It’s time for our July 2023 market update for the Los Angeles real estate market. I’m Scott Himelstein from the Scott Himelstein Group, and today we’re diving into the exciting world of real estate trends and how the current 7% interest rate is affecting the market!
Leading vs. Lagging Indicators: Understanding the Present
We start by understanding the importance of differentiating between leading and lagging indicators. While the media tends to focus on lagging indicators, which reflect past market conditions, we believe it’s more crucial to pay attention to leading indicators. These indicators provide insights into the current state of the market and where we are headed.
Decline in New Homes and Limited Inventory
One of the key leading indicators we closely monitor is the number of new homes coming on the market for sale. Compared to the same time last year, this number has taken a significant hit, plummeting by 43.4%. The reason behind this decline can be attributed to homeowners in Los Angeles being hesitant to sell their properties due to concerns about finding suitable properties to buy. On top of that, the overall number of homes for sale in Los Angeles has also decreased by 24.6%.
Impact of Fluctuating Interest Rates
Currently, mortgage interest rates are fluctuating between 6.5% and 7.5%. These rate fluctuations have made homeowners think twice about selling their homes. Many homeowners are hesitant to walk away from a lower mortgage rate in the 3% to 4% range to enter a market with higher rates ranging from 6% to 7%. This shift in interest rates has a significant impact on both the purchase price and the monthly payments for buyers.
Inventory and Demand
With the decline in new homes hitting the market and homeowners being cautious about selling, the inventory of homes for sale is rapidly shrinking. However, the demand from buyers remains high and persistent, even with interest rates ranging from 3% to 7% over the past 8 to 10 months. This situation exacerbates the supply-demand imbalance, putting sellers in a favorable position.
The Nuanced Story of Median Sales Price
Now, let’s address the one elephant in the room: the median sales price. The media often misrepresents the market by solely focusing on the median sales price, leading some to believe that the market is relatively flat. However, this is far from the truth. The median sales price in Los Angeles has actually increased just under 2% year over year from June 2022 to June 2023. This, however, doesn’t tell the whole story. Between June 2022 and January 2023, there was a significant decline of approximately 15% in median home prices. But from January to June alone, prices bounced back remarkably, with the median sales price increasing from $829,000 last June to $905,000. In certain parts of Los Angeles County, the median home price for single-family homes sold in June reached nearly $1 million.
Monthly Increases and a Highly Competitive Market
The market has been experiencing monthly price increases of around 2% to 4% since January. The shortage of available homes for sale combined with a high level of activity and multiple offers makes for a highly competitive market. To navigate this competitive landscape, working with an experienced professional who understands the current market dynamics is essential.
In conclusion, the 7% interest rate has certainly impacted the Los Angeles real estate market in July 2023. The decline in new homes coming on the market, along with limited inventory and fluctuating interest rates, has made homeowners cautious about selling. However, buyer demand remains strong, leading to a highly competitive market. Understanding the nuanced changes in median sales price and working with experienced professionals can help both buyers and sellers navigate the complexities of the current market and make informed decisions.
So if you’re considering buying or selling, give us a call at the Scott Himelstein Group. We’ll be more than happy to answer all your real estate questions and guide you through this exciting and dynamic market. Thanks for tuning in to our vlog, and we hope you enjoyed this market update!
