L.A.’s market is hot, inventory is low and — for the third month in a row — signed contracts are down.
Single family home signings in February fell nearly 12 percent compared to a year earlier in a key swath of the Los Angeles market, according to a report published on Thursday by the appraiser Jonathan Miller.
“The story generally is that new listings entering the market continue to be anemic, especially as you skew to the higher end of the market,” Miller said. “The challenge of this market countries to be that inventory is simply not available.”
Last month saw 3,251 new signed contracts in Miller’s focus area, which stretches from Downtown to the Westside. That was down from 3,681 in February 2021 and marked the third straight month of year-over-year drops: January year-over-year signings were down by nearly 18 percent, and December year-over-year signings fell by nearly 17 percent.
The reason for the year-over-year dips, Miller said, has remained the same: Southern California housing inventory remains far overmatched by demand. But looked at with a longer view, L.A.’s market is still relatively active — the number of signed contracts last month was higher than the number two years ago, just before the pandemic took hold.
The strong economy of the past couple years — and historically low interest rates —accelerated demand for single-family homes, exacerbating the inventory mismatch to send prices soaring. Miller said he expects L.A.’s market, where supply is dramatically low, to remain tight even after the Federal Reserve begins implementing quarterly rate hikes, which it is widely expected to do this month.
“It takes the edge off,” Miller said of the expected hikes — but don’t expect a dramatic shift: “In Southern California, essentially, bidding wars are 40 to 60 percent of all sales. Is the market really slow if the bidding wars drop to 20 to 30 percent?”
In the new report, L.A. County signed contracts on homes priced between $500,000 and $700,000 fell by nearly 35 percent; contracts on homes priced between $2 million and $5 million fell by 18 percent; and contracts on homes priced between $900,000 and $1 million increased by nine percent. New single family listings in L.A. County were virtually flat compared to a year earlier, while new condo listings were down by 28 percent. Year-over-year signed contracts on condos were also down.
Year-over-year signed contracts in Orange County, home to among the country’s hottest residential markets, fell by 27 percent, from 1,530 in February 2021 to 1,120 last month.