It is nearly time for the annual 4th of July 5K. For some, it's a race, but for others, it's a fun walk in the sunshine with friends by their side. The elite runners line up right in front of the starting line and run the course at an incomprehensible pace. Others jog pushing strollers or holding an American flag. Small kids speed past, weaving in and out of pedestrian traffic. Many briskly walk the entire route and enjoy a great conversation while exercising. There is a variety of running speeds in every 5K race.
Similarly, when the Los Angeles County housing market is divided into various price ranges and separated between single-family detached homes and attached condominiums and townhomes, there is a variety of different speeds. Some ranges take weeks, while others take months or close to a year.
For years, one of the hottest price points has been detached homes priced between $750,000 and $1 million. While not as fast as last year’s 52-day Expected Market Time (the number of days it takes to sell all Los Angeles County listings at the current buying pace) or 37 days two years ago, the current speed for these homes is 78 days. A turnkey home between $750,000 and $1 million, nicely appointed, in excellent condition, and priced appropriately, will attract considerable attention and sell quickly, often with multiple offers.
For detached homes priced below $750,000, the Expected Market Time slows slightly and stands at 85 days, not as fast as it has been in the past couple of years. The market decelerates for all homes priced at $1 million or higher. For detached homes priced between $1 million and $1.5 million, the Expected Market Time is a little over 3 months. The higher the price, the longer it takes to sell. It takes 116 days to sell homes priced between $1.5 million and $2 million, and 134 days to sell homes priced between $2 million and $3 million. It takes eight months to sell homes priced between $3 million and $6 million, and 588 days, nearly 20 months, for homes priced over $6 million.
Overall, across all price ranges, detached homes take over three months from the time the FOR SALE sign is hammered in the yard to becoming a pending sale. It is taking a lot longer to sell due to the increased number of homeowners opting to sell this year compared to the last couple of years. The supply of detached homes has increased by 39% year-over-year, rising from 8,114 homes last year to 11,263 homes today. Yet, demand (a snapshot of the number of new pending sales over the prior month) has not changed significantly, rising from 3,022 last year to 3,095 today, an increase of 2% or 73 pending sales. The increased seller competition has resulted in the Expected Market Time rising from 81 days a year ago to 109 days today. It takes 28 days longer to sell this year. In comparison to two years ago, when the Expected Market Time was at an extremely fast 58 days, the supply was 5,994, which is 47% fewer available homes. Again, demand was not much different, with slightly more pending sales at 3,116.
There is also a big difference between attached condominiums and townhomes. With rapidly increasing monthly association fees due to rising insurance costs and required balcony inspections in the state of California, the attached homes market is slower than the detached homes market. The fastest price ranges are condominiums and townhomes priced between $500,000 and $750,000, with an Expected Market Time of 105 days. The Expected Market Time rises to 110 days for attached homes priced below $500,000. It is 114 days for attached homes between $750,000 and $1 million. The Expected Market Time jumps to 146 days for homes priced between $1 million and $2 million, and slows to 192 days for luxury attached properties priced over $2 million, over six months.
Like detached homes, the market speed was considerably faster for condominiums and townhomes last year, and nearly instant two years ago. The inventory is up 58% compared to last year, and up 161% compared to 2023. Demand is down 2% compared to last year, down 18 pending sales, and up 1%, or 10 pending sales, compared to two years ago.
That is how the market has developed. Demand is not changing much from year to year, but more homeowners are participating and contributing to the build-up of today’s rising inventory. Rates exploded higher in 2022, rising from 3.25% in January to 7.37% in October 2022. At the start of 2022, 89% of Californians with a mortgage had a rate at or below 5%. 72% had a rate at or below 4%. As a result, in 2023, homeowners in Los Angeles County “hunkered down” in their homes, unwilling to move due to their underlying, locked-in, low fixed-rate mortgage, and 33% fewer homeowners came on the market compared to the 3-year pre-pandemic average (2017-2019). In 2024, it dropped to 22% fewer. The additional sellers contributed to the supply of available homes, and inventory rose at a faster pace. This year, there are 12% fewer sellers. In matching more sellers with similar year-over-year demand, the active inventory has grown rapidly, and the market has downshifted considerably.
There are different speeds to the market, depending on price and whether a home is detached or attached. It is incumbent upon housing participants to consider the speed factor in approaching the market with the best strategy. A buyer looking to purchase a detached home at $850,000 will have a much different game plan than a buyer looking for a $1,600,000 home. Yet, it is also crucial for sellers to understand that as the supply of homes continues to grow and demand remains relatively the same, dropping slightly through the summer months, the Expected Market Time will also increase. The accumulation of extra homes means more seller competition.
To find success at ALL price points, it is vital that sellers carefully price their homes according to their Fair Market Values by meticulously scrutinizing recent comparable pending and closed sales. Overpriced homes result in wasted market time and prolonged periods on the market with little to no success, even in the hottest price ranges. Many sellers will fall victim to overpricing and will not achieve their objective until they correct their asking price with a reduction more aligned with their true Fair Market Value.
