If you’ve been looking at homes for sale in LA, you’re probably aware that prices are rising. According to data compiled by Realtor.com, the median home price as of July 2022 was $449,000. That’s approximately 16.6% more than it was just a year prior. This has led some homebuyers to fear a repeat of the housing bubble that began in 2006, which contributed to the Great Recession.
Fortunately, today’s market conditions differ greatly from those that ushered in the financial crisis. No longer is the market driven by lax lending standards and risky investor ventures. Instead, experts say the reason for the rise in home prices is simply a matter of supply and demand. Here’s what you should know about today’s market along with some tips for how to best navigate it.
Today’s Difference
While both today’s housing market and that of the mid-2000s are marked by often-unaffordable home prices, the causes of such increase differ greatly. Lenient lending practices and an excess of investors led to the bubble that previously occurred. These days, we’re seeing more ethical and stringent loan terms. Plus, the majority of buyers are looking for a home to reside in, rather than an investment property. Rather than the risky adjustable-rate mortgages and other questionable tactics, most loans tend to be 15 or 30-year fixed-rate mortgages that require buyers to prove creditworthiness.
Low Housing Supply
There is currently a limited supply of homes, both in existing properties and new builds. A number of factors contribute to the lack of new houses. Over the past decade or so, home builders haven’t produced at a rate to meet today’s demand. To make matters worse, the pandemic has produced conditions that make it difficult to make up for lost production. Some of these include a lack of qualified labor, building materials, and available lots. Existing home inventory is down because fewer people are selling. Many likely worry about finding a new home in these challenging market conditions as well.
High Buyer Demand
Despite the challenges, there is still a high demand for properties. People in their 30s are looking to buy homes for their expanding families. In addition, the increase of work-from-home opportunities caused by the pandemic has led to people looking for homes to accommodate their needs. They may no longer be restricted to office commuting distance, meaning they have more options regarding the location of their residence.
Market Projections
Experts predict it will be at least a couple of years before things begin to even out and the supply of homes meets the demand. Rising interest rates should help lower demand, though buyers shouldn’t expect prices to decrease any time soon.
There are some steps you can take to improve your chances of buying a home. Consider widening your search, especially if you can work remotely or on a hybrid schedule. Obtaining a new construction could be easier than finding an existing home to suit your needs. Being open to the possibility of a condominium or townhouse could also make a difference. Working with a qualified real estate agent in LA can provide you with the information you need for a more strategic search.