Summer 2019 Market Update

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In Spring I wrote about how the real estate market in Los Angeles bounced back (after a poor end to 2018) in the first quarter of 2019 as lowered interest rates and an increase in inventory spurred buyers to act. While prices had begun to fall at the end of 2018, in early 2019 prices had held steady across most markets, and in the entry level market, they had slightly increased. With rates remaining low, the second quarter saw similar results, as prices have remained steady, and the market has continued on to flatten.

Similar to the first quarter, a divide amongst sectors in the market has furthered widened. The entry level market is still very strong due to a lack of good inventory and a lot of buyer demand seeking to take advantage of low interest rates. Meanwhile, the market north of $2.5 million has slowed. Simply put, there are fewer buyers with the purchasing power to afford a $3 million + home, and with increased prices and more development in this price point compared with lower ones, there is a glut of inventory. Therefore, the higher end of the market is slowing and prices are slightly dropping in some cases, while the lower end of the market is slowing rising to meet it.

The recent news that The Fed has dropped interest rates for the first time since 2008 has ignited a lot of talk about how it will affect the real estate market, but so far I haven’t noticed much of a change. Interest rates had adjusted lower prior to The Fed’s decision, which resulted in the refinance world blowing up (even if you purchased within the last two years, it may be wise to look in to refinancing), but so far I haven’t seen an immediate change in buyer’s desire to purchase. In most cases buyers main reasons to purchase are to avoid high rental payments while making a long term investment, or an upgrade from their current property into a larger home. Low interest rates obviously are making those decisions easier and more affordable, but in most cases are not the driving factor.

In my opinion, all these factors are ushering us to a neutral market where bidding wars will no longer be common, prices will flatten with increased price sensitivity, but demand will remain constant for well priced properties in good locations. This is a positive sign for our market and should bring some normalcy for both buyers and sellers. With The Fed seemingly committed to keeping rates low, these look to be the market conditions for at least the next year, so the million dollar question is what the next big card on the table will be? It seems that the most likely factors that could affect the real estate market would be a change in the economy (US or global) or some global political event, which of course is difficult to predict. For now, the real estate market seems to be on a steady, straight course.

As always, if you or any acquaintances have any questions or need any help with a property or the market, please feel free to contact me.

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