_____

Home Prices & Mortgage Rates

These are two things that it seems every individual and family in Los Angeles is attuned to. The housing market is shifting, and with spring around the corner, buyers and sellers are looking for clarity. 

Home Prices: A Return to Normalcy?

After the volatility of the past few years, home prices appear to be stabilizing. CoreLogic’s Selma Hepp puts it this way: “Home prices have mostly been moving sideways, a trend that may continue into the early months of 2025.” And according to the latest FHFA House Price Index, U.S. home prices rose 4.5% year-over-year and 1.4% quarter-over-quarter in Q4 2024. While this suggests continued appreciation, the pace has slowed compared to previous years—a sign of a more balanced market.

Four-Quarter House Price Change by State
US Four-Quarter Appreciation = 4.5%
(2023 Q4 – 2024 Q4)

Source: FHFA HPI

Nationally, price trends are normalizing, with most markets seeing steady, moderate appreciation. However, real estate remains local, and understanding your market is critical. The Los Angeles housing market has shown resilience, with the median home price reaching approximately $883,312, reflecting a 3.9% increase from last year.

The Wildfire Effect

The January 2025 wildfires in Pacific Palisades and Altadena destroyed thousands of homes, tightening housing supply and increasing demand for rentals. As displaced residents seek temporary housing, rental markets are surging.

Despite the setback, the market remains active. Sales rose 4.6% from January to February, and 41.3% of homes sold above asking—many with multiple offers.

Mortgage Rates: A Positive Shift

Any positive news is welcomed, and rates are no exception. Rates have been trending downward since peaking above 7%. Now hovering around 6.7%, they’re slightly better than projected for this time of year. While the drop isn’t dramatic, it’s meaningful—reducing monthly payments and boosting purchasing power by tens of thousands of dollars.

Freddie Mac’s Sam Khater sums it up well:
“The drop in mortgage rates combined with modestly improving inventory is an encouraging sign for consumers in the market to buy a home.”

Mortgage Rates Have Declined This Year
Average 30-Year Fixed Mortgage Rate in 2025

Source: Freddie Mac

________________________________________________

Exclusive Interview: Market Trends, Wildfires & the Future of LA Real Estate

I recently had the pleasure of sitting down with Michael Winestone on From the Ground Up to discuss the evolving Los Angeles real estate market. We covered everything from market volatility, the impact of the recent wildfires, changes in home construction, and what’s next for different LA neighborhoods.

Michael always brings great insight, and I’m grateful for the opportunity to chat with him about the trends shaping our industry.

_____

Some Juicy Morsels: Let’s Dig In!

Given the uncertainty of 2024 and the trepidation heading into 2025, I thought I’d throw in a few bite-size portions of information for your enjoyment that will hopefully be agreeable to your palate. 

Homes Are Sitting Longer

Median days on market have steadily risen since 2021. This trend reflects a slower market—as buyers are taking their time, and homes are staying on the market longer, both buyers and sellers can expect a more plodding start to the year, with spurts of opportunity (e.g., favorable economic news, an increase in inventory, rate cuts, etc.) sprinkled in here and there.

Days on Market Have Risen Since 2021
Median Days on Market, October of Each Year

Source: Realtor.com

Inventory Is Inching Up

This has been a nice little trend many folks aren’t aware of. Active listings have increased steadily over the past few years. For buyers, that means more homes to choose from and less rapid-fire-sight-unseen-buying to beat the competition to the jump. However, for sellers, it means the opposite: more competition.

Inventory Has Risen Since 2021
Active Listing Count, October of Each Year

Source: Realtor.com

Mortgage Rates Should Dip

Many in the industry are predicting mortgage rates to trend downward in 2025. By the end of next year, rates are forecasted to dip to around 6.33%, potentially touching the high-5% range! While we’re unlikely to see dramatic drops, a more stable rate environment should provide relief to buyers sitting on the sidelines. 

