The Los Angeles real estate market continues to be one of the hottest in the world. But in order to understand what’s happening, you have to look beneath the surface and study the latest trends and developments.
3 LA Real Estate Market Trends to be Aware Of
In many respects, Los Angeles is a microcosm of what’s happening in the larger real estate market across California and the United States. However, it’s also unique in many regards just like this new Barrie real estate development.
Here are several of the most vibrant trends in 2022:
- Low-and-Slow Mortgage Rates
Los Angeles was hit extremely hard by the COVID-19 pandemic during 2020 and much of 2021. And while every city in the country dealt with its own fair share of blows from the pandemic, you could say that Los Angeles absorbed more hits than most, due to extremely tight (and borderline oppressive) restrictions and lockdowns. As a result, the local housing market basically came to a screeching halt.
Thankfully, the shelter-in-place orders were fairly temporary and normal activity was allowed to return fairly quickly. One of the few isolated benefits of the slowdown has been the continuation of suppressed interest rates.
If it hadn’t been for the pandemic-related shutdowns, it’s likely that interest rates would have creeped up much faster. But in order to ensure ongoing activity, rates have held well below 4 percent. In some cases, rates can still be secured below 3.5 percent.
While it’s likely that rates will hit 4 percent at some point in 2022, this is still an excellent rate when viewed through a historical lens. It was just a few decades ago that rates were as high as 10 percent to 16 percent.
The longer rates stay below 4 percent, the more we can expect to see home sales rise. We’ll also continue to see buyers open up their purse strings and overpay for properties on the justification that they’re saving hundreds per month on lower rates.
- Rapidly Increasing Real Estate Values
Real estate values continue to rise in Los Angeles and in all surrounding counties of southern California. Much of this has to do with the low inventory of single-family homes.
“Economists and real estate agents blame the supply shortage on a variety of factors, including a lack of new construction and homeowners who have locked in low mortgage rates and don’t want to move in a competitive housing market,” the L.A. Times explains.
It remains to be seen what will happen when the market finally does cool. While prices are inflated, you don’t hear much talk of a “bubble.” This isn’t 2008 all over again, but it does cause some interesting speculation and slight concern. Keep an eye on prices moving forward and get a real estate appraisal.
- Shift to Multifamily Investments
The national economy (and, by proxy, the Los Angeles economy) is still being artificially propped up. However, the government can only print money for so long before there’s a reckoning. This economy has been in “boom” territory for nearly 15 years. At some point, history tells us that a recession will come. Investors are already preparing for it by making strategic investments.
In particular, investors are worried about inflation. Many of them are turning to multifamily housing investments as a hedge against it. That’s because commercial real estate investments often perform better than other real estate alternatives during periods of heavy inflation.
Another reason for the shift to multifamily investments has to do with the preferences of younger renters. In particular, millennial renters are fond of living in tight-knit communities that are close to walkable entertainment districts. (This is where a lot of multifamily developments are being built.) By owning a piece of this pie, investors are able to secure predictable cash flow that won’t dry up when the economy hits a speed bump.
Bringing it All Together
There are very few real estate markets in the country that can hold a candle to Los Angeles over the past decade. It’s a hot market that continues to heat up. Whether it’s single-family residential properties, commercial properties, or even industrial real estate, the market is booming. By staying aware of the latest trends and remaining abreast of what’s happening at every layer of the marke
