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Los Angeles Real Estate Market Update for December 2022

Market update December 2022
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What’s going on in the Los Angeles real estate market for December 2022? Stay tuned.

What’s going on in the Los Angeles real estate market in December of 2022. I’m Scott Himelstein with the Scott Himelstein Group, and today I want to help you understand what in the world is going on here in Los Angeles, so you could decide, does it make sense to buy, sell, rent, or invest? What should I be doing in this market is what a lot of people are asking themselves.

So some of the things that we really want to focus on right now and any time, is we’re looking at statistics, is that we want to see what’s really happening in the market today so you can decide what’s going to happen in the future.

So a lot of the data that the media reports, like I always say, is always delayed. Sometimes three, four, five months from what’s actually happening because they’re looking at closed data, which tends to lag a little bit behind what’s happening today. So what we like to look at just from basic economics is supply and demand.

So the first thing we look at is the number of new listings. So how many homes come on the market for sale? And you’ll see if we look at a year-over-year comparison, we’ve seen a 26% decrease in the number of homes for sale. But you’re going to say, “Hey Scott, that’s interesting. Why is that?” Well, the reason why that a lot of people aren’t selling right now is, really the biggest reason, is the mortgage interest rates. They’ve risen significantly. We’ve seen interest rates that are originally down at 3.25% at the beginning of the year. Now they’re actually in the 7s, although they’ve kind of pushed back a little bit and gone down and now they’re kind of fallen back down to the mid-6s.

So rates drop quite a bit, literally, over the course of the last 10 to 12 days. That being said rates we’ve been seeing for the last couple of months in the high 6s and low 7s. So the problem is that a lot of people are not selling because they don’t want to relinquish those low interest rates especially if you have a sub 4% interest rate. Maybe you refinanced or you purchased and to walk away from a rate in the 3s or maybe the 2s just doesn’t make a whole lot of sense for people. It’s very expensive when you have a massive gap like that.

So that’s why we’ve seen a 26% decrease in supply. But then you look at demand, right? So how many homes went pending? And that means how many homes were listed for sale and accepted an offer. They went pending under contract in escrow. Well, a variety of different terms that could be used. And when we look at those numbers year over year, you kind of expect, right, as rates have jumped significantly, you saw that decrease of 44%. So both numbers are down.

So those of you that were looking at homes six months ago, this was a far cry from what you were seeing. Now when you go look in a neighborhood right now, there’s five or six homes for sale as opposed to just one home that had 5 or 6 offers on it at least. So things have changed quite a bit there.

The other thing that I really like to look at, and this is where data can really be telling, is closed sales. So the media reports this number a lot. They look at the number of homes that have actually sold and then the other number they look at is the median sales price. And these are lagging indicators. So the data is a bit behind, right, by the media. And this is where data can really be manipulated a lot because the media could say, “Oh, well median sales price it’s up 4% from a year ago.” Now that is technically true, right? They’re not wrong; but here’s what they’re not telling you. Let’s really investigate this. Let’s look at this a little bit more in depth. If you look at what the monthly numbers right now, you can really take a look at the median sales price as it really peaked out. Already. So we kind of all agree that we’re looking at a single family home specifically. Now we kind of really peaked out in April. Nobody disagrees with that.

The median sales price in Los Angeles County right now is just over $900,000. So I think that it’s really important to understand, and now also understand that this is talking about what homes closed out about in October as we wait for the November numbers to actually come out. And well, what stuff closed in October? It probably went under contract in August or September. And as I’m shooting this video, this is the most accurate data that right now that we have from any association of realtors.

So just understand that what I’m able to report looking at our closed numbers is delayed two, three, four months when these homes actually went under contract. So I believe we’ve actually probably slid further than that 12 to 14%. If I have to probably say, you’re probably in that 15 to 17% at this point. So it’s really important to understand when you’re looking at data to know what you’re truly looking at and each time we look at close numbers, you have to make sure you’re looking at the correct data. All of those are telling us that we really have some room to go because that data is showing you that you really need to focus on the amount of inventory you have on the market and how long it takes those homes to sell. So I personally don’t think we’re done going down just yet. We still got some room to go.

That being said, for the first time in a while, we’re seeing some light at the end of the tunnel. Now you’ve probably heard about this little thing called inflation, which is commonly measured by what is known as the CPI, this consumer price index. And so here’s what happens. The report came out at the beginning of November. It’s for numbers that happened in October, and for the first time we saw a considerable drop in inflation. So I want to kind of help you just understand real quick why that is. So these are the last 12 months. And so, anyway, the way that this works is that if you look at each month, how much did inflation go up month over month? So September of ’21 to October of ’21, it went up 0.9%, and then the next month, 0.7, 0.6, 0.6, 0.8, 1.2, 0.3, right? So this is the monthly change.

The number that gets reported, which the number that’s been reported lately has been in the 8s and 9s and is basically adding up the 12 months’ worth of change. Well, what that means is every time a new month gets reported, it replaces an old month. So here’s why we saw inflation drop considerably with three most recent numbers. Well, the numbers that just got reported for October, if we had to look at last October, we had a nine-month over month increase and this October, 0.4 month over month increase. So we just replaced a 0.9 with a 0.4, that dropped month over month. So with that said, it means really that you’ve kind of dropped the inflation by 0.5. And if we look at next month, we’re going replace a 0.7 and then etc., etc… So we’re going to start replacing some of the really big numbers and here’s really the numbers that we’ve had in the most recent months. So if we continue to have numbers, little numbers like this, replace the big numbers then you’re going see inflation drop considerably and mortgage rates will follow the inflation rate.

So as the inflation starts to pull back, I think you’re going to start seeing the mortgage rates pull back also. I don’t think you’re going to see the 3 and 4% interest rates again, but I do believe, and a lot of the lenders that we work with believe, that you’re probably going to see interest rates probably in the mid 5s, closer to 6%, probably sometime in 2023. As rates pull back, and more and more optimism starts to come back in the market, people who are thinking of selling, maybe they didn’t sell because it was too big of a jump in rates, they’re going to start getting back in the game. Then buyers start getting back in the game. Again, just more optimism overall in the market. So there’s a lot going on right now as always in the Porter Ranch, San Fernando Valley and Los Angeles real estate markets!

Any real estate questions, give me a call 818-396-3311, that’s 818-396-3311. And thanks for watching our vlog.


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