Mortgage Rate Projections
30-Year Fixed Rate, as of 12.04.24

Source: Fannie Mae, MBA, Wells Fargo

Normal Appreciation of Home Values

This bodes well for 2025. The majority of forecasts predict 3-4% appreciation nationally for the year. While some markets may see flat prices or small declines, others will continue to thrive. After years of rapid appreciation followed by volatility, stability is exactly what we need. 

2025 Home Price Forecasts
Percent Appreciation, as of 12.04.24

Source: ResiClub

What Tasty Treats Can You Expect in 2025?

For Buyers

Could this be the year? 2025 could turn out to be a sweet spot with more inventory, stabilized rates, and slower appreciation. If you’ve been waiting for better conditions, now is the time to prepare.

For Sellers

Remain objective and flexible to market dictates. Buyers are more selective now. To stand out, ensure your home is priced right, shows well, and is positioned effectively in the market.

‘Tis the Season for Caution
(And Anticipation)

It’s been a busy month. The election is in the past. The holidays are upon us. And buyers and sellers alike are wondering what the near (and far) future holds as we approach 2025. The main thing on everyone’s mind is rates: Will they come down? Are they static? Are they going to inch up? Forecasters are pointing toward more stability in the coming weeks and months.

Mortgage Rates & Projections
30-Year Fixed Rate, As of 11/13/2024

Source: Fannie Mae, MBA, NAR, Wells Fargo

 

This all bodes well for buyers, in particular, as a more favorable mortgage rate environment would bring some needed relief. Higher rates have been an issue, and recent studies show 70% of buyers halted their search due to affordability concerns. But the horizon is brightening. As rates decrease, many will reenter the market, increasing competition. Now is the time to be strategic and vigilant. Yes, being cautious is paramount, but recognizing the hidden gems out there—and being ready to act when opportunity beckons—is the key to landing your dream home.

_____

 

Are Prices Coming Down Or Going Up?

One of the best outcomes of this uncertain market is the fact that home prices have remained stable—in part due to a long-standing inventory shortage. Over the past decade or more, inventory has been out of whack due to significant underbuilding. Following COVID-19, low rates and limited inventory drove prices sky-high. But now forecasters project modest (not dramatic) home appreciation of 2.5–4%, suggesting a much healthier, balanced market. For sellers, competitive pricing remains crucial to attract buyers. For buyers, favorable prices and home values reflect a more stable environment for long-term investments. So, this could be a win-win for both.

 

Home Prices Are Forecast to Rise in 2025
Price Appreciation as of 11/5/2024

Did You Know?

Inventory continues to tick upward. October marked the 12th consecutive month of annual inventory growth, with active listings up nearly 30% year-over-year—the highest levels since 2019. More homes mean more options for buyers and less pressure to enter bidding wars. For sellers, increased competition highlights the importance of preparing and presenting your property to stand out in a growing market.

What Fate Awaits Buyers & Sellers?

It’s easy to get spooked by real estate news and forecasts. But don’t become paralyzed. Both buyers and sellers should exhibit caution while seeking out opportunity with a qualified real estate agent—not some ghoulish, fast-talking shark, but someone who truly has your best interest in mind. Above all, realize that the time we are in—this very moment, in fact—is beset by one huge bogeyman that could shake up the market, for better or worse: the 2024 Presidential Election. There are a lot of unknowns, especially within the next week with the election on November 5, followed by the next Fed Meeting November 6-7, in which experts predict another 25 Basis Points cut.

Gloom be Damned, Sunnier Days Lie Ahead

The housing market is poised for a much better year in 2025. In fact, there are several encouraging signs that homeowners and prospective buyers should realize. First, mortgage rates are expected to continue easing over the next 6-18 months, with projections putting them in the mid-to-high 5% range. This is great news for affordability, as lower financing costs will likely pull many buyers who have been sitting on the sidelines back into the market.

2025 Mortgage Rate Projections
As of September 2024

Did You Know?

