Now that we’ve finally entered yet another new year, it’s time to recap our 2018 market and discuss a few trends we can expect to see moving forward.
We’ll begin with home prices. Through the first several months of last year, home prices in Los Angeles County reached record highs. They rose so high, in fact, that they surpassed levels seen leading up to the Great Recession more than a decade ago. This trend slowed in June, but affordability continued to fall given the ongoing rise of interest rates—which moved from approximately 4% in January to about 5.25% by December.
Now, following the dip in our stock market, rates have receded back down to around 4.875% for the time being. Despite the marginal relief this has offered to homebuyers, statistics show that one out of every four Los Angeles County residents is still unable to afford the current median home price. This limits the buyer pool and, in turn, has sparked a shift in our market.
Homes that are still priced correctly, however, continue to sell. Homes that are already remodeled are particularly successful, given that a large portion of buyers can only afford to buy a home—not to renovate one.
Along with affordability issues, buyers were also faced with a shortage of supply in 2018. In July of last year, there were just 90 properties for sale in the 91326 ZIP code. Amazingly, this was actually an improvement from the 46 listings that were available at the beginning of the year in that same area.
This lack of supply was not unique to the 91326 ZIP code, though. Markets across the entire San Fernando Valley had an average of 1.5 months’ worth of supply for the first half of 2018.
As we progress into 2019, we now have an average of 2 months’ worth of inventory across the Valley, and we expect even more listings to come onto the market this spring.
Despite all of this, fears that the market may bottom out will prove to be unfounded. Lenders are much more careful today than they were before the Great Recession. With that said, prices are expected to keep going up. Most experts predict that they will rise approximately 7.5% nationwide by the end of the year. Local growth, though, will be more tempered. It’s likely that home prices in the state of California will only rise by 4% or 5%.
The bottom line is this: Those looking to sell will need to be strategic with their pricing if they hope to be successful, and buyers will need to be proactive as well.
If you have any other questions or would like more information, feel free to give us a call or send us an email. We look forward to hearing from you soon.
