Why 2022 is Still a Good Time to Buy in Los Angeles
In addition to an extremely tight housing market in Los Angeles, prospective homebuyers are also now facing the prospect of a rising cost of living on everything from cars to gas to groceries to consumer goods.
This in turn, has triggered a more aggressive stance by the Federal Reserve, which has
thus far, raised interest rates for a 30-year, fixed-rate mortgages from an all-time low of 2.65% at the beginning of 2021 to nearly 5.8% by June 2022.
However, despite the rising headwinds facing the real estate market in California, there are also reasons for potential homebuyers to overcome the dreaded “buyer fatigue” to get their foot on the property ladder in 2022.
First, interest rates are expected to continue to normalize back to pre-pandemic levels where rates above 5% were the rule, not the exception.This is an important consideration for future homebuyers because for the projected $830,000 median-priced home in California this year, each 0.5% increase in mortgage rates translates into roughly $200 per month in additional mortgage payments.
Another important factor for homebuyers to consider is the outlook for home prices. Even with the rise in interest rates, housing demand still far outstrips housing supply in LA and this trend is expected to generate more upward pressure on home prices. California Association of Realtors (CAR) is currently forecasting that the median home price will rise by 5.2% in 2022, but there is consensus amongst other forecasters that prices will continue to rise as well.
Taken together, that means that the cost of waiting until next year will be two-fold: paying higher prices at even higher interest rates—something that will have significant financial implications for homeowners over a 30-year loan period.
Finally, the white-hot market characterized by extreme competition amongst buyers that prevailed last summer, has ebbed slightly creating a bigger window of opportunity for would-be homeowners. Although still very tight by historical standards, homes are staying on the market slightly longer now than they were in 2021. In addition, the percentage of homes selling for more than the asking price has also fallen slightly—another positive development for those submitting offers.
As always, the decision on when is the “best time to buy” a home comes down to the individual personal and financial circumstance. Rates that are still near historic lows, and the prospect of both higher prices and higher interest rates in the future suggest that, for those in a position to be able to do so, 2022 could be a good time for many homebuyers in Los Angeles to finally achieve the "American Dream" of homeownership .
Source: California Association of Realtors (CAR)