The spring buying season is just around the corner, and as home prices continue to trend upward, many home owners are likely to get into the market in the coming months. Million dollar homes in the Los Angeles area have seen price appreciation and more demand, as most areas of the country, including Southern California, are experiencing low supply. Couple this with rising mortgage rates and it becomes clear that the housing market is in for quite a shift this year.
Most signs point to a prosperous housing market this spring, but there are a few things standing in the way. Low inventory is one of the big ones. Economists are optimistic that home buyer and seller confidence will be up in the coming months, which will alleviate some of the issues with available supply. However, many are concerned that, although home builder confidence is also up, there is a shortage of labor workers to replenish the market with new homes.
Another factor that will come into play this buying season is increasing mortgage rates. Nationally, the average mortgage interest rates are expected to remain fairly steady for much of the year, but even so, they are already inching up month by month. A recent report from Freddie Mac found that the 30-year mortgage rate ticked up to 4.33 percent from 4.28 percent week-over-week in the middle of February. The 15-year fixed-rate mortgage also crept up to 3.35 percent from 3.33 percent.
“Mortgage rates crept up further following the uptick in the 10-year Treasury yield as minutes of the Federal Reserve’s last meeting indicated little possibility of a pause in the central bank’s reduction of bond purchases,” Frank Nothaft, vice president and chief economist, Freddie Mac said. “Housing starts in January fell 16 percent to a seasonally adjusted annual rate of 888,000 units, below consensus forecast. Permits were at a seasonally adjusted annual rate of 937,000 in January, also below consensus.”
A Look at the Los Angeles Housing Market
While the median single family home value began to level off during the latter half of 2013, there is still ample demand for homes in the area. According to Altos Research, a California-based real estate analytics company, the median home value was posted at $482,208, as of February 21. During the same time, the market conditions began to trend further into the control of sellers. With only about 1,639 properties available on the market in Los Angeles, the city is entering the busy season with more than 500 fewer properties than it had last year.
For potential home buyers in Los Angeles, the increasing mortgage rates could play a positive role in the house hunt as more people may stay stationed along the sidelines. However, mortgage rates could also play the opposite role and drive more people into the market now while rates are still fairly low.
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(all data current as of 10/22/2017)
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