During the past two years the Los Angeles housing market has favored sellers giving them leverage to sell at higher on average price points each month. However, this golden stint of seller leverage looks like it may have run its course.
One such indication of the end of this period is that in Orange County, the area’s priciest markets, around one-third of the sellers have been forced to cut prices down, according to the real estate firm Redfin. Prices have also hit somewhat of a plateau all across the Southland with the number of sales declining as buyers got choosier.
Although sellers are usually the last to see market shifts like this, many buyers are finally coming to realize that they may just have to reduce their prices to get buyers in the door. These cuts indicate a balancing or at least an adjustment period in the market following the smoking hot seller’s market of the past two years.
According to data from CoreLogic DataQuick, the Los Angeles area has seen the median home prices come in with double digit annual gains every month for the past two years. However, this August marked the third straight month in a row in which we saw single digits gains with Orange County coming in with just a 5.4 percent year over year increase.
Though sellers may be losing some of their leverage, the August median home price of $420,000 is still the highest it’s been since the recession started in late 2007. This relatively high median home price has put a lot of potential homebuyers out of the market and lead to an increase in mid-range priced inventory.
With this fairly saturated state of the market, many sellers have chosen price cuts while others have taken their homes off the market hoping next spring selling season while allow them to sell at higher price points.
Michael Bain is an analyst for New Home Source
