Los Angeles Housing Report

Los Angeles County Housing Report: 2025 Forecast

2024 in Review

In 2024, Los Angeles County's housing market experienced rising inventory, muted demand, and a rebound in the luxury segment, all shaped by high mortgage rates. Here's a look back at the key trends:

Active Inventory:
Inventory started the year low, with under 7,000 homes available, growing steadily to a late peak of over 12,000 in October—its highest since 2019. By year’s end, inventory dipped to just under 10,000 homes, marking the highest year-end level since 2018.

Demand:
Buyer demand remained muted due to persistent affordability challenges, particularly during spring and summer, when mortgage rates exceeded 7%. Demand peaked in May at approximately 4,000 pending sales, the lowest peak on record. A slight recovery occurred in the fall as rates briefly dropped below 7%, but demand fell again toward the year’s end, ending around 10% below historical averages.

Luxury Market:
The luxury market rebounded with approximately 13% more sales compared to 2023, making 2024 the third-strongest year on record for homes priced above $2 million. However, longer market times persisted, with luxury homes taking an average of 250 days to sell by December.

Expected Market Time:
The time to sell a home increased throughout 2024 as inventory rose and demand softened. It started strong at around 80 days in January, dropped briefly to 60 days in March, and climbed to approximately 100 days by the end of the year.

2025 Forecast

The 2025 housing market will largely depend on the direction of mortgage rates, driven by economic performance. Three potential scenarios are outlined:

Scenario 1: Steady Economic Growth (Most Likely)

• Rates: Expected to fluctuate between 6.5% and 7%.
• Inventory: Likely to start at about 9,000 homes, climbing gradually to a peak of 14,000 in the fall.
• Demand: Stronger than 2024, with increased buyer activity during the spring market.
• Sales: Closed sales could rise by about 8% to 10%.
• Home Values: Expected to increase by 2% to 5%.

Scenario 2: Slowing Economy (15% Chance)

• Rates: May drop to between 6% and 6.5%.
• Inventory: Peaks lower at around 12,500 homes.
• Demand: A more favorable rate environment could boost demand significantly.
• Sales: Closed sales might rise by 12% to 16%.
• Home Values: Could grow by 4% to 7%.

Scenario 3: Economic Resilience and Higher Inflation (15% Chance)

• Rates: Likely to remain above 7% throughout the year.
• Inventory: Peaks at around 15,000 homes, higher than pre-COVID levels.
• Demand: Sluggish buyer activity due to affordability constraints.
• Sales: Minimal growth of up to 2%.
• Home Values: May decline slightly by 0% to 2%.

Final Thoughts
The 2025 housing market will follow typical seasonal trends, with the spring market being the strongest. Luxury sales will likely perform better early in the year before slowing. Distressed properties are expected to remain rare, reflecting a healthy housing stock.

Mortgage rates, projected to hover between 6% and 7.5%, will dictate market dynamics. The hotter the economy, the higher rates—and the cooler the market.