Prices dropped both MoM and YoY. House prices were flat YoY, with condo prices down 2% YoY. It would be easy to think this is the start of prices coming down that many buyers had been hoping for, but there’s more at play here, which I will explain below.
|
Year-over-Year (YoY) |
Month-over-Month (MoM) |
|
|---|---|---|
|
Homes for Sale |
+28% |
+4% |
|
New Listings |
+9% |
FLAT |
|
Homes in Escrow |
+1% |
+1% |
|
Closed Sales |
+6% |
+13% |
|
Median Sale Price |
-1% |
-5% |
What is also interesting to see is that homes in escrow are almost flat MoM. We are in peak selling season, when homes should be entering escrow at an increasing rate MoM, but we didn’t see that last month. Prices coming down MoM aren’t a big surprise as we’re coming off the highs caused by the Palisades buyers purchasing luxury properties.
What’s Happening with the Market?
We are in one of the most challenging markets in recent times, where it has become almost impossible to predict what will happen next. Sellers think their home is worth more than it is, and buyers believe prices are on the way down, so we have a standoff. I’ve been involved in two canceled escrows where I represented the buyer, and the reason for canceling was mainly because the sellers thought their home was worth more than it is; they were dishonest, unreasonable, and thought they held all the cards. Sellers, this is not the case… The disconnect between buyers and sellers is real. I feel it has a lot to do with sellers begrudgingly having to give up their rate in the 2%’s or 3%’s, and so they think if they have to do that, then the buyer has to make up for their misery. We need to go back to the days when the seller was happy to sell for what a buyer was willing to pay, and a buyer was reasonable in the price they offered. This isn’t across the board, but the more people I talk to in the biz, the more I keep hearing it.
Inventory
This time of the year is historically when the most new inventory hits the market. However, last month saw no increase in new inventory MoM. So when we see prices drop both MoM and YoY, it’s not that easy to assume prices will continue to decline. The housing market is driven by supply and demand. And if you’re out there seeing how many buyers are at open houses on the weekend, you will notice the demand is there. So if the supply remains status quo, or even worse, declines, it’s hard to see prices coming down. Now, again, this isn’t across the board. There will be homes that a buyer can get a deal on, but for the homes in good condition, in a good location, and priced fairly, they will sell quickly. For areas, such as Venice, where inventory is piling up, that’s a different story, and there are deals to be had in areas like that. Providing the seller understands the market we’re in, and if not, their home will sit.
Mortgage Rates
To quote Nate Bargatze on SNL, “Nobody knows…” Mortgage rates are always impossible to predict, and with everything happening with tariffs, recession fears, inflation, and talk of stagflation, it’s entirely up in the air what rates will do for the rest of the year. It’s important to note that some buyers in LA are getting rates in the 5% range, contrary to what the national headlines say. And these aren’t just banking relationship rates. Banks are very aggressive with ARM loans right now.
Palisades
Burnt-out lots continue to hit the market each day. There are currently 180+ lots for sale, with only 23 in escrow. Land value is down roughly 25% compared to prices before the fires, and we expect those values to decrease even further. Some of the land that has been purchased has been bought by owners buying adjacent lots so they can rebuild onto a double lot. There’s a rumor that Caruso has been purchasing commercial buildings around The Village, further increasing speculation that the Palisades will be back bigger and better than ever. There’s also a belief that a hedge fund like BlackRock will purchase the lots in droves and develop most of the area. It’s all still speculation right now, and only time will tell.
Measure ULA
Starting July 1st, the threshold for the mansion tax will increase from $5,150,000 to $5,300,000 with the 4% tax and from $10,300,000 to $10,600,000 with the 5.5% tax. Keep in mind that the entire purchase price gets taxed, not just the amount above the threshold. There is ever-increasing pressure to remove or at least suspend the tax, as it hasn’t provided the City with the funds they projected. However, that is tied up with the attorneys, as the public voted for it, so theoretically it would have to go to a vote again to remove it.
