Market Update: Q1 2018

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Spring is here in Los Angeles and with it comes change to the real estate market. In January I wrote about rising interest rates and new tax laws affecting the market in 2018 and that came to fruition in the first quarter of the year. Across the board sales and prices were down in January and February as buyers and sellers tried to make sense of the implications of the new tax laws. The market was also affected by rates rising about another half of a percent since the beginning of the year.

However as 2018 has progressed, that does not seem to have affected the market as much as I expected – at least as of now. Once buyers and sellers had processed the new tax information and we passed the slower winter months, the market picked up where it left off in 2017 starting in March.

On a nationwide level, prices went up 8.9% in March compared to this time a year ago which was the largest year over year increase in 4 years. Here in Los Angeles the market under $2 million continues to be incredibly strong with multiple offers, overbidding, and rising prices caused by a lack of inventory (as it has been for the past 5 years). As rates have increased and look to continue to do so throughout the year, buyers have a sense of urgency to find the right home and lock up a historically low interest rate while they can. This has kept demand high in this price range.

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However, the market north of $2 million has been much more affected by rising rates and new tax laws. The amount of mortgage interest that you can deduct has been reduced (which affects higher price points), and rates rising about a point higher than a year ago at this time has impacted buyer’s purchasing power. As a result, buyers have become more price sensitive and more judicious in their search, which has reduced demand. Meanwhile, more inventory has crept into this market as some sellers are sensing the peak of the market.

Throughout the rest of the year I see the market continuing on the pace described above: a short term rush to the market while buyers look to lock in a great rate through the Summer, while slowly more inventory comes available and prices begin to flatten towards the end of the year. If this does occur, it will be a healthy sign for the market as prices cannot continue up at their torrid pace forever, so stay tuned for more updates throughout the year!

As always, if you or any of your acquaintances have any questions on this or the market in general, please do not hesitate to contact me.

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