Will LA's Housing Market Cool down in 2019?

Home prices in Los Angeles reached record heights in 2018, climbing to levels far above those recorded in the years leading up to the Great Recession. But price increases have fallen since summer and a several analyses suggest a cooling trend in the market will continue into 2019.

Analysts with the online real estate company CoreLogic surveyed 100 real estate experts across the country on their expectations for 2019. Their responses suggest that home values in Los Angeles will continue to rise in 2019, but at a significantly lower rate than the nationwide average. The panelists predict that prices will climb 7.7 percent across the country; but in the LA metro area (which includes Orange County), they are expected to tick up 5%. 17 of 22 experts polled about the LA market said it was likely to “underperform” the nationwide average in terms of home value and appreciation. That’s partly because prices in LA rose quickly after the housing bubble of the mid 2000s burst a decade ago. “it’s the markets that experience more exuberance that will then be the first to slow down,” says Skylar Olsen, Zillow’s director of economic research and outlook.

Now that median home prices have climbed to unprecedented levels in Los Angeles, many buyers may be priced out of the market, she says. Others may simply bide their time. “We think a big part of it is basically demand exhaustion,” Olsen says. “People can’t just outbid each other anymore.” Jordan Levine, senior economist for the California Association of Realtors, suggests some buyers are hoping prices will suddenly bottom out. “Some folks remember 2008 when prices fell dramatically,” Levine says. “There is a big consumer confidence element to the housing market. No want wants to be the last one in.” Levine says it’s a mistake to think home values will tank the way they did during the last recession, since mortgage providers are still shying away from the kind of risky home loans that fueled the housing market’s last collapse. More likely is that home values will continue to grow – but at a more modest rate.

This is good news – especially for buyers – though sellers might not see it that way. Buyers still may have a hard time getting excited as nearly three in four LA residents can’t afford to buy a median priced home. But as the job market remains strong, interest rates are still relatively low, and there are a lot of financing options for buyers – there is reason to be optimistic.