Rising Los Angeles home prices and heated bidding wars caused some buyers to step to the sidelines in May, resulting in fewer home sales than the previous month.
Existing, single-family home sales dipped 3.1 percent month-over-month as the median home price rose by 1 percent to $725,680, according to the latest report from the California Association of Realtors (CAR). Sales are up a whopping 80.7 percent compared to the same period last year, but last spring’s market activity was severely hampered by the pandemic and lockdown restrictions.
The typical price of a Los Angeles home has surged 31.1 percent annually, equating to nearly $172,000. Having been priced out of the single-family home segment, many buyers are turning to comparatively affordable condos.
A recent report from residential real estate brokerage Douglas Elliman suggests that pending sales for Los Angeles County condos surged 235.9 percent compared to May 2020, with 1,508 units going from ‘active’ to ‘pending.’ The largest share of newly signed contracts was for condos priced between $300,000 and $499,000, well below the median price of a single-family home.
Unsold inventory for single-family homes increased from 1.8 months of supply in April to 2.0 months in May, notes CAR. However, supply is down considerably from one year ago when there was 4.7 months of unsold inventory. A balanced market ranges from four to six months of supply, meaning the market still has ground to make up.
The typical LA home spent eight days on the market, up from seven days in April. Nevertheless, this is an incredibly quick turnaround as it took 16 days for a home to go under contract during May 2020.
Similar market trends played out statewide, with existing, single-family home sales falling 2.7 percent on a monthly basis to 445,660 annualized transactions.
“A lack of housing inventory continues to push up prices, and modestly higher interest rates, increased competition, and declining affordability have caused some buyers to become discouraged,” said CAR Vice President and Chief Economist Jordan Levine. “Despite strong growth rates, the level of home sales has fallen on a monthly basis in four of the last five months.”
California’s median home price soared to another record high at $818,260, up 0.5 percent from April and 39.1 percent from May 2020. It was also the second consecutive month that annual price gains surpassed 30 percent. The report explained that still-active luxury buyers, who have not been deterred by bidding wars, are propping up the statewide median home price, noting that million-dollar home sales have outpaced those priced below $500,000 for the past several months.
“Pending sales data for May, which was virtually unchanged from April, suggests further slowing in coming months. Fortunately, new listings have finally started to rise, which could help to sustain a higher level of home sales deeper into summer by providing much-needed supply,” added Levine.