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Highland Premiere Real Estate - The Hardest-Working Team in Real Estate

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

– Vivian Yoon & Dennis Hsii, LIC #01925833 / 01919746

See Your Home’s Value


The Big Story

July sees a huge mortgage rate drop and more inventory on the market

Quick Take:

Note: You can find the charts & graphs for the Big Story at the end of the following section.


Home prices continue to reach new highs even as demand declines

Home prices generally stagnate this time of year, so it’s more challenging to ascribe causation for why price growth has decelerated nationally to economic factors — inflation, mortgage rates, supply shortages, and looming recession — when they coincide with long-term seasonal trends. Historically, prices increase in the first half of the year and flatten in the back half. Prices in 2020 bucked this trend, increasing through October before flattening in the last quarter of the year. Although prices rose much higher in 2021, the historical trend returned. This year has, of course, come with different economic and psychological drivers than 2020 and 2021, especially in the housing market. 

For many, if not most of us, the pandemic brought us largely inside our homes, increasing the desire for larger, nicer private spaces. The mass movement to remote work meant that proximity to an office, usually a primary selling point in major metro areas, mattered less or not at all. Many of us experienced our home spaces, work spaces, and communal spaces becoming one, and realized that the home we usually spent little time in would simply no longer work for us. This need for a bigger space, combined with extremely low-rate financing, a substantial increase in disposable income, and more time to look for a new home created a boom in demand in an already undersupplied housing market. As a result, the median sale price rose higher and faster than any other point in history, up 36% over the past two years according to data provided by the U.S. Department of Housing and Urban Development. For reference, in the eight years preceding 2020, the median home price rose a total of 38%. 

As we know, housing isn’t the only asset to rise since 2020. Nearly everything has become more expensive, and inflation (CPI)*, which has rarely ever risen above 5%, ticked above that mark in the summer of 2021 and has only increased since then. The Federal Reserve, which has a dual mandate of price stability and maximum employment, has one major tool: raising the federal funds rate†. By doing so, the Fed indirectly affects the debt markets, thereby increasing other interest rates, such as mortgage rates. 

In the first half of this year, the average 30-year mortgage rate rose nearly 3%. It’s hard to overstate how significantly that rate increase affects affordability. To hopefully simplify the explanation, we will use a $1 million home that is fully financed for illustrative purposes. For a $1 million home, a 3% increase in interest rates raises the monthly mortgage cost by 42%. It’s fairly safe to say that income hasn’t risen by 42% for most people, which means that many potential buyers are priced out of buying homes, softening demand. For those potential buyers waiting for a correction of the residential real estate market, home prices would have to decline by 30% for the monthly costs to be equivalent — that is, $700,000 at 6% is the equivalent monthly mortgage cost of $1 million at 3%. If the housing market experienced such a large correction, there would likely be much larger concerns in the global economy than home prices. Barring a collapse of the entire financial system, supply would simply be too low for a major correction. Luckily for potential homebuyers, mortgage rates dropped by 0.50% in July, and many economists predict that the mortgage rates will flatten out around 5% even as the Fed continues to raise the federal funds rate. This is partially because the market largely understands and has already accounted for the Fed’s rate hike path, which will continue until inflation begins to meaningfully decline and recession worries wane. 

The economy has felt a little uneasy lately — a classic “will they, won’t they?” when it comes to the recession — but for now, we aren’t technically in a recession because job numbers are too good. Demand for homes has clearly softened, which is fine in a severely unbalanced market. We will likely see less significant price appreciation in the second half of the year due to seasonal norms and higher mortgage rates. The market remains competitive and homes are selling quickly. However, buyers are seeing more inventory than last year, which is good for the market. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home.

* The Bureau of Labor Statistics (BLS) collects the prices of approximately 94,000 items from a sample of goods and services to calculate the Consumer Price Index (CPI).
† The federal funds rate is the interest rate that banks get to borrow from the Federal Reserve. Also known as the Fed’s benchmark rate or the risk-free rate.


Big Story Data

The Local Lowdown

We break down three luxury areas in Los Angeles as follows:

Quick Take:

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.


Is the market balancing? Tentatively, maybe!

Median single-family home prices rose month-over-month across the selected markets. Usually, median price is a great barometer of housing trends, but for luxury markets, median prices tend to have more variability month-to-month. Price per square foot, which accounts for size, shows a more accurate price trend over the past two years. The North Beach and West Side price per square foot is below peak, while the South Bay reached a new all-time high in July. These price movements are within the bounds of normal price variability, but after large price gains, it feels like any downward movement signals a market correction. As mentioned in the Big Story, prices tend to stagnate in the summer and fall months when inventory is at its highest, so we aren’t ringing the alarm bells quite yet. Homes over the past five years have become less affordable, yet demand boomed. With 30-year mortgage rates potentially settling around 5%, fewer potential buyers will participate in the market than they did last year when mortgage rates were at all-time lows.

Supply is still historically low, which will protect prices from experiencing a major downturn. Prices will likely follow a similar trend as last year, holding relatively steady through the summer and fall months. If you’re following home prices closely, as we tend to do, you don’t need to worry about losing equity in your home, or softening demand, or even an official recession — so long as it doesn’t affect your job. The housing market remains incredibly strong in Los Angeles.


Sales slowdown

Housing inventory declined in July, indicating that inventory already reached the peak for 2022 in June. Inventory tends to peak in June in the selected markets, which appears to be the case this year. The number of homes for sale has trended lower since August 2020 and settled at historically low levels. There were 29% fewer homes on the market in July 2022 than in July 2021. With the drop in sales and new listings in July, the peak inventory levels for 2022 will undoubtedly be the lowest on record.

