What does 2022 look like for the LA market
Market Watch: What 2022 Has In Store For the LA Housing Market
After nearly two years of living in a COVID-covered world, we are still dealing with a housing market (and population) that is reeling from the effects of the ongoing pandemic. An uptick in remote work and unemployment, along with a shift in housing demand to more affordable areas, is still affecting the housing market and will likely continue to do so in the new year due to Omicron’s current status.
Whether you’re selling a home, looking to buy one, or are renting but keeping a close eye on the market: here’s what you can expect to see in the Los Angeles Housing Market in 2022.
The Market Will Start Cooling Down
The California Association of Realtors predicts a cooling of the housing market this year, due to the current slowing of single-family home sales and halting of price hikes.
Specifically, CAR predicts that 416,800 existing single-family homes will be sold this year, and that prices will rise by five percent.
Home Prices Will Rise, But At A More Manageable Rate
Yes, you read that last sentence right: home prices are still expected to rise in 2022, even as the market cools. But, if you’re looking to buy a home, this is still great news.
For comparison, California home prices rose about 20.3 percent in 2021, to a median home price of $793,100 (the median home price was $659,400 in 2020).
Home prices typically grow every year in the Southern California region, so if it’s only rising by a small amount, it’s good news for buyers. Unfortunately, selection may be limited (more on that later).
In 2022, the median home price is forecasted to land at about $834,400. Part of the reasoning for this prediction is due to employment forecasting, which foresees job growth at about 5.2% and non-farm job growth at around 4.6%. But, part of this prediction may also result from the limited supply of houses on the market, due to many homeowners not wanting to give up their spacious homes during a time when most of us are stuck in the house. Alternatively, those with smaller homes may not be wanting to upgrade to something larger if they are facing unemployment or a reduced paycheck due to the recession.
Southern California is Still Recovering From The (Ongoing) Pandemic
While we saw the market start to recover last summer after a temporary stalling due to COVID-19, it’s unclear how things will fare in 2022. There’s still no end to the pandemic in sight and the Omicron variant continues to ravage highly populated cities and fill hospital beds just like we saw in March of 2020 (back when this whole thing started).
Some recent trends in the Southern California market that we may see continue in 2022 are:
Buyers wanting larger spaces due to spending more time at home
Sellers being unmotivated to sell, partially due to wanting to keep their large spaces, and partially due to the recession and job losses
Higher demand with lower supply, making LA a seller’s market
Historically low interest rates
Median home prices rising (this has been the trend for the last 16 months)
The Market’s Volatility All Depends On COVID’s Next Move
While supply issues will likely bring the rate of sales in California down this year, home sales will still be at their highest level in the past five years, according to CAR.
Jordan Levine, Vice President of CAR, says “the cyclical effects from the latest economic downturn will wane, and a strong recovery will follow.” But, he warns that this prediction is made under the assumption that the pandemic situation will be kept under control.
Under control doesn’t mean that COVID will disappear entirely, but CAR’s predictions do depend on COVID staying relatively stable if it’s not going to go away completely (translation: no new, more contagious or fatal variants)
Unfortunately, with the Omicron variant and certain businesses and schools shutting down again, it’s difficult to make completely accurate predictions on what 2022 has in store. The good news is that here at Cadiz & Lluis Group, we will continue to monitor the market to keep you informed about what’s going on in the housing market.