The COVID-19 pandemic has widened the wealth gap between high- and low-income households. As wealthy families worked from home and put money in savings that would have otherwise gone towards vacations, dining out and gym memberships, poor families experienced job losses, fell behind on rent and turned to food banks.
More than a year into the pandemic, Los Angeles’ high earners are making money moves, using their excess savings to purchase $1 million-plus homes. A new Redfin study found that high-end LA home sales jumped 64 percent annually in the three months ending April 30 compared to a 40 percent increase for mid-priced homes and a 27 percent increase for affordable homes during the same period.
“So far, the economic recovery from the pandemic has disproportionately benefited Americans with bigger bank accounts,” said Redfin Chief Economist Daryl Fairweather.
“This means a lot of the demand for homes is coming from folks who are well-off, while many lower-income Americans sit on the sidelines because they’ve been priced out of the housing market due to surging prices.”
The median sale price of a high-end home in Los Angeles totaled $1,168,000 during the three-month period, up 11 percent year-over-year. Sale price growth was relatively consistent across all price tiers, with mid-priced and affordable homes recording 10 percent and 11 percent gains, respectively. The typical mid-priced home fetched $705,000, while the typical affordable home sold for $499,300.
The three months ending April 30 also coincided with California’s vaccine rollout. As wealthy families grew more confident that post-pandemic life was on the horizon, they began purchasing expensive homes in urban areas at a faster rate, noted Fairweather.
High-end LA homes spent about a week longer on the market than their mid-priced and affordable counterparts, taking a median of 37 days to go from ‘active’ to ‘pending.’ Still, this was seven days faster than a year ago when the statewide stay-at-home order prompted many buyers to put their home searches on hold.
Mid-priced homes spent 30 days on the market, down seven days from the previous year, as affordable homes took an average of 31 days to go under contract, eight days sooner than the same period in 2020.
New listings spiked across all price tiers, rising 40 percent, 30 percent and 37 percent for affordable, mid-priced and high-end Los Angeles homes. However, this data should be taken with a grain of salt as the spring 2020 market was hampered by a ban on in-person showings.
Fairweather says that the popularity of high-end homes can be attributed to lifestyle changes brought about by the pandemic. “People are snapping up properties with home offices, big backyards and more square footage,” she added.
Fairweather anticipates that home price growth will accelerate for affordable and mid-priced homes as the perks of the economic recovery extend to middle-class families.