The decline in sales indicates that demand is softening. We aren’t saying that demand is low, but it’s trending closer to balanced between buyers and sellers than we’ve seen in years.


Months of Supply Inventory inches toward a more balanced market

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). Luxury markets tend to have a higher MSI because there are fewer market participants. Currently, the South Bay MSI firmly indicates a sellers’ market. Despite MSI indicating a slight buyers’ market in North Beach, it is still definitely a sellers’ market as well. The West Side MSI jumped due to the drop in July sales. One data point does not make a trend, but we are watching closely. 


Local Lowdown Data

Subscribe To Our Newsletter Here

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

– Vivian Yoon & Dennis Hsii, LIC #01925833 / 01919746

See Your Home’s Value

The Big Story

Mortgage rate increases slow; housing stays hot

Quick Take:

Note: You can find the charts & graphs for the Big Story at the end of the following section.


Prices continue to rise as mortgage rates hit 13-year highs

It’s become hard to accurately describe the state of the housing market in the face of rising rates, historically low supply, and high but softening demand. Real estate professionals often say the market is cooling to indicate a turn from a sellers’ to a buyers’ market, but that feels like an overstatement. Additionally, some recent articles were published with titles like “Cracks in the Housing Market,” which also may make the reader erroneously think we are headed into a major correction. After much deliberation, we decided to define market hotness with a pepper analogy. The current market is going from the hottest pepper in the world, the Carolina Reaper, to the second hottest, the Trinidad Moruga Scorpion. Yes, the market is technically becoming less hot, but it’s still about as hot as it gets. Ultimately, we believe we are headed toward a steadier state of growth rather than a significant home price reversal. Home prices will still fluctuate month-to-month, which is normal, but they will generally trend higher at a slower pace. A slower growth rate is a healthy growth rate. 

In May, home prices increased around 16% year-over-year, which means that prices would double every 4.5 years if that trend were to continue. That kind of rapid growth is simply unsustainable and would eventually lead to a major market collapse. Based on what happened as a result of the 2006 housing bubble, we know that mass wealth destruction is not the path we want to take. The Federal Reserve (the Fed) is actively raising rates to bring down the growth rate by making borrowing more expensive, thereby lowering demand. Luckily, we are starting to see inflation respond to the Fed’s monetary policy, although it is still near a 40-year high. 

In 2022, mortgage rates have moved about 2% higher for 30- and 15-year fixed mortgages, reaching 5.09% for the average 30-year fixed-rate mortgage and 4.32% for the average 15-year fixed-rate mortgage as of June 2, 2022. Every 1% rate increase raises the monthly mortgage payment significantly — by about 13%. In this environment of rising rates and rising inflation, all-cash purchases become more attractive because financing is more expensive and money is worth less over time. In the first quarter of 2022, all-cash purchases increased, reaching the highest levels since 1988. Economists now estimate that the average 30-year mortgage rate could climb above 6% in 2022. Because the Fed indicated the path of rate hikes for the rest of the year, we expect that mortgage rates will, at most, reach around 7% this year for prime borrowers. 

If it feels like you missed a unique opportunity to finance a home at under 5%, we are sorry to say that you did. However, you are in good company and can still take advantage of low rates. While it can feel like rates are high when they’ve risen from the all-time low of only a few months earlier, a rate of 5% is still historically low. Since 1971 (the start of the data set), we’ve had 2,671 weekly 30-year mortgage data points, only 24% of which reflected rates below 5%.

The market has remained so hot because of supply — or lack thereof. In May, the housing supply ticked up ever so slightly but is still 49% lower than the number of homes on the market in May 2020. We are entering what is traditionally the hottest time of year for the housing market with a record low supply of homes. Through May 2022, which had the lowest inventory on record, home prices increased 15%. The chief economist at Realtor.com, Danielle Hale, explains that the market is about 5.8 million single-family homes short, which means we’re four to five years behind in building new homes. Although single-family housing starts — homes that have begun construction — have slowed recently, multi-unit housing (5+ units) starts have reached their highest numbers since 1986.

If you are considering buying a home, there aren’t many reasons to wait. Home prices and rates are still rising. The low but rising supply continues to make the market extremely competitive. We are starting to see some softening in demand, but not nearly enough to balance the supply side of the market.


Big Story Data

The Local Lowdown

We break down three luxury areas in Los Angeles as follows:

Quick Take:

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.


Home prices continue to rise as new listings meet high demand

Single-family home prices in the selected Los Angeles markets are historically high. It’s still too early to determine how increasing rates will affect the market. However, in a rising rate environment, buyers are better off locking in an interest rate sooner rather than later. Since the start of 2022, the average 30-year mortgage rate has increased 2%, which equates to a 27% increase in monthly mortgage payments. Yet prices keep moving higher. 

One reason that home prices continue to rise is that buying a home is not only a financial process but also an emotional one. Over the past two years, our homes have become such a large part of our lives, with many of us moving to permanently remote or hybrid work. As more homes come to the market, as is typical in the first half of the year, buyers are more likely to find the home that’s right for them in what’s been an incredibly competitive market. Even with increases in mortgage rates (which, again, are still historically low), it’s reasonable to pay more for the well-being that comes with buying the right home. For most of us, our home is our largest asset and store of wealth, so treating it as such makes sense.


Inventory holds steady at a low level

The selected Los Angeles markets’ inventory marginally increased in May, which indicates that home supply will remain depressed this year. The high demand and lack of new listings over the past year brought supply to record low levels. In times of normal seasonality, inventory increases in the first half of the year. However, that trend hasn’t happened yet this year, and nothing in the market is signaling a rush of sellers is coming.

Even though inventory is low, sales remain relatively high. This trend once again highlights the high demand in the area. Sellers can expect multiple offers, and buyers should come with competitive offers.


