Beverly Hills Houses
Is the Los Angeles real estate market in danger of another housing bubble?
The answer to that question is…maybe.
But there is some cause for concern in Los Angeles and across the US that housing prices might be increasing too much too quickly for the market to bear, and it’s the lack of available housing inventory that is causing the price increase.
Normally, an increase is the price of homes is sign of a recovering real estate market, but if the price increase is too quickly, it’s an example of too much of a good thing and can cause the recovery to stall or backslide as potential buyers are priced out of the market.
This disturbing possibility is examined in detail in an article published recently on Aol.com.
In the article, Jed Smith, managing director of quantitative research for the National Association of Realtors, defines what he sees as the current state of the real estate market in the United States:
Smith expects home prices to rise 5 percent in 2014, which he calls “sustainable and reasonable,” but if they start to creep any higher, it will start pricing buyers out of the market and fuel speculation of another bubble. On Thursday, the National Association of Realtors reported housing inventory fell 9.35 percent at the end of December, to 1.86 million available homes, which is about a 4.6 month supply at the current sales pace. According to Smith, a normal market has about a six-to-seven-month supply available.
Later in the article, Smith identifies what he believes to be the reason for the lack of housing inventory necessary to meet the growing demand: lack of new construction. A normal housing market brings approximately 1.5 million new homes onto the market per year. Last year, only 800,000 new homes made it to the market. That’s just 53% of normal.
“The Great Recession forced many of the smaller builders to go out of business because they didn’t have access to the credit market and those builders tend to make up about 50 percent of new home construction,” said Smith.
The numbers in the Los Angeles real estate market are even more arresting. According to the Department of Numbers, the median asking price for a condo or single-family home in Los Angeles is 29.3% higher than it was this time last year and inventory is 13.9% lower.
So, what does this mean you?
Well, as Smith said, it’s not time to panic. This is a recovering market coming out of one the most severe recessions in the nation’s history. There are bound to be some areas that recover faster than others, but that doesn’t mean the recovery is in danger. Banks will begin to loan money to developers, builders will build houses and buildings and new construction will come on the market to make up the current gap between inventory and demand.
One way that owners of Los Angeles real estate, whether it’s a house on the Sunset Strip or Beverly Hills home, can help is by not waiting to put your home up for sale. If you are considering selling your home, don’t wait. Do it today. Price and demand are high right now. Competition is low. This is the ideal time to sell a Los Angeles home. Don’t wait around for the conditions to get better. Take advantage of the great selling conditions now and get in touch with me to start the process.
To read the complete article, please visit Aol.com.
Susan Andrews | Estates Director
BRE License #01425843
Susan Andrews is your ultimate real estate source for Los Angeles, California and surrounding communities.
Photo courtesy of the Fox Business Network via Aol.com.