It's all about Rates in the Housing Market

Mortgage rates impact both buyers and sellers in the housing market. Low mortgage rates increase affordability and buyer demand, while high rates decrease demand and limit the number of sellers. The pandemic caused a surge in demand due to low rates and stimulus packages, but rates have been rising since June 2022, reducing affordability and demand. As rates fall, affordability will improve, allowing more buyers to enter the market, and fewer homeowners will hunker down as the gap between their current fixed-rate mortgage and the prevailing rate narrows. The missing sellers have resulted in falling inventory levels, resulting in a hot market even with higher rates. The Expected Market Time is currently 61 days, lower than the pre-pandemic average of 65 days, due to low supply and fewer homeowners coming to market.

Active Listings

The active listing inventory has recently dropped by 4%, representing a decrease of 302 homes. This puts the current inventory at 7,600 homes, the lowest it's been since May of last year. It's important to note that February typically sees a slow climb in inventory, but this year is following the post-pandemic trend of declining inventory. While surging demand is partially responsible for this trend, it's actually the lack of homes entering the market that's the main issue. In January, only 4,794 new sellers came onto the market in Los Angeles County, which is 34% less than the pre-COVID 3-year average (2017 to 2019) of 7,311. This lack of new sellers is preventing the inventory from growing as quickly as it could.

Last year, the inventory was 5,328, 30% lower, or 2,272 fewer. The 3-year average before COVID (2017 through 2019) is 10,806, an additional 3,206 homes, or 42% extra.

Demand

With demand surging higher and the supply falling, the Expected Market Time (the number of days to sell all Los Angeles County listings at the current buying pace) plunged from 76 to 61 days in the past couple of weeks, its lowest level since June of last year. Last year the Expected Market Time was 31 days, substantially faster than today, and home values were screaming higher. The 3-year average before COVID was 65 days, similar to today.

Last year, demand was at 5,204, 38% more than today, or an extra 1,441. The 3-year average before COVID (2017 to 2019) was 5,089 pending sales, 35% more than today.

The Los Angeles County housing market is heating up, with demand skyrocketing and supply plummeting. In just the past couple of weeks, the Expected Market Time - the time it takes to sell all listings at the current buying pace - has dropped from 76 to 61 days, its lowest level since June 2022. This is a sharp contrast to last year's market, where homes were selling in just 31 days. The 3-year pre-COVID average of 65 days is also similar to today. As demand continues to outpace supply, the market is ripe for sellers to cash in on the hot market.

Luxury End

With demand surging and supply only slightly increasing. In just the past couple of weeks, the inventory of luxury homes priced above $2 million increased by 5%, while demand soared by 34%. This resulted in the Expected Market Time for luxury homes dropping from 203 to 160 days, its strongest level in months.

Although luxury demand is still down from last year, the market is heating up with the number of active luxury listings increasing by a whopping 48%. For homes priced between $2 million and $8 million, the Expected Market Time also decreased significantly, making it a great time for sellers to put their homes on the market. However, for homes priced above $8 million, the Expected Market Time is still quite long at 633 days, so it may take some time to sell.

Overall, the luxury market is showing great signs of improvement and is expected to continue its upward trend in the coming weeks.