Coronavirus And Its Impact On The Los Angeles Real Estate Market – June Update
Over the last two months we have kept a close eye on how the coronavirus and “stay at home” orders are impacting the Los Angeles real estate market. Based on the trend of unusually low new listings in the past two months, we predicted that the summer months will potentially present a buying opportunity as previously reluctant sellers flood the market. With May now behind us, we can see that prices have continued to drop slightly, with buyers and sellers beginning to re-enter the market. This stabilization is likely due to decreased uncertainty and more comfort with the coronavirus situation. However, supply remains remarkably low, and so the coming months still present the likelihood of a surge in inventory when the stay-at-home orders are lifted.
How Coronavirus Impacted The Market And Sales In May
April saw a significant decline in the number of pending sales. This signaled an expected drop in closed sales in May. The below graph shows, as expected, that the number of closed sales in May declined due to the drop in pending sales in April.
More interestingly, the median sale price of homes has continued to steadily decline. This is likely the effect of fewer new listings, meaning a higher than usual proportion of homes that are selling are less desirable properties that have sat on the market for a longer period of time. Unlike prior years, 2020 is the only year in recent history in which the median sale price of homes sold in April and May has declined in LA County. Nevertheless, given that prices remain higher than previous years, prices appear to remain relatively stable.
In short, sales data appears to continue to confirm that the market has slowed in comparison to prior years, but remains relatively steady.
What May’s Data Tells Us About June
Interestingly, data regarding listings and pending sales in May indicates that confidence of both buyers and sellers is on the rise. With coronavirus and stay at home orders becoming the new norm, both sellers and buyers appear to be re-entering the market, although both new listings and pending sales remain low in comparison to prior years. As shown below, the number of new listings in May showed a sharp increase to pre-coronavirus levels. There is certainly still a large gap between the number of new listings this year in comparison to the same time last year, but the increase in comparison to prior months shows the beginning of a return to “normal” for sellers of real estate.
Pending sales data similarly shows increased confidence of buyers in comparison to prior months, but confidence remains significantly lower in comparison to prior years. As shown below, pending sales have historically increased in March-May, with that trend continuing through the summer months. 2020 has been the exception. However, data from May appears to show that we are past the bottom of the decline in demand, with pending sales beginning to increase. This number will likely continue to increase in June, particularly given the above information showing a spike in the number of new listings. The graph below shows historical pending sales per month in LA County.
In sum, both buyers and sellers appear to be re-entering the market. The market remains slow in comparison to prior years, and so we still expect a surge in the coming months in order to clear the backlog of inventory that has not hit the market, but the increased new listings and pending sales is promising for the stability of the overall market.
Predictions For The Future Of The Los Angeles Real Estate Market
In the past few months, we have seen a jump in “months’ supply of inventory”, which is the measure of how many months it would take for the current inventory of homes on the market to sell given the current pace of home sales. As the graph below shows, May is the first month since the imposition of the stay-at-home orders that months’ supply of inventory has decreased. This is reflective of increased buyer confidence, as indicated by the increase in the number of pending sales above. The graph showing months’ supply of inventory is shown below.
Overall, the data from May again appears to confirm our prediction that although the coronavirus and stay-at-home orders created an initial decline in the market, the overall market remains strong and buyers and sellers will re-enter the market as their comfort level increases. We have seen a sharp increase in the number of new listings in May, and a slight increase in the number of pending sales. That increase in new listings will likely increase, particularly when the stay-at-home orders are lifted. We predict this will create an environment more favorable for buyers than in recent history.
For more information on how Esquire Real Estate Brokerage, Inc. can help you in the Los Angeles real estate market, feel free to give us a call at 213-973-9439 or send us an email at firstname.lastname@example.org.