A 2024 Outlook On the Real Estate Market in Los Angeles

What is the Real Estate Market Forecast in Los Angeles in 2024?

Prices in the housing market are governed by two primary factors: supply, represented by listings, and demand, represented by buyers. Will a decrease in rates boost demand? Without a doubt!

The rate reduction will likely augment supply. This is because many homeowners, who have been enjoying historically low locked-in rates, are expected to enter the market by listing their homes. While approximately 70% of these new listings will result in the seller becoming a buyer, thereby maintaining demand, about 30% will not lead to a purchase.

The 2024 forecast for the Los Angeles housing market points to a sustained rise in home prices, an increasingly competitive landscape, and a resurgence in home sales. This trend suggests a challenging scenario for both potential buyers and renters.

Housing Affordability in Los Angeles 2024?

For those concerned with affordability in the housing market, it's helpful to have some historical perspective. In the early 1980s, purchasing a home was actually less affordable than it is today, largely due to the high mortgage rates of that era. The most opportune time for buying a home, from an affordability standpoint, was in 2012. During this period, home prices had not fully rebounded from the Global Financial Crisis (GFC), and mortgage rates had decreased significantly, making it an exceptionally good time to buy. The period from 2008 through 2021 was marked by remarkable affordability, contributing to a significant increase in home values. This exceptional rise in values, coupled with a rapid and dramatic increase in mortgage rates, has led to the current affordability challenges in the housing market.

Freddie Mac Chief Economist Sam Khater: “Affordability continues to impact homeownership, but a solid economy, strong demographics, and lower mortgage rates are setting the stage for a more robust housing market.

In the Los Angeles housing market, affordability remains a significant challenge, as forecasts predict a 6.2% increase in median home prices alongside stagnant levels of housing affordability. Although declining mortgage rates could boost demand, benefiting sellers, these lower rates also enhance affordability for buyers by increasing their purchasing power. However, depending on inventory levels, this situation could lead to scenarios of multiple offers, making the concept of affordability somewhat paradoxical and consistently challenging.

Are Home Prices Dropping in Los Angeles?

Highlighting home prices is essential because approximately one in four Americans still believe prices are declining and will persist through 2024.

If buyers and sellers perceive that home prices are on a downward trend, they may be reluctant to engage in the market, concerned that they could face a situation reminiscent of 2008. Current figures further amplify this apprehension, which significantly exceeds historical norms. Consumer sentiment is being swayed by negative headlines, underscoring the importance of reshaping the narrative to reflect a more accurate picture of the housing market.

Contrary to widespread fears of a recession in 2023, the economy experienced an exceptional year. This positive trend is underscored by the recent release of Moody’s repeat sales house price index for December, which shows a 5% price increase from the previous year. Adding to this optimistic outlook, Zillow has recently significantly revised its 2024 home price forecast. Except for Louisiana and San Francisco, Zillow anticipates a widespread increase in house prices across the United States this year.

Will Los Angeles Home Prices Rise in 2024?

The outlook on the housing market has remarkably shifted in just a few months! Several economists now hold a more optimistic view of the housing sector's future compared to their assessments from a short while ago.

Latest Housing Price Projection from Top Chief Economist

The prevailing trend in the Los Angeles housing market shows a marked increase in home prices instead of a decrease. The median home value in the Los Angeles-Long Beach-Anaheim area is $901,342, demonstrating a 5.0% rise from the previous year. With mortgage rates declining and sellers adjusting to new norms, anticipate a sizzling housing market in 2024 within the Los Angeles area.

What Is Happening With Inventory In Los Angeles?

From Danielle Hale, Chief Economist of Realtor.com:

“We are seeing increases in inventory and, IMPORTANTLY, GAINS IN NEW LISTINGS for sale, indicating sellers are more ready to move. Time on the market fell, signaling that buyers are ready to make offers on these new options.”

The uptick in "new listings" plays a crucial role as it signifies that sellers, who previously enjoyed lower mortgage rates than those currently available, are gradually adjusting to the "sticker shock" brought on by the recent higher rates. The decline in mortgage rates to below 7% has made more sellers comfortable with moving. Rates falling below 6% will significantly boost the number of "new listings," indicating a marked increase in market activity as sellers become increasingly willing to list their properties.

 Odeta Kushi, deputy chief economist at First American:

“We expect existing-home sales to pick up in the coming months as mortgage rates moderate. And we know that the new-home market has also picked up, so it does seem right now that the worst is behind us and that the housing market has already had its recession and is now heading into recovery mode.” 

Are Homes Selling in Los Angeles?

Although the housing market has cooled from the peak activity of the pandemic years, when homes sold at record speeds, properties are still moving off the market more quickly than usual.

Realtor.com:

“Homes spent 69 days on the market, which is three days shorter than last year and more than two weeks shorter than before the COVID-19 pandemic.”

Mike Simonsen, Founder of Altos Research:

“. . . 2024 is starting stronger than last year. And demand is increasing each week.”

In Los Angeles, homes typically remain on the market for about 49 days before being sold. Data from Redfin shows that, on average, Los Angeles homes attract 3 offers and sell within 49 days, a noticeable improvement from the 57 days observed in the previous year. This reflects a reasonably vibrant housing market, where homes sell on average in just under two months.

Mortgage Rates Will Settle in 2024

The top chief economist predicts that by mid-year, there will be a five in front of the average rate for a 30-year fixed mortgage, indicating a decrease to the 5% range. Today, the rate has slipped to 6.99%, with a spread of 290 basis points. It's expected that these rates will fluctuate before ultimately trending downward.

If you are thinking about selling your home, this is a great time to do so as the current data strongly suggests. The housing market is showing exceptional strength and performing better than usual for this season. If you are located in Los Angeles or its surrounding areas and are considering selling your property, or even if you are just curious about the current market dynamics, we would be happy to offer you a complimentary consultation. Let's discuss how you can take advantage of the current market conditions together.