Consistent with our prediction at the end of Q2, the Los Angeles real estate market surged into recovery-mode in the summer months of 2024. A decline in interest rates, coupled by increasing buyer confidence in the economy, resulted in record high prices and a continuing healthy real estate market. In this 2024 Q3 real estate update, we provide our in-depth analysis of why the market has remained healthy, and where we expect the market to go as we head into 2025.
Mortgage Interest Rates Drop As Fed Cuts Rates
In September, the Federal Reserve announced a cut in the Fed’s target interest rate by 50 basis points, or 0.5%. This rate cut was highly anticipated for much of 2024, with the Fed previously announcing it expected at least three rate cuts in 2024. Mortgage rates dropped sharply in response to the Fed’s announcement. In mid-June, the average interest rate on a 30-year fixed rate mortgage was about 6.8%. After the Fed’s announcement, mortgage rates dropped to as low as 6.09%, and have now stabilized at about 6.3%.
The graph below depicts Freddie Mac’s data on the average rate on a 30-year fixed rate mortgage, with the tail end depicting the sharp drop in rates after June of 2024.
Data courtesy of Freddie Mac.
The Fed has indicated that it is on track for one or two more rate cuts before the end of the year. As we previously predicted, our expectation is that as the Fed continues to make cuts to the target interest rate, buyers will return to the market resulting in increased demand.
Los Angeles Real Estate Market Hits Record Highs As Healthy Market Continues
At the end of Q2, we predicted continuing growth into the summer months as the Federal Reserve implemented its much-anticipated cuts to the target interest rate. This prediction was proven to be true. The median sale price of an existing single family home in Los Angeles rose substantially in June, as it does in every year, and continued its upward trend through September. The median sale price of an existing single family home in Los Angeles hit a record high of $960,370 in September of 2024, up 5% from the same time last year.
The graph below depicts the median sale price of an existing single family home in Los Angeles over the past four years. Notable observations are: (1) the unusual decline in prices in the latter half of 2022, caused by the Fed’s rapid increase in the target interest rate in response to inflation concerns; (2) the rapid recovery in 2023, particularly in the latter half; and (3) continuing stability and growth in 2024.
Data courtesy of California Association of Realtors.
What’s Next?
It is safe to say that after an initial period of panic as the Fed aggressively raised interest rates, the Los Angeles real estate market has returned to a period of normalcy. While many sellers remain reluctant to sell due to their locked in low interest rate mortgages, buyers have begun to accept that interest rates in the 6% range are the new norm and that we are not facing a market crash. As buyer confidence in the market grows, so will demand. Demand will likely further grow as the Fed slowly begins to make cuts to the target interest rate, thereby further increasing buying power.
As noted in our prior real estate market update, we expect this trend to continue into the end of 2024 and beginning of 2025. We continue to expect 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 Q3 Real Estate Update for Los Angeles, or how Esquire Real Estate Brokerage can help you in the Southern California real estate market.
