Los Angeles, California Housing Market Predictions: Summer 2017 – 2018

Recent forecasts for the Los Angeles, California housing market indicate that home prices might slow down over the coming months. In fact, one prediction suggests that L.A. house values will rise below the national average over the next 12 months.

But don’t let that fool you. The Los Angeles real estate market is still very competitive, due to limited inventory and steady demand among buyers. As one agent put it: “There is no inventory.”

Here are the latest predictions and forecasts for the Los Angeles real estate market, as we head into the fall of 2017.

Home Prices Have Exceeded Bubble-Era Peaks

In many local housing markets across the Southland, including Los Angeles and Orange counties, the median home value has risen above the peaks reached during the last housing bubble. And they are still climbing.

According to an August 2017 housing report, the median home sale price in Los Angeles County reached $575,000 in July 2017. That was an increase of 8.1% from the same month a year earlier. Zillow puts the median home value a bit higher at $632,000, as of August 2017, which marked an increase of 7.6% over the last year.

Regardless of the source, the general trend is clear. House prices within the Los Angeles housing market have risen steadily over the last year, and there are signs that they will continue rising (to some degree) over the coming months.

Tight Housing Inventory Making Things Tough for Buyers

Housing markets across California, and even across the country, are experiencing inventory shortages in 2017. This means there aren’t enough homes listed for sale to satisfy the current level of demand. We are seeing this to some degree in the Los Angeles real estate market as well.

Recent MLS reports and other data show that Los Angeles had approximately a 2.7-month supply of homes for sale as of July 2017. A “balanced” real estate market has about 5 to 6 months worth of supply. This means there is a relative shortage of homes for sale in the Los Angeles area, and that the market still favor sellers over buyers.

It’s not an extreme sellers’ market like those seen in Portland, Oregon and Seattle, Washington. But it does appear that sellers in Los Angeles will continue to have more negotiating leverage as we approach the fourth quarter of 2017.

Cody Coffman, a real estate agent on the Westside of LA, recently told the Los Angeles Times: “There is no inventory. It’s causing prices to go significantly over asking.”

Perhaps this is why most forecasts for the Los Angeles housing market suggest that home prices will continue rising in 2018. And speaking of those forecasts…

Real Estate Forecast for Los Angeles: Are Prices Slowing?

Given the current supply and demand situation in L.A., it’s likely that we will see continued home-price appreciation through the end of 2017 and into 2018. But one notable real estate market forecast for Los Angeles suggests that prices could slow down considerably over the coming months.

In August 2017, the housing analysts and economists at Zillow predicted that the median home value for Los Angeles would rise by a mere 1.8% over the next 12 months. This forecast extends into late summer 2018. Compare this to be 7.6% increase they measured over the previous 12 months, and you get a sense of what they are expecting. Clearly the research team at Zillow expects home prices in Los Angeles to rise more slowly over the next 12 months than the last.

Higher Interest Rates for Borrowers?

The housing forecasts and predictions above primarily relate to home prices. The general consensus appears to be that house values in L.A. will continue moving north but possibly at a slower pace.

On the mortgage front, a forecast published recently by a key industry group suggests that borrowers could see higher mortgage rates over the coming months as well.

In August 2017, the Mortgage Bankers Association published its latest finance forecast for the U.S. economy. Among other things, they predicted that the average rate for a 30-year fixed mortgage loan would rise to around 4.3% by the end of this year, and would continue climbing throughout 2018. (For reference, 30-year mortgage rates were averaging around 3.82% when this article was published in August.)

Granted, these are just predictions and forecasts for the Los Angeles real estate market. They are the equivalent of an educated guess. A highly educated guess offered up from well-informed analysts and economists – but a guess nonetheless. So you probably shouldn’t get too wrapped up in the exact numbers being projected here.

The bottom line is that housing costs in Los Angeles are expected to continue rising through the end of this year and into 2018, partly due to the tight inventory conditions.

Disclaimer: This report contains housing market forecasts for the greater Los Angeles area, as well as other economic projections. These statements were provided by third parties not associated with our company. We have gathered and presented them here as an educational service to our. MetroDepth makes no claims or assertions about future conditions within the housing market.

About the author: Brandon Cornett is a full-time real estate blogger and creator of the Home Buying Institute. He has been covering the housing market for 15+ years and also provides writing services for agents across the U.S.