Will The Market Crash Soon?

Today’s question is one I’ve been getting asked a lot by both sellers and buyers. As pretty much everyone knows, the homes throughout the Los Angeles area and most of California have been flying off the shelves with sales numbers at all time highs. With this very strong sellers market having gone now for over a year, of course, people are wondering, when will it stop? While I’d love to have that magic real estate crystal ball, I can say the market we’re in is completely different from the mid-2000s when things came to a screeching halt. That’s not going to happen with our current market, and here’s the main reason why.

Inventory continues to sell off very quickly. To predict the longevity of a market, we look at the amount of available homes to buy or the months of inventory. A balanced market, where the number of sellers and buyers is relatively the same, is usually considered to be around six months. In other words, it would take six months to sell off all the homes for sale, if no new homes came on the market. More than six months of inventory is considered a buyers market, where buyers can expect to pay less and get more for their purchase. Anything under six months is pretty much the reverse, where sellers can expect to receive over-asking and buyers compete to get their offer accepted.

Sound familiar? Here in Los Angeles, most communities have been experiencing a sellers market for several years now with the extreme buyer competition being a serious factor over the last 16 months. To put it in perspective, the likelihood of the current market crashing is almost non-existent because most of LA’s communities have around one month’s worth of inventory. It’s not so much a case of no inventory, it’s just that almost every new listing that comes on the market sells within a few weeks. I hope this helps put things in perspective. If you’re wondering when the best time for you to sell your home or buy another one is, get in touch. I’m here to help.