Katie Davis has whiplash.
A long-time renter, she’s in the market for her first home, but needs low mortgage rates to afford the monthly payments. Anything less than 6% would be possible.
Since last year, she has been keep an eye on them Like a hawk. He saw them fall from 7% to 6.5% last spring, until they finally fell below 6% in February.
“I felt like my time had finally come,” Davis said.
A few days later, a series of air strikes sparked the Iran War, causing mortgage rates to rise. Then, in April, the US signed a ceasefire agreement, which brought rates down again. During that period, Davis has wavered between pessimistic and optimistic on a weekly basis.
“I just want a small starter house in El Sereno, but somehow it depends on whether the Strait of Hormuz is open or not,” she said.
A small fluctuation in mortgage rates may not feel like much, but for many first-time home buyers, the margin of affordability is very thin in Southern California’s expensive market, and $200 more for a monthly payment is the difference between sticking with a loan or getting crushed by it.
LA’s housing market was already cold; According to Zillow, only 3,072 homes changed hands in L.A. County in January, the lowest monthly total in three years. The Iran war brought it all to a halt, sending mortgage rates back to 6.46% and pulling potential buyers out of the market.
In February, the average LA home for sale spent 80 days on the market – the longest average in the past five years, according to redfin. Additionally, 17.6% of home listings had price reductions, up 1.4 percentage points year over year.
There is a growing gap between the number of sellers and buyers in LA’s market, mirroring a national trend. according to a march redfin reportThere are 630,000 more sellers than buyers in the active US market – the largest difference on record since 2013.
Brett Parsons, A real estate agent Craig Strong at Compass, with the group, said the war is having a psychological impact on buyers.
“Buyers have been slow to pull the lever,” he said. “It’s human nature. When a big event happens, buyers get nervous.”
He said that if the ceasefire holds, it may calm their collective nervousness.
“It will have a momentary effect, no doubt about that. Humans are very reactionary,” Parsons said.
He cited skyrocketing insurance rates and said mortgage rates are only one part of the puzzle in the Los Angeles market. Hollywood’s dismal job market As for other factors keeping demand down.
But sub-6% rates This would be the fastest way to bring cautious buyers back into the market, so sellers are hoping the ceasefire will stabilize rates. Until then, for buyers, constantly changing rates mean that even with more leverage, it still doesn’t feel like a buyer’s market.
“February was brutal because we thought we were in a buyer’s market. A lot of properties had been sitting since the fall,” said Ashley Moorehead, an attorney who has been buying homes since December. “But just before the war rates went down, and everyone started coming out together to bid on houses that had been on the market for more than 20 days.”
Moorhead said that for every house he bid on, there were at least four other offers. In one case, his bid for a house in Pasadena exceeded $225,000.
His ideal budget was $1.25 million. He ultimately spent $1.39 million.
Depending on how you look at it, Moorehead got lucky. Just before the war began he had set a mortgage rate of 5.99%. If she had waited a month the rate would have been 6.5%. But if the war had never started in the first place, he said, it could have been 5.75% or less.
“I’m not optimistic that rates will go down,” Moorhead said. “I think time in the market beats timing the market.”
Real estate agent Matthew Hoult said the spring market has been slow for a few reasons. For buyers, affordability is most important, and many are not estimating what they can afford if rates rise. For sellers, many have the “golden handcuffs” of low interest rates during the epidemic, so they are not encouraged to move.
“It’s not as simple as supply and demand because there’s a lot of pent-up demand,” Hoult said. “Many people want to buy a home, especially Millennials and Gen Z, but there is so much uncertainty over mortgage rates and cost of living that they are not choosing to buy a home.”
Two of his clients locked in a 6.1% mortgage rate in December. If they had waited until the spring, they would have been paying $200 more per month on the million-dollar loan.
“The frustrating thing is that no one really knows when this will resolve. Oil may stabilize, tensions may ease, but there is no crystal ball,” he said. “I’ve seen people wait for better rates and end up paying more six months later because the prices kept rising while they sat on the sidelines.”
He said that for some, the market’s suspended state could be an opportunity, pointing to a famous quote from Warren Buffett: “Be fearful when others are greedy, and greedy when others are fearful.”
Hoult said, “Now is the time to find deals. Use the war to advantage.” He urged buyers to seek concessions from sellers who are tired of waiting for more buyers to emerge. “Ask them to cover the fees, lower the rate or buy at a lower sales price.”
Real estate agent Daniel Milstein said the market is already bouncing back, but sales numbers don’t show that yet.
“There is a clear gap between what people are reading in public data and what is actually happening on the ground,” he said. “Most widely cited housing metrics are 30 to 60 days behind reality, meaning the narrative many people are responding to today is already out of date.”
He cites as evidence the new escrows, which are not recorded as sales until they close weeks or months later. According to his partner at an escrow company, Milstein said, new escrows in the L.A. County markets have increased by 50% in the past few weeks compared to the previous month.
“Since most of the current activity exists in escrow and has not yet closed, it is not reflected in the public record. Over the next two to four weeks, we expect to see a notable influx of recording transactions,” he said. “In other words, the market is already moving – people just haven’t seen it yet.”
