The Ebb and Flow of the Market: Median Price of Homes Reach Record High in Los Angeles County - Chernov Team

The Ebb and Flow of the Market: Median Price of Homes Reach Record High in Los Angeles County

In May 2019, the median price of condos and homes in Los Angeles County reached $615k), a new record for median price in the county. In the preceding month, April, the median price was just over $600k (this is an increase of roughly 3% from April 2018, and an increase of roughly 1.7% from March 2019); April represented the first time since August 2018 that the median price of homes in Los Angeles County surpassed the $600k mark. Since May 2019, the median price has remained fairly stable, mystifying some market analysts. The increase in housing prices does not paint the entire picture however. At its core, the increase in median price may be a reflection on the supply of available homes in the area.

Approximately 6.5k houses were sold in Los Angeles County in April 2019, which represents a 12% increase from March 2019, but represents a 1% decrease from April 2018. Keeping in mind that the median price of homes in April was 1.7% higher than March 2019, and 3% higher than April 2018, that theory seems to pan out. Of particular note, notwithstanding the fact that April 19’ saw a 3% increase in median price from March 19’, the total number of home sales in March 19’ was roughly 15% below the average sales for the month of April; further, total sales have been below the previous year’s sales for nine months in a row. While many analysts suspected this was the result of increasing mortgage rates (which has the practical effect of making houses less affordable because it increases monthly payments in most cases), the interest rates have stayed very low over the last several months.

As such, the increase in median price may be the net result of a cycle; limited supply increases price, increased price reduces demand, and the circle goes on and on (a lower interest rate would offset this). More to the point, the increase in the median price of houses may be the result of it’s on independent market – making it less effected by the health of the economy than previously thought. At its core, it is possible that the price of houses in Los Angeles County are simply outpacing the growing income of the county residents, despite the existence of a robust economy.

At the end of the day, many buyers simply don’t have the option to obtain the loans necessary to fund the purchase of homes so far outside their price range. As such, we can expect the median price of houses to decrease in the coming months (unless the fed reduces the rates, but nothing is indicating that this will happen as of today). Of course, as the prices go down, sales will go up. When sales go up, the equilibrium goes up; we will be having this conversation again in the coming months.

At the Chernov Team we understand that knowledge is power, particularly when it comes to predicting a buyer’s market; and a buyer’s market is coming. At the Chernov Team we know that whoever shows up to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.

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