Top Factors Contributing to Housing Shortage in Los Angeles

Following a national trend of low inventories and shortages of homes, Los Angeles and throughout California, the available homes for sale follow the trend with those same record low inventories. The conversation of Home Buyers in multiple competitive offers for homes is repeated often. Many of today’s Sellers are profiting from home sales above current market values.

5 decade long trends in Los Angeles Real Estate Development

“The crisis” is not solely pandemic related: Many real estate market analysts believe the COVID 19 lockdown has accelerated the impact of these five significant trends that have been nearly a decade in development:

  • Low-Interest Rates

“Ultra-cheap” money is a driver of both increased demand and decreased supply. When interest rates are persistently low, it becomes relatively inexpensive to keep the first property for investment income and then purchase a new home rather than selling the primary residence. Homeowners are “doubling up,” building their real estate asset portfolios. Fueled by institutional investment in single-family rental properties over the past 10 years, the inventory shortages are increasing in number (estimated at 7 million residential properties nationwide). Previously resalable homes have now shifted into the rental market. As interest rates stay low, this trend will continue.

  • “The Buy Now, Sell Never” Proposition

Innovative new technologies and industries like Airbnb and short-term leases, coupled with favorable holding policies and lower costs, have created greater profitability in rentals.

  • Underbuilding

The after-effects of the housing and financial market collapse of 2008 had resulted in levels of new construction homes of nearly half of their normal levels. Only now has the home building and new construction permits reached the post-2008 “normal” output. The limited growth of housing supply led to decreased demand for loans and construction financing, which contributed to the low-interest rate stimulus. Further, underbuilding resulted in would-be Sellers reconsidering the listing of their homes for fear of not being able to find a replacement property (home).

  • Demographic Shifts

There are now more Millennials than any other generation, and the Millennial generation is coming into their “peak years” for earnings and home buying. This Buyer/Seller shift historically should last for the next 5 to 10 years. In addition, the Baby Boomer generation has opportunities to secure inexpensive mortgages for years resulting in holding on to their homes much longer than previous generations.

  • Homeowner Focused Policy

The CARES Act foreclosure moratorium is designed to keep distressed homeowners in their homes and has resulted in preventing distressed properties from coming on the market. Fueled by the pandemic, the foreclosure “pipeline” is below pre-pandemic record lows; and today, American homeowners have gained over a trillion dollars in home equity. Although there are more than 2.5 million homeowners in the mortgage forbearance program, they continue to gain equity from their homes.

Among professional realtors and the California Realtor Association, and National Realtor Association, there is debate about whether the low inventories are consistent with relatively low Buyer demand. Further, other factors contribute to “an opportunity” rather than a crisis mode.

In fact, there are a sizable number of available homes that are not actively on the market for sale where data is tracked; these homes are referred to as “shadow inventory.”

To learn more about where the Buying opportunities are in Los Angeles and Southern California, as well as market trends that will fuel an emergence to higher available homes, connect with me at michael@michaelhitatthomes or visit my website at

Source data from CAR, the Multiple Listing Service, and Altos Research.

Sign In


Reset Password

Please enter your username or email address, you will receive a link to create a new password via email.