Earlier this year, I wrote about what would happen to the Los Angeles real estate market in 2016, so I feel it is only right to reflect on the expectations for, and the realities of, what happened this past year. Probably everyone can agree, 2016 was a tumultuous and unpredictable year in world events, politics, and pop culture. However, the 2016 Los Angeles real estate market did more or less what was expected.
So... what did we get right and what did we get wrong? Our grades for each prediction are below.
Prediction #1: Housing prices will stabilize
Grade : C for what was expected (but a B+ for the market!)
While economists did predict further improvements to the housing market, it was expected to slow down. In our 2016 predictions blog we wrote, "'Affordability is dulling demand,' said Leslie Appleton-Young, chief economist for the California Association of Realtors, which projects the state's median home price to increase 3.2% this year, about half the pace of the 6.2% gain in 2015." However, the median home price increase was the same as 2015 and was again 6.2%.
Prediction #2: The rise in mortgage rates will not have a big effect in 2016
Grade : B (no effect seen, but rates didn't rise until November)
The rise in mortgage rates did not have a big effect in 2016, however, it is not as easy as saying this prediction was correct. We did see an increase in mortgage rates, but not until the beginning of November. Combined with the holidays and the election, any effect on the Los Angeles real estate market that directly connects to the mortgage rate increase cannot be seen at this time. While the jury is still out on how much of an impact rising mortgage rates will have on the market, we should see the impact in 2017 due to additional rate increases and as we see what a Trump presidency means for the economy and real estate.
Prediction #3: Luxury home sales will have a banner year
Grade : A or C (depending on how you gauge market performance)
While there were some incredible sales of 2016, for example The Playboy Mansion sold for $100M, Owlwood sold for $90M, and a spec home on Carolwood sold for $90M (according to title records, $100M according to MLS). However, the numbers show there was more sales in 2015 than 2016. While volume was down, the sales prices were up.
|2015||Average Price||2016||Average Price|
|$10 - $19.999M||84||$13,444,286||73||$13,390,377|
|$20 - $29.999M||18||$22,648,694||13||$23,635,769|
|$30M and over||18||$44,530, 067||10||$52,519,850|
Prediction #4: Rents will increase
Grade : A+
Congrats, Los Angeles, we did it again! The Los Angeles rental market remains at 7th highest in the nation but that wasn't too much of a stretch to expect this to happen. Lack of inventory and strong demand of renters kept the rents rising. For a one-bedroom, rents increased by 5.2% from 2015 with the median price being $2,030 per month.
Prediction #5: 2016 will be a great year for sellers to act
Grade : A
As mentioned in Prediction #1, the median home price continued to increase and a much higher pace than was anticipated by experts. While the median prices were expected to increase by half of 2015, the sales prices continued to rise at twice the expected rate. While volume was down in the high end luxury market, sales prices were up and the highest end saw an unheard of 3 sales over $90M, a number that had only been eclipsed once ever in Los Angeles. If you didn't sell in 2016, there is a good chance you are going to be wishing you did, which I will go into our next blog - Los Angeles Real Estate Predictions for 2017.
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