In 2017, Los Angeles housing prices shattered records, reaching previously unseen heights and eclipsing prices seen in the run-up to the 2007 mortgage crisis.
Does that mean we’re in a real estate bubble?
Not necessarily. A recent report from real estate tracker CoreLogic noted that prices across all of Southern California are still 13 percent below their pre-recession peak, when adjusted for inflation.
The company further predicts that prices in LA County will shoot up a hefty 6.4 percent before the end of the year.
Eric Sussman, adjunct professor of real estate and accounting at UCLA, finds that prediction “bullish,” but says there’s little reason to believe prices will bottom out anytime soon.
He says a lack of supply—rather than the risky lending practices that fueled the bubble of a decade ago—is keeping prices high.
“There are just not that many homes on the market,” Sussman says, noting that a strong rental market may be encouraging some owners to hang on to their properties.
So far, a countywide median sale price well over $500,000 doesn’t seem to be deterring buyers.
“Demand continues to be very high,” says realtor Tracy Do, with Compass. Do says that home shoppers looking for anything under $1 million should “be prepared for competition—be prepared for heartbreak.”
She mentions that, even during the holiday season, when buyers tend to be busy with family events, two of her clients received double digit offers on their properties.
Richard Haynes, a broker with Manhattan Pacific Realty, tells Curbed that buyer interest in higher-end properties has begun to cool, but that younger buyers are fueling a particularly hot market for more affordable properties.
“Lower quartile prices keep rising,” he says. “There’s just too much demand.”
“A home on the market now may be selling for $50,000 more six months from now,” he says. “The sooner you can get into the game, the better off you are.”
How long will home values keep climbing? It’s a question that Sussman finds difficult to answer.
“Trees can only grow so high,” he says, noting that more and more residents are being priced out of the market.
“How does the middle class buy a house here?” he wonders.
Lind, however, insists the market isn’t as inaccessible as it may seem.
“Don’t assume you can’t afford anything,” he says, noting that clients are often unaware of what they can buy before sitting down with a lender.
“Once they see what their purchasing power is,” he says, “they’re often pleasantly surprised.”
But that doesn’t necessarily mean first-time buyers should expect to land the home of their dreams. Lind says they’ll have to be ready to enter bidding wars and be willing to take on a bit of extra legwork—researching the market and being prepared to jump at the right opportunity.
“You almost have to treat it as a second job,” Lind says.
Buyers “will get there,” says Do, but they may have to adjust their expectations.
“Your first home doesn’t have to be your last home,” she points out.