Market Update: 2024 Q1 Insights

Market Update: 2024 Q1 Insights

When it comes to Los Angeles real estate, micromarkets stand out as distinct neighborhoods with a unique pull for a select clientele. While everyone is familiar with the distinct areas of Beverly Hills and Santa Monica, the diversity of Los Angeles neighborhoods expand far beyond simple exclusivity. These micromarkets act as stable zones within the national real estate scene, they show a surprising resilience to economic ups and downs, thanks to a steady demand that remains unaffected by broader uncertainties. Part of that demand is due to the global allure of these micromarkets, and Los Angeles as a whole. Combined with the already consistent demand from locals- these areas are ideal for investors who are looking for a long term holding.

Changing Interest Rates & Demand

The tide has not turned just yet, but with interest rates slowly going down, it's a great time for people looking to buy a home. Right now, the average mortgage interest rate is around 6.5%, a significant drop from last year when it was closer to 8%. These lower rates mean that getting a mortgage is more affordable for buyers. While it’s not comparable to the ultra-low rates of 2020 & 2021, the dynamics of that market are still in recent memory. Those who are looking to wait for even lower drops in interest to start the home buying process may find that the higher demand of the market is an even greater hindrance. Not only will they be dealing with higher prices, but in a city like Los Angeles where inventory is so limited- timing becomes everything.

Smart Deals with ULA Taxes:

In the luxury Los Angeles market, standard city and county taxes are already nothing to sneeze at. The introduction of ULA, also known as the “mansion tax”, establishes an additional 4% tax on all real estate property sales priced or valued at or above $5 million and a 5.5% tax on real property sales priced or valued at $10 million or greater. Both sellers and buyers are aware of these changes and are still looking to make deals, oftentimes just under these thresholds if need be. While it hasn’t stopped anyone in their tracks looking to buy or sell, it can sometimes push a deal one way or another if the price is right.

Challenges in Beverly Hills Construction:

Judge Kurtis Kin has issued a ruling that prohibits new construction permits in Beverly Hills because of a lack of affordable housing in the area. The conflict stems from the Los Angeles Superior Court and the city's laws which dictate that a certain percentage of new developments in the area need to serve lower income families. For developers and agents, there’s no need to panic just yet. Lawyers on the Beverly Hills side have already submitted an appeal for the court order and officials are still issuing building permits for the time being. As we keep an eye on the progress of appeals, some agents are speculating on the potential effects of this ruling. It’s possible that prices could temporarily surge on homes and new constructions that have already been remodeled as homes that need work would be seen as being taken out of the possible inventory for many buyers.

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