How the Federal Reserve’s Next Move Could Impact the Housing Market in Los Angeles and Beverly Hills, CA
How the Federal Reserve’s Next Move Could Impact the Housing Market in Los Angeles and Beverly Hills, CA | Christophe Choo at Coldwell Banker Global Luxury is Your Local Real Estate Expert
As we enter September, the Federal Reserve (the Fed) is once again in the spotlight. Many experts expect the Fed to cut the Federal Funds Rate in their upcoming meeting due to cooling inflation and a slowing job market. Mark Zandi, Chief Economist at Moody’s Analytics, anticipates this cut, stating:
“They’re ready to cut, just as long as we don’t get an inflation surprise between now and September, which we won’t.”
But what does this potential rate cut mean for the housing market, particularly in high-demand areas like Los Angeles and Beverly Hills? Whether you're a buyer or a seller in these luxury markets, understanding the implications could be key to your next move.
Why a Federal Funds Rate Cut Matters in Los Angeles and Beverly Hills
The Federal Funds Rate has a direct impact on mortgage rates, which influence buying and selling decisions across the nation, but especially in affluent markets like Los Angeles and Beverly Hills. Alongside broader economic factors, mortgage rates are influenced by shifts in the Federal Funds Rate.
When the Fed cuts rates, it signals a loosening of economic conditions, and mortgage rates generally respond by trending downward. In luxury real estate markets like Beverly Hills, where properties often require significant financing, even a small decline in mortgage rates can affect affordability and buyer interest.
Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), explains:
“Once the Fed kicks off a rate-cutting cycle, we do expect that mortgage rates will move somewhat lower.”
In cities like Los Angeles and Beverly Hills, where buyers are often looking at multi-million dollar properties, even minor rate cuts can significantly lower monthly mortgage payments, potentially increasing buyer activity. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), anticipates multiple rate cuts, stating:
“Generally, the rate-cutting cycle is not one-and-done. Six to eight rounds of rate cuts all through 2025 look likely.”
Projected Impact on Los Angeles and Beverly Hills Mortgage Rates
Experts expect mortgage rates to gradually decline as the Fed begins to cut the Federal Funds Rate. In high-end markets like Los Angeles and Beverly Hills, this could drive both buyer and seller activity, especially for those who have been hesitant to move due to higher interest rates.
The graph below (not shown) illustrates recent forecasts from major institutions like Fannie Mae, MBA, NAR, and Wells Fargo, showing a steady decline in mortgage rates through 2025. This trend presents two significant advantages for the Los Angeles and Beverly Hills housing markets:
1. It Helps Alleviate the Lock-In Effect
Many homeowners in Los Angeles and Beverly Hills may feel “locked in” to their current properties because their existing mortgage rate is far lower than today’s rates. With the anticipated rate cuts, some of this pressure could ease, making the idea of selling and upgrading to a new luxury home more appealing.
However, the Beverly Hills market might not see an immediate flood of listings, as many homeowners could remain cautious about giving up their existing mortgage rates. Nevertheless, even a small drop in rates could encourage homeowners to list, especially those looking to capitalize on the steady appreciation of property values in these coveted areas.
2. It Should Boost Buyer Activity
A rate cut could also drive renewed buyer interest in the Los Angeles and Beverly Hills luxury real estate markets. High-end buyers, often sensitive to shifts in financing costs, may see the reduced mortgage rates as an opportunity to purchase a home at a lower overall cost. In neighborhoods like Beverly Hills, Bel Air, and Holmby Hills, where properties frequently range from $5 million to over $20 million, any decrease in financing costs can make a significant difference.
What Should You Do?
While a potential rate cut won’t drastically lower mortgage rates overnight, it will likely contribute to a gradual easing in financing conditions, making luxury real estate more attractive to buyers and sellers alike. That being said, waiting for the “perfect” time to buy or sell can be challenging in a market as dynamic as Los Angeles and Beverly Hills.
Jacob Channel, Senior Economist at LendingTree, offers wise advice:
“Timing the market is basically impossible. If you’re always waiting for perfect market conditions, you’re going to be waiting forever. Buy now only if it’s a good idea for you.”
Bottom Line for Los Angeles and Beverly Hills Homeowners and Buyers
The expected Federal Funds Rate cuts are poised to gradually lower mortgage rates, which could help ease some of the pressure on both buyers and sellers in the luxury real estate markets of Los Angeles and Beverly Hills. Whether you’re considering selling your current home or looking to buy a new property in these areas, now could be a prime time to start exploring your options.
Let’s connect to discuss how these changes could impact your specific real estate goals and prepare you for the opportunities that lie ahead in these highly competitive markets.
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