In a recent Bankrate poll, it was revealed that more than half of homeowners would be motivated to buy with rates under 6%.

_____

In addition, total home sales are forecasted to rise next year, with experts predicting anywhere from 5.2 to 5.7 million homes sold nationally. While inventory is still tight in many areas, this transaction increase signals a healthier, more balanced market. Home prices are also expected to moderate, with a projected 3-4% appreciation nationally – a more sustainable pace compared to the rapid growth we’ve seen. Of course, local market conditions will vary, so be sure to consult with a trusted real estate professional to understand the dynamics in your specific neighborhood.

_____

Ghoulish Home Tours!

Ah, Hollywood, that citadel of dreams that can also give birth to nightmares. Poised like stalking vultures throughout the greater Los Angeles area, amid dark avenues and cryptic alleyways, are a number of homes, buildings, and properties that have aroused suspicion of paranormal activity in the past. Who knows what manner of witchery or conjuring or the like has settled upon these ill-starred homes—homes so benign and inviting on the outside, yet dark and dastardly within. What say ye? Shall we summon our nerve and take an evening stroll through a witch’s brew of haunted homes that are even more scary than the volatile real estate market?

Myers House

Although set in the fictional town of Haddonfield, IL, John Carpenter’s influential slasher hit was actually shot in and around cozy South Pasadena, CA. The infamous Myers House, where 6-year-old Michael slaughtered his sister Judith with a kitchen knife, is located directly across the street from the brick building that served as the hardware store where Michael stole his iconic white-faced mask in the original movie. No longer as spooky or ramshackle as it appeared in the film, the Myers House is smaller than it looks on screen but retains many of the subtle Victorian details that made it such a perfect choice for a horror film.

1000 Mission St., South Pasadena

_____

A Nightmare on Elm Street

It’s really in Hollywood, but the movie set in the fictional town of Springwood, OH, kept the same house number and changed the street to Elm Street. The traditional style house where beloved final girl Nancy lived (played by fan favorite Heather Langencamp) also appeared in “Freddy’s Revenge” and “Wes Craven’s New Nightmare.” It last sold for $2.1 million and features a pool and guest house if you don’t mind feeling the spirit of Freddy Krueger hanging over your daily activities.

1428 N Genessee Ave, West Hollywood

_____

The People Under the Stairs

Set primarily in a former funeral home, Wes Craven’s indescribably freaky horror-comedy tells the story of an incestuous pair of landlords who terrorize their neighborhood by locking unsuspecting residents in their fortified basement. Subsisting on a diet of human flesh, the unlucky captives eventually escape from the confines of the cellar and invade the rest of the house by crawling through a series of hidden passageways in the walls. The 1905 Thomas W. Phillips House is located in Los Angeles’ West Adams neighborhood just across the street from the spooky mansion used in “The Convent.”

2215 South Harvard Blvd, Los Angeles

CLICK HERE to Open These and Other L.A. Horror Film Locations in Google Maps

_________________________________________________________________________________

Rates Are Going Down
(Could Optimism Be Creeping Up?)

Quote of the Week
“This decision [to cut the rate by half a point] reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate growth and inflation moving sustainably down to 2%.”
~ Jerome Powell, Federal Reserve Chairman

The real estate market is like a giant puzzle. But unlike a cardboard puzzle, we’re talking real bricks and mortar, so the stakes are high. And there are so many moving parts and variables involved that trying to align everything and make it fit can be overwhelming. So many pieces to consider: Fed rate cuts, mortgage rate volatility, consumer mindset, inventory levels, insurance changes, home values, the general economy overall, not to mention the pending Presidential election. It’s a lot to figure out—especially because it’s ever-evolving.

The Current Situation

Fed rate was cut by half a point yet mortgage rates went up anyway. That’s interesting. So is the fact that inventory is increasing (steadily in some areas) while home values remain strong too. And with the election looming, everyone is holding their collective breath to see what the economy will do. Let’s take a deeper look at what this means for buyers and sellers.

