Spring Forecast:
The Winds of Opportunity vs. the Winds of Caution
Well, the New Year started with optimism as rates dropped to the 6s in late December/early January. But despite all the buzz and excitement, rates have not exactly stayed the course. Go figure. That’s what we’ve been dealing with for the past 18 to 24 months.
Today, mortgage rates are in the low 7s (where they hover consistently, save for a dip here and there in the high 6s). Inventory is creeping up, which is always helpful—call it the optimism of spring. Surprisingly, home prices have remained stable, exceeding expectations in many locales. And the prevailing wisdom suggests the Federal Reserve will not cut interest rates until June. Time will tell. If that holds, it could lead to somewhat static mortgage rates until that time. What does it all mean to you and me? Simply this, the Greater Los Angeles market is somewhat volatile, and buyers should be cautious. There will be opportunities for buyers, and more sellers should start listing homes, as early prognosticators suggest. But tread lightly. Nothing is set in stone.
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By The Numbers:
January 2024 Los Angeles Metro Area Overview
• Median Sold Price: $750,000
• Month-to-Month Price Change: -1.3%
• Year-to-Year Price Change: 7.1%
• Sales Month-to-Month Change: -14.6%
• Sales Year-to-Year Change: 2.8%
Source: Norada Real Estate Investments
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KEY TIP
Don’t be misled by national real estate figures. They’re not apples to apples. In Greater Los Angeles, home values and prices vary from neighborhood to neighborhood. For example, Beverly Hills is currently in a “Slight Buyer’s Market,” with a Market Action Index (MAI) of 29. Meanwhile, Pasadena is a “Strong Seller’s Market,” with an MAI of 55.
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Beverly Hills, CA
March 17, 2024
Beverly Hills, CA’s median list price, is $9,995,000 this week, and the Market Action Index is hovering around 29, the same as last month’s Index of 29.
Beverly Hills | Slight Buyer’s Advantage
The Beverly Hills market has shown some evidence of slowing recently. Both prices and inventory levels have been relatively unchanged in recent weeks. Watch the Market Action Index for changes, as it can be a leading indicator for price changes.
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Pasadena, CA
March 17, 2024
This week, the median list price for Pasadena, CA, is $1,765,000, and the Market Action Index is hovering around 55. This is an increase over last month’s Index of 51.
Pasadena | Strong Seller’s Market
Pasadena home sales continue to outstrip supply, and the Market Action Index has increased for several weeks. This is a Strong Seller’s Market, so if the trend continues, watch for upward pricing pressure in the near future.
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A Bird’s Eye View
Amidst the volatility and uncertainty, there are positive signs within the Great L.A. market. Home sales saw a jump in 2024—some 250,000+ homes sold during January alone.
“The statewide median home price for January 2024 was $788,940, reflecting a 3.8 percent decrease from December but showing a positive 5.0 percent increase from $751,700 in January 2023. Year-to-date statewide home sales exhibited a commendable increase of 5.9 percent, signaling sustained momentum in the California housing market.”
Source: Norada Real Estate Investments
Federal Interest Rates
All eyes are on next week’s Fed Announcement on rates. Spoiler alert: No rates will be cut during this meeting, which is the prevailing outlook. In fact, many feel the next rate cut will not come before June, if then. Why? Primarily, it’s due to recent inflation and consecutive months of elevated core Consumer Price Index (CPI) and Producer Price Index (PPI) figures. Additionally, positive labor market data has further complicated the Fed rate outlook, indicating that lower interest rates may be on hold for the near future and even beyond.
“A primary driver of the increase in the yield over 2023 was inflation expectations…so the higher the current rate of inflation and, more importantly, the higher the expected future rates of inflation, the higher the yield on the 10-year as investors demand to be compensated for that inflation risk in the future.”
~ Mark Fleming, Chief Economist, First American
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What It All Means
In today’s market, staying attuned and diligent is more critical than ever. Above all, stay informed and be prepared to act when the time is right. The current trends in mortgage rates, the economy, and home prices offer a relatively promising outlook for buyers, sellers, and investors alike. One thing is sure: the residential real estate market continues to meander through an indefinite period of adjustment and ever-so-cautious optimism.
For Buyers
- Opportunity Amidst Caution: The detailed analysis of mortgage rates, particularly the spread between the ten-year treasury and thirty-year fixed mortgage rates, indicates a volatile but potentially rewarding market for buyers. With rates influenced by inflation expectations and the Federal Reserve’s cautious stance, buyers should stay informed and ready to act as conditions evolve.
- Economic Resilience: The optimistic economic forecasts, including expectations of a soft landing and stable unemployment rates, suggest a conducive environment for long-term investments in residential real estate.
- Home Price Trajectory: The stable appreciation rates observed in 2023, debunking fears of significant depreciation, alongside predictions of continued growth into 2024, provide a reassuring backdrop for buyers contemplating entering the market.
For Sellers
- Stable Appreciation: Home prices’ resilience, with appreciation rates aligning with historical norms, offers a favorable scenario for sellers. The market’s stability, underscored by a lack of inventory and sustained demand, suggests that well-positioned properties will continue to attract interest and command solid values.
- Market Confidence: The upward revision of home value forecasts by experts signals a growing confidence in the market’s strength, encouraging sellers to consider listing their properties to capitalize on the current momentum.
For Investors
- Long-Term Growth: The consensus among economists and real estate experts, projecting consistent home price appreciation through 2028, paints a promising picture for investors. This environment suggests that strategic investments made now could yield significant returns over the medium to long term.
- Informed Decision-Making: The detailed insights into mortgage rates, economic health, and home price trends equip investors with the knowledge to make calculated decisions. Understanding these dynamics is crucial for identifying opportunities and navigating potential risks in the evolving real estate landscape.