Months of Supply Inventory further indicates high demand relative to supply

Homes are selling extremely quickly in these luxury markets. Buyers must put in competitive offers, which, on average, are 98–102% of the list price.

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). Luxury markets tend to have a higher MSI because there are fewer market participants. Currently, North Beach and South Bay MSIs firmly indicate a strong sellers’ market. Despite MSI indicating a buyers’ market on the West Side, it’s definitely a sellers’ market as well. Without a huge number of new listings coming to market, we will continue to see a sellers’ market for the foreseeable future.


Local Lowdown Data

Subscribe To Our Newsletter Here

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

– Vivian Yoon & Dennis Hsii, LIC #01925833 / 01919746

See Your Home’s Value

The Big Story

Will rising rates normalize the housing market?

Quick Take:

Note: You can find the charts & graphs for the Big Story at the end of the following section.


Early innings for rising rates

Mortgage rates rose faster than expected in the first quarter of 2022, already surpassing forecasts for the year. The 30-year average mortgage rate rose swiftly in the two weeks after the Fed’s March meeting, up 0.5% between March 17 and 31 to 4.67%. This rapid increase has spurred purchases as buyers try to lock in lower rates before they climb higher. The data reflect the urgency buyers face. Nationally, home prices have reached yet another milestone: hitting above $200 per square foot, the highest level in history. But is the urgency justified? The answer is 100% yes, assuming you find the right home for you. Let’s dig into the numbers a little.

The average 30-year mortgage rate was 3.11% in December 2021, rising to 4.67% by the end of Q1 2022. If you bought a home in December and financed it with a $500,000 mortgage loan at 3.11%, your monthly spend on principal and interest would be $2,138 — versus $2,584 if you got the same loan in March 2022 at 4.67%. Over the life of the loan, you’ll spend $160,560 more at 4.67%. In short, every percentage point matters significantly. As an aside, refinancing has decreased 60% below last year’s levels, according to the Mortgage Brokers Association. Economists and real estate experts seem torn between rates peaking just below or just above 5%. Because the Fed indicated the path of rate hikes for the rest of the year, mortgage rates increased in anticipation and are likely to be affected less when the Fed moves the federal funds rate in the future, if it sticks to its schedule. At this point, we can almost guarantee that rates will not decline substantially this year.

As we look at historical trends in inflation, we are curious about how effective the Fed’s rate hikes will be. Rates rose significantly in the 1970s, partially due to the inflation rate at the time. Mortgage rates peaked at over 18%, which is unimaginable today. As we look at the long-term data, we see that inflation tends to decline when the federal funds rate is above the inflation level. Currently, the federal funds rate is far below inflation, and the Fed doesn’t plan to lift it near the inflation level because of the economic shock that would ensue. The current cost to borrow is actually negative, which may incentivize more people to borrow and spend more in the short term, driving inflation higher. At current mortgage and inflation levels, the borrower, not the lender, gains around 3% from borrowing.

In addition to rising rates, supply still drives home prices. In March, the housing supply ticked up ever so slightly from the all-time low in February. We are entering the spring buying season, however, with the lowest inventory on record. From March 2020 to March 2022, the housing supply declined 62%. Over the past three months, which had the lowest inventory on record, home prices increased nearly 10%. Rising rates, in the short term, boost demand because potential homebuyers want to get ahead of the increase, but in the long term, they reduce demand. Because the market is so undersupplied, less demand is actually a good thing. Home prices simply cannot maintain the rapid increases. Although a housing bubble isn’t likely yet, a sustainable growth rate is better and safer for the long term.


Big Story Data

The Local Lowdown

We break down three luxury areas in Los Angeles as follows:

Quick Take:

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.


Home prices close the first quarter at record highs

In March 2022, home prices declined from the all-time highs reached in February in the West Side and the South Bay, while North Beach prices rose slightly. Because sales often have a one-month lag, with homes going under contract around a month before the sale is complete, we cannot yet determine how significantly increasing rates have hit the market. Mortgage rate hikes really only lower demand in the long term, but in the short term, demand increases as buyers try to lock in a lower rate. The housing market in Los Angeles has a major advantage in that high demand is constant. Luxury homes in particular are experiencing record demand. Despite the huge increases in home prices over the past 12 months, the lack of housing supply will keep prices rising in the coming months.  

The Fed is expected to raise interest rates by 0.25% at least six times this year, going from 0% to 1.90%. We are now entering a period where factors that affect prices are more mixed, unlike the past two years when all the factors caused prices to increase. Rising interest rates, which will hopefully curb the still-rising, 40-year-high inflation rate, will make homes less affordable and dampen demand over the course of the year. But inventory is so low that even with less demand, the market will likely remain undersupplied. It might seem counterintuitive that home prices can still appreciate after increasing so much over the past two years, but with inventory at record lows, home prices in 2022 will still increase — though at a slower rate than in 2021. With high sales relative to the available inventory, we anticipate a competitive market in the year ahead.


Low, but rising, inventory

The selected Los Angeles markets, like the rest of the country, have a historically low housing inventory. The sustained high demand and lack of new listings over the past year brought single-family home supplies to record lows across markets. Although the first quarter of 2022 had the lowest inventory on record, we are pleased to see that inventory is starting to increase. If an upward trend continues into the second quarter, that will be a large indicator that the housing market is normalizing. 

Sales have still been incredibly high, especially when accounting for available supply, again highlighting demand in the area. Sellers can expect multiple offers, and buyers should come with competitive offers. The incredibly high demand we’ve seen over the past year might wane as interest rates increase; however, the supply is so low that the market can handle a drop in demand without negatively affecting prices. The 30-year average fixed-rate mortgage hasn’t climbed above 5% yet, but it almost certainly will. If mortgage rates reach 5%, demand will likely decline more substantially. In the next few months, demand will remain high relative to available supply.


