My Real Estate Outlook
Jay Evan Schoenfeldt | February 23rd, 2021
A house could simply be defined as “shelter,” but a home is much more than that. It is a place where you create memories, cook romantic dinners, play with your children and pets, find peace, and in the last 12 months…quarantine. Considering the past year we had, it is amazing that the existing U.S. home sales in 2020 were at 5.64 million units, up 5.6% from 2019.
If there is one thing you can say about Angelenos, it’s that we love buying and selling property. Southern California had a 31% increase in sold single-family listings in 2020 from the previous year. If we focus more specifically on the portion of Los Angeles between Downtown L.A. and the Pacific Palisades, there was a 28% increase in sales volume and the median price rose 15% year over year.
What’s driving these numbers? Many factors, but a big one is low-interest rates. Today the average interest rate for a conventional 30-year loan is 2.73%. In January 2020, it was 3.51%. How does that affect prices? The difference in interest rate seems minimal, but a buyer can borrow 10% more for the same monthly payment which means they can afford to pay a higher price for their home and not even notice the difference. These are the lowest interest rates we’ve ever experienced, and no one wants to be left out. Now we have one of the factors driving demand.
Let’s talk about supply. Not only did the number of sales increase in 2020, but we experienced a 50% decline in new listings from the previous year. If Southern California continues buying at the same pace in 2021, we will delete all existing homes for sale in just under 45 days assuming no other new listings. To put this into perspective, a balanced market typically equates to 6-7 months of supply; while a buyer's market equates to 7 months of supply and above; and a seller's market equates to 6 months of supply and under. If “inventory” is a difficult concept to grasp in the world of real estate, remember what low inventory looked like when you tried to buy N95 masks or a Peloton last spring. Real estate is more beloved than a mid-summer gelato. High demand, short supply, oh my.
What does this mean to Angelenos in 2021? It will continue to be great for Sellers and Buyers need to have expert guidance on how to present themselves well. Even in a Seller’s market, you must price right. Negotiations aren’t off the table, but one should be strategic about the how and when. If you’ve been on the sidelines wondering if the timing is right for you, please say hello. I’m happy to give you my perspective.
How can I see neighborhood metrics? If you are an Angeleno and would like me to send you data for a specific neighborhood, reach out and say hello. I’m happy to share more information.