Los Angeles Housing Market Update for November / December 2022
November found more prospective buyers are actively searching for a home: Despite higher interest rates negatively impacting housing affordability and demand for homes, not all buyers have been sidelined. According to the latest Housing Trends report by the National Association of Home Builders (NAHB), in Q3/22 59% of prospective buyers had moved beyond the planning phase and had become fully engaged in the buying process. This was up from 46% in Q1/22 and 49% in Q2/22. The share of prospective buyers actively searching for a home rose in every region between the second and third quarter of 2022, with the West having the largest share at 68%. Less competition and more inventory were the driving force for the share increase in the recent quarter.
Homes were listed on the market for a median of 23 days before escrow opened, more than doubled from that in October of last year when the median was 11 days. Inventory inched up but remained low by historical standards. Tight supply has kept prices afloat thus far, even as demand has pulled back significantly. Nevertheless, October had the slowest year-over-year price growth in the last 29 months and prices should continue to moderate in the months ahead.
Constructions in the multi-family sector have been more resilient to the effects of rising rates, as multifamily starts continued to outpace last year’s level by 17.8%, despite a dip from the prior month. With demand slowing in the purchase market, developers are shifting their building effort in the rental market in recent months and most likely in the near future.
Where are prices headed in 2023? It's hard to say but as rates keep rising, it will no doubt affect buyer demand and housing prices. However, lack of housing inventory is good news that prices will not be dropping as drastically as in previous years.
Projections are for prices to stay stagnant with up to 5% growth for Los Angeles county in 2023.