Beverly Hills and Los Angeles Home Prices: Understanding the Path to Normalization
Beverly Hills and Los Angeles Home Prices: Understanding the Path to Normalization | Christophe Choo at Coldwell Banker Global Luxury is Your Local Real Estate Expert.
If you're contemplating a move, one of the foremost questions on your mind is likely centered around the trajectory of home prices. Despite the mixed signals in the news, it's essential to recognize that, nationally, home prices are not plummeting; rather, they are entering a phase of normalization. To grasp this trend fully, let's explore how it pertains to the unique real estate landscapes of Los Angeles and Beverly Hills.
In the real estate realm, there exists a predictable rhythm known as seasonality. It's akin to the changing seasons. Spring marks the zenith of homebuying activity, with the market buzzing with energy. Summer keeps the momentum going, but as the year progresses toward the cooler months, the fervor naturally diminishes. Home prices closely mirror this pattern, as they tend to appreciate the most when demand is at its peak.
This consistent annual cycle has given rise to a long-term trend in home prices. The graph below, drawing from Case-Shiller data spanning from 1973 to 2022 (unadjusted for clarity), vividly illustrates this seasonality:
As illustrated by the data, at the beginning of the year, home prices see growth, albeit not as pronounced as in the spring and summer. January and February typically witness subdued market activity due to fewer relocations during the colder months. However, as the market gears up for the peak homebuying season in spring, both activity and home prices surge significantly. Then, with the arrival of fall and winter, the market cools down again. Price growth moderates, but it still generally appreciates.
Following several extraordinary years in the real estate market, today's higher mortgage rates have initiated the return of seasonality. Selma Hepp, Chief Economist at CoreLogic, sheds light on this phenomenon:
"High mortgage rates have slowed additional price surges, with monthly increases returning to regular seasonal averages. In other words, home prices are still growing but are in line with historic seasonal expectations."
Why This Matters
In the upcoming months, the media will likely intensify its coverage of home prices. You can expect to encounter industry terminology like:
Appreciation: Indicates price increases.
Deceleration of appreciation: Signifies that prices are still rising, but at a slower, more sustainable pace.
Depreciation: Suggests a decrease in prices.
Don't be disconcerted by the terminology or misled by sensational headlines. The breakneck pace of home price growth witnessed in recent years was inherently unsustainable. It was inevitable for this growth to temper at some point, and what we are witnessing now is a deceleration of appreciation, not depreciation.
Remember, it is entirely customary for home price growth to taper as the year progresses. This by no means implies that home prices are plummeting. They are simply ascending at a more moderate pace.
In Conclusion
Despite the sensational headlines causing anxiety and confusion regarding the state of home prices, the reality is straightforward. Home price appreciation is reverting to its normal seasonal pattern. If you have any inquiries about the state of prices in the Los Angeles or Beverly Hills area, do not hesitate to reach out.
Call Christophe Choo at (310) 777-6342 to tour your future home "HERE" or click "HERE" to estimate your home value.