By Jeffery Marino
The residential real estate market in Northeast Los Angeles boils down to this: On one side, you have a horde of buyers. On the other side, you have a dearth of homes for sale. The result is more competition for fewer homes – and rapidly rising prices.
The median sale price for a home in NELA reached $1.1 million in December, the latest month with comprehensive data. That million-dollar-plus price tag marks a 20% increase over December of 2021, the largest annual price gain since June 2014. It’s also the 11th straight month of double-digit, year-over-year price increases.
Moreover, the upward trend in prices appears unstoppable at this point. Eager buyers are snatching up homes as fast as they can – the median days on market was 37 in December, compared to 41 days a year ago. At the same time, homeowners appear content to sit on their hugely appreciated properties rather than put them up for sale. New listings of homes for sale were down 22% in December compared to a year earlier. That’s the largest annual decline in new listings since June of 2020, when sales activity was depressed because of the pandemic lockdown.
The upward price trend can also be seen in the competition data. In December, the sale-to-list ratio hit 109%, meaning the average buyer paid 9% over the asking price, which works out to $100,000 in today’s market. In data going back to 2012, the sale-to-list ratio has only been this high once before, in June 2021, just after the median sale price for a home in NELA reached $1 million.
Is this a new housing bubble? By and large, economists don’t think so. The dodgy mortgages that characterized the housing bubble in the early years of this century are not a factor today. What’s mainly at work here is too little supply, brought on by zoning rules and other constraints that thwart new construction, even as demand surges.
Unlike bubbles, which can burst with disastrous consequences, a supply/demand imbalance tends to correct – at some point — via market and political processes. But in the meantime, it can do a lot of damage in the form of dislocation, gentrification, homelessness and widening wealth gaps as home ownership slips out of reach for most people. There’s a dark side to those high home prices.