Introduction to the Los Angeles Home Sales Market
Los Angeles is firmly in the trend of homebuyers walking away from deals at record levels as costs, inspection woes and financing hurdles chip away at the market.
Across the country, about 56,000 home-purchase agreements, or 15.1 percent of all contracts signed, were canceled in August, the highest share for that month since Redfin began tracking the data in 2017, L.A. Business First reported, citing Redfin data. The rate was up from 14.3 percent a year earlier.
Home Sales Cancellations in Los Angeles
In Los Angeles, 14.9 percent of sales fell in August this year, down a small tick from 15 percent in August of last year, a continuation of a trend that goes back to spring.
Comparison with Other California Markets
The Los Angeles area isn’t the only market in California seeing home sales collapse. Cancellations in San Jose climbed to 6.9 percent year-over-year from 1.6 percent, marking the largest year-over-year increase in all metro areas tracked by Redfin. In San Francisco, the cancellation rate rose to 5.9 percent, a 2.3 percent year-over-year increase from 3.6 percent. Notably, rents in San Francisco have now surpassed pre-pandemic levels.
Market Softness on Prices
The market is soft on prices, too. Nationally, one in six sellers, or about 16.7 percent, dropped their asking price in August, the steepest share since 2012. Homes sold for an average of 3.8 percent below asking price across the country. As is the case nationwide, the housing market in Los Angeles has been plagued by affordability issues, increasing insurance premiums and overall economic uncertainty.
Buyer Negotiation Power
With an oversupply of about half a million more sellers than buyers last month, buyers have been using the upper hand to negotiate for repairs and discounts. One agent in Tampa, for example, told Business First they worked with a seller who received 78 repair requests in a failed deal after multiple price cuts.
Reasons for Broken Contracts
Inspection or repair issues drove more than 70 percent of broken contracts, though failed financing, slow sales of buyers’ own homes, and shaky economic confidence also played key roles. About 62 percent of agents similarly reported more deals falling apart than a year ago, per Homelight data cited by Business First.
Related News
U.S. cities with most cancelled home sales
SoCal resi market sees wave of deal cancellations continue
Los Angeles County sees drop in home sales amid long-term recovery
Conclusion
The Los Angeles home sales market is experiencing a significant increase in cancellations, with 14.9 percent of sales falling in August. This trend is not unique to Los Angeles, as other California markets such as San Jose and San Francisco are also seeing a rise in cancellations. The market softness on prices, combined with buyer negotiation power and reasons for broken contracts, all contribute to the current state of the Los Angeles home sales market.
FAQs
Q: What is the current rate of home sales cancellations in Los Angeles?
A: 14.9 percent of sales fell in August this year.
Q: How does the Los Angeles market compare to other California markets?
A: The Los Angeles area isn’t the only market in California seeing home sales collapse, with San Jose and San Francisco also experiencing a rise in cancellations.
Q: What are the main reasons for broken contracts in the Los Angeles home sales market?
A: Inspection or repair issues, failed financing, slow sales of buyers’ own homes, and shaky economic confidence are all contributing factors.
Q: Is the Los Angeles home sales market expected to recover?
A: The market is currently experiencing a long-term recovery, but the rise in cancellations and market softness on prices may impact the speed of this recovery.