Months of Supply Inventory further indicates high demand and low supply

Homes are selling extremely quickly in these luxury markets. Buyers must put in competitive offers, which, on average, are 98–102% of the list price.

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes on the market to sell at the current rate of sales. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). Notably, MSI is less instructive than usual — sales have slowed because inventory is so low, not because of lack of demand. Despite current MSI indicating a balanced market in the West Side, it’s definitely a sellers’ market across neighborhoods.


Local Lowdown Data

Subscribe To Our Newsletter Here

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

– Vivian Yoon & Dennis Hsii, LIC #01925833 / 01919746

See Your Home’s Value


The Big Story

Record highs and lows in the housing market

Quick Take:

Note: You can find the charts & graphs for the Big Story at the end of the following section.


Amplified seasonal trends

Seasonality in the housing market was incredibly steady before the pandemic. Prices typically rose from January to June, when inventory was low but rising, and then flattened from July to December, when inventory was high but declining. In January 2020, homes were already undersupplied, hitting a record low with just over a million homes for sale on the market. When the pandemic hit, demand for homes exploded, dropping inventory to shockingly low levels. During the 18 months between January 2020 and June 2021, inventory declined 49% and prices increased 32%, doubling the total price increase of the previous three years combined. By January 2022, inventory had reached an all-time low, down 60% in the past two years, while home prices reached a record high, up 34%. 

Home sales have only gotten quicker as the market has become more efficient. We can see this trend through the Days on Market and Months of Supply Inventory (MSI). Before the pandemic, homes were already selling more quickly, primarily because of technology and an increasingly competitive market. A more efficient market matches the right people with the right home at a fast pace, causing a drop in supply when new homes aren’t being built. MSI, which quantifies the supply-and-demand relationship, is at a record low, further indicating a sellers’ market. The low supply, high prices, and speed of purchases have shifted homebuyer makeup. 

The number of first-time buyers dropped 6% over the past year, while sales to investors rose 7%. All-cash offers increased significantly, often disproportionately affecting first-time buyers, who are most likely to need financing. With rising mortgage rates, many first-time buyers will once again be hit hardest with higher monthly payments. Rates have already risen, because the Fed is expected to start increasing rates in mid-March, and they will only climb higher. Because of the rising cost, the average age of homebuyers is climbing. The average first-time buyer is now 33 years old, and the average repeat buyer is 56 years old, an all-time high. As we enter a new chapter in the housing market, one characterized by rising rates and very low supply, demand can only go one direction: down. But for now, prices aren’t in danger of declining. 

Over the next several months, we expect supply to matter more than the interest rate hikes when it comes to home prices. Economists anticipate that the Fed will start the first of six incremental 0.25% increases in March. The Fed uses interest rates in particular as a tool to meet its dual mandate of maximum employment and price stability. With inflation at a near-40-year high, prices for most goods are rising while incomes are not. This situation gives the Fed little choice but to raise interest rates. Essentially, when the cost to borrow increases, fewer people want to borrow, leading to less consumer spending (less demand), which lowers prices.

As we enter this new chapter of rising mortgage rates, we don’t expect home prices to decline significantly, if at all, because supply is still such a driving factor. The low supply means that demand can decline without negatively impacting prices. We don’t expect home prices to appreciate at the record level we experienced over the past two years, but we do expect to see an increase. We are still in the middle of one of the strongest sellers’ markets in history. Buyers must come in with fast, competitive offers in this environment.


Big Story Data

The Local Lowdown

We break down three luxury areas in Los Angeles as follows:

Quick Take:

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.


Home prices hit record highs in front of Fed rate hikes

In February 2022, home prices rose to all-time highs in the West Side and the South Bay, while the North Beach area declined from the peak reached last month. Mortgage rate hikes really only lower demand in the long-term, but in the short-term, demand increases as buyers try to lock in a lower rate. The housing market in Los Angeles has a major advantage in that a large number of affluent people want to live there. Luxury homes are experiencing record demand. This tends to have a snowball effect, making these areas more and more desirable places to live. Despite the huge increases in home prices over the past 12 months, the lack of housing supply will keep prices rising in the year to come. 

The Fed is expected to raise interest rates by 0.25% six times this year, going from 0% to 1.50%. We are now entering a period where factors that affect prices are more mixed, unlike the past two years when all the factors caused prices to increase. Rising interest rates, which will hopefully curb the still-rising inflation, will make homes less affordable and dampen demand over the course of the year. But inventory is so low that even with less demand, the market will likely be undersupplied. It might seem counterintuitive that home prices can still appreciate after increasing so much over the past two years, but with inventory at record lows, home prices in 2022 will still increase — though at a slower rate than in 2021. With high sales relative to the available inventory, we anticipate a competitive market in the year ahead. 


Record-low inventory persists

The selected Los Angeles markets, like the rest of the country, have a historically low housing inventory. The sustained high demand and lack of new listings over the past year brought single-family home and condo supplies to record lows across markets. We are seeing that far more people want to live in these luxury Los Angeles neighborhoods than want to leave. Sales have been incredibly high, especially when accounting for available supply, again highlighting demand in the area. Sellers can expect multiple offers, and buyers should come with competitive offers. The incredibly high demand we’ve seen over the past year might wane as interest rates increase; however, the supply is so low that the market can handle a drop in demand without negatively affecting prices. The 30-year average fixed rate mortgage hasn’t climbed above 4% yet, but it almost certainly will as the Fed starts raising rates. If mortgage rates reach 5%, demand will likely decline more substantially. In the next few months, demand will remain high relative to available supply.


