Home appreciation reached historic levels in 2021, with inventory plummeting and bidding wars erupting across the United States. In Southern California, the region’s reputation as a seller’s market grew even more apparent due to low interest rates, significant bidding wars, and a bevy of homes selling over asking price. So let’s look at what the experts predict for the 2022 real estate market.
Last year, The Los Angeles Times reported that over half of the properties sold in the City of Los Angeles went for over asking price in March 2021. In the nearby city of Lancaster, more than 70 percent of homes sold for more than the asking price. Luxury enclaves like Beverly Hills and the Hollywood Hills also saw extreme jumps in sale prices.
The word on many people’s minds regarding the meteoric housing market is “bubble,” with many wondering whether the incredible pace of sales, massive price hikes, and intense bidding wars might falter in 2022. An article in Forbes Magazine suggests that demand for homes will remain high throughout the year because Millennials are reaching their most active homebuying years.
The balance between new construction, available homes, and market demand has yet to reach an equilibrium, despite an increase in construction activity over the past year. The number of homes for sale remains well below pre-pandemic numbers, which means new construction activity isn’t even close to covering the gap between supply and demand.
According to an article published in Reuters, single-family home sales fell in February because of a rise in mortgage rates and the continued increase in home prices. However, despite the mild slowdown in sales, overall activity remained higher than pre-pandemic levels.
Experts believe home sales may cool marginally over the short term but that the continued low inventory of available homes will allow the market to remain hot throughout 2022. Significant economic turmoil and continued interest rate increases could cool the market further, but no one expects the real estate market to collapse.
First-time homebuyers around Los Angeles will continue to experience a rough time buying a new home unless they can contend with average sale prices of close to a million dollars in the city and almost $800,000 within the county.
Nationwide, the average sale price of a home at the end of 2021 was $408,110, according to the Federal Reserve. Homes selling around Los Angeles County commonly sell for more than double the national average. The high prices for single-family homes may push some first-time buyers into condos and townhouses rather than single-family homes.
Economic conditions will result in a mild slowdown of the real estate market in Los Angeles County and the Southland. Still, experts don’t expect a significant drop in sales activity, bidding wars, or home appreciation. Real estate agents in LA must remain cognizant of market and economic trends to help homebuyers make intelligent bids and help sellers get quick offers.