Los Angeles Home Builder Outlook

With inventory at historical lows in many housing markets throughout the country, perhaps one of the most resounding votes of confidence in the still-recovering economy is the activity of home builders. Fortunately, it looks as though builder activity is apt to look even better in 2015 than it did in 2014, according to the National Association of Home Builders.

Every month, the group combines data with First American Title Insurance Company to release the Leading Markets Index, which looks at factors including home price appreciation, employment and single-family home building permits to gauge the overall health of the real estate market. In the fourth quarter of 2014, the nationwide index increased to .90, which indicates that the nation is operating at 90 percent of normal economic and housing activity.

“The encouraging news is employment, where the number of metros that reached or surpassed their norms rose by 23 in a year,” said NAHB Chief Economist David Crowe. “However, single-family permits are only at 44 percent of normal activity, and remain the sluggish component of the index.”

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Los Angeles was among the top ten highest performing metropolitan areas. Baton Rouge led the way with a score of 1.41, or 41 percent growth. Other major metropolitan areas that have performed well are Austin, Texas; Honolulu; Houston, Texas; and Oklahoma City.

“More than 80 percent of all metros saw their Leading Markets Index increase or hold steady over the quarter, a strong indicator that the overall housing market is making headway,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.

Los Angeles Home Prices Downgrade

One of the more promising trends that may result in more buyers coming to market is the downgrading in home prices to make things more affordable. According to Altos Research, a California-based real estate analytics company, home prices in Los Angeles started decreasing around September 1, coming to a current median single-family home value of $570,642. Prices had been rising throughout the first two quarters but took a turn toward declining trends in the last two quarters resulting in the current median home value.

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Home prices may see a reversal of this current downward trend as home demand is on the upswing at the moment. Altos measures supply and demand levels through a unique value known as the Market Action Index, which uses 30 as a neutral value. With a current MAI of 41.57, Los Angeles is well above the 30 neutral mark and into seller-favored territory, which means that inventory is low but buyers are still very active. This is creating a demand for properties that could push home prices back into gaining trends at any time.

Inventory has fallen throughout the winter, which is helping to further skew things in favor of the few home sellers that have kept their homes on the market. There are currently about 1,846 properties on the market in Los Angeles.

If you are interested in learning more about the luxury side of things in Los Angeles, don’t hesitate to give our team a call today. We’d love to help you find a great luxury Los Angeles home to call your own today.

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