Entering the fourth quarter of 2024, the real estate market in the Los Angeles metropolitan area has experienced a brief surge in October due to fluctuations in mortgage rates. As the year-end approaches, what is the current market situation? Veteran real estate broker Roy Zhang provided insights into the current state of the housing market.
Roy mentioned that from November through January of the following year is typically the slowest period for real estate sales. He noted, “Overall, the housing market is relatively subdued right now, with fewer buyers in the market; however, there may be differences in specific areas.”
The fourth quarter leading into the months of March and April of the following year is usually considered the off-season for the housing market. Roy explained that the uptick in sales in October was a result of a temporary decline in mortgage interest rates; now, with interest rates rising again, the market is cooling off.
Reflecting on the situation in October, he stated, “Homes priced between two to three million sold particularly well, comprising a significant portion of sales; whereas lower-priced homes, such as three to four hundred thousand, had a much lower share in sales volume.”
According to Roy, this indicates that although the incomes of a considerable number of residents have increased, the extent of rising home prices and inflation has offset their ability to save for a home purchase. He emphasized, “Even a small increase in mortgage rates, like a quarter point (0.25%), while it may slightly raise monthly payments, buyers take it into consideration; with slightly higher interest rates, they may no longer afford to buy a home.”
Compared to the peak selling season, there have been significant changes in both pricing and the time properties stay on the market for homes listed in October.
Roy pointed out, “Nearly 33% of properties listed in Los Angeles County, 36% in Orange County, 36.6% in Riverside County, and 41.5% in San Bernardino County experienced price reductions.” Additionally, the average time these properties stayed on the market, which used to be around three weeks and would sell within a week, has increased to about a month now. Specifically, Los Angeles and Orange County averaged 27 days, while San Bernardino County was at 33 days.
The affordability of housing for residents has also reached its lowest point since 2012.
According to a report from the California Association of Realtors (C.A.R.), in the third quarter, only 16% of households in California could afford a median-priced single-family home, compared to 56% during the same period in 2012. At present, the national average stands at 35%, significantly higher than California residents.
Despite the current quieter state of the real estate market, it may still present an opportunity for those looking to buy a home.
“With fewer buyers in the market competing and sellers being more aware of the current stage of the market (slow market), they are more willing to negotiate on prices. So if buyers come across a suitable property, the pricing is often quite favorable,” predicted Roy. He anticipates that as we head into March and April next year, with more buyers entering the market and an increase in parents looking to move for school changes, the competition will intensify.
Currently, there is anticipation in the market for a decrease in the 30-year mortgage rates. Roy, considering the general consensus of experts, believes that barring any unforeseen circumstances, the 30-year mortgage rates are likely to remain around 5.5% in the next one to three years, unlikely to drop back to the 3% or 4% range seen in the past.
Given the noticeable trend of rising home prices, Roy expressed, “The current rate of over 6% feels a bit high. However, for those with a housing demand, waiting for rates to drop a bit may not result in significant savings when spread out over thirty years.”
He noted that there are still many homes selling hot in The Preserve at Chino community. While prices may not be high in this area, the real estate taxes are relatively high. However, due to its better school district compared to other parts of Chino, this community is particularly attractive to Chinese, Korean, and Indian parents.
What are the development trends in the Los Angeles real estate market next year? According to the latest report released by Norada Real Estate Investments in November, although the rate of increase in house prices has slowed down, limited supply and ongoing demand may lead to further increases in the near future. Especially in communities near good schools and employment centers, demand is on the rise and is expected to continue.
(Perspectives of the interviewees do not necessarily represent the stance of Dajiyuan.)