Los Angeles County Housing Report Presented by Linda Mendoza                           September 8, 2020

Luxury Surge

A record number of luxury homes closed in Los Angeles County in August.

The luxury housing market not only bounced back from the

initial shock of the Coronavirus, it has reached unprecedented

levels.

After a hiatus due to the Coronavirus, professional baseball, basketball, and hockey returned to empty stadiums and arenas. For sports enthusiasts, it was a welcome distraction to COVID-19 and the daily news. Hockey is in the midst of the Stanley Cup playoffs and down to the conference finals. The high intensity play is reminiscent of the Winter Olympics where hockey players around the world compete for gold. One of the greatest moments in hockey history occurred during the 1980 games, the “Miracle on Ice,” when the United States defeated Russia by scoring two goals in the final period. Despite Russia being heavy favorites, stacked with experienced, professional players, and winning five of the six previous Olympics, they lost to the United States whose roster was filled with amateurs and was the youngest of the 12 competing teams. The game was memorable and completely unexpected.

Life is full of unexpected events. Just like the “Miracle on Ice,” this year’s housing market has surpassed just about everybody’s expectations. Demand has been off the charts, the highest in years. The active listing inventory has remained at unbelievably low levels for this time of the year. Multiple offers are the norm. Home values are on the rise. Homes are quite literally flying off the shelves. Luxury housing has also beat everybody’s expectations and has been surging at a record pace.

In Los Angeles County, luxury closed sales in August, homes above $1.5 million, hit a record high of 849. The prior high occurred in July at 807 sales. It has never topped 800 homes prior to the last two months. It has only exceeded 700 three times: June 2017, June 2018, and August 2018. August’s 849 closed sales was 5% higher than July, and 31% higher than August 2019’s 646 sales. 

For all price ranges in Los Angeles County, closed sales in August were down by 4% over last year, 5,880 closed sales in 2020 compared to 6,125 in 2019. It is the highest level so far this year. A deeper look reveals that the higher ranges are performing stronger than the entry level. For homes priced below $750,000, year over year there were 685 fewer closed sales, 18% less. For homes priced between $750,000 and $1.5 million, there were 241 additional closed sales compared to last year, 15% higher. And for the luxury range, over $1.5 million, year over year there were 199 additional closed sales, an unbelievable 31% more.

Quite simply, there are more closed sales in the luxury range than ever before. The high end is firing on all cylinders and it is most likely a combination of Wall Street’s return to record high levels, private banking relationships, and record low interest rates. It does not appear to be slowing, either. In looking at demand (the last 30-days of pending sales), there are 1,566 more pending sales than last year at this time, 30% extra. Luxury demand is up by an incredible 97%.

Not only is luxury outperforming any other time in terms of closed sales, it appears as if that trend will continue given the current velocity of demand. The Expected Market Time (the amount of time between hammering in the FOR-SALE sign to opening escrow) for homes priced between $1.5 million and $2 million is less than 90-days, a solid Seller’s Market, a super-sonic pace for this price range. It is at 109 days for homes priced between $2 million and $4 million. For homes priced above $4 million, the Expected Market Time is 312 days. Yes, that is a lot slower than all other price ranges; however, it is far better than last year’s level at 557 days.

A warning to luxury sellers: luxury may be hotter than ever, but it still is not as hot as the lower price ranges. Homes below $1 million are experiencing the hottest activity with a mass number of showings, multiple offers, and very quick sales; however, it takes a bit longer to find success in the upper ranges with not as many showings and fewer multiple offer situations. Expecting instantaneous purchase offers is just not realistic.  

Active Listings

The current active inventory increased by 1% in the past two weeks.

The active listing inventory increased by 76 homes in the past two-weeks, up 1%, and now sits at 10,179. It is still the lowest level for September since tracking began in 2012. The pace of the market has everything to do with that old economics 101 principle of supply and demand. When there is limited supply and plenty of demand, like today, the market favors sellers and home values appreciate rapidly. The current ultra-low active inventory levels are here to stay for the remainder of 2020, and it will continue to be the trend going into 2021.

