Since the COVID-19 pandemic, over 1 million people in Los Angeles Country have filed for unemployment. With the economy taking a hit that will likely require years to recover from, it seems like the natural effect would be that housing prices begin to drop. After all, during the 2008 recession, the median price of a home reached a 30 year low.
But while LA and the country at large have seen a big dip in home sales, the prices have stayed the same. The median listing price of a Los Angeles single-family residence has actually gone up 3% since last month. How could this be?
2008 vs. 2020: Supply and Demand
Housing prices reflect the balance of supply and demand. Just before the economic collapse in 2008, predatory mortgage lending drove up the demand for new houses to be built. When the bubble burst and many of those houses went into foreclosure, the supply of housing jumped, but the demand took a nosedive. Banks couldn't give out loans as easily and freely, plus many would-be homebuyers could no longer afford a mortgage anyway because of the recession.
In 2020, home prices aren't moving because although the demand is low, so is the supply. This is for a couple of reasons.
For one, many who put their houses on the market just before the pandemic decided instead to stay put until things settled down. This was either due to economic fear or the fear of looking for a new home/moving while a contagious virus was raging (or probably both!). The other effect on supply was the CARES Act stimulus bill which put a halt on home foreclosures. All those people who can no longer pay their mortgages because they lost their jobs are holding on to their homes for the time being.
Will Home Prices Go Down in the Future?
It's possible. While those people struggling financially can keep their homes now, the CARES Act bill doesn't say much about what will happen to these homeowners once the state of emergency has been lifted. Unless another stimulus bill is passed that includes protections on foreclosures going forward, it's likely that there might be a spike in the supply of housing in the future. It's also possible that once the city opens back up, people will feel more comfortable putting their house back on the market and shopping for new homes.
It's a Good Time to Sell
The positive part of all this is right now it's safe to sell without worrying about losing out on your investment. If you're looking to sell your home in the greater East Hollywood or surrounding areas, email us or gives us a call at (323) 412-9060.Posted by Ben Nicolas on