fall with a cooling economy, more buyer demand is on the horizon. Rates have only plunged recently, starting at the tail end of the Summer Market. Improved affordability did not align with real estate's busiest time of the year. Yet, it will line up much better with the 2025 market, and housing will be hotter with tremendous competition and rising values.
ATTENTION SELLERS: Today’s market requires a meticulous, cautious approach to pricing. Overprice and it will result in wasted market time and an unsuccessful outcome. Homes that are in excellent condition, attractively upgraded, recently updated, and ready for an immediate move-in will attract the most attention and will sell the fastest as long as they are appropriately priced. Competition among sellers has been on the rise, demanding careful pricing and for many to sharpen their pencils.
