Market Update: Q2 2018

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While temperatures are rising in the heat of Summer in Los Angeles, the real estate market continues to cool by comparison. While prices are still slightly up from last year, the number of sales is down across all price points and all types of properties. This trend began at the start of the year, and looks to be the general projection for the market for at least the next year.

The key factors leading to this change in the market are increased interest rates (up about a full percent since this time last year), the change in the tax laws making homeownership slightly more expensive, and the newest change to the market: increased inventory. As more sellers are sensing the top of the market, they look to cash in on the equity built up in their homes before the market cools further. This has lead to the highest inventory levels we’ve seen since the Recession.

Conversely, because the cost of ownership is increasing due to higher prices and rates, demand is waning. Buyers are being more judicious with what, where, and at what price they purchase, compared with even just a year ago.

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Ultimately demand waning and inventory increasing is leading us to a plateau in the market, which is healthy sign for the market. Over the past 6 years sellers have had all the leverage, and that is finally starting to level out with more normal market conditions. The long term outlook for the Los Angeles market is still very strong on the account of our diverse economy, high quality of life, and desirability for foreign investment, but the crazy run up in prices seems to be over.

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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