Fed Rate Cuts 101

The Fed rate cut influences short-term rates, not the 30-year fixed mortgage rate—at least not directly. Mortgage rates are more closely tied to longer-term Treasury yields, which have already fallen by about 1.5% from their peak in late 2023. This means that while the Fed’s actions are important, mortgage rates have already factored in many of the expected changes.

Fickle Mortgage Rates

While many are hoping for lower mortgage rates, that didn’t happen right away. In fact, they rose! The market is more interested in the Fed’s outlook on future rates, especially as outlined in their “dot plot,” which can sway rates in either direction. Point is, it’s important to understand that the impact of a Federal rate cut may not be as straightforward as it seems. But as time marches on, the new half-point cut should ease mortgage rates. In fact, mortgage rates had already fallen nearly 2% from last year’s peak at 8.0%, reflecting what the market believes will happen in the coming months.

Bottom Line:
Even when rate cuts happen, mortgage rates could still fluctuate based on the Fed’s future outlook.

Mortgage Rates and Projections
30-Year Fixed Rate, As of 09/04/24

Source: Fannie Mae, MBA, NAR, Wells Fargo

Home Values Remain Strong

Despite market slowdowns throughout the past year, home prices continue to show strength. CoreLogic forecasts a 2.2% rise over the next year, and I’m hearing from various housing prognosticators that we could see a cumulative 20% appreciation over the next five years. For those considering a purchase, just remember…housing remains a very reliable avenue for wealth generation as a short or long-term investment.

It’s Not a Circus (But It’s a Balancing Act)

I try to remember that in times of uncertainty and market change. Inventory levels are rising, which is good, and homes are sitting on the market longer, indicating a shift toward a more balanced market. Sellers should be focusing on a strategic price point (not an inflated one), as aspirational prices tend to deter buyers. And on the buyer’s side, stop trying to time the market perfectly. It’s not only impossible, but it will make for sleepless nights. If (after conferring with a knowledgeable agent and lender) buying makes sense for you now, consider taking action.

Market Snapshot

Inventory: Active listings are rising, with homes sitting on the market longer. Median days on market have increased to over 50 days.

Pricing: Correct pricing is crucial. Price reductions are becoming more common as sellers adjust to current market dynamics.

Market Outlook: With a more balanced market emerging, both buyers and sellers need to be prepared. For buyers, getting pre-approved and understanding loan options is essential. Sellers should expect offers contingent on a multitude of thorough inspections (“over-inspecting”) and be open to repairs and improvements.

_________________________________________________________________________________

Signs of New Normalcy?

Inventory is up and the economy is headed for a soft landing. When’s the last time you heard that? It’s been a while, but availability is better (as is the economy) and this could, indeed, be a turning point for both buyers and sellers. According to Sam Khater, Chief Economist at Freddie Mac, “Our recent moderation in home price growth and increases in housing inventory are a welcoming sign for potential home buyers.” If you look back to January, inventory has been creeping up with more homes on the market. Some of that is new construction. And some of that is because of elevated home prices or buyer skepticism. Whatever the case, the increase bodes well.

 

Inventory of New Homes
Month’s Supply of Newly Built Homes, Seasonally Adjusted

Source: Census

Number of Homes for Sale Rising in 2024
Active Monthly Listing Count, in Thousands

Source: Realtor.com

_________________________________________________________________________________

A Key Shift in the Market

Another significant development is the recent drop in mortgage rates, which now sit at around 6.4%, down from over 7.5% earlier this year. This decline (influenced by the Federal Reserve’s actions and rising unemployment) is making home buying more affordable.

Inventory Is a Relative (& Regional) Thing

As we’ve emphasized in previous editions of In The Black, not all real estate is created equal—and local and regional markets can vary widely. Nationally, inventory is up about 36% compared to last year, but still down nearly 30% from pre-pandemic years. The South and West have seen the most significant increases, while the Northeast remains tight with inventory still 40-50% lower than in 2019. This variation merely underscores the importance of understanding your local market.

