In June 2021, Los Angeles home prices were up 24.7% compared to last year, and days-on-market decreased by 27.1% for the same time period. 60.4% of homes sold above list price last month, up 75% year-over-year. Overall, prices increased 8% in 2020, the tenth consecutive year of price growth for Los Angeles, with expectations of closing 2021 with an even more significant increase.
Sales are starting to moderate in all price points, except luxury. The pandemic-induced Great Reshuffle saw sales activity surge in 2020 with ultra-luxury sales of $10 million+ increasing 26% year-over-year. In 2021, prices in the top percentile are up 52.7% year-over-year.
Intensified inventory shortages have given rise to opportunistic ultra-luxury flips. Nest Seekers’ top Los Angeles producer, Dylan Eckardt, explains the anomaly of the Los Angeles market, saying: “It seems like we are selling the same houses over and over again, I’ve sold the same house three times over the last year without anyone actually moving in.’
There are 5,507 UHNW individuals holding more than $30 million in assets residing in Los Angeles, and most are taking full advantage of low interest rates. Cash buyers as a percentage of total sales in Los Angeles decreased from 41% in Q2 2020 to 20% in Q4 2020. Mortgage payment growth in the entire state of California accelerated sharply in January 2021, and payments are 34.8% higher year-over-year at present.
Many feel priced out of the market, despite low interest rates, thus demand for rentals has accelerated with average rent rates rising faster than median prices. Average rents are also increasing faster than average wages in Los Angeles and the unemployment rate remains high at 15.1%. With the price-to-rent ratio at 18.28, the decision to rent v. own is a difficult one in the lower pricing tiers. This is an opportunity for investors, however, and three years in a row, Los Angeles has been the top market in the country for foreign capital. The city’s proximity to Asia has been a large draw, though expectations are tempered as Miami is emerging as the new darling of international investment.
Thus, Los Angeles is really a tale of two cities, with luxury prices booming and an expectation of an additional 8% gain over the remainder of 2021 and median rental prices increasing as many other hopeful buyers are left empty-handed due to a shortage of inventory.
