Coronavirus And Its Impact On The Los Angeles Real Estate Market – May Update
Last month we posted a summary of how the coronavirus and “stay at home” orders affected the Los Angeles real estate market in March and what we expected in April. We also predicted that the summer months will potentially present a buying opportunity as previously reluctant sellers flood the market. Now, with April behind us, the data is more clear, and the trends we saw in March/April are continuing into May. In short, the number of new listings and pending sales are down, sales completed in April are down, and prices dropped in comparison to March but remain high in comparison to prior years. We expect these trends to continue so long as the stay at home orders remain in place, with a likely surge in listings as stay at home orders are lifted in the summer.
How Coronavirus Impacted The Market And Sales In April
Last month we saw that the number of pending sales in March was down in comparison to prior years. As a result and as expected, the number of closed sales in April dropped. As shown in the graph below, the number of closed sales in April dropped significantly, whereas in prior years closed sales in April either rose or declined only slightly.
This is of course expected given that for about half of March, buyers were hesitant to tour homes and make offers, and so there were fewer closings in April. Again, this was reflected in a decline in the number of pending sales in March. What’s more interesting, and perhaps more indicative of confidence in the real estate market, is the sale price of the homes that did sell. As the graph below shows, while the median sale price of homes in Los Angeles did decline slightly in comparison to March, prices have continued to increase in comparison to the same time last year.
In short, while the market has slowed down in terms of volume, prices appear to remain steady, and are in fact higher from a year-over-year perspective.
What April’s Data Tells Us About May
The April data also shows us that, as we expected, the trend of sellers and buyers being less willing to enter the market has continued. So long as people are being told to stay at home, we can expect this trend to continue.
The graph below shows the number of new listings per month in Los Angeles. As indicated by the data from 2017, 2018, and 2019, the number of new listings typically picks up in March and April, with that trend continuing through the summer, and then dropping off into the winter months. 2020 has been an anomaly due to the stay at home orders. As shown below, the number of new listings dropped in March with the stay at home order being in effect for approximately half of March. The impact in April is even more exaggerated, with the stay at home order being in place during the entirety of the month. This reflects an unwillingness of property owners to list their properties for sale during the coronavirus pandemic.
That trend also appears to be true for buyers. The graph below shows the number of monthly pending sales. As with new listings, the typical trend of is for pending sales to increase in March/April and for that trend to continue through the summer months, as shown by the data from 2017-2019. Once again, 2020 is an outlier, with the number of pending sales dropping significantly in March and April. This is reflective of an unwillingness of buyers to make offers, as well as a reduction in inventory due to decreased new listings.
Thus, as with March, and as we expected in April, both buyers and sellers are hesitant to enter the market during the coronavirus pandemic and while the stay at home orders are in place. This trend will likely continue at least until the stay at home orders are lifted.
Predictions For The Future Of The Los Angeles Real Estate Market
Last month we predicted that the summer months will present an excellent buying opportunity due to a backlog of inventory, i.e. due to property owners holding off on listing their properties while stay at home orders are in place. We saw that the 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, was increasing. As the graph below shows, that trend has continued, likely due to the significant drop in the number of pending sales.
Overall, the data from April appears to confirm our predictions last month. Sellers and buyers continue to be hesitant to enter the market, as reflected by a decline in new listings and pending sales. Prices dropped in April in comparison to March, but remain high in comparison to the same time last year. We predict that when stay at home orders are lifted, likely during the summer months, there will be a surge in new listings due to previously reluctant sellers being willing to enter the market. This will potentially create a “buyers’ market”, at least relative to recent history, and thus may present an excellent buying opportunity for buyers who are currently waiting on the sidelines.
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 email@example.com.