After more than four years of steep price increases, Los Angeles-area real estate prices will stabilize over the next year, according to a forecast released Thursday by the real estate site Zillow.
The forecast predicts home prices will rise just 1.2 percent in the L.A. metro area, compared to 2.4 percent nationwide over the next year; The median price of a home in Los Angeles is now $583,500, up from $544,000 last July. In comparison, the median price of a home in the U.S. is $187,300.
Such a leveling off would be a substantial change; Home prices in L.A. have been climbing steadily since 2012 and increased 7.2 percent over just the last year, which was a bigger increase than economists were expecting.
“All of us thought we would be seeing a more dramatic slowdown than we’ve have been seeing," said Dr. Svenja Gudell, the chief economist of Zillow.
Gudell blames the continuing increases on tight inventory, especially for houses on the lower end of the market.
"It’s hard to come by those homes so that’s what’s driving up prices,” said Gudell. “The expectation was for inventory to increase more, but we haven’t really been seeing that.”
Gudell expects inventory to increase soon as prices return to pre-recession levels when fewer homeowners are "underwater" in their mortgages, meaning that they owe more than their homes are worth.
Two areas with relatively low home prices saw the biggest year-over-year increase in prices locally; Prices increased 10.3 percent in East Los Angeles, 9.4 percent in Compton, and and 8.7 percent in Downey.
Rental prices will continue to increase
The Zillow report has less good news for those in the rental market.
The median price of an apartment in Los Angeles is now $2,793, up from $2,587 last July. Gudell expects rent increases will continue to be around 5 percent a year for the foreseeable future.
“Demand for rentals will remain strong,” she said.