Los Angeles Real Estate Market Update for May 2022.

Rate increases and adjustable rate mortgages? Housing market bubble?

What is going on in the Los Angeles Real Estate market in May of 2022? Los Angeles Realtor Scott Himelstein goes over the real estate market numbers and stats for May 2022. He does a deep dive into the number of New Listings, Days Pending, Inventory, and Days on the Market. He then wraps up by talking about the current interest rates and how you can take advantage of less competition in the market.

Let us dive in to the numbers.

First the number of new listings that have come in the market for sale is down 18% from last year in the San Fernando Valley. In Los Angeles County, it is 16.4%. Next, the number of homes going pending have gone down about 19%. One might think that the housing market is crashing but it is just a result of having fewer homes for sale - less homes for sale means less homes that go pending. Second, days on market is down 10% from a year ago this time. Third, is supply. That number is down 20% from the same time a year ago. What is causing these numbers to go down? Again, just the lack of homes from sale is keeping these numbers suppressed. 

It makes sense that those numbers all line up and if we examine the cause we see there are fewer people selling their homes. The biggest change is interest rates. At the beginning of the year it was in the low 3’s. And earlier this month, we’re looking at close to 6% although the rates have scaled back a little in the mid 5’s. Indeed there is a shake up in the real estate market which can be scary; but can also offer buyers some opportunities.

What does it really mean for everybody?

First is that the buyers who could barely afford or those buyers who were just extremely picky and could not jump off the fence have been washed away. The opportunity lies for those who are still in the market. If you are a buyer in the market right now, you have a lot less competition. Two months ago it would feel weird to offer a million dollars on a million dollar listing. Just within a couple weeks, there is a good chance that your offer will be accepted at the list price or even potentially just a little bit low if the home is not priced right. Buyers will have a higher payment now with rates in the 5’s. For sellers, before homes sold in just days after being on the market. Now it is possible it will take two (2) to three (3) weeks to sell a home. As some of these sellers stay on the market longer, they are a lot more open to dealing with offers at the list price or even less.

One of the new things that we’re really seeing over the course of the last 30 days is that there are a lot of buyers who are getting into adjustable rate mortgages. These are not the same adjustable rate mortgages that got us in to the foreclosure crisis years ago. The lending standards are a lot more stringent now. The adjustable rate mortgages make a lot more sense especially if the buyer does not plan to be in the home for 10 years or longer. For example, maybe in 5-7 years the kids maybe graduating high school the parents will be empty nesters, and plan to downsize afterwards. Might be better that they have a fixed rate for a certain amount of time then it becomes adjustable after that. If the interest rates are in the mid 5’s and your adjustable rate is only in the mid 4’s, that is a big savings on your monthly payment. 

“There is finally a little bit of a of shake up in the real estate market and it could create some opportunities for some.”

For a  seller, you have a lot to decide. We do not know if we are at the top of the market but we are probably pretty close to it. We have been on this upward trend  for 12-13 years now. We do not know where the market will go, possibly we head into in a recession or face even higher interest rates. If the unpredictability worries you and you wish to avoid this risk, this would be a really good time to cash in right now especially with buyers still offering great prices.