With covid-19 protocols shutting down economies and industries worldwide for months, things may never be normal again. The office culture that realtors and other workers have been used to has been replaced by remote working.
From Beverly Hills to Compton, the pandemic's far-reaching impact on real estate is a certainty for realtors in LA. Though there is still much uncertainty surrounding the movements of house prices, Los Angeles realtors expect a future price increase.
Record low mortgage rates and the low supply of houses available for sale are projected to drive up a high demand in 2021. Despite the pandemic, Los Angeles County has already hit record sales of luxury homes in 2020.
This article explores how COVID-19 has impacted real estate and single-family housing in Los Angeles.
How The Pandemic Has Impacted Real Estate In LA
Undoubtedly, the Los Angeles market is considered one of the top commercial real estate markets for both homeowners and investors. However, with the coming of the pandemic and covid-19 protocols in 2020, there has been a lot of impact and uncertainty.
Stay-at-home orders, health concerns, and widespread economic uncertainty have brought a fall in home prices for sales. Residential rentals, commercial real estate, contract flipping, and other cash flows for real estate agents and realtors have been dealt a blow.
The cost of homes for sale in LA, Southern California, fell by 26.6% in April of 2020 relative to the month before. This is rare even for the LA real estate market, which is known to be a seller’s market.
The year over year (YOY) fell by 31.5% in that period as well. When it came to the median sold price, single-family homes in the Los Angeles Metro Area were priced around $550,000. This was a 2.5% YOY increase.
In the past seven months, the figure for median home price rose by 15.5% from its 2019 amount to $715,000. Los Angeles also saw an increase of 11.2% during this period. One positive for real estate buyers in 2020 is the fact that mortgages clocked an all-time low rate. Although early into 2021, mortgage rates rose for the first time in two months.
What Is The Future Of The Real Estate Market In Los Angeles?
The real estate industry is changing rapidly. Recent happenings and trends suggest moving to less physical and more remote or online dealings for the future. To navigate the future properly and crisis-free, the industry's big players need to prioritize safety first. This is important because, for all other economic and commercial aspects of the industry to operate normally, buyers should not face any health threats. The following points give an idea of what to expect in the future of realty in Los Angeles.
#1. Online Virtual Showings
Public health experts and the CDC encourage everyone to adhere to strict social distancing rules. With such restrictions in place, physical interactions between realtors and clients are to the minimum.
Nevertheless, solutions aren’t far-fetched as online and remote interactions have become the new normal in the real estate industry. One of the tools that will prove helpful is virtual showings and virtual open houses.
As real estate agents adapt, virtual showings and open houses will be the safest way to show people around their dream house. All this was done while buyers are at the comfort of their homes, as realty agents live stream to social media apps.
From showings to meetings with clients and closings, LA County public health encourages all remote interactions. However, all showings should comply with California rules on showings.
#2. Expected Rise In Price
The real estate industry expects a rise in the price of houses in Los Angeles based on the current increase in affordability via low rates and the fact that there are fewer new houses built. This breakdown in the supply is mainly because of reduced construction activities due to COVID-19 restrictions. Most of the construction materials are obtained abroad from Asian countries.
The cost of these materials may increase over time, prompting increases in the cost of construction. And with no definite end to the pandemic in view, all these will place upward pressure on the price of houses.
#3. Reduced Demand For Luxury Homes
The high volatility in the real estate market and the economy coupled with the uncertainty surrounding COVID-19 could reduce demand for luxury homes. The wealth of most LA households may have already been impacted by recent disruptions in the financial market. That being said, there could be a further decline in the demand for luxury homes. Real estate agents looking to put luxury homes for sale in Beverly Hills or Bel-Air may have to wait for buyers.
#4. Increased Demand For Homes With Outdoor Access
2020 saw California become one of the first states to order a lockdown that saw people huddled inside their homes for weeks. For many Americans and indeed Los Angeles dwellers, a statewide lockdown was indeed new and frustrating.
As we advance, more home buyers will be on the lookout for homes with outdoor access. Be it a pool, outdoor rooftops, and larger backyards, it is safe to say that people are preparing for any future pandemics. And it appears real estate construction firms are listening, with new single-family homes for rent satisfying the desire for outside space.
The COVID-19 pandemics have halted old trends and then introduced new ones in almost all aspects of our lives. The market has undergone widespread uncertainty for real estate even as its future promises blockchain integration and virtual shows. Thinking about the future might seem scary if there was no knowledge of what will happen and no preparation is done—having the right resources and guidance to know which direction the industry will shift to could be the key to succeeding in the post-pandemic real estate journey.