COVID-19 is no longer suppressing homeowners from coming on the market. In August, there were 631 more homes compared to 2019, 8% extra. Yet, from May through June there were 27% fewer FOR-SALE compared to 2019, meaning 9,222 missing sellers. While August’s 631 home helps make up the difference, there are still far fewer homeowners that have entered the fray in 2020 compared to last year, 14% fewer through August.

Last year at this time, there were 13,237 homes on the market, 3,058 additional homes, or 30% more. There were a lot more choices for buyers last year.

Demand

Demand increased by only 7 homes in the past two weeks, nearly unchanged.

Demand, the number of new pending sales over the prior month, increased from 6,713 to 6,720, an additional 7 pending sales, nearly unchanged in two weeks. This is the highest demand reading since November 2012, nearly eight years ago, and the highest reading of the year. When the kids go back to school, housing transitions to the Autumn Market. Typically, both the inventory and demand slowly drop. While the inventory has started to decline, demand has not yet softened. The low mortgage rate environment is continuing to instigate plenty of demand. It will eventually slow as housing moves deeper into the Autumn Market.

Last year, demand was at 5,154, that is 1,566 fewer pending sales than today, 23% less.

In the past two-weeks the Expected Market Time remained at 45 days, a HotSeller’s Market (less than 60 days), where sellers get to call the shots during the negotiating process and home values are on the rise. This is the strongest level since June 2013. Last year the Expected Market Time was at 77 days, much slower than today. 

Los Angeles County Housing Summary

• The active listing inventory increased by 76 homes in the past two-weeks, up 1%, and now totals 10,179, its lowest level for September since tracking began in 2012. COVID-19 is not suppressing the inventory and in August, there were 8% more homes that came on the market compared to last year. Last year, there were 13,237 homes on the market, 3,058 more than today, or 30% more.
• Demand, the number of pending sales over the prior month, increased by 7 pending sales in the past two-weeks, nearly unchanged, and now totals 6,720, its highest level since November 2012. COVID-19 currently has no effect on demand. Last year, there were 5,154 pending sales, 23% fewer than today.
• The Expected Market Time for all of Los Angeles County remained at 45 days, a Hot Seller’s Market (less than 60 days). It was at 77 days last year, much slower than today.
• For homes priced below $750,000, the market is a hot Seller’s Market (less than 60 days) with an expected market time of 27 days. This range represents 34% of the active inventory and 56% of demand.
• For homes priced between $750,000 and $1 million, the Expected Market Time is 40 days, a Hot Seller’s Market. This range represents 15% of the active inventory and 17% of demand.
• For homes priced between $1 million to $1.5 million, the Expected Market Time is 55 days, a Hot Seller’s Market.
• For luxury homes priced between $1.5 million and $2 million, in the past two weeks, the Expected Market Time decreased from 74 to 73 days. For homes priced between $2 million and $3 million, the Expected Market Time increased from 98 to 102 days. For luxury homes priced between $3 million and $4 million, the Expected Market Time decreased from 133 to 126 days. For luxury homes priced above $4 million, the Expected Market Time increased from 287 to 312 days.
• The luxury end, all homes above $1.5 million, accounts for 36% of the inventory and only 13% of demand.
• Distressed homes, both short sales and foreclosures combined, made up only 0.7% of all listings and 0.7% of demand. There are only 47 foreclosures and 24 short sales available to purchase today in all of Los Angeles County, 71 total distressed homes on the active market, up 3 in the past two-weeks. Last year there were 145 total distressed homes on the market, more than today.

• There were 5,631 closed residential resales in July, down 7% from July 2019’s 6,039 closed sales. July marked a 30% rise over June 2020. The sales to list price ratio was 98.5% for all of Los Angeles County. Foreclosures accounted for 0.5% of all closed sales, and short sales accounted for 0.4%. That means that 99% of all sales were good ol’ fashioned sellers with equity.