Growing inventory fuels Southern California home and condo sales

Markets absorb ULA and mortgage shocks, boding well for multifamily investment

Growing Inventory Fuels SoCal Home and Condo Sales

Sales of single-family homes and condo units have risen each month since the start of the year in Orange County and San Diego, catching up with the Los Angeles County trend that kicked off last November, according to a new Douglas Elliman report authored by appraisal firm Miller Samuel. 

The reason behind the bump: In all three Southern California markets, “new inventory growth has pressed higher across the market for the past three months, enabling more sales,” the report said.

When it comes to transactions above $1 million, activity has ramped up in Los Angeles County and San Diego since November and October respectively, with Los Angeles County also showing an increase in newly signed contracts since September.

And it looks like buyers are not waiting for the interest rates to come down, with new inventory across California markets fueling sales, Douglas Elliman’s research shows.

Single-family properties between $1 million and $2 million topped transaction volume with 676 new contracts signed in Los Angeles County in March, marking a 36 percent increase compared to a year before, according to the report authored by Jonathan Miller.

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Also more sellers seem to have adjusted to the Measure ULA transfer tax as the new normal, with a 35 percent jump in new listings for properties over its $5 million threshold. There were 172 new listings in March, compared to 124 in February.

In the condo segment, contracts signed for the $800,000 to $1 million listings have seen the biggest jump, increasing 65 percent from the year before. The March 2024 volume was also up 21 percent from the previous month.

When it comes to apartment buildings, there is also a lot of “pent up demand” according to brokers focused on this market segment.

“People still have a lot of money to invest, I think that demand has hit a peak,” said Taylor Avakian, a multifamily broker in Los Angeles at Lyon Stahl. “The seller-buyer gap has shrunk pretty significantly from what it was last year, because the sellers didn’t feel the interest rate rise immediately — that was where the disconnect was.”

He is also seeing the impact of anticipated interest rate decreases by the Federal Reserve fueling the volume of transactions.

“Investors are looking at deals on a longer-term horizon now. It’s not a 12-month thing,” Avakian noted. “If this stays the same for 24 months, and rates come down slightly 25 to 50 basis points, can we make this deal work? Those are the deals that are getting sold.”