As the #1 real estate team on LA's Westside, with over $6.5 billion in LA real estate sold since Smith & Berg Partners got its start, you can bet we keep a close eye on the LA housing scene. With mortgage rates peaking over 8% before easing back down, prices leveling off a bit after the recent boom, and more homes poised to hit the market, now's the time to share our insider take on why 2024 is a solid year to buy a home. Let’s get into it.
1. Interest Rates Are Still Relatively Low Historically
While mortgage rates have climbed from all-time historic lows in 2021 and 2022, breaking over 8% in the past months, they are still reasonably and relatively low when looking at the past few decades. For reference, in the 2000s, average mortgage rates ranged from 6-8%. In the 1990s, with rates peaking at 10%. So, even with the recent hikes, we are still on the lower end, historically speaking. Locking in a fixed rate for the next 30 years provides stability and insulation from volatility and future increases in inflation or Fed rates.
2505 Summitridge Drive
2. Home Buyers Regain More Negotiation Leverage
The wild seller's market of the past two years has begun cooling slightly. As inventory levels start rising back toward a more neutral territory, buyers may regain some leverage with negotiations, in some instances. In 2021 and 2022, homes were getting snatched up instantly with dozens of offers over asking prices. We do expect the market to remain competitive for the most desirable homes in prime LA ‘hoods. However, buyers may see some sellers willing to negotiate on price, credits, contingencies, repair — something we haven’t seen over the last couple of years.
211 South Muirfield Road
3. Less Ultra-Competitive Environment
Dovetailing on the point above about leverage, the full-blown hyper competition of the past two years may simmer down in 2024 as inventory levels climb back toward pre-2020 levels. As LA home buyers saw recently, it felt like thunderdome having to compete with all cash offers, waived inspections, waived appraisal values, escalation clauses and more — just to have a chance. As more homes come to market to better meet buyer demand, there should be relatively less chance of constantly getting caught in intense bidding wars on properties.
4. Home Values Have Some Room to Appreciate
While parts of SoCal may have seen some small price drops, home values in the core LA metro have dropped minimally following massive appreciation over the past decade. However, after experiencing the shockwaves of 2020-2022, there may be a rounded peak on pricing and incremental home value growth moving forward. Simply put, buying a home before rapid growth kicks back in means locking in your price before substantial value jumps occur again.
13040 Evanston Street
5. Buying Still Beats Renting, Financially Speaking
Even with higher rates and rising prices, buying real estate continues to make better financial sense over the long run compared to renting the same property in an expensive market. Penciling in your monthly housing costs may be similar or slightly higher by buying, but mortgage builds equity while paying rent does not. Despite any short term uncertainty, owning comes out on top fairly quickly in many areas, especially when thinking 5-10 years ahead.