Redfin's Predictions for 2026

 2026 Market Expectations According to Redfin

-Interest rates expected to stay in low 6% range, which won't shock buyers.

-Prices to tick up only 1% compared to 2025 due to job and generally economic insecurities. 

-There will be more volume activity in 2026 mainly due to pent up sellers unleashing inventory on the market to upgrade, relocate, free up cash. 

-Those who started with 7-8% mortgages will refinance.

-Fire victims who were in temporary housing and had insurance payouts will begin to look for housing or rent in areas away from fire hazard zones, creating local migration within LA.

-Rental market will be stronger than 2025 as housing affordability remains low, and the demand for rentals, especially roommate situations, will rise. 

Why have LA home prices been so resilient?

The market in urban areas has come down since pre-COVID. On average, in NYC, about -18%, in SF, about -10% and in DTLA, about -4%. (Prices in the more suburban areas of LA are up about +1%)

Why has LA been more resilient? 

1. First, prices in LA were always lower than in NYC and SF. And suddenly, the nice weather, larger spaces and lower prices are looking pretty good when you can transplant yourself anywhere and work from home.

2. Remember, NYC was and still is the hardest hit COVID zone. LA, with it's huge population, has a fraction of the number of cases and deaths. Something is being done right in LA in terms keeping things safer. 

3. People still want a city, and LA, with its proximity to green spaces, mountains, beaches, deserts, etc, is proving to be the ideal place to settle during this uncertain time. 

4. There is a lot more space in LA than in other major cities. The average home size is about 1300sf in greater LA, and that's not including yards and other outdoor spaces. Compare that to 700sf is SF. You do get a lot more space for your money in LA, it's just a fact. 

5. The population. LA has a huge population. Where there is a population, whether employed or not, is going to need basic services, and that means jobs. Why else are companies like Amazon buying up warehouse spaces in LA? Because of demand for goods. 

Life, Interrupted; Real Estate, Still High

Seriously, what is going on? Stock market is up, real estate is up, employment is down, confidence in the economy is down, and the world is a really uncertain place, yet real estate activity continues. Even in a pandemic, people need a place to live. Whether you're employed or not, you need shelter, and you have so many groups of people who are going through different things and are keeping real estate activity going and propping up prices.

What I've been witnessing recently:

1. People downsizing into rentals after selling their homes

2. Couples cohabitating to save money

3. More people converting to roommate situations

4. People panic selling

5. People selling with the equity to buy

6. People buying because of low interest rates

7. People wanting home offices

8. People moving around because they work from home

9. People holding on to wait out the storm before selling

2020 - The Year That's Good for Selling and Buying

2019 was a good time to sell.

It doesn't always happen this way, but sometimes, the sweet spot for selling and buying collide. 2020 is the year where this is the case. Real estate prices are largely unscathed, and interest rates are low. Both sellers and buyers win. 

2021 is going to be a good time buy. Price will have slowed (at least I think anyway!) and interest rates will still be low. In fact, I think through 2022 will be a good time to buy.

Buy, Sell or Hold?

Downtown (and LA in general) prices are up, per usual, inventory is low, and it's a Seller's market. Prices have well surpassed the 2007 height, and are now beginning to stabilize due to the holidays.

So what to do, BUY, SELL or HOLD?

Assuming you have equity, if you need the cash to upgrade, relocate or just to have liquid for whatever, SELL. It's a good time because prices are higher than ever before and buyers are pent up because inventory has been low for at least 12 months.

If you're buying to invest in the short term, don't. If you're buying to invest in the long term, then BUY. Prices are high, but they are going to be stabilizing into next year, so if you're planning on holding for a while (5-7 years) or you're sick of renting (I predict rental prices will continue to increase again next year in DTLA), then BUY. Why pay a landlord when you can pay yourself while gaining equity?

If you are not planning to do anything with the equity money, then HOLD. DTLA is getting lots of good investment in terms of qualified resident buyers, businesses looking to expand, companies relocating, and developers that are looking to be in one of the most unique parts of LA (e.g. The Row, At Mateo, Oceanwide Plaza). This will only help continued growth and revitalization.

DTLA: A Good Investment Or Not?