Months of Supply Inventory further indicates high demand and low supply

Homes are selling extremely quickly in these luxury markets. Buyers must put in competitive offers, which, on average, are 95%-102% of the list price. 

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes on the market to sell at the current rate of sales. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). Notably, MSI is less instructive than usual — sales have slowed because inventory is so low, not because of lack of demand. Despite current MSI indicating a balanced or even a buyers’ market, it’s definitely a sellers’ market across neighborhoods.

Local Lowdown Data

Subscribe To Our Newsletter Here

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Vivian Yoon & Dennis Hsii, LIC #01925833 / 01919746

See Your Home’s Value

The Big Story

Mortgage Rate Hikes Now Definite

Quick Take:

Note: You can find the charts & graphs for the Big Story at the end of the following section.


The Fed Dual Mandate

On January 26, 2022, the Federal Reserve (the Fed) indicated that it would raise the federal funds rate as soon as March for the first time in over three years. The Fed adjusts the federal funds rate to influence broader interest rates, which directly affect the borrowing costs of banks. Generally, if bank borrowing costs are low, consumer borrowing costs will be low(er), and vice versa. The Fed uses interest rates in particular as a tool to meet its dual mandate of maximum employment and price stability. Employment and price stability are long-term indicators for home prices. 

We will start with the good news. Employment rebounded considerably from the highest spike in unemployment in modern history in spring 2020 to pre-pandemic levels by December 2021. As you might imagine, high unemployment rates for extended periods lead to less overall wealth: Fewer people buy homes, and more people experience foreclosures, thereby lowering home prices. Although unemployment seemed dire in 2020, employment is now on solid ground. If we view the current record-high 10.5 million job openings, along with the nearly 10 million new businesses created over the past two years, we get a better understanding of why unemployment dropped so significantly despite a record number of job openings. Simply put, people are working, and that is good for individual wealth and the larger economy. 

On to the kind-of-good, kind-of-bad news … rising mortgage rates could help curb inflation and create a more balanced housing market (although 2022 will surely be a sellers’ market), but it will make homes more expensive monthly, hitting first-time homebuyers the hardest. With the federal funds rate at 0% and inflation at a near-40-year high, rate hikes are expected to combat inflation. Essentially, when the cost to borrow increases, fewer people want to borrow, leading to less consumer spending (less demand), which lowers prices. We can look to the last inflationary period, the 1970s, as a loose guide. Inflation today is likely to be much more transitory than it was in the 1970s, but we can still expect a rise in mortgage rates like we saw then. Luckily, however, we will certainly not reach the 18+% mortgage rate that we saw in the early 1980s. As it was then, the Fed is obligated to do something now. While we wish that we could always be in periods of high employment, low inflation, and low interest rates, as we experienced for nearly a decade before the pandemic, we must recognize the atypical nature of that period. 

As we enter this new chapter of rising mortgage rates, we don’t expect home prices to change significantly, if at all, because supply is still such a driving factor. In December 2021, there were 57% fewer homes on the market than in December 2019. The low supply means that demand can decline without affecting prices. Does it matter if 10 offers drop to five? Probably not, and it might even create a better market. Sellers tend to become buyers, so unless you’re a first-time homebuyer, you’ll likely experience both sides of the market. Because sellers are often selling one home and buying another, it’s essential that sellers work with the right agent to ensure the transition goes smoothly. 

We don’t expect price appreciation to see the record gains we experienced over the past two years, but we do expect home prices to increase. Another factor at play over the past two years was a sharp increase in disposable income, which has now normalized. People had more money to spend over the past two years, and we saw that throughout markets: The housing market, the stock market, cryptos, art, jewelry, etc. all reached record high prices. As disposable income has dropped to a more normal level, we can expect assets to appreciate at a more normal pace.

If you have 30 minutes, Ray Dalio’s video How the Economic Machine Works is well worth watching.


Big Story Data

The Local Lowdown

A hot market ahead

We break down three luxury areas in Los Angeles as follows:

Quick Take:

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.


Home price movements in a rising rate environment
Home prices in the selected luxury markets began the year at all-time highs in the North Beach and South Bay areas, while the West Side dipped slightly from the December peak. The housing market in Los Angeles has a major advantage in that a large number of affluent people want to live there. Luxury homes are experiencing record demand. In most of the country, we saw price appreciation slow in the second half of 2021, but the sustained record highs highlight the strong demand and desirability of the selected markets.

Mortgage rate hikes really only move demand in one direction: lower. We are now entering a period during which factors that affect prices are more mixed, unlike the past two years when all the factors caused prices to increase. Rising interest rates, which will hopefully curb the still-rising inflation, will make homes less affordable and dampen demand. But inventory is so low that even with less demand, the market will likely be undersupplied. It might seem counterintuitive that home prices can still appreciate after increasing so much over the past two years, but with inventory at record lows, home prices in 2022 will still increase — though at a slower rate than in 2021.


Record low inventory across markets
We entered 2022 with historically low inventory. The sustained high demand and lack of new listings over the past year brought supply to record lows across markets. We are seeing that far more people want to live in these luxury Los Angeles neighborhoods than want to leave. Sales have been incredibly high, especially when accounting for available supply, again highlighting demand in the area. Sellers can expect multiple offers, and buyers should come with competitive offers. The incredibly high demand we’ve seen over the past year might wane as interest rates increase; however, the supply is so low that the market can handle a drop in demand without negatively affecting prices.


Months of Supply Inventory further indicates high demand and low supply
Homes are selling extremely quickly in these luxury markets. Days on Market is trending upward slightly, but this is more a function of seasonality rather than a lack of demand for homes. Buyers must put in competitive offers, which, on average, 95%-102% of list price.

