Predictions for the LA Real Estate Market
Recently, Zillow’s Chief Economist Stan Humphries released his four real estate predictions for 2014. Some of Humphries’ predictions could be considered bold and a little out there.
Humphries predicts that in 2014 we will see:
- Home values will increase by 3-percent nationwide.
- Mortgage rates will finally crack the 5-percent barrier.
- Lenders will relax the onerous restrictions that have been affecting borrowers since 2007.
- The homeownership rate will drop to its lowest point in 20 years.
Humphries’ first prediction is not too out there. Home values will increase, and we’ve already seen examples of that in the Los Angeles real estate market, but Humphries’ prediction of just a 3-percent increase nationwide is very conservative and depends on his next two predictions coming true.
“Home value gains will slow down significantly because of higher mortgage rates, more expensive home prices, and more supply created by fewer underwater homeowners and more new construction,” Humphries stated.
It’s the last prediction that causes people to pause and ask, “What?”
Saying that homeownership rates will plummet to a 20-year low is like saying that gas prices will be under a dollar a gallon again. It’s unheard of. Homeownership and the dream of owning a home has become so ingrained in American culture that it’s almost impossible to imagine that we will be going backwards, but that just might be the truth.
Higher interest rates and rising home costs – and a still struggling job market – means that less people will be able to afford to climb on to the property ladder.
But what does this mean for real estate in Los Angeles? What does this mean if you have a house for sale in LA? Or if you plan to lease a home in Los Angeles out?
Well as a seller, whether you are listing a Bel-Air home or a house on the Sunset Strip, your home gaining value is a good thing. Less good is the increase in interest rates, but if the corresponding relaxation of lending standards occurs, that’s almost a wash. What is less clear is the effect that a dramatic reduction in homeowners will have on the market. Certainly the LA rental market will strengthen, but what effect will it have on the home sales market? Well, we will just have to wait and see.
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Susan Andrews | Estates Director
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Susan Andrews is your ultimate real estate source for Los Angeles, California and surrounding communities.
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