8 Real Estate Trends You Must Know Before Selling Your L.A. Home


By on April 19th, 2017 in Photo & Video

8 Real Estate Trends You Must Know Before Selling Your L.A. Home

Since Los Angeles luxury real estate is one of the most competitive markets in the country, staying abreast of the latest market events is crucial to success. This list has got you covered on the most recent real estate trends affecting L.A. like financial legislation, home prices, and credit.

Our List of 8 Real Estate Trends You Must Know Before Selling Your Los Angeles Home:

1. Millennials Will Continue Reinventing the Country’s Major Cities

According to a recent Forbes study, Millennials are continuing to flow into major metropolitan areas like Los Angeles and New York. With their unique lifestyles and spending habits, millennials are affecting change not only in major cities, but also in the residential areas surrounding the city (think Silver Lake, Echo Park, or East Hollywood). In addition to the larger cities, the study also shows that Millennials are also inciting growth in smaller metropolitan areas, though at a smaller rate.

2. Rising Interest Rates

Towards the end of March, the Federal Reserve decided to raise interest rates from 1.0% to 1.25% for the second time this year. According to CNN, “the rate increase is a sign that the U.S. economy no longer needs as much help from the Fed.” The Federal Reserve is also predicted to raise interest twice more in 2017.

Real estate experts point to the rising interest rates as being bittersweet. On the one hand, higher interest rates may price many out of the market as loans will become more difficult to obtain. However, rising interests have always been the symptom of a burgeoning economy–welcomed news, as the country begins to heal from The Great Recession of 2008.

3. Real Estate Market On an Upswing

According to quarterly real estate reports, the luxury real estate market in Los Angeles is following a strong upswing. The market continued to make steady improvements from the fourth quarter of 2016, as prices steadily increased and days on market rapidly decreased. More specifically, home prices increased by 7.72%, inventory decreased by 18.17%, and days on market fell by 38.33%.* (Information sourced from The MLS)

4. Home Prices Expected to Dip

As a response to rising interest rates, sellers are expected to knock hundreds, or even millions, off of asking prices as a way to encourage the market. Since sellers are aware that rising interest rates will make it more difficult for people to obtain loans, they are likely going to counteract the effects of interest hikes by lowering their asking prices. Buyers can either take two approaches:

  1. Buy sooner before interest rates rise again.
  2. Buy later in the year when interest is higher but home prices are lower.

5. More Available Credit

Credit has been more readily available since 2015 under the Obama administration and has continued to grow ever since. It may also be the key for homebuyers to counteract the effect of rising interest rates. Sources like Fortune Magazine report that the Federal Housing Administration will likely lower fees for first-time homeowners in the hopes of further stimulating the market. If this succeeds, financing a home will be more accessible to a larger pool of buyers. Fortune also reports that mortgage giants Fannie Mae and Freddie Mac will begin to finance larger mortgages this year, thus encouraging new homeowners.

6. The Fate of The Dodd-Frank Act

The fate of the Dodd-Frank Act under Trump’s administration is a Sword of Damocles over the real estate world. When he entered office, President Trump was clear about his administration’s goal to dismantle the act deeming it a “disaster” and an “embarrassment.” Passed in 2010 by the Obama administration, the act contains a series of regulatory reforms for banks and other financial institutions to safeguard the economy from falling into another recession. As a deregulator, Trump’s approach to stimulating the economy involves removing restrictions (like the Dodd-Frank Act) on banks so that smaller entities are approved for loans. However, many real estate experts agree that although this may stimulate the market in the short-run, the market may fall into another recession if the Dodd-Frank Act is not replaced by some type of regulatory measure.

7. Homes Are Selling Faster

All around the country, homes are selling at lightning rates never reported before. According to CNBC, home sales increased nine percent in March of 2017 compared to March of 2016. “The typical home went under contract in just 49 days, down from 60 days a year ago,” the source reports. One reason for fewer days on market likely has to do with the recent interest hike. Since savvy homebuyers are aware that the Federal Reserve will likely raise rates again in 2017, they are eager to purchase more quickly to take advantage of lower interest rates.

8. Cash Transactions Continue to Dominate

Since homes are selling rapidly, cash transactions are going to be the secret weapon for buyers to keep up in a quickly moving market. In cash transactions, only the buyer deals with the loan approval process, appraisals, and other contingencies. Since the money is completely out on the table with cash, these transactions continue to be the most popular agreements within Los Angeles luxury real estate.