Rising interest rates put brakes on home sales

The Federal Reserve’s rising interest rates have put the brakes on Los Angeles housing sales, based on a recent report from brokerage Douglas Elliman.

The report found that in June, newly signed contracts for homes fell for the third consecutive month in the greater L.A. market, which stretches from the downtown area through the westside and up to Malibu.

Ratcheting up pressure on the Los Angeles market, the report found that listing inventory declined annually for the fifth consecutive quarter to the third lowest since Douglas Elliman started publishing these reports in second quarter 2020.

Month-to-month comparisons tell the story in more detail, said Jonathan Miller of Miller Samuel, who put together the Douglas Elliman report.

“The market trajectory peaked in March and began declining in April, right about when the Fed started ratcheting up interest rate pressure,” he wrote.

Newly signed contract data which combined single family homes and condos declined 9.9 percent in April compared to March. In May signed contracts declined by 4.1 percent. In June, signed contracts declined by 13.1 percent.

The report also placed in stark relief the current market compared to the go-go selling of 2021. New signed contracts for single-family homes declined 29.5 percent year over year in June to 2,744 homes, compared to 3,891 in June 2021. There also was a 24.3 percent year-over-year decline in new listings for single-family homes in June.

Condos told a similar story. There was a 30.5 percent slide in new signed contracts for condos in Los Angeles. In June 2022, there were 1,039 newly signed contracts for condos, while a year ago the total came to 1,495 condo contracts.

Despite the slumping sales numbers, buyers got no relief on prices. The trend was most pronounced in Malibu. The report noted that median sales prices were nearly double pre-pandemic levels in the beachside market.

Research from the Redfin listing site noted that in June, the median sales price for a Malibu home was $4.5 million, up 10 percent compared to June 2021. Supporting the Douglas Elliman research, it found that Malibu home prices more than double the 2019 median which was about $2 million.

Another recent report from Redfin confirmed that the national real estate market is showing similar trends to the Los Angeles area. In June, pending home sales were down 14 percent compared to the same time last year. It was the largest decline for this category since May 2020. New listings of homes for sale were down 1.7 percent compared to the same time during the previous year.

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