The Southern California coastline is stunning. Its rolling sets of crashing waves beckon beachgoers to splash in the surf. For first-timers ready to jump in the water after basking in the sun, they are unexpectedly greeted by a very cold Pacific Ocean, where temperatures average the mid-50s during the winter and the upper 60s in late summer. Occasionally, when all the stars align, the water is perfect, reaching the mid-70s.
In recent years, the housing market has felt very cold and unwelcoming for buyers. The supply of available homes, especially in the lower price ranges, had been especially limited, and mortgage rates had been stuck between 6.5% and 7.5% since September 2022. Yet, the conditions have been changing. For buyers new to the market, as they test the waters and dip their toes into the housing arena, they are finding the stars are finally beginning to align. There are more homes available in the more affordable price points, and mortgage rates have dropped to 6%.
Digging deeper into the numbers, there are a total of 12,118 homes available in Los Angeles County. That’s up 9%, or 992 homes, compared to last year’s 11,126. The increase is not coming from luxury, above $2 million. In fact, luxury is down 7% or 210 homes compared to a year ago. The rest of the market, homes under $2 million, there are 9,375 today compared to 8,173 last year, up 1,202 or 15%. The lowest price points have grown the most, an excellent development for entry-level, first-time buyers. The supply of properties below $500,000 is up 363 or 35%. From $500,000 to $750,000, it is up 441 or 21%, and from $750,000 to $1 million, it is up 112 or 5%.
Inventory levels have been limited for years, and the extra homes are a welcome relief to the chronically low supply. In 2024, there were 7,671 available homes, 37% fewer than today. In 2023, there were 7,220, 40% fewer, and in 2022, there were 5,394, 55% less. Today’s 12,118 is the highest end of February reading since 2019’s 12,910 homes, 7% more than today.
Mortgage rates had been stuck between 6.5% to 7.5% ever since they spiked above 6.5% in September 2022, three-and-a-half years ago. Occasionally, they would drop slightly below 6.5% or rise above 7.5% for a few days, but for the most part, they were stuck right around 7%. With a weakening labor market in 2025, they dipped below 6.5% on September 3rd and have never looked back. It has now been 6 months, indicating that this new, lower-rate environment is here to stay. Recently, rates have been dancing right at 6%, their lowest levels since September 2022, 41 months ago. With today’s higher property values, affordability remains squeezed, but the year-over-year improvement is eye-opening.
Buyers desirous of a $5,000 per month principal and interest payment with 20% down would have been looking at a $940,000 home last year, when mortgage rates bobbed around 7% (it was last above 7% at the end of May). Today, with mortgage rates right at 6%, that same buyer is looking at a $1,042,500 home, or an additional $102,500 in purchasing power. At the same time, home values dropped slightly over the past year, down 1.6% according to the Zillow Home Value Index.
If the U.S. economy were to downshift further in the coming months, mortgage rates could fall further to 5.75%. When the economy cools, investors shift their focus from stock market volatility to the long-term safety of government treasury bonds and mortgage-backed securities. The buyer seeking that $5,000 payment would be looking at a $1,071,250 home.
The market may have appeared frozen over the past few years, with a limited supply and higher mortgage rates, but Los Angeles County housing has been slowly thawing behind the scenes. The buying conditions have improved dramatically with a growing inventory of available homes and a much more favorable mortgage rate environment. For many, it may be time to dip their toes into the water.
Another way to look at the improvement in affordability is to compare the payment on a specific-priced home as rates drop. For a $1 million home with 20% down, at 7%, the payment is $5,322. The payment drops to $4,796 per month at 6%, a $ 526-per-month savings, or $6,307 per year.
