In recent years, the housing market in Los Angeles has been crazy, with double-digit increases in home prices in a single year not uncommon. But what can we expect in 2022? Will this be another stellar year for the housing market, and will it still be as challenging to purchase a new property as in 2021? Many of the local experts agree that the ongoing housing shortage will prevent a drop in price but that the extreme seller’s market may start to level off.
If you’re looking to buy a property, you might have an easier time than those who entered bidding wars in the last few years and were forced to buy their home at a higher price than anticipated. With the Coronavirus pandemic slowly resolving itself, many younger people might opt to return to the cities. At the same time, families continue to choose the suburbs, which means that there might be significant turnover in areas like View Park, CA.
Housing Market in Los Angeles: 7 Trends to Watch in 2022
1. The Housing Shortage
Since about 1970, there has been a growing housing shortage in California. There are many reasons for this, including the fact that regulations for building new properties are very strict, materials and labor are expensive, and the price of purchasing land is much higher than in other areas of the US. Thus, developers often choose a different state, which results in fewer new homes being built here.
It is unlikely that this will change in 2022, so you can expect there to be more buyers than sellers in LA and the surrounding area. This means that anyone selling a home is likely to receive multiple offers, and they won’t have to wait long. In fact, your property could be sold within 10-30 days, depending on the time of year and the exact location.
2. Immigration Affecting Prices
California is one of the areas in the world that experiences the highest levels of migration. It is sunny and warm year-round, allowing residents to enjoy their favorite outdoor activities no matter the season. What’s more, the cities offer great shopping, fine dining, and a host of cultural experiences. Many people decide to move there because they are looking for a high quality of life.
Similarly, jobs in Los Angeles and San Francisco are usually extremely well-paid when compared to the same occupation in other states. For this reason, an abundance of young professionals looking to take advantage of the opportunities. They believe that moving to LA will permanently benefit their career, and this migration of people keeps prices higher than in some other places.
3. A Leveling Off of Price
In recent years, house price increases have been in the double digits. This growth rate is much faster than inflation and wage growth, so homes have become less affordable for many people. While some experts predict another growth year in 2022, many others state that this rate is unsustainable and that there will be lower levels of increases. It’s generally accepted that prices probably won’t drop, but they also won’t increase at the same rate as before.
4. Lower Chances of Bidding Wars
Slower market growth has many positives for home buyers looking to enter the housing market in Los Angeles. Although there will still be many people looking for a property, there is a lower chance of bidding wars driving prices ever higher. We predict a slightly calmer market that is more rational than in previous years.
For sellers, this doesn’t necessarily have to be a disadvantage. If you have a great property in a desirable location, it’s likely that you will easily find a buyer in 2022. However, you will almost certainly need the help of a real estate agent who can make your home stand out from the others. They will know where to find the most enthusiastic buyers and how to best present the property.
5. Interest Rates
One of the reasons why some people predict a slightly less frenzied market is because mortgage interest rates might rise slightly. With inflation increasing across the country, interest rates for many products are spiraling. Although this isn’t going to drastically change the mortgage you can get in California, it could lead to slight changes. The current interest rates are approximately 3.14% on 30-year fixed mortgages and 2.25% on 15-year fixed mortgages.
While some experts predict that they will remain constant, others state that the 30-year rate could rise to 3.40% in the first quarter of 2022. Thus, you will need to pay more attention to the type of mortgage you get and the company you select, since not everybody will be offering good deals to home buyers anymore. Again, a competent real estate agent can give you advice about where to find the best rate for the type of mortgage you’re choosing.
6. A Return to Cities
After the slowdown of the Coronavirus pandemic, many people are looking to restart their careers. With “the great Resignation” of 2021, a lot of new jobs have become available, and many professionals are on the lookout for a better opportunity. Thus, we can expect the cities to once again become a hub of activity. Young people from all over the country are likely to migrate to Los Angeles and San Francisco in pursuit of employment.
For condos and houses in central areas, this could mean greater-than-average price increases within the major cities. While some of the new arrivals will purchase their home, many others will be looking to rent. Thus, a buy-to-let in a downtown area could be a good opportunity for property investors.
7. Continued Expansion to the Suburbs
In contrast to the younger, career-focused immigrants, families are still moving to the suburbs or the outskirts of their city. Many have discovered during the pandemic that their current home no longer meets their needs and that they need to move to a greener, more accessible location such as View Park, CA. At the same time, many elderly people still residing in their suburban homes are deciding to sell at the top of the market and move to a different area.
As a result, we will likely see a high turnover in upscale, suburban neighborhoods with good schools and amenities. If you have a property in such a location, it could be a good time to sell because there will be many young families ready to snap up your home.
2022 Could Be Your Year
2022 promises to be an interesting year for the housing market in Los Angeles because there are several trends that affect the current and future house prices. It is likely that California homes will continue to increase in price, but in a more moderate way than during previous years. This could mean that conditions remain favorable for sellers and that buyers will have an easier time, as well.
Several factors, such as high immigration, a return to the city after the Coronavirus pandemic, and a continued expansion to the suburbs will ensure that homes won’t lose their value in the near future. If you’re looking to buy or sell in the next year, now is a good time to get in touch with a local real estate expert. Contact Teresa Mack today and book a meeting to discuss your situation and find out how to best proceed.