It sure seems like it is. Take for example, my client who bought in Little Tokyo in 2012. They were told by everyone they knew that they were crazy to buy when the market was still in the dumps. What they found out through me was that the condo they were interested in was going to be surrounding by a slew of new upscale development, so if they were investing, now was the time. Today, their condo has $220k in equity, is cashflow positive by $1200/mo, and rents out in about 2 weeks each time they put it on the market (because it's heavy on the student ratio, and students tend to leave every year, meaning the owners can charge market rental rates each time they have a new tenant since most of the properties in DTLA are NOT under rent control. Sweet investment).

Another client bought a loft in 2014, after living in a rental for 2 years and was getting sick of paying his absentee landlord increased rents every year. He wasn't thrilled that the market had gone up quite a bit when he bought his pad, but decided it was the lesser evil than continuing to pay his landlord. Today, his place has $100k in equity and he is paying himself, not a landlord.

A friend of mine from NYC just bought a DTLA investment pad in 2015, because she felt that she was only just now able to see some substantial investment in DTLA, making her confident about the area. Back in 2007 when everyone was buying like it was going extinct, she waited to see if there would be more growth in residents and necessary amenities to sustain residents, such as supermarkets and restaurants (smart girl). We low-balled and offered to pay for some piddly services such as termite, HOA docs, and Home Warranty, and she got the pad. It's now worth about $85k more than she bought it for.

It's 2016, and several buyer clients are looking for choice properties in DTLA--meaning large size, top floor, good views. Size will be a big deal in DTLA in the near future. What was once considered too small for a 1-bedroom is now considered huge. Nearly all of the new developers are chopping up the units, and the average 1-bedroom is now about 610sf, while back in 2007, the average 1-bedroom was 900sf.

When investing in DTLA, low price is always good, but you also need to look out for what will become the rare, coveted attribute in the long term because this is what will add further value.

Rental and Sales Prices Going Up in 2016

It's 2016, and there's no sign of a housing slowdown according to a UCLA's economist, David Shulman. Rents are expected to climb by 4.5% this year over last year, and housing prices are expected to rise 6% over last year. What's causing the rise in prices is low inventory of homes for sale as owners are holding on for even higher returns. And the recent rise in interest rates are keeping some renters out of the sales market for longer.

The reality is that first time buyers are frustrated. The upside is that interest rates, while up from last year, are still pretty low in general. 2017 could have another interest rate hike which is why some buyers who plan to hold onto their property for a while are buying now before things get worse.

DTLA is one of L.A.'s Prime Markets

2015 has been a good year for real estate, and very good for downtown.  Check out the numbers for Q3 on condos:

[Neighborhood]  [Avg Sale Price]  [Avg Price Per SF]

DTLA.                         $807,808.                $642!!!
Beverly Hills.            $1,342,739.             $697
Brentwood.               $832,412.                $541
Hollywood.               $1,087,838.             $658
Malibu.                      $939,607.                $595
Mid Wilshire.           $628,684.                $422
Pacific Palisades.     $1,058,011.             $598
Santa Monica.          $1,242,651.             $887
Silverlake.                 $716,657.                $529
Sunset Strip.             $787,375.                $574
Venice.                       $1,468,500.             $739
West Hollywood.     $876,579.                 $629
West L.A.                   $774,557.                $503

Why DTLA is So Hot

The real estate situation in downtown these days can be summed up in two ways: Homeowners are thrilled at the rising prices and buyers are frustrated at the rising prices. Many are wondering when the prices will go down. In my opinion, prices won't go down because prices are similar to the prices in 2007. The same condo bought in 2007 is still around the same price now, if not a bit higher. It's as if prices have stood still for nearly a decade. Now, if you bought in the golden window of 2010-2012 like I advised most of my buyer clients to do (as well as myself), and you still own that property (myself included), then you killed it.

So why is DTLA showing signs of bigger increases than other parts of LA? A few reasons:

1. DTLA is still way more affordable than the Westside. $2500 per month in downtown will get you a highrise condo with a pool, spa, front desk security, parking, and dog run. In the Westside, the same price will get you a 3-story late 60s walkup with carpets and a 90s kitchen.

2. DTLA condos have character. You get a lot more character in a historic former bank building that is designated with the Mills Act than with a 70s aluminum-windowed box. Where else in L.A. can you find such a high concentration of historic buildings?

