Los Angeles County, hit hard by the 2008 recession, never returned to Millennium Boom levels in terms of home sales volume and construction. LA recovered the number of jobs lost during the recession at the end of 2014, reaching a full recovery when counting population gain in 2019, just in time for the next recession to hit in February 2020.

The long home sales volume recovery in Los Angeles County was driven primarily by investors. But the housing market began to show more life from owner-occupants as employment and incomes improved beginning in 2017. Then, as buyer-occupants fought against rising mortgage rates, they became more cautious, causing sales volume to fall in 2018-2019.

In 2020, interest rates plunged to historic lows. But low interest rates haven’t been enough to induce sellers who are unable or unwilling to list in light of the job losses stemming from the pandemic and underlying recession. This has resulted in a strangled MLS inventory, accelerating prices to unsustainable heights. As we continue through the recession hangover, expect to see home sales volume continue its volatile path, not to begin a consistent recovery until around 2024. Today’s rising home prices will be brought down by the end of the foreclosure moratorium heading into 2022, which has thus fast kept roughly 3% of California’s mortgaged homeowners in their homes, despite being delinquent on their mortgages.

View the Los Angeles regional charts below for details on current activity and forecasts for its housing market.

Updated October 4, 2021. Original copy posted March 2013.

Home sales volume remains low

Chart update 10/04/21

2020 2019 2018 2003: Peak Year
Los Angeles County home sales volume 71,300 73,500 74,500 125,900

Los Angeles County home sales volume has decreased each year since 2018. In 2020, home sales volume declined 3% below 2019, translating to roughly 2,100 fewer sales over the course of the year. Still, given the pandemic and recession-induced slowdown mid-year, 2020’s sales totals may have been much worse. However, record-low interest rates continued to prop up buyer interest, as well as home prices. At the end of Q2 2021, year-to-date (YTD) home sales volume is a whopping 48% above a year earlier.

Looking back, after home sales volume plummeted during the Great Recession of 2008, volume rose briefly in 2009 into early 2010, due primarily to the housing tax credit stimulus and a naturally recurring “dead-cat bounce” at the end of every recession. Sales volume fell back in 2011 for lack of end user homebuyers and a retreat in speculator acquisitions. Home sales volume picked up in 2012-2013 due to the return of heavy speculator activity. During this period, speculators burned through LA housing inventory, particularly in low-tier home sales.

At the same time, demand in the form of end users (homebuyer occupants and long-term income property investors) for low-tier homes subsided, driven down by very rapidly rising prices and increased mortgage rates mid-2013. The nail in the coffin for sales volume was 2018’s rising mortgage interest rates, which reduced buyer purchasing power and enthusiasm. Since then, sales volume has trended down, and is likely to continue down in 2021-2022 as we continue to slog through the ongoing recession.

A complete recovery of around 110,000 annual home sales will likely occur in the years following 2024, when end user demand in Los Angeles County will be buttressed by a Great Confluence of Baby Boomers and first-time homebuyers who are lured by an employment recovery. Residential construction starts will increase dramatically to fill buyer demand as cities within the county open up the permit process by a reduction in zoning restrictions in urban centers that will enlarge inventory counts.

Turnover is down

Chart update 09/07/20

2018 2017 2016
Los Angeles County homeowner turnover rate 5.4% 5.7% 6.7%

Los Angeles County renter turnover rate

12.9% 12.9%

Home sales volume depends in large part on homeowner and renter turnover. The number of people moving from their residence each year is indicative of both the willingness and ability of homeowners and renters to relocate. Turnover rates are highest when jobs are abundant, wages are rising, housing starts increase and employee confidence in the economy is high.

The most recent trough in Los Angeles’ homeowner turnover rate was during 2008, when California was at the depths of the Great Recession. The number of homeowners relocating increased in the immediately following years, mostly due to turnover on foreclosures and short sales. The latest reports show LA homeowner turnover was relatively high in 2018 with one in 16 homes selling annually. Still, this is below the peak year of 2005 when one in 12 homes sold.

With home prices running higher and average turnover dropping, expect homeowner turnover reports to slip dramatically in 2020. With 2020 recession job losses alongside COVID-19 eviction moratoriums, significantly fewer renters and homeowners are currently changing residences.

The homeowner turnover rate will rise once home prices and interest rates align to produce desirable homebuying conditions. This is not expected before 2022-2023, when the additional and necessary factor of greatly increased residential construction will be experienced and a recovery from the 2020 recession will begin.

This upturn will be fueled by a Great Convergence of first-time homebuyers (members of Generation Y forming households), retiring Boomers buying replacement homes and increased inventory generated primarily by construction starts, but short sales and REO resales will be in the mix. Domestic and international emigrants will play a significant role in the county’s periphery housing — the suburbs.

Homeownership bottoms

Chart update 10/04/21

Q2 2021
Q1 2021 Q2 2020
Los Angeles County homeownership 48.6% 48.3% 48.3%

The homeownership rate in Los Angeles County trended downward from the time the Millennium Boom ended in 2007 to its lowest point in Q3 2016 at under 45%. This low homeownership rate was only slightly higher at 48.6% in Q2 2021. This is well below the 55% figure set at the height of the Boom. The rate will likely decrease and remain low until around 2023-2024 as rising FRM rates and faltering prices in the interim drive many owners into negative equity with attendant short sales and foreclosures creating a wait-and-see attitude among buyers.

LA County’s homeownership rate has historically been lower than the state average, which was 53.9% in Q2 2021. LA County has a smaller share of homeowners since much of the county is urbanized, and renting is a convenience, if not a financial necessity. LA’s homeownership rate today is right around what may be considered a “normal” (pre-Millennium Boom) rate, which was 48% in 2000.

