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Hoping for a drop in Los Angeles home prices in 2025? Don’t hold your breath.
Despite shifting trends, the LA market remains resilient, with strong demand and limited supply keeping prices steady.
Let’s break down why this city’s housing prices are unlikely to decline in 2025.
This article gives you valuable insights, but remember, it’s not and will never be investment advice. We pull data from a range of sources to provide you with the most accurate picture possible, yet we can’t guarantee complete accuracy. Markets are difficult to predict. Make sure to do your own research and consult a professional before making any financial moves. Any risks or losses are your own responsibility.
1) Los Angeles home prices rose 4.0% to a median of ... $1.0 million!
In October 2024, Los Angeles home prices increased by 4.0% from the previous year, reaching a median sale price of $1.0 million.
This growth indicates a strong real estate market driven by high demand and a healthy economy.
The city's diverse economy, cultural attractions, and favorable climate continue to attract people, sustaining housing demand and pushing prices up.
Consequently, Los Angeles home prices are expected to remain stable or rise in 2025, suggesting a resilient market with little risk of a downturn.
Source: Redfin
2) Millennials now make up 32% of homebuyers in Los Angeles
Millennials constitute 32% of homebuyers in Los Angeles, making them the largest generational group, according to the National Association of REALTORS® 2024 report.
First-time buyers, many of whom are Millennials, represent 37% of L.A. buyers, indicating Millennials' significant impact on the housing market.
As they enter prime buying years, their preference for vibrant, walkable neighborhoods near employment hubs is shaping real estate trends.
This sustained demand suggests that home prices in Los Angeles will likely remain stable or increase in 2025, as Millennials' influence supports market stability.
Sources: National Association of Realtors, SCG
3) Los Angeles reported a 4.9% rental vacancy rate (which is very low)
As of Q1 2024, Los Angeles reported a rental vacancy rate of 4.9%, an 11.36% increase from the previous year.
A vacancy rate below 5% indicates a tight rental market and strong demand, often leading to rising rental prices and making homeownership more appealing.
This shift can increase home demand, supporting stable or rising home prices due to competition.
In Los Angeles, where housing is already in high demand, this trend is significant.
Consequently, home prices in Los Angeles are unlikely to drop in 2025, as strong rental demand continues to push people towards buying, keeping the market competitive.
Source: Kidder
4) LA City programs help people become homeowners, making the housing market more competitive
In Los Angeles, government policies like the Low Income Purchase Assistance (LIPA) program and Measure ULA significantly influence the housing market.
LIPA provides loans up to $140,000 to first-time, low-income homebuyers for down payments and costs, boosting demand and potentially raising home prices.
Measure ULA, effective April 1, 2023, imposes a 4% tax on property sales between $5 million and $10 million, and 5.5% on sales over $10 million, funding affordable housing projects.
These initiatives stabilize the market by supporting demand and managing supply, suggesting home prices are unlikely to drop soon.
Source: Los Angeles Office of Finance
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5) The California Association of REALTORS® predicts mortgage rate will drop to 5.9% in 2025
The California Association of REALTORS® (C.A.R.) forecasts a decrease in the average 30-year fixed mortgage rate from 6.6% in 2024 to 5.9% in 2025.
This reduction is expected to boost buyer demand and support home prices in Los Angeles by easing the "lock-in effect."
Although 5.9% is higher than pre-pandemic rates, it improves affordability, attracting more buyers and increasing competition.
Consequently, home prices in Los Angeles are likely to remain stable or rise in 2025 as the market becomes more active and competitive.
Sources: California Association of Realtors, Norada Real Estate Investments, The World Property Journal
- Why is California still a great place to invest in real estate in 2025?
6) Los Angeles County's housing inventory is at 3.6 months (which is low)
In 2024, Los Angeles County had a housing inventory of 3.6 months, below the balanced market range of 4-6 months, indicating limited home supply.
This low inventory leads to increased competition and higher prices.
Geographical constraints and strict zoning laws restrict new developments, creating a supply-demand imbalance that supports rising home prices.
Consequently, prices are unlikely to drop in 2025, as ongoing supply constraints and strong demand suggest prices will stabilize or rise, highlighting the market's resilience.
Source: Norada Real Estate Investments
7) The 2028 Summer Olympics are just around the corner
Los Angeles is preparing for the 2028 Summer Olympics with major infrastructure and urban development investments, boosting the local real estate market.
