Los Angeles 2024 Q2 Real Estate Update

Los Angeles 2024 Q2 Real Estate Update

The Los Angeles real estate market continued to show its resilience in the second quarter of 2024. Interest rates remained steady at just under 7% while sale prices continue at record highs. In this article, we provide our 2024 Q2 Real Estate Update and our guidance on on what to expect for the remainder of the year.

Mortgage Interest Rates Remain Unchanged

Since the beginning of the year, the average interest rate on a 30-year fixed mortgage has largely remained between the 6.7%-6.9% range, with a few small dips below and spikes above that range. That pattern remained true in the second quarter of 2024. The graph below depicts the weekly average rate on a 30-year fixed mortgage since 2018, and shows stability at just under 7% since the beginning of the year after a spike in late 2023.

Data courtesy of Freddie Mac.

The average mortgage interest rate is largely tied to expectations concerning the Federal Reserve’s target interest rate. Earlier this year, the Fed announced it was anticipating three rate cuts in 2024. At the Federal Reserve’s meeting on June 12, it announced it would not be cutting the target interest rate at that meeting, and it now anticipates only one rate cut this year. While the Fed saw some progress toward its goal of 2% inflation, it noted that more progress must be made before any cuts are made to the target interest rate. Yesterday, however, Federal Reserve Governor Michelle Bowman announced she does not anticipate any rate cuts this year, and is in fact willing to increase the target interest rate if the economy does not see further progress on inflation.

The key takeaway is that although rates remain high (in comparison to recent history), it is likely that we will see interest rate cuts at some point in the near future. If and when that happens, we anticipate an influx of buyers into the market and a resultant increase in real estate prices. Buyers who are able to secure a property now while rates are high will eventually benefit from refinancing into loans with lower interest rates, and will avoid the increased competition when rates decline.

“Normal” Market Continues As Sale Prices Remain Steady

Despite the disappointing news of no interest rate cuts this year, the median sale price of existing single family homes remains at record highs year-over-year. Continuing confidence in the real estate market, coupled with low supply, has continued to float the historically high real estate prices. As with prior years, we anticipate growth to increase in the summer months due to the seasonal nature of the real estate market. The red line in the graph below depicts the median sale price of homes in 2024, which remains above prices in 2022, and is significantly above the trend line for the same time of the year in 2023.

Data courtesy of California Association of Realtors.

The data shows that the real estate market is continuing on its normal course, despite prior doom and gloom predictions of a crashing market. Buyers should be comfortable knowing that the worst of the interest rate hikes are behind us, and despite those hikes the market has remained stable and healthy. We expect the normal trend line of the market to continue, potentially with spikes along the way when the Federal Reserve decides to make cuts to the target interest rate.

What’s Next?

After a frenzy of buying during the post-covid years, the real estate market appears to be returning to normal. For real estate professionals who have been involved in the industry for an extended period of time, the market’s return to normalcy is a welcome change. The covid years saw drastic cuts to the target interest rate in a short period of time, record low mortgage interest rates, and a surge in demand and prices. Buyers struggled to compete with skyrocketing prices and a market flooded with other buyers. With rates higher, the current market sees less competition amongst buyers and is therefore more buyer friendly, while still healthy for sellers looking to cash out the equity they have acquired.

We expect this trend to continue into the end of 2024 as rates remain stable. Many sellers will remain content with their locked in mortgages in the 2%-3% range, thereby keeping the supply of homes available for sale low. As buyer confidence gains, we expect to continue to see a healthy real estate market with moderate growth, and we welcome this return to normalcy.

Please call or email us at 213-973-9439 or info@esquirereb.com to further discuss our 2024 Q2 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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