Los Angeles 2024 Q1 Real Estate Update

Los Angeles 2024 Q1 Real Estate Update

Home values in Los Angeles continue to steadily rise as interest rates have stabilized at just under 7%. In fact, home values in Los Angeles are the highest in the first quarter of 2024 than they have been in the first quarter of any other year. In this article, we provide our 2024 Q1 Real Estate Update, as well as our guidance on on what to expect for the remainder of the year.

Mortgage Interest Rates Remain Stable At Under 7%

The average interest rate on a 30-year fixed rate mortgage hovered between 6.5% and 7% for the first quarter of 2024. Although the Federal Reserve backtracked on its original plan to cut the target interest rate, it continued to express its intent to cut the rate multiple times before the end of 2024. Mortgage interest rates responded by stabilizing at just under 7%. The relatively high interest rates (in recent history) have continued to stifle demand, while simultaneously contributing to low supply by discouraging homeowners from selling their homes secured by low interest rate loans. The tail end of the graph below depicts the relatively stable rates in the first quarter of 2024.

Interest rate data courtesy of Freddie Mac.

Despite higher than expected inflation in the first quarter of 2024, the Federal Reserve has continued to indicate at its March meeting that it expects to cut the target interest rate as many as three times before the end of 2024. Since then, inflation has continued to remain higher than expected, triggering many experts to predict fewer rate cuts than the Fed has indicated. However, if and when those rate cuts occur, we expect to see a drop in mortgage rates. Homeowners who have purchased recently will greatly benefit from those cuts as they are able to refinance into more affordable mortgages.

Sale Prices Continue To See Year-Over-Year Gains

The median sale price of an existing single family in Los Angeles continues to rise year-over-year. In fact, the median sale price in February and March of 2024 (black line) was over 10% higher than at the same time in 2023 (red line), when interest rates were lower than their current rates. Continuing high buyer confidence, combined with low supply caused by homeowners reluctant to sell homes secured by low interest rate mortgages, has offset any downward pressure on the market caused by the rise in interest rates. Indeed, the median sale price of an existing single family home in Los Angeles was higher in the first quarter of 2024 than the first quarter of any other year in history.

Data courtesy of California Association of Realtors.

The market’s continuation of its normal yearly trend is a sign that the real estate market remains healthy in spite of rising interest rates. Although prices are not climbing as rapidly as they did during the 2020-2022 time period, it is important to note that those gains were fueled largely by abnormally low interest rates designed to fuel the economy during covid. The market now appears to have returned to “normal” gains.

What’s Next?

We previously advised that those considering purchasing a property in the near future should consider doing so before interest rates drop. The reasoning is simple – a drop in rates will cause an already healthy market to see an influx of buyers and a jump in prices. The current market is much more buyer friendly due to decreased competition, although it may be difficult to find a “dream home” in a market where supply is low. However, if the right opportunity presents itself, it makes sense to secure the property with the plan to refinance at a later date. Sellers, on the other hand, can rest assured that they can still obtain top-dollar for their properties while supply remains low.

In the near future, we expect that the Fed will stay true to its word and reduce the target interest rate during 2024. We expect this cut to be accompanied by a drop in mortgage interest rates and an increase in demand, resulting in further gains in home values.

Please call or email us at 213-973-9439 or info@esquirereb.com to further discuss our 2024 Q1 Real Estate Update for Los Angeles, or how Esquire Real Estate Brokerage can help you in the Southern California real estate market.

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