The Rate Migration
Mortgage rates have crept their way back above 7% with hotter than expected economic readings, resulting in a slowdown in purchase activity.
Rate Sensitivity
The 7% mortgage rate marks a crucial threshold for the housing market's behavior.
TODAY'S RATE: 7.10% (30 Yr. Fixed Rate 2/29/2024)
Prospective buyers closely monitor monthly payments, heavily influenced by prevailing mortgage rates. The housing market witnessed a surge in values as rates plummeted to record lows until 2022. However, as rates soared past 7%, the market became notably sensitive to rate changes, with values showing limited fluctuations despite supply constraints.
Amidst efforts to combat inflation, the Federal Reserve eyes multiple economic indicators, hinting at potential rate cuts. Despite initial expectations for rate drops in 2024, economic reports delay anticipated cuts, causing rates to fluctuate. This uncertainty affects home affordability, with buyers seeing significant shifts in purchasing power based on mortgage rate changes.
Rate sensitivity significantly impacts the housing market, reflecting consumer behavior and broader economic trends.
Active Listings
The active listing inventory in the past couple of weeks increased by 44 homes, up 1%, and now sits at 7,505 homes. In January, 24% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,756 less. 776 more sellers came on the market this year compared to January 2023. Last year, there were 7,600 homes on the market, 95 extra homes, or 1% more. The 3-year average before COVID (2017 to 2019) was 10,806, or 44% more.
Demand
Demand, the number of pending sales over the prior month, increased by 386 pending sales in the past two weeks, up 12%, and now totals 3,491. Last year, there were 3,763 pending sales, 8% more than today. The 3-year average before COVID (2017 to 2019) was 5,089, or 46% more.
Los Angeles County Housing Summary
- With demand rising much faster than the small rise in supply, the Expected Market Time, the number of days to sell all Los Angeles County listings at the current buying pace, decreased from 72 to 64 days in the past couple of weeks, its lowest reading since July. It was 61 days last year, similar to today. The 3-year average before COVID (2017 to 2019) was 65 days, also similar to today.
- For homes priced below $750,000, the Expected Market Time decreased from 50 to 47 days in the past couple of weeks. This range represents 28% of the active inventory and 38% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time decreased from 49 to 46 days. This range represents 18% of the active inventory and 25% of demand.
- For homes priced between $1 million and $1.5 million, the Expected Market Time decreased from 70 to 54 days. This range represents 15% of the active inventory and 18% of demand.
- For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 101 to 80 days. This range represents 10% of the active inventory and 8% of demand.
- For homes priced between $2 million and $3 million, the Expected Market Time in the past couple of weeks decreased from 131 to 116 days. For homes priced between $3 million and $4 million, the Expected Market Time decreased from 149 to 134 days. For homes priced between $4 million and $8 million, the Expected Market Time decreased from 407 to 287 days. For homes priced above $8 million, the Expected Market Time increased from 862 to 1,108 days.
- The luxury end, all homes above $2 million, account for 29% of the inventory and 10.5% of demand.
- Distressed homes, both short sales and foreclosures combined, made up only 0.8% of all listings and 0.8% of demand. Only 40 foreclosures and 19 short sales are available to purchase today in all of Los Angeles County, with 59 total distressed homes on the active market, down three in the past two weeks. Last year, there were 52 total distressed homes on the market, similar to today.
- There were 2,823 closed residential resales in January, 8% more than January 2023’s 2,624 closed sales. January was down 14% compared to December 2023. The sales-to-list price ratio was 98.4% for all of Los Angeles County. Foreclosures accounted for just 0.6% of all closed sales, and short sales accounted for 0.2%. That means that 99.2% of all sales were good ol’ fashioned sellers with equity.
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