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes on the market to sell at the current rate of sales. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). In January, MSI remained low in North Beach and the South Bay, indicating a strong sellers’ market, while West Side MSI implies a balanced market. Notably, the January increase in MSI is less instructive than usual — sales slowed because inventory is so low, not because of lack of demand. Currently, it’s a sellers’ market across neighborhoods.


Local Lowdown Data

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Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Vivian Yoon & Dennis Hsii, LIC #01925833 / 01919746

See Your Home’s Value

The Big Story

New Year, Same Housing Market

Quick Take:

Note: You can find the charts & graphs for the Big Story at the end of the following section.


Will the housing shortage reverse?

The driving force behind the substantial price increases over the past two years has been the supply of homes, or lack thereof. So, will the housing shortage reverse? The answer is no, as there is no reasonable scenario that would bring active listings to pre-pandemic norms. Before February 2020, seasonal inventory typically peaked in the summer months, but it was trending slightly lower each year. In 2016, inventory peaked at 1.55 million active listings, and by 2019, the peak fell to 1.35 million homes. Inventory in 2021 reached its highest point at approximately 621,000, a 54% decline over two years. Homebuilders simply cannot build fast enough, especially in sought-after urban areas that have already been developed, and new listings are peaking far lower than the historical seasonal norms. 

At the same time, we are on pace to see around a million more homes sold in 2021 than in a typical year, based on the long-term average. In other words, more homes are selling, despite the historically low inventory, which is further driving down inventory. In 2022, we expect demand to remain elevated and supply depressed, which should keep home prices from depreciating. 

Price appreciation likely will not see the record gains we experienced over the past two years, which is actually good. If we learned one thing from the mid-2000s, we know that we don’t want another housing bubble. The deceleration in price increases, therefore, actually benefits the current market. From a practical standpoint, home prices rising at 20% per year is unsustainable and would certainly cause a major collapse. Moving through 2022, we expect year-over-year price increases to move back to historical norms, in the 5–10% range. 

Fed rate hikes in 2022 could drastically affect appreciation as well, which, again, isn’t a bad thing. The low-cost financing we’ve seen over the past two years could be coming to an end (although it’s difficult not to take a believe-it-when-I-see-it-approach to rate increases). When we account for current inflation, which is the highest it’s been since 1981, the real rate of borrowing is negative if you borrow at a rate below 6.8%. Simply put, you’re getting paid to borrow! We don’t expect this phenomenon to last long — it’s a fairly unique situation.

The market remains competitive for buyers, but conditions are making it an exceptional time for homeowners to sell. Low inventory means sellers will receive multiple offers with fewer concessions. Because sellers are often selling one home and buying another, it’s essential that sellers work with the right agent to ensure the transition goes smoothly.


Big Story Data

The Local Lowdown

A hot market ahead

We break down three luxury areas in Los Angeles as follows:

Quick Take:

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.


Home prices still have room to run in 2022

Home prices in the selected luxury markets finished out the year at all-time highs in the West Side and the South Bay, while North Beach dipped slightly below the November peak. It might seem counterintuitive that home prices can still meaningfully appreciate after increasing so much over the past year, but with inventory at record lows, 2022 will likely be one of the hottest markets we’ve seen. 

In most of the country, we saw price appreciation slow in the second half of the year, but the sustained record highs highlight the strong demand and desirability of the selected markets. With high sales relative to the available inventory, we anticipate a competitive market in the year ahead. 


Record low inventory across markets

Inventory declined significantly in the second half of 2021 due to the sustained high demand and lack of new listings, bringing single-family home supply to historic lows. We are seeing far more high-net-worth buyers in the market than ever before, and that affluence is drawn, unsurprisingly, to Los Angeles. Sales have been incredibly high, especially when accounting for available inventory, again highlighting demand in the area. Sellers can expect multiple offers, and buyers should come with competitive offers.


Months of Supply Inventory further indicates high demand

Homes are selling extremely quickly in these luxury markets. Days on Market is rising slightly, but this is more a function of seasonality than a lack of demand for homes. Buyers must put in competitive offers, which, on average, are 2–10% below list price. 

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes for sale on the market to sell at the current rate of sales. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). Currently, single-family home MSIs are historically low in North Beach and the South Bay, indicating a strong sellers’ market, while West Side MSI implies a balanced market.


Local Lowdown Data

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If you plan on selling your home, research shows that minor repairs and inexpensive replacements are worth the time, effort and money you put into them. The good news is that most of these investments not only pay for themselves, but can return dividends! So before putting a “For Sale” sign in your yard, tackle these upgrades to maximize your home’s market value.

#5: If It Has A Faucet — Upgrade It

According to surveys by Realtor.com, the top updates and upgrades to your home before selling are your kitchen and bathrooms. If you are not planning a complete renovation of either, then smaller and more inexpensive improvements can pay off nicely. In your kitchen and/or bathrooms, consider updating your look with new faucets, counters and new hardware for the cabinets. For a bathroom, consider adding wallpaper to create an accent wall.  In the kitchen, install a new backsplash, then regrout your tile for a fresh new look.

#4: Everything Gets A Fresh Coat of Paint

The number one piece of advice from Realtors is to freshen up your home by repainting every room. You want your home to appeal to the largest number of buyers, so as you’re looking over color swatches for each room, remember to keep it neutral. The buyer can add all the color and splash they want after the sale. Don’t forget to clean or repaint the baseboards, too! Be sure to choose high gloss to guard against scuffs and add maximum shine. 

#3: Create Wide Open Spaces

In order to paint you will need to remove most of the furniture from the room. This is also a good time to think about de-cluttering. Carefully select what items to move back into a room, with an eye toward creating more space with less furniture. This will allow the buyer to visualize how their furniture might look in this room and imagine how they will decorate. Pack up the rest of the room, including personal items and knick knacks and move them to a storage unit or another location offsite. You’ll also have the added bonus of having those things neatly boxed and ready for your move after the sale!

