While real estate becomes increasingly expensive in every area, Los Angeles prices are soaring to unexpected heights. The numbers recently released by Zillow are signaling a meaningful rise in the housing market, making the public take notice.
According to Zillow’s latest report, the estimated value of the housing market in the L.A. metro area was up $202 billion in the last year alone. That number represents the sum of Zilow’s estimates for every house on the market in a given area. The area’s total value was reportedly $3.7 trillion, rising 38% over the past three years.
In August 2023 alone, the average price of a home in Los Angeles County was up a shocking 4.2%, according to the California Association of Realtors.
“While a small chunk of this growth can be attributed to a 1.3% rise in the average value of a U.S. home over the past year, the powerhouse behind this surge has been new construction,” Zillow senior economist Orphe Divounguy stated. The trend may span the United States, but the spike in Los Angeles County is out of the ordinary.
Orphe Divounguy stated, “Builders have chipped away at the housing deficit as a steady flow of new homes have hit the market this spring and summer.” As households grow at rapid rates that outpace the nation’s housing stock, we continue to get a clearer picture of why prices have risen in such a stark and astonishing fashion.
Approximately 6.3 million units were constructed between 2015 and 2021. Unfortunately, that number couldn’t keep up with the 7.1 million new households created then. There is a solution on the table, according to Divounguy, as controversial as it may be. Creating “higher-density homes wherever possible to work around increased costs and bring desperately needed units to the market” seems to be the current action plan.
However, implementing this current method is more complex than one might expect. “Obstacles remain to new construction in many parts of the country,” he added. “Measures that allow for more density and increase buildable land would help.” Instead of pending legislation, work is being done to remedy the issue.
With such a significant rise over a short period, analysts are considering future moves the market will make. If we’re looking at a continuous increase in prices and evaluations, the housing market could easily reach unprecedented heights. $202 billion over one year is extraordinary, and even if no steep increases occur shortly, the market is in a strong position.
Still, more work needs to be done to accommodate the housing market’s demand today. New measures will need to be required if the pace of growth will catch up with the number of households developing in the future. We’ll keep an eye on the next steps the market takes, how the evaluation of Los Angeles County real estate operates, and see how next year compares to this one.