Enhancements in transportation, new facilities, and neighborhood revitalization are expected to raise property values and attract buyers and investors.
Historically, Olympic host cities see increased property demand, and Los Angeles is following this trend.
These improvements are likely to elevate the city's global profile, making it more desirable for domestic and international buyers, leading to higher home prices.
As we approach 2025, home prices in Los Angeles are expected to remain stable or rise, supported by ongoing projects and increased housing demand, indicating a strong and resilient market.
Source: LAist
8) Los Angeles set a state record with a $210 million Malibu mansion sale
In 2024, Los Angeles set a state record with a $210 million Malibu mansion sale, highlighting robust luxury real estate activity.
Despite Measure ULA, a transfer tax on high-value properties, areas like Beverly Hills remain in high demand.
This luxury market strength indicates economic confidence, potentially boosting mid-tier and entry-level housing.
Consequently, Los Angeles home prices are expected to remain stable in 2025, supported by ongoing interest in high-end properties.
Sources: The Times, New York Post
9) Los Angeles County added 73,900 jobs by July 2024, a 1.6% increase
Los Angeles County added 73,900 jobs by July 2024, a 1.6% increase.
Nonfarm payroll jobs are projected to grow by 1.7% in 2024 and 1.8% in 2025, reaching 4.76 million by 2024's end and 4.83 million by 2025's end.
The unemployment rate was stable at 5.2% in July 2024, expected to average 5.6% in 2024 and return to 5.2% in 2025.
These trends indicate a robust labor market, supporting consumer confidence and spending.
Rising job numbers and stable unemployment rates bolster the housing market, suggesting home prices in Los Angeles are unlikely to drop in 2025.
Sources: Employment Development Department State Of California, Los Angeles RC
10) There is the Los Angeles Metro's D Line Extension, opening from 2025 to 2027
The Los Angeles Metro's D Line Extension, opening from 2025 to 2027, will connect Koreatown to Westwood, enhancing city accessibility and likely increasing property demand along the corridor.
New transit options often boost real estate interest, and the D Line will make commuting easier, attracting homebuyers and investors.
This demand suggests Los Angeles home prices will remain stable or rise in 2025, as improved transit and neighborhood development keep housing competition strong.
The D Line Extension is crucial for sustaining or boosting the city's real estate market.
Source: Metro
11) The DTLA 2040 Community Plan should revitalize Downtown Los Angeles
The DTLA 2040 Community Plan, adopted in 2023, aims to revitalize Downtown Los Angeles by promoting adaptive reuse and increasing housing density, which is expected to boost property values.
By converting existing structures into residential spaces, the plan preserves architectural heritage and meets housing demand.
Increased housing density in this desirable urban area typically raises property values due to enhanced appeal and convenience.
This strategy is likely to attract more residents and investors, strengthening the real estate market.
Consequently, Los Angeles home prices are expected to remain stable or rise by 2025, signaling potential appreciation to buyers and investors.
Source: Central City Association of Los Angeles
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So, will Los Angeles home prices drop in 2025? Unlikely!
Los Angeles home prices are expected to remain stable or even rise in 2025. The city's real estate market is driven by a combination of strong demand and limited supply, which keeps prices buoyant.
In October 2024, home prices in Los Angeles increased by 4.0% from the previous year, reaching a median sale price of $1.0 million. This growth is fueled by a diverse economy, cultural attractions, and a favorable climate, all of which attract people to the area.
Millennials, who make up 32% of homebuyers, are entering their prime buying years, further supporting demand. Additionally, a low rental vacancy rate of 4.9% indicates a tight rental market, pushing more people towards homeownership.
Government programs like the Low Income Purchase Assistance (LIPA) and Measure ULA also bolster demand by making homeownership more accessible. Meanwhile, the anticipated drop in mortgage rates from 6.6% to 5.9% in 2025 is expected to boost buyer demand.
With a housing inventory of just 3.6 months, supply remains constrained, further supporting price stability. Upcoming events like the 2028 Summer Olympics and infrastructure projects such as the Los Angeles Metro's D Line Extension are likely to increase property demand.
Overall, these factors suggest that Los Angeles home prices are unlikely to drop in 2025, making the market resilient and competitive.