The national housing market is slowing almost to a dead stop, say some experts, as existing home sales have fallen for nine straight months.
As Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics, wrote recently, “In one line: Collapse in prices is coming,.”
According to a recent report in Axios, Pantheon estimates that existing home prices will keep falling, ultimately dropping by about 20% from their June peak of around $414,000.
Goldman Sachs analysts also recently cut their outlook for home prices from roughly flat next year to down 4%, noting that “unsustainable levels of housing affordability (will) continue weighing on housing demand.”
With mortgage rates near 7%, and an increase expected today from the Fed’s Jerome Powell to slow down the inflation train, a large-scale housing slowdown is becoming increasingly likely.
In Los Angeles County, said the Norad Real Estate report, the number of closed sales dropped by 39.8%, reflecting that “things are continuously becoming less hot as compared to the previous year due to higher mortgage rates.”
The Los Angeles Metro Area posted a decline of -40.8% year-over-year in sales of existing single-family homes. The median home price in the Los Angeles metropolitan region was $742,570, 2.4% higher compared to October 2021, when it was $725,000. However, it was a decline of 1.0% from September’s price of $750,000.
Generally, a balanced market will lie somewhere between four and six months of supply, said Norad. Inventory is calculated monthly by taking a count of the number of active listings and pending sales on the last day of the month.
If an inventory is rising, there is less pressure for home prices to increase. With 4.1 months of supply left, it is still short of what economists say is needed for a balanced market. Hence, the Los Angeles County housing market will continue to see upward pressure on home prices, Norad added.
According to the California Association of Realtors’ “2023 California Housing Market Forecast,” existing single-family home sales will eventually fall 7.2 percent next year to 333,450 units, down from 359,220 units in 2022. The current Months Supply of Inventory (SFH) for Los Angeles County is now 4.1 months, while the Months Supply of Inventory (SFH) for the Los Angeles Metro Area is 3.7 months.
Los Angeles County home prices are still slightly higher than last year, based on single-family, condo, and townhome properties listed for sale on realtor.com.
Axios also pointed out that a surge in defaults as in 2008 and 2009 is unlikely, economists say. The report added that “Some decline in home prices is likely in the offing. It won’t be a disaster. And lower prices will be welcomed by frustrated, would-be buyers.”
