The real estate market throughout the United States has experienced unprecedented volatility due to the COVID-19 pandemic. Although a portion of this can be attributed to the evolution of consumer preferences and the economic downturn, the prevalent cause of the United States real estate boom was the historically low mortgage interest rates. Therefore, to make a financially educated decision on whether now is the right time to invest in West LA homes, it is crucial to gather context on how and why California interest rates are what they currently are.
Historically low mortgage interest rates
At the start of the pandemic, the entire country came to a standstill, resulting in a massive economic decline. In the hope of stimulating the economy and avoiding a tide of foreclosures and defaulted loans, the Federal Reserve slashed mortgage and refinancing interest rates - dropping them to historically low levels, from 3.9% to nearly 3%, thereby creating a strong seller’s market. Interest rates have gradually been rising since those levels in March of 2020 to a 3.28% thirty-year fixed-rate in December 2021, the highest they’ve been in eight months.
This rate is still historically low, especially by pre-pandemic standards, but experts predict these depressed interest rates to be only temporary. Those on the fence when it comes to buying West LA homes should act now.
Economic factors that influence interest rates
Mortgage interest rates are influenced by Federal Reserve decisions and by inflation, economic growth, the bond market, and local housing market conditions. The pandemic caused a wave of supply chain issues after the decrease in demand in 2020 due to difficulty finding workers and supplies like lumber, steel, and microchips once the market started back up. As a result, inflation reached 6.8% in November of 2021, increasing throughout the remainder of the year.
The United States has not seen this level of inflation since the 1980s, and the combination of low mortgage rates is incredibly rare. Though this is only temporary, it does make borrowing more attractive at the present moment.
The United States has not seen this level of inflation since the 1980s, and the combination of low mortgage rates is incredibly rare. Though this is only temporary, it does make borrowing more attractive at the present moment.
Economic recovery will increase rates
The Federal Reserve cut interest rates to counteract the economic slowdowns, so it stands to reason the economic recovery will only increase those rates in turn. The second anniversary of the United States’ start of the pandemic is just around the corner, but the country has learned to thrive despite its persistence. The unemployment rate has decreased and the market is slowly recovering from the initial shock which led to the emergency rate drop. While there are still mild economic slowdowns from different COVID variants such as the recent Omicron, the economy has continued to improve. As a result, the COVID era stimulus rates and bond-buying programs are no longer necessary.
Federal officials forecast three rate hikes to a 0.9% increase by the end of the year and a reduction of bond-buying by March. Earlier projections had one rate hike and a benchmark of 1.8% by 2024, rather than the now projected 2.1%. These increases signal to those buying West LA homes that right now is the most opportune time to explore the market and take advantage of these temporarily advantageous conditions before they end.
Federal officials forecast three rate hikes to a 0.9% increase by the end of the year and a reduction of bond-buying by March. Earlier projections had one rate hike and a benchmark of 1.8% by 2024, rather than the now projected 2.1%. These increases signal to those buying West LA homes that right now is the most opportune time to explore the market and take advantage of these temporarily advantageous conditions before they end.
How do the interest rates impact the quality of a West LA homeowner’s investment?
These record-low mortgage interest rates are an attractive incentive for real estate all over the nation. Still, they become even more appealing considering the state of the West LA real estate market. Along with the lower sale-to-list price and reduced competition with other homebuyers, West LA real estate is also known for being one of the best long-term real estate investments.
Los Angeles has a property appreciation rate that amounts to approximately 13.4% annually, according to Norada. Another source, NeighborhoodScout, estimates a 6.13% average annual appreciation rate, whereas the total appreciation for Los Angeles homes since 2000 was reported to be as high as 264.61%. Even with the pandemic slowdowns, prices have risen steadily and shown West LA homes to be a sound investment.
Mortgage interest rates have never been in a more unique position than during this pandemic. The historic lows, slow increases, and current high inflation are great reasons to explore your real estate options no matter your location. These economic factors, the attractive local housing market due to the pandemic, and resilient high appreciation values in West LA present significant motivations to invest in West Los Angeles property. If you’re ready to take the next step and begin shopping for West LA homes, reach out to trusted local agent David Dippong for guidance.
Los Angeles has a property appreciation rate that amounts to approximately 13.4% annually, according to Norada. Another source, NeighborhoodScout, estimates a 6.13% average annual appreciation rate, whereas the total appreciation for Los Angeles homes since 2000 was reported to be as high as 264.61%. Even with the pandemic slowdowns, prices have risen steadily and shown West LA homes to be a sound investment.
Mortgage interest rates have never been in a more unique position than during this pandemic. The historic lows, slow increases, and current high inflation are great reasons to explore your real estate options no matter your location. These economic factors, the attractive local housing market due to the pandemic, and resilient high appreciation values in West LA present significant motivations to invest in West Los Angeles property. If you’re ready to take the next step and begin shopping for West LA homes, reach out to trusted local agent David Dippong for guidance.
