Navigating the current real estate market in Los Angeles and Beverly Hills, CA: Bid farewell to the era of “unicorns.”
Navigating the current real estate market in Los Angeles and Beverly Hills, CA: Bid farewell to the era of "unicorns." | Christophe Choo at Coldwell Banker Global Luxury is Your Local Real Estate Expert
Comparing real estate metrics from one year to another can be challenging in a normal housing market. That’s due to possible variability in the market making the comparison less meaningful or accurate. Unpredictable events can have a significant impact on the circumstances and outcomes being compared.
However, when we take a closer look at the real estate landscape in Los Angeles and Beverly Hills, CA, it becomes even more apparent that comparing this year's numbers to the past couple of years is virtually meaningless. These areas have their own unique dynamics and factors that influence the housing market.
The pandemic has had a profound effect on the real estate market over the last few years, not just nationally but also in cities like Los Angeles and Beverly Hills. The demand for homes skyrocketed as people sought out properties with home offices and spacious backyards. This surge in demand was fueled by both first-time buyers and those looking for second homes in desirable locations.
In addition to the increased demand, historically low mortgage rates further stimulated the market. Buyers were able to secure financing at incredibly favorable terms, making homeownership more accessible and attractive. Furthermore, the implementation of forbearance plans helped to stave off foreclosures, effectively eliminating them from the market.
As a result of these factors, home values in Los Angeles and Beverly Hills reached unprecedented levels of appreciation. The market experienced a level of growth and desirability that had been greatly sought after but difficult to find—a true "unicorn" year.
However, as we move forward, the housing market is gradually returning to a more normal state. The "unicorns" have galloped off, and it's essential to understand that comparing today's market to those exceptional years is not a meaningful exercise. Here are three examples that illustrate why:
- Buyer Demand: While headlines may suggest a decline in buyer activity, it's important to note that we are still witnessing significant home sales on a daily basis. In the United States, over 10,000 houses are sold each day. When we compare the current buyer activity to more normal years, such as 2017-2019, we can see that buyer demand remains strong, as indicated by data from ShowingTime.
- Home Prices: Today's home price increases cannot be compared to the exceptional growth observed in 2020 and 2021. Those years recorded historic appreciation numbers that set them apart. By examining home price trends during the more typical years of 2017-2019, we can observe a return to more normal home value increases. While there were some months of minimal depreciation in the latter half of 2022, the market, according to Fannie Mae, has since returned to a more balanced appreciation trend in the first quarter of this year.
- Foreclosures: Recent headlines have highlighted alarming increases in foreclosure filings. However, it's crucial to consider that these percentages represent increases over historically low foreclosure rates. With the end of the foreclosure moratorium, there will inevitably be a rise in foreclosure numbers compared to the past three years. Nevertheless, when we put the current figures into perspective, we can see that we are actually reverting to the normal filing rates seen during 2017-2019. While it's distressing for the families affected, it's important not to sensationalize these numbers.
In conclusion, it's important to approach housing market news with a discerning eye, especially when it comes to comparisons with the "unicorn" years. Headlines may stir up unease, but it's crucial to consult with a real estate expert who can provide you with proper perspective and guidance tailored to your needs. If you're in Los Angeles or Beverly Hills, let's connect so that you have an experienced professional by your side to help you navigate the unique dynamics of these local markets.