#2: Find The Fuse Box

Another inexpensive upgrade sellers with some DIY skills and comfort working with electricity can make is replacing old or dated light fixtures and ceiling fans. While shopping for those items, also think about replacing your old light switches with newer, smart home-enabled switches.  If you haven’t worked with electricity before, it’s best to hire a licensed electrician. . Safety first!

#1: Focus on First Impressions

Curb appeal is real! Stand on the sidewalk and look at your home from the view of a potential buyer. Think about upgrading any dated outdoor lighting fixtures, pressure wash the outside, and clean the windows and gutters. There are also plenty of low-cost landscaping ideas that can create a  “wow factor,” and research shows landscaping upgrades have one of the highest rates of returns! Consider repainting or replacing your front door to create a welcoming gateway to your home. Finally, update the numeral signs (for your street address) on your house to instantly give it a modern look and bring the value up!We are here to help guide you on your home selling journey! Our years of experience will help us identify which projects to tackle that will generate the greatest return on your investment. We are constantly monitoring the latest trends in home improvements and the value they create.. We wish you all the best for a wonderful, healthy and prosperous 2022!

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Vivian Yoon & Dennis Hsii, LIC #01925833 / 01919746

See Your Home’s Value


The Big Story

What to expect when you’re expecting inflation


Quick Take:

Note: You can find the charts/graphs for the Big Story at the end of this section.


Inflation: Short-lived or long-term?


By now, you’ve likely run across a headline regarding the large inflation jump we’ve experienced over the past six months. Even if you haven’t, you’ve probably noticed a general increase in prices for things like gas and food over the past couple of months. The last significant long-term inflationary period was in the 1970s when inflation expectations created a feedback loop largely because unions were common and had more bargaining power. As prices rose, union workers demanded higher pay, which increased operating costs and fueled rising prices. But 2020-21 is quite different from the 1970s. Currently, companies are using inflation as a mostly bad-faith excuse to raise prices during a time of record corporate profits, which will benefit companies as consumers bear the burden of rising costs. This is likely the unfortunate feedback loop we will see during the next six months. All that to say, as consumer costs rise, we might see demand for housing decline. With fewer experiences to spend money on during the pandemic, savings shot up, allowing potential homebuyers to reach their down payment goals far more quickly than expected. Inflation will cut into our ability to save. 

Unlike a normal business cycle, the pandemic is still disrupting the global supply chain, with fewer dock/port workers and truck drivers as well as continued international travel restrictions. This is compounded by the pandemic-related shifts in consumer preferences: consumers are choosing physical goods rather than services. The demand for physical goods isn’t unique to the U.S., either — the whole world is trying to recover economically with a move toward physical goods, which is stressing the supply chain. The good news, however, is that inflation will likely fall around summer 2022 and shouldn’t mimic the decade-long inflationary period of the 1970s. The bad news is that it isn’t coming down today.

Although not necessarily a strict supply chain issue, the rising cost of housing can definitely be tied to supply. In the U.S., the supply of houses for sale is still near the all-time low reached in April. At the same time, demand remains high for homes, and we are on pace to have around a million more homes sold in 2021 than in a typical year, based on the long-term average. In other words, more homes are selling despite the historically low inventory. Because inflation diminishes the purchasing power of a dollar over time, buyers face pressure to buy sooner rather than later, further increasing demand for homes. Coupling inflation with historically low mortgage rates creates incentives to buy now even with the run-up in prices.

The market remains competitive for buyers, but conditions are making it an exceptional time for homeowners to sell. Low inventory means sellers will receive multiple offers with fewer concessions. Because sellers are often selling one home and buying another, it’s essential that sellers work with the right agent to ensure the transition goes smoothly. 


Big Story Data

The Local Lowdown

Who doesn’t want to live here?

We break down three luxury areas in Los Angeles as follows:

Quick Take:

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.


Low supply lifts prices

After single-family home prices appreciated significantly in the first half of the year, it makes sense that price appreciation is slowing in the third and fourth quarters. However, that doesn’t mean prices aren’t still rising. Prices across the selected luxury markets rose to record highs in November. In most of the country, we are seeing prices decline in the second half of the year, but Los Angeles and Southern California have shown the considerably high desirability of the area. 


Home supply peaked at a low level

Despite the mild increase in single-family home inventory in 2021, we’re still at historic lows. August and September are typically the months each year with the highest inventory. In 2021, total inventory didn’t come close to last year’s level and was even further from pre-pandemic levels. Even though we’re seeing some price correction after the first half of the year, the sustained low inventory will lift prices. Sales have been incredibly high, again highlighting demand in the area.


Homes are selling fast — really fast

Homes are selling extremely quickly for these luxury markets. The Days on Market reflects the high demand for homes in these neighborhoods.

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes for sale on the market to sell at the current rate of sales. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). Currently, single-family home MSIs are historically low, indicating a sellers’ market in North Beach and the South Bay, while West Side MSI implies a buyers’ market.


Local Lowdown Data

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December is typically the slowest month of the year for real estate transactions with the focus shifting to holiday traditions and spending time with family and friends. The holiday season can be stressful enough without scheduling open house appointments to your busy calendar full of festivities. That said, there are actually quite a few very good reasons you should consider continuing your house hunt during the holiday season! 

Winter Is A Relative Term

Around much of the country, wintry weather can make buying and selling a home challenging. Since we live and work in Southern California, winter temperatures obviously aren’t nearly as daunting as some other parts of the country. Here in Los Angeles, specifically, it’s been more than 50 years since temperatures fell below freezing. (The record sits at 28 degrees set in 1949!)  Since weather isn’t a factor, continuing your search for a home during the holidays could be to your advantage.