3. DTLA walkability & transportation. With markets (including Whole Foods), bars, restaurants and shopping centers springing up all around, it's getting easier and taking less time to stroll over to run errands and just enjoy nightlife without thinking of the drive home. Uber and Lyft is highly concentrated in DTLA, and costs about $6 to get from any point within downtown. Plus the Metro will take you straight to Santa Monica soon--it already goes to Culver City and Hollywood!

4. DTLA is just beginning. You know when investors from New York and San Francisco start to snatch things up, things are happening. Savvy investors have seen areas like SoHo, Brooklyn, SoMa go from blight to some of the most expensive real estate in the world. And they are buying up trophy buildings and attracting a new type of retail and commercial clientele. The Ace Hotel is a prime example. Soon after you had Acne, APC, Oak, Aesop and Tanner Goods follow.

5. DTLA and rent control. Investors, this is for you. The fact that so many people spend their hard earned money on a duplex that generates what's essentially 1980s income is beyond me. Because nearly all residential property in DTLA was developed into residential housing well after 1978, rent control rules don't apply. This makes downtown a very nice place to invest.

2015 Housing Forecast

According to Freddie Mac economists, the following projections in housing for 2015

1. Mortgage rates: Interest rates will likely be on the rise next year. By next year, Freddie projects mortgage rates to average 4.6 percent and inch up to 5 percent by the end of the year.
2. Home prices: Continued house-price appreciation and rising mortgage rates will dampen affordability for home buyers. Historically speaking, that's moving from 'very high' levels of affordability to 'high' levels of affordability.
3. Housing starts: Homebuilding is expected to ramp up in the new year, projected to rise by 20 percent from this year. That will likely help total home sales to climb by about 5 percent, reaching the best sales pace in eight years.
4. Single-family originations: Mortgage originations of single-family homes will likely slip by an additional 8 percent, which can be attributed to a steep drop in refinancing volume. Refinancings are expected to make up only 23 percent of originations in 2015; they had been making up more than half in recent years.
5. Multi-family mortgage originations: Mortgage originations for the multi-family sector have surged about 60 percent between 2011 and 2014. Increases are expected to continue in 2015, projected to rise about 14 percent.

2015 Median Prices Expected to Rise 5.8%

According to the California Association of Realtors (C.A.R.), the housing median price is anticipated to increase by 5.8% in 2015. From 2013 to 2014, there was an increase of 11.8%, and DTLA was overall higher than the state average.

Median Price from Sep 2013 vs Sept 2014

Stats are out: The median home price in California was $428,290 back in September 2013. The median home price in September 2014 was $460,940. That's a 7.6 percent increase. And need I say again that interest rates are at an unprecedented low?

DTLA Real Estate Climate as of June 2014

Lots of buyers who've decided they want to buy in DTLA are asking me key questions before they take the leap. As a homeowner and investor in downtown myself, here are my answers to these questions:

"Am I buying at the height?" 
Understandable question since prices have been steadily climbing to near-2007-peak prices--and in some super-desirable buildings (think Eastern Columbia, Biscuit Company Lofts, Barker Block)--beyond peak prices. I always tell my clients the same thing: "This isn't the height." What's so sublimely different now than what happened back in the crash of 2009 is the inventory is super low in DTLA. Supply and demand always affect prices, and there is a great demand for condo and loft housing right now yet the pickings are slim. Buildings that were once slated to be condos (e.g. The Chapman, The Roosevelt, Apex, etc.) became rental-only buildings because of the crash--and the owners of these buildings are happy to just rake in the continuously increasing rents. Most of the new developments such as One Santa Fe in the Arts District, 8th & Hope near South Park, and Ava in Little Tokyo for example, are all rentals. It's no wonder the newest phase of Barker Block is nearly sold out with only 7 units left as of today.

"Is there a bubble that will burst?"
Two reasons the climate is different from that of the 2007-2009. First, the loose lending practices that dominated the height of the market are now gone. It's been a lot more difficult for buyers to get qualified for a loan and many lenders are requiring a larger down, the upside being that this has helped buyers have instant equity as soon as they've purchased. While this means some buyers who have little savings for a downpayment or bad credit might experience hurdle and blocks, those who can qualify for a loan will be buying  what they can actually afford, and this should help prevent short sales and foreclosures. Secondly, the the investment happening in DTLA right now is from businesses, NOT just homebuyers and residential developers. Back in the bubble days, a bunch of buyers/investors scrambled to buy a condo due to speculation, