Thoughts on L.A. housing and higher interest rates (Los Angeles: sale, rental)

[69Charger]

What are everybody's thoughts on the interest rates going up on mortgages? What are you seeing in terms of home prices this month? Up or down? Predictions for next year?

(Only local L.A. thoughs)

[Lablitz]

I think home prices will keep going up because economy is good. everyone seems to have jobs and unemployment is at an all time low. Here is zillow link for example, not sure if it is accurate and estimates keep changing every month.

Los Angeles CA Home Prices & Home Values | Zillow

Zillow says LA housing went up 8% in 2016. I think it will repeat so in 2017, prices will go up another 8%.
Zillow estimates housing will go up 2% in 2017.

Mortgage rate will go up 1% in 2017 but does not affect the housing prices in my opinion.

[Mike121]

Probably depends on how many buyers are cash buyers versus how many buyers are getting a mortgage. The cash buyers don't care about mortgage rates.

So the trendy areas or Chinese areas will have property values that will go up, but, the "regular person" neighborhoods will go down slightly.

[disgruntled la native]

Originally Posted by Lablitz

I think home prices will keep going up because economy is good. everyone seems to have jobs and unemployment is at an all time low. Here is zillow link for example, not sure if it is accurate and estimates keep changing every month.

Los Angeles CA Home Prices & Home Values | Zillow

Zillow says LA housing went up 8% in 2016. I think it will repeat so in 2017, prices will go up another 8%.
Zillow estimates housing will go up 2% in 2017.

Mortgage rate will go up 1% in 2017 but does not affect the housing prices in my opinion.

"everybody" has a job but most don't have jobs that can buy a home in LA. many of these jobs are part time as well.

unemployment is "low" but that's because nearly 100 million people aren't in the labor force and are not counted.

the myth of the obama recovery.

but I agree that home prices will continue to remain high or even go up in LA. foreign money influx, supply and demand.

[TR95]

I think history will somewhat repeat itself. Many in the summer/fall of 2003 were worried about increasing interest rates, and there was a buying frenzy with multiple offers, people trading up to be in their "forever" home to take advantage of the low rates back then, which if I remember correctly were about 5.25% for a 30 year. Then one to two years go by around 2004/2005 and rates are a little higher 5.625%/5.75%. Prices are 20+% higher and fewer people can afford a 30 year mortgage, so lenders loosen standards, more people take out interest only 1/1, 3/1, 5/1 ARMS and prices got more out of control for the next 6-12 months. Then everyone knows what happened.

When will this happen and to what extent will there be a drop is anyone's guess. But if I had to guess, barring any unforeseen major catastrophe I think we have another 2-3 years of gains, albeit not near the same scale as the last 4-5 years. The good areas will continue to be in high demand and may suffer a 10% decline, and the outer not so prime areas will experience a much larger decline. It won't happen all of a sudden, as the last cycle peaked in 2006/2007 and hit its low in 2011/2012, so the next bottom could be in 2023/2024. Again, just a guess based on historical trends and current macroeconomic factors. If lenders don't loosen then there will likely be a period of flat to slightly negative growth. But lenders have to make money so the greed will somehow kick in.

[ryanms3030]

Prices will keep going up like they did and still are in the Bay Area and NYC. As others have mentioned, a lot of the property in LA is still being purchased by cash buyers so interest rates don't matter.

[Lablitz]

Originally Posted by Mike121

Probably depends on how many buyers are cash buyers versus how many buyers are getting a mortgage. The cash buyers don't care about mortgage rates.

So the trendy areas or Chinese areas will have property values that will go up, but, the "regular person" neighborhoods will go down slightly.

There are alot less chinese all cash buyers in 2016 because of a new law from China. The new law makes it harder to take cash out of china. Therefore a rich Chinese area like Arcadia, CA went down 4% in 2016. compared to Los Angeles went up 8% in 2016.

Arcadia CA Home Prices & Home Values | Zillow

[ryanms3030]

Originally Posted by Lablitz

There are alot less chinese all cash buyers in 2016 because of a new law from China. The new law makes it harder to take cash out of china. Therefore a rich Chinese area like Arcadia, CA went down 4% in 2016. compared to Los Angeles went up 8% in 2016.

Arcadia CA Home Prices & Home Values | Zillow

The arabs will buy up the rest

[BRinSM]

Originally Posted by ryanms3030

The arabs will buy up the rest

There are a lot less wealthy arabs than chinese, so I'm not sure that will be the case.

anyways, more important to me than home values are rental prices. i doubt I'll sell my house any time soon, but I may move and turn my house into a rental property at some point. a stronger economy, limited new building, and increased home prices certainly help me on this front. even if sale prices stagnate or decline a bit, the stronger economy and increased savings rates should keep rent prices from declining. i'm not too worried about the low end (e.g. part time workers and the under employed) as renting my house would require a healthy family salary, probably double the median at a minimum.

[ryanms3030]

Originally Posted by LA Guru

Arabs aren't moving into Arcadia. Who are you joking lol.

Prices will probably stay pretty flat for 2017.

The saying is "who are you kidding?" LOL

Anyway, the Chinese aren't buying up property in Arcadia to live there either, they are buying investment property