Standing Out From The Crowd

Historically, December has been the month with the fewest new real estate listings. For buyers, that may mean less inventory but it also means less competition!  When other buyers pause their search and wait until spring, those with patience who are willing to search during the holiday months may be rewarded with end-of-the-year bargains and motivated sellers. At the same time, sellers shouldn’t be afraid to sell their homes toward the end of the year. Although many buyers expect discounts to be had towards the end of the year, the current market is still very competitive compared to previous years, so sellers that are not desperate to sell stick closely to their asking prices. They should hold out for year-end buyers, especially those who are purchasing late to shield their tax liabilities.

Holiday Decorations

Some sellers may find it inconvenient to show their homes during the holidays or host an open house. Their houses may be full of holiday decorations and reserved for weekends filled with family and friends. But motivated sellers won’t be among them!  They’ll still want to entice buyers by showing their homes, and less foot traffic at open houses can actually be a bonus for a discerning buyer who will have an opportunity to take more time to notice the home’s details. 


New Year Rings In New Beginnings

For some, a new year will come with a new career, which means some buyers will be using the months of November and December to go house hunting. Relocating for a new job is one of the main reasons people buy homes during the holiday season. Also, buying a home before December 31st comes with a holiday gift in the form of tax breaks! Buyers are allowed to write off mortgage interest, the interest on loan costs as well as property taxes. 

If you are thinking about selling your home in the new year, please reach out to us as we have a number of buyers eager to make a move immediately!  We may be able to help you complete an off-market deal that could be less stressful and require less preparation than going to market.  

For those of you waiting for the new year and scheduled to list with us in January, we can’t wait to work with you! Highland Premiere is here for you in every season and throughout the year. Happy Holidays!

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

– Vivian Yoon & Dennis Hsii , LIC #01925833 / 01919746

See Your Home’s Value


The Big Story

Where can home prices go from here?


Quick Take:
• Home prices appreciated faster in 2021 than at any other time, even surpassing the 2004–2006 housing bubble
• Home prices will probably decrease before returning to a more reasonable growth rate.
• Home prices in the last 20 years increased at more than twice the rate of the median household income in California (142% vs. 65%).
• Despite record low inventory, home price growth is hitting a ceiling.
• The average 30-year fixed mortgage rate, while still historically low, rose to 3.14% at the end of October 2021.


Note: You can find the charts/graphs for the Big Story at the end of this section.


Highs (price) and lows (inventory) in the housing market

Income is one of the largest predictors of home price growth, second only to available supply. Consumers have more money to spend, which in turn drives up prices. But the increases in income haven’t kept up with the rise in home prices, especially in the last two years. In 2020, home prices increased 10% according to the Case-Schiller 20-City Composite Index, while median income decreased by 1%.

The disconnect between income and home prices is happening for two reasons. First, the ability to take on debt means that income doesn’t necessarily need to increase at a 1:1 ratio with home prices. Second, the pandemic changed buyer preferences, increasing the demand for homes and dropping inventory to previously unseen lows. 

Because home price increases outpaced income growth, homebuyers needed to take on more debt to buy a home than they would have a few years ago. But due to the drop in interest rates, the monthly payment, even on a higher-priced home, becomes more affordable. For every 1% decrease in a 30-year mortgage rate, the price of the home can increase 13% without a change in monthly payment (and vice versa). For example, the monthly payment on a $1,000,000 mortgage at 4% is almost identical to the monthly payment for a $1,130,000 mortgage at 3%, a $130,000 difference. 

The pandemic also changed buyer preferences. Rather than spending roughly half of our time at home, which is the norm, we were faced with endless time in our living spaces. (You remember — you were there.) As of September 2021, the United States has 59% fewer homes on the market, and 53% of that happened in the last two years. We were happy to see more homes on the market in the second quarter of 2021 because the increased supply helped satiate the high buyer demand, but we are already seeing the seasonal shift to fewer homes coming to market. Inventory will likely remain super low in the coming fall and winter months. 

The market remains competitive for buyers, but conditions are making it an exceptional time for homeowners to sell. Low inventory means sellers will receive multiple offers with fewer concessions. With so many moving parts in real estate transactions, working with an experienced real estate agent is essential in smoothly navigating the entire buying and selling process.


Big Story Data

The Local Lowdown

The market is cooling but it’s still not a buyers’ market

We break down three luxury areas in Los Angeles as follows:

Quick Take:

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.


Single-family home prices moved like stocks in 2021

The growth rates in 2021 are highly unusual and unsustainable in these three luxury markets; for example, home prices would more than double every five years at a 15% growth rate (every four years at 20%). After huge single-family home price appreciation in the first half of the year, it made sense that prices pulled back in the summer months. From July–October, home prices declined in North Beach and the South Bay but remained historically high. West Side prices were the only exception, as they continued to appreciate and reached record highs in October. 


More supply, no problem

Despite the mild increase in single-family home inventory in 2021, we’re still at historic lows. August and September are typically the months with the highest inventory every year. In 2021, total inventory didn’t come close to last year’s level and was even further away from pre-pandemic levels. Even though we’re seeing some price correction after the first half of the year, the sustained low inventory will lift prices. Sales have been incredibly high, again highlighting demand in the area.


Homes are selling fast — really fast

Homes are selling extremely fast for these luxury markets. The Days on Market reflects the high demand for homes in these neighborhoods.

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes for sale on the market to sell at the current rate of sales. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). Currently, single-family home MSIs are historically low, indicating a sellers’ market in the South Bay and a more balanced market in North Beach and the West Side.


Local Lowdown Data

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