Will LA’s housing market cool down in 2019?
Curbed, Dec 2018
Home prices in Los Angeles reached record heights in 2018, climbing to levels far above those recorded in the years leading up to the Great Recession. But price increases have fallen off since summer, and a new analysis from Zillow suggests a cooling trend in the market will continue into the new year. Analysts with the online real estate company surveyed 100 real estate experts across the country on their expectations for 2019. Their responses suggest that home values in Los Angeles will continue to rise next year, but at a significantly slower rate than the nationwide average. The panelists predict that prices will climb 7.7 percent in 2019 across the country; but in the Los Angeles metropolitan area (which includes Orange County), they are expected to tick up 5 percent. Seventeen of 22 experts polled about the LA market said it was likely to “underperform” the nationwide average in terms of home value appreciation. That’s partly because prices in Los Angeles rose quickly after the housing bubble of the mid 2000s burst a decade ago.“It’s the markets that experience more exuberance that will then be the first to slow down,” says Skylar Olsen, Zillow’s director of economic research and outlook.
Now that median home prices have climbed to unprecedented levels in Los Angeles, many buyers may be priced out of the market, she says. Others may simply bide their time. “We think a big part of it is basically demand exhaustion,” Olsen says. “People can’t just outbid each other anymore.” Jordan Levine, senior economist for the California Association of Realtors, suggests some buyers are hoping prices will suddenly bottom out.“Some folks remember 2008, when prices fell dramatically,” Levine says. “There’s a big consumer confidence element to the housing market. No one wants to be the last one in.”Levine says it’s a mistake to think home values will tank the way they did during the last recession, since mortgage providers are still shying away from the kind of risky home loans that fueled the housing market’s last collapse.
More likely, says Levine, is that home values will continue to grow—but at a more modest rate. Olsen agrees. “Really we’re getting back to normal,” she says. “This is actually good news, though sellers probably won’t see it that way.” Buyers might also have a hard time getting excited. As Levine points out, nearly three in four residents of Los Angeles County can’t afford to buy a median-priced home in the area. “There is a limit to how much folks can afford to pay,” he says. “People are actually picking up and leaving.”