Signed contracts in Los Angeles County fell for a sixth-straight month in May, as low housing inventory continued to cut into sales, according to a Douglas Elliman monthly report.
But there were some proverbial silver linings to the report, as the recent rise in mortgage rates relieved market pressure.
A total of 4,351 single-family homes and condos went into contract last month, down from 4,538 in April, according to Douglas Elliman’s monthly report.
The total included 3,205 single-family homes, a drop from 3,341 in April.
May saw 1,146 condos go into contract, down from 1,197 the month prior.
The continuing tight supply of available homes likely crimped sales and kept prices high. In April, the median home price of a Los Angeles County home was about $900,000, which represented an increase of 13.2 percent in a year-over-year comparison by listing site Redfin.
Among single-family homes, signings were down year-over-year nearly across the board. For homes priced at $300,000, a rarity in L.Adeals fell 42.9 percent; homes between $700,000 and $899,000 declined 6.5 percent, homes between $900,000 and $1 million also fell 7.0 percent, homes between $2 million and $5 million saw 21.1 percent fewer signings.
In Orange and San Diego counties, new signings declined on a month-to-month basis for the first time in 2022, the Elliman report noted.
However, a rise in mortgage rates in recent months has enabled a year-over year- addition of new listings to the market, said Jonathan Miller, the appraiser who authored the report.
“It relieves some upward pricing by slowing sales and raising inventory, even though it’s not much,” he said.
The low inventory and high demand of the past year or so has sharpened the intensity of the market and made bidding wars a regular occurrence, he said. In Los Angeles County, four out of 10 house sales have been over the asking price. A closing price which is higher than an asking price typically means there was a bidding war, Miller said. In Orange and San Diego counties, more than 64 percent of homes went into bidding wars.
A rise in mortgage rates in recent months has enabled the year-over-year addition of new listings to the market for the past two months. In May, new listings for single family homes increased to 2,958 listings or 22.6 percent from 2,413 listings in May 2021. In April new listings increased 14.5 percent from 2,264 listings in April 2021 to 2,593 listings in April 2022.
“We’re seeing new inventory rise in a low place––this is something we haven’t seen since the pandemic era,” Miller said. “While it’s painful initially, it keeps the housing market moving forward, and it helps sustain long term growth.”
There are other silver linings. High demand helped to drive up home values to new heights in Los Angeles County. Home values pushed the L.A. County Assessor’s roll––an inventory of all taxable property––to a record high of $1.86 trillion, according to an announcement on May 15. In 2021, the L.A. County’s Assessor’s roll was $1.76 trillion.
A statement from the L.A. County Assessor’s office said that $18 billion in tax revenue could be raised from the $1.86 trillion on the assessor’s roll.