Housing Market Trends
With a third of the year in the rearview mirror, definitive trends have emerged in 2024.
Driving a car in the middle of the night on an unfamiliar road without headlights would be challenging. For buyers and sellers stepping into the real estate scene, the countless YouTube videos, headlines, and neighborhood chatter make it as daunting as driving that car in the dark with no lights. To properly shed light on the current state of the housing market, ignoring the noise and turning to the 2024 trends backed by statistics and data will allow buyers and sellers to navigate the real scene properly.
Here is a breakdown of the “Top 5” Los Angeles County housing trends:
1. After bouncing along a record-low number of homeowners willing to sell in the high mortgage rate environment, there are finally more new sellers in 2024. Most homeowners are “hunkering down,” unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. Since 84% of California homeowners with a mortgage have a fixed rate of 5% or lower, today’s nearly 7.5% mortgage rate prevents many would-be sellers from placing their homes on the market. In 2023, 33% fewer homeowners were willing to sell compared to the 3-year average before COVID (2017 to 2019), or 30,371 missing FOR-SALE signs. That is a large chunk of the market, considering the 3-year pre-pandemic average annual residential closed sales was 65,000. In 2024 through March, there were 28% fewer homeowners compared to the 3-year average. Yet, there were 11% more FOR-SALE signs than 2023, or an extra 1,706 sellers. It is a step in the right direction, and will dramatically improve once rates drop below 6.5%.
2. With a rising inventory, more homes are on the market than last year. Last year, the active inventory continued to drop from mid-January through mid-April. Before COVID, the inventory started to climb cyclically in February, not April. This year, the inventory began at 6,827 and has grown to 8,831 homes today, a rise of 29% or 2,004. On the surface, it appears to be a typical year. Yet, fewer homes are coming on the market. The low supply has been pitted against low demand due to home affordability constraints. The growth in the inventory is a direct result of more homes coming on the market in the higher price ranges, which take a bit longer to sell compared to the lower ranges, starter homes. For homes priced below $750,000, from January through March, 4% fewer homes were placed on the market than last year. For homes above $750,000, there were 19% more homes. The higher the price range, the longer it takes to sell, which has allowed more homes to accumulate on the market and the inventory to rise.
3. Demand has been bouncing along a bottom like last year. The current demand trendline cannot get much lower than it currently stands. Demand in 2023 and 2024 has been subdued due to the high mortgage rate environment and the lack of homeowners willing to sell. Demand has remained at bare-bone, inherent levels. There are always buyers in every market. Year-over-year numbers have been nearly identical since ringing in the New Year. Currently, demand, a snapshot of the number of new pending sales over the prior month, is at 3,789 pending sales, 6% less than last year. Demand will only break higher when rates drop substantially below the 7% threshold. Until then, demand will continue to bounce along a bottom.
4. The market speed is a bit slower than last year. The Expected Market Time, the number of days it takes to sell all Los Angeles County listings at the current buying pace, is a function of supply and demand. At the beginning of the year, fewer homes were on the market than at the start of 2023, and demand was similar. Due to the constrained inventory, the Expected Market Time was lower year-over-year. The market felt noticeably faster in January. The Expected Market time was 91 days at the end of January, much faster than last year’s 108 days. Demand has closely mirrored 2023 this year, yet the inventory has slowly but surely grown. There are now more homes available than last year. With more supply and similar demand to the previous year, the market is slower than in 2023. Today's Expected Market time is 70 days compared to 51 days last year. As long as the inventory growth continues to outpace last year’s growth, the market will continue to slow faster than last year. In the trenches, the difference between 70 and 51 days is almost undetectable, yet if current trends continue, year-over-year comparisons will be much more noticeable.
5. Higher mortgage rates are muffling the true potential of the Los Angeles County housing market. While mortgage rates had surpassed 8% in October, they plunged to nearly 6.5% in mid-December. They started 2024 at just over 6.5%, close to January 2023. However, economic report after economic report exceeded expectations, which resulted in mortgage rates continuously climbing. In February and March, rates danced around 7%, the psychological barrier preventing many buyers from pursuing a home and some homeowners from listing their homes for sale. Rates have remained above 7% with duration since the start of April, similar to the second half of 2023. In January and February, closed sales were up 8% compared to last year. Yet, in March, sales were down by 10% due to climbing rates. Today’s 7.43% rate is much higher than 2023’s 6.59% level. As long as rates remain above the 7% threshold, activity will slow and impact the number of closed sales.