Inventory Up Most in the South and West
Regional Inventory Change, Percent YOY vs Pre-Pandemic (2017-2019)

Source: Realtor.com

Home Values Remain Strong

Despite concerns about potential price corrections, the general consensus among experts is that home prices will continue to appreciate, albeit at a more moderate pace. By the end of 2024, we’re expected to see a 3-5% increase in home prices, with a similar trend forecasted for 2025. While some regional markets may experience slight declines, others could see continued growth.

 

2024 Home Price Forecasts
Percent Appreciation as of 08/05/2024

 

2025 Home Price Forecasts
Percent Appreciation as of 08/05/2024

What It All Means

From the numbers, it appears buyers are gaining power and sellers must adapt. With more homes on the market and mortgage rates slightly declining, buyers are starting to regain some negotiation power. For families or individuals who’ve been waiting for better conditions, this might be the sweet spot to make a move. As for sellers, they need to ensure their homes are priced correctly and in good condition to attract these more discerning buyers. While homes are still selling relatively quickly, the dynamics are shifting. And as some experts suggest (including Lawrence Yun of the National Association of Realtors), we could see further rate cuts this year, which would likely spur more home sales and keep upward pressure on prices. 

_________________________________________________________________________________

Making Sense of a Volatile Market

Volatility. It’s a word that has been invoked countless times over the past year with regard to the state of real estate. Whether it’s the result of an uncertain economy, home valuation fears, rising rates, lack of inventory, or a combination thereof, there is no denying that the past few months have caused hesitation, even paralysis, for both buyers and sellers.

FHFA HPI Quarterly Report

To make sense of the market, I feel it is imperative to look at the Federal Housing Finance Agency (FHFA) House Price Index (HPI) Quarterly Report. It provides a snapshot of home price trends across the U.S., and it’s essential for understanding the trajectory of the housing market. It helps buyers and sellers make informed decisions by highlighting areas of growth, stability, and potential investment opportunities.

_____

_________________________________________________________________________________

Key Highlights of the HPI Report

Annual Growth: The national average of the house price index increased by 6.6% from the first quarter of 2023 to the first quarter of 2024.

Quarterly Gains: The quarter-over-quarter gain dipped to 1.1% in Q1 2024 from 1.5% in Q4 2023, indicating the second consecutive decline in quarterly gains and signs of market softening.

Regional Trends: On an annual basis, 16 of the 100 largest Metropolitan Statistical Areas (MSA) recorded double-digit increases in house prices (refer to page 20), while three MSAs saw declines (refer to page 21). Quarterly declines were observed in 22 MSAs in Q1 2024, up from 13 in Q4 2023 and nine in Q3 2023.

State Performance: House prices rose in all 50 states between Q1 2023 and Q1 2024. The top five states with the highest annual appreciation were Vermont (12.8%), New Jersey (11.6%), New York (10.9%), Delaware (10.7%), and Wisconsin (9.9%). The District of Columbia experienced a decline of -1.5%.

California: House prices increased by 6.28% from the first quarter of 2023 to the first quarter of 2024. Over the past five years, the state has seen a remarkable 50.04% increase in house prices, and since the first quarter of 1991, prices have surged by 321.04%.

Greater Los Angeles: House prices rose by 9.39% year-over-year. The five-year appreciation in this area stands at 51.94%, with an impressive 348.41% increase since the first quarter of 1991.

_____

_____

The Market Dynamics Today

Even with rates dipping below 7% lately—(hovering between 6-8% over the past six quarters)—the low supply of existing homes for sale continues to put upward pressure on house prices. The U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012. This bodes well for sellers, who can feel confident about a higher listing price, and for buyers, who can feel good about the long-term value.

