Southern California is one of the nation's most prestigious and coveted places to reside. Home to perfect year-round weather, sunny beaches, and high-end living, it’s no surprise that Hollywood’s elite chooses to live here. Those who are in search of a luxury apartment or estate have no shortage of choices when coming to the area.
Have you been exploring Bel Air, West Hollywood, and Beverly Hills properties for sale? Before getting serious about touring homes and making offers, it’s wise to educate yourself on the local market. Check out what you need to know about the current Los Angeles real estate market to have the best possible buying experience.
Luxury real estate is in demand
Despite all of the less than favorable real estate news reported in the media, high-end real estate is thriving in Southern California. More specifically, in the Los Angeles area, there were 61 sales over $5 million between May 1 and May 17 of this year.
Considering the size of the city, that may not sound like much. However, this is actually a big deal. Why? It signals an important shift that many real estate professionals are beginning to see. While it may not feel like significant changes are happening, sales are steadily increasing — even in the luxury real estate market. As the months continue on, this number will likely continue increasing. At this stage, though, the degree to which purchases will rise is not known.
Increased number of listings
Throughout 2020 and 2021, inventory shortages were a massive problem for the real estate industry. In Los Angeles — and nationwide — these shortages made home buying extraordinarily competitive.
While this trend is still happening at some level in certain parts of the country, inventory has increased significantly. In the immediate area, there are more listings this month than there have been in the past few months. What’s even more exciting is that a higher number of listings is forecast to come out over the next several months, further alleviating the problem.
What does this mean for you as a buyer? With a higher number of available homes, finding the right luxury property will be far easier than it has been over the last two years. Instead of feeling rushed to place an offer, you can take a bit more time to explore the market. Doing this helps buyers feel far more confident and happy with their final decision. Another advantage is that, in a less competitive market, negotiations that favor the buyer can resume. For months, sellers have benefited heavily from the quick pace at which homes were selling. Now, with more inventory, having a competitive edge as a seller is becoming important once again.
Interest rates continue to increase
Although there are many positive things happening in the Los Angeles (and national) real estate market, some things are still not favorable for buyers. One is the recent increase in inflation.
Back in 2020, average mortgage interest rates hovered around 2.68 percent. During the pandemic, rates hit record lows, which made home buying especially appealing through 2021. However, this trend changed almost immediately in 2022. After multiple interest rate increases, mortgage rates of over seven percent are common. On any home purchase, this increase has added hundreds to thousands of dollars extra to monthly mortgage payments.
All indicators show that interest rates on every form of borrowing will increase at least one more time before the end of the year. This means that mortgages will only become more expensive as time goes on. If you are considering financing for your Los Angeles property, this is a critical consideration to make.
All cash offers are especially valuable
As a result of interest rates being so high, cash is the preferred method of purchase. While this is almost always the case in “normal” times, borrowing is especially costly right now. Since this trend will almost assuredly continue through the end of 2022 (and into 2023), all cash offers are particularly ideal.
Making all cash offers is still preferred in terms of buyer negotiations as well. Even though inventory is on its way up, it is still comparatively low. Offering all cash can be compelling enough to close a deal quickly.
In uncertain economic times, working with a local realtor is essential
With impending economic uncertainty, having a proven real estate expert on your side is incredibly important. These trends simply skim the surface of everything there is to know about the Los Angeles market. To ensure that you find your dream home — and purchase it at the best possible price — enlist the expertise of one of the area’s top realtors.
Leading the way in high-end real estate, Dean Mandile and Sotheby's International Realty are your go-to source for all things related to home buying and selling in the Los Angeles area. Whether browsing in West Hollywood, Malibu, or Beverly Hills, our team is ready to work with you on your schedule. Contact us today to find the luxury property of your dreams.
