Why LA’s and San Diego’s Housing Market May Cool in 2020

It seems like only yesterday that California cities were consistently ranked as one of the “hottest” housing markets in the United States. Though in 2019, lots of the once highly sought after markets have cooled considerably. Within the current real estate market, home-price appreciation has slowed so much that some have reversed. Price discounts are now a more common occurrence, as homes are on the market longer. 

Unfortunately for those hoping to turn a profit from their homes, the forecasts of the California real estate market predicts a continuation of this trend well into 2020. But why is this happening in Los Angeles and San Diego, two California cities that are still thriving? Let’s take a look. 

Los Angeles: Inventory Growth Grants Buyers More Prospects

Recently, the Los Angeles real estate market received a moderate projection, “Los Angeles home values have gone up 2.0% over the past year,” wrote Zillow.com. “We predict they will rise 0.5% within the next year.” As of the 2019 summer, the average house price in L.A. was roughly $700,000 within the city. In the more general Los Angeles-Long Beach-Anaheim area, the value was around $650,000. 

Inventory growth is major news within L.A.’s market, and many speculate it had something to do with the modest forecast published by Zillow. According to Douglas Elliman Real Estate, the housing inventory in the greater Los Angles area snowballed during the second quarter of 2019, compared to the market in 2018. 

“With lower [home] sales levels, listing inventory expanded year over year for five consecutive quarters as well as cooling the pace of the market. Months of supply, the number of months to sell all listing inventory at the current rate of sales, increased 33.3% to 6.4 months.”

Generally speaking, substantial inventory gains point to a smaller increase in home pricing. There are more properties to choose from on the market, so buyers don’t have to compete so aggressively. There’s less urgency, and less reason to offer competitively, which eases the rise of home prices.

San Diego: Will Home Prices Flatline In The New Year?

The home prices in the real estate market in San Diego rose by around 1.8% over the past year or so, Zillow’s stats predicted smaller gains over the next year, issuing a forecast for a mere 0.5% price increase.

While it should be taken with a grain of salt, as it’s only a projection, the San Diego real estate market has bubbled over for several years now, continually posting above-average home price gains. A freeze ordinarily follows this kind of exponential growth. 

Will 2020 finally be the right time to buy a home in San Diego, or will these lower prices give buyers a reason to wait? Like other significant cities in California, the San Diego real estate market has cooled down and will continue to in 2020. What sets San Diego apart from L.A. is that the area still has a lot of population growth and minimal inventory, so the upward pressure on home prices could continue at a later date.

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