Los Angeles Mortgage and Housing Market: Slump or Return to Normal?

By Richard Barrington
Local Lender Columnist
Apr 22, 2008
If you are a mortgage broker, real estate agent, or speculator, you may well refer to the current real estate market as being in a slump. However, from a more balanced perspective, what's going on looks more like a return to normal. In fact, in areas such as Los Angeles County, where the housing boom was completely off the charts, "normal" may still be a long way off.

Los Angeles Housing--a World of its Own

In a recent television news story on the housing market, a Southern California real estate broker bemoaned the fact that houses that used to sell in one or two days now sit on the market for one or two months. The truth is a one- or two-month turnaround is much more indicative of a normal market than one or two days. A slower sales rate gives buyers more of a fighting chance.

Consider the following indicators that Los Angeles County real estate is still far from in a state of depression:

• The median home price in Southern California exceeds the amount considered by mortgage brokers to be a "jumbo" mortgage.
• Assuming 35% of gross household income can be spent on housing, the median income in Los Angeles County is only 60% of what it would need to be to afford a median-priced home in the county.
• Despite falling transaction rates, as recently as August median home prices in Los Angeles County were still rising slightly.

A Turn at Bat for Buyers

A healthy market should be fair to buyers and sellers. The Los Angeles-area real estate market has been pretty rough on buyers in recent years. Along with falling mortgage rates, a housing slowdown may actually be a sign that buyers are finally about to get their turn at bat.

Source:
LA Times

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.