Los Angeles, CA

Opinion: 2022 LA Home Value Appreciation is Going to Boom

Glenn Shelhamer

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My hands are up. I've got the white flag. Don't shoot the messenger. I'm sure you'll agree, the 2021 real estate market was like a high-speed bullet train for buyers — one full of sharp turns and an unexpected passenger count. And, if you were brave enough to get on board, you're probably wondering what's in store for the 2022 market.

It's hard to make predictions, especially about the future. But I'm going out on a limb and saying that the LA home value appreciation rate is going to be high in 2022. Why?

Spoiler Alert! There is no real estate bubble and 2022 won't be a price correction year. Sorry, Charlie. The Southern California real estate market will remain a seller's market and stay hotter than ever. Here's why:

Tight inventory 

Today there are half as many active single-family homes or condos on the market as there were last April 2021. Couple that with no shortage of active home buyers - you got a market with a lot of competition and not enough product. Expect prices to continue to go up as we move through 2022.

Rising interest rates 

The central bank raised its interest rate last month for the first time since 2018. Last year, we saw historically low rates in the mid 2% range. We expect that mortgage rates will hover at an average of 3.7 percent throughout 2022, inching up to 4 percent by the end of the year and beyond.

Meanwhile, back at the ranch, existing home sales prices will continue to increase. The silver lining? A stronger economy is hopefully the light at the end of the tunnel and not an oncoming train.

Demand 

Who's leaving Los Angeles and who's moving in? Since 2010, about 7.5 million people said bye-bye to sunny California while only 5.8 million people said hello! According to the Department of Finance, the state has lost residents to other states every year since 2001.

People who move to California are different from those who move out. In general, those who come here are more likely to be of working age, to be employed, and to earn high wages than those who move away. This is an expensive town, any way you slice it. Seriously, my wife cannot order a sushi roll on a food delivery app without the bill rolling above $100. 

This Town Attracts Affluence

Here's the rub, this city has enough people qualified to buy and that can afford north of a million bucks for a 2 bedroom starter home. If the budget is tighter than the market, there are plenty of areas in the city with homes in the $300s - $700s range. You'll have to trek to the valley or east L.A. and these are the last of the Mohicans.

You may be asking yourself, "where do these people get the money?" Most of our first-time buyers have down payment assistance "gift funds" from parents or cash out their tech company stock options.

We are also seeing "move up" buyers. We may have sold them a house five or eight years ago, and plenty of appreciated value makes it possible for them to sell high and buy a home closer to their forever home. 

The Bottom Line

Los Angeles seems to exist in a bit of a vortex that deflects national real estate trends. Despite predictions of a slowdown and even a market crash, Southern California's economy is still going strong and the demand for housing continues to outstrip the available supply. So, what does that mean for you as a homebuyer?

In short, if you're in the market to buy a home in Los Angeles County, now is still a good time to do so. Prices are predicted to continue to rise through 2022, so don't wait too long!

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Glenn Shelhamer is the founder and broker of the Shelhamer Real Estate Group and is ranked among the top 5% of real estate brokers in the U.S., showcased in business publications, and seen on Bravo TV's "Million Dollar Listing Los Angeles."

Los Angeles, CA
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