The rise and fall of home pricing

Chart update 10/04/21

Low-tier annual change Mid-tier annual change High-tier annual change
Los Angeles County home pricing index: July 2021 +19% +20% +19%

Along with the rest of the state, Los Angeles home prices skyrocketed during the Millennium Boom, then plunged to below mean price levels during the financial crisis and have been climbing out of the wreckage ever since. Like in other regions, there was a small bump in prices in 2009 driven by various state and federal economic stimulus programs. The increases proved unsustainable and, without the support of fundamentals, home prices dropped back fully in 2011 to the price level of early 2009.

During 2013-2014, Los Angeles saw another rapid price bump, most significant in low-tier home sales. This rapid rise fell back somewhat in the following years, increasing about 6% each year.

Accurate home price reports run about two months behind current events. Even when caught up, sticky prices tend to persist several months beyond the moment when home sales volume begins to slow. Starting in March 2020, economic volatility and shelter-in-place orders caused home sales volume to decline dramatically. However, historically low interest rates provided a boost for buyer purchasing power, which, along with low inventory, inflated home prices in 2020.

In 2022, the economic recession will finally take its toll on home prices, placing downward pressure on pricing with the removal of support provided by economic stimulus. The overall home price trend for the next couple of years will be down, the result of historic job losses and rising 90+ day mortgage delinquencies, which will lead to a wave of forced sales following the recent end to the foreclosure moratorium. As during the 2008 recession, the drop in sales volume and prices will first be most volatile on the coast, before rippling outward to inland areas.

Construction starts feed on rental demand

Chart update 10/04/21

2020 2019 2018
Los Angeles County single family residential (SFR) starts 8,000 5,700 6,100

Los Angeles County multi-family starts

18,400 15,900

Multi-family construction starts jumped significantly in Los Angeles County at the outset of the recovery from the 2008 recession, far outpacing the near-flat trend in single family residential (SFR) starts. This is due to the increased demand for rental housing, evidenced by the steep rise in rents, especially in the urban city-center areas of Los Angeles County. Builders know this, the City of Los Angeles is accommodating and lenders are catching on.

However, the multi-family recovery has ended in 2020, falling dramatically in the third quarter. This steep decline is partly the result of shelter-in-place orders in response to the COVID-19 pandemic, and also due to cautious lenders and builders. However, significant gains experienced earlier in the year resulted in an overall annual increase in construction over the previous year.

The next peak in SFR construction starts will likely occur in the 2024-2025 period due to a boost from state legislation. Even then, SFR starts will not return to the mortgage-driven peak experienced during the Millennium Boom. However, multi-family housing starts in the next upturn will experience higher levels as last seen in the mid-1980s, which accommodated the arrival of Baby Boomers to the housing market. This time, the need for multi-family housing will be fueled by their Gen Y children — Millennials — before they turn away from renting and become homeowners as they age, no differently than did the Baby Boomers in the early 1990s.

More jobs needed

Chart update 10/04/21

Aug 2021 Aug 2020 Annual change
Los Angeles County employment 4,248,000 4,091,700 +3.8%

Since homeowners and renters require employment to make housing payments (with rare exception), the jobs recovery is key to the housing recovery. Just over 4.2 million people are employed in Los Angeles County as of August 2021. This is 406,000 fewer jobs than at the December 2019 pre-recession peak.

From the December 2019 peak to the trough in April 2020, Los Angeles lost 738,000 jobs. Since then, jobs have increased marginally as some social distancing measures have loosened. However, as of August 2021, the number of jobs held in Los Angeles is 3.8% higher than a year earlier. This level of recovery is slightly below the statewide recovery of jobs, which is 5.5% above a year earlier. Expect a W-shaped recession in the coming months, with jobs rising and falling, not to enter a true recovery until 2023-2024.

Jobs by top employing industry

Chart update 10/04/21

Aug 2021 Aug 2020 Annual change
Construction 148,000 146,800

Real Estate

79,600 80,600

In the housing industry, construction jobs have gradually regained numbers over the past decade of recovery from the 2008 recession, reaching a full recovery just before the job losses of the 2020 recession. Likewise, the number of employed real estate professionals was recovered gradually, cresting pre-200 recession levels in 2016 and rising.

In 2020, both industries experienced a hit to job numbers, resulting in thousands of lost jobs. While construction will bounce back fairly quickly due to the unmet demand for housing, real estate professionals will see a slower rebound as they contend with reduced transactions and, in the coming months, lower home prices. The real estate profession will not likely experience a sustained increase until the next confluence of buyers and renters (members of the Generation Y and Baby Boomer generations) converge on the market in the years following 2023.

Everyone needs income to buy or rent

Chart update 03/03/20

2018 2017 Annual change
Los Angeles County per capita income $62,200 $59,100 +5.4%
California per capita income $67,000 $63,900 +4.9%

The average income earner in Los Angeles County earned roughly $62,200 in 2018 (the most recently reported Census year). For perspective, this figure is slightly below the statewide per capita income.

Until 2019, home price increases consistently exceeded income increases. As long as prices rose faster than incomes across most job sectors, increases in home prices and rents were unsustainable. This is because buyers and tenants ultimately determine sales prices and rent amounts — collectively they can pay no more to buy or rent a home or apartment than their savings and income qualify them to. According to the U.S. Census, the average Los Angeles resident with a mortgage pays 51% of their income on housing expenses, as of 2015. Renters pay 52% of their income on housing costs. This high price for housing can’t be sustained at today’s incomes without a long-term drop in their standard of living and a rise in poverty and related homeless or relocation symptoms.