Southern California's housing supply is expanding ahead of the spring buying season.
The number of homes on the market jumped in February, according to new figures out Monday from the California Assn. of Realtors, and is well above figures from a year ago.
C.A.R. reported five months' worth of unsold inventory on the market in the Los Angeles metropolitan area – meaning it would take five months, at the current sales pace, to sell every home listed as for sale. That’s up from 4.5 months in January, and 3.8 months in February 2013. In some parts of the region, especially Riverside County at 5.6 months, the inventory was even higher.
Housing economists consider six to seven months of inventory to be a healthy supply.
“It’s a sign we’re getting back to a more normal market, certainly," said C.A.R.’s chief economist, Leslie Appleton-Young.
Tight supply has hindered the housing market’s recovery in recent months, as some homeowners remain underwater on their mortgage and can’t sell, while others stay put because they can't find a home that suits them.
Appleton-Young pointed to a 27% growth in homes for sale between $300,000 and $750,000 – a range that accounts nearly half of all home sales in California – as a sign that the market is becoming more fluid.
“You’ve got sellers responding to price appreciation and thinking maybe now’s the time to make a move,” she said.
But that price appreciation is making it harder for buyers to take advantage. Sales volume in the Los Angeles area is down 12.6% year-over-year, which is also contributing to higher inventory, as homes stay on the market longer.
The next hurdle, she said, will be keeping demand for homes strong amid prices that have climbed much faster than wages. After several years of low prices and low interest rates, affordability is becoming more of a problem again.
“That’s one of the things we’re getting increasingly concerned about,” she said. “The share of first-time home buyers is really low.”