_____

Home Values Are Holding Tight

Headlines suggest that some sellers are lowering their asking prices. However, a significant difference exists between lowering an asking price and declining home prices. Current data shows a range of price appreciation forecasts from major forecasters like Fannie Mae and Freddie Mac, with an average expectation of 3% price appreciation for the year.

Overall: Forecasters predict 3% to 5% price appreciation, a normal healthy year for residential real estate.

 

2024 Home Price Forecasts
Percent Appreciation as of 06/03/2024

_____

Opportunity Awaits

Caution is the operative word in a volatile market, yet new opportunities are always available for the savvy buyer (or seller). In general, the housing market continues to show resilience with steady annual appreciation despite recent signs of softening. Affordability remains a significant challenge due to high home prices and mortgage rate fluctuation. But on the brighter side, the forecast for moderate price appreciation and improving inventory levels provides a positive outlook for both buyers and sellers in the coming months. Of course, this is just the tip of the iceberg. There is plenty more data and information that we can discuss relative to your own unique situation. 

By The Numbers:

January 2024 Los Angeles Metro Area Overview
•    Median Sold Price: $750,000
•    Month-to-Month Price Change: -1.3%
•    Year-to-Year Price Change: 7.1%
•    Sales Month-to-Month Change: -14.6%
•    Sales Year-to-Year Change: 2.8%
Source: Norada Real Estate Investments

______

KEY TIP

Don’t be misled by national real estate figures. They’re not apples to apples. In Greater Los Angeles, home values and prices vary from neighborhood to neighborhood. For example, Beverly Hills is currently in a “Slight Buyer’s Market,” with a Market Action Index (MAI) of 29. Meanwhile, Pasadena is a “Strong Seller’s Market,” with an MAI of 55.

______

Beverly Hills, CA
March 17, 2024
Beverly Hills, CA’s median list price, is $9,995,000 this week, and the Market Action Index is hovering around 29, the same as last month’s Index of 29.

Beverly Hills | Slight Buyer’s Advantage

The Beverly Hills market has shown some evidence of slowing recently. Both prices and inventory levels have been relatively unchanged in recent weeks. Watch the Market Action Index for changes, as it can be a leading indicator for price changes.

______

Pasadena, CA
March 17, 2024
This week, the median list price for Pasadena, CA, is $1,765,000, and the Market Action Index is hovering around 55. This is an increase over last month’s Index of 51.

Pasadena | Strong Seller’s Market

Pasadena home sales continue to outstrip supply, and the Market Action Index has increased for several weeks. This is a Strong Seller’s Market, so if the trend continues, watch for upward pricing pressure in the near future.

______

A Bird’s Eye View

Amidst the volatility and uncertainty, there are positive signs within the Great L.A. market. Home sales saw a jump in 2024—some 250,000+ homes sold during January alone. 

“The statewide median home price for January 2024 was $788,940, reflecting a 3.8 percent decrease from December but showing a positive 5.0 percent increase from $751,700 in January 2023. Year-to-date statewide home sales exhibited a commendable increase of 5.9 percent, signaling sustained momentum in the California housing market.”
Source: Norada Real Estate Investments

Federal Interest Rates
All eyes are on next week’s Fed Announcement on rates. Spoiler alert: No rates will be cut during this meeting, which is the prevailing outlook. In fact, many feel the next rate cut will not come before June, if then. Why? Primarily, it’s due to recent inflation and consecutive months of elevated core Consumer Price Index (CPI) and Producer Price Index (PPI) figures. Additionally, positive labor market data has further complicated the Fed rate outlook, indicating that lower interest rates may be on hold for the near future and even beyond.

“A primary driver of the increase in the yield over 2023 was inflation expectations…so the higher the current rate of inflation and, more importantly, the higher the expected future rates of inflation, the higher the yield on the 10-year as investors demand to be compensated for that inflation risk in the future.”
~ Mark Fleming, Chief Economist, First American

______