This shift began in Q2 as the Fed acted aggressively to ease inflation by raising the fed funds rate which resulted in mortgage interest rate hikes and volatility. As Q1 began, rates* were 3.2%, then inched up to 4.72% at beginning of Q2 to a peak of 5.81% in the 3rd week of June and are stabilizing today around 5%. Borrowers lost $200k+ of purchase power.
The S&P was down 14% YTD by June. Oil and other commodity prices were on the rise, supply chain issues and shortages continued confirming that inflation was not ‘transitionary’. Affordability and sentiment changed. Many say we are in a recession or will be in the next 12 months. And yet transactions are still happening, just at a slower pace and with fewer offers. Dare we say ‘normalizing’ after the wild real estate frenzy of the last 2+ years?
LA remains an international city and Hancock Park is a coveted neighborhood. Regardless of headlines, there are always sellers, buyers and renters based on traditional factors – from family formation to empty nesting, divorce, job transfers and death.
Implications for Buyers: Bidding wars have eased. Now there are more options and less competition than during the pandemic.
Implications for Sellers: There are still benefits from the housing shortage and limited inventory, especially at certain price points and locations. Many Buyers of Hancock Park real estate pay cash and not as interest rate sensitive as the broader market. That said the buyer pool is smaller than it was over the last 24 months based on affordability. As always it is wise to prepare your property for the market properly including strategic pricing to meet the market where it is, not based on your neighbor’s sale last year.
Forecast: Geopolitical, macro-economic and local factors will continue to influence sentiment. A housing market ‘crash’ in Hancock Park is unlikely with recession based on supply. Most homeowners either own their homes outright or have mortgage rates locked below 4%, lending standards have been tighter than the years proceeding 2008, foreclosures are limited and running behind historic averages and more housing is needed to meet buyer demand nationwide. Price appreciation is decelerating and some segments will soften. The pace of sales will likely slow based on limited supply. Mortgage rates are projected to stabilize in the 5% range and possibly rise into 2023. The California Association of Realtors projects mortgage rates to be 6.5%, best case in 2023 and 8%, worst case if inflation is not controlled and assuming a fed funds target rate between 3 – 3.5%
*Freddie Mac 30 year fixed rate
Across the city there has never been a year like 2021 and there were many pending sales at the beginning of 2022. The highest end of market started to slow in June but there were still 73 pending sales over $5 million.
At the end of June 2022 there were 573 closed sales over $5 million versus 571 at this time last year.
Of these, 194 sales were over $10+million versus 181 at this time last year.
- 54 were $20+ million versus 45, +20%. 2 were in Hancock Park. Bel Air has 11 sales, Malibu 10 and 8 in Beverly Hills
- 15 were $30+ million, + 67%.
The Loveland Carr Group has courageously navigated changing markets before, helping Hancock Park and Los Angeles residents with their real estate decisions since 1980.
Contact us if you would like to discuss your specific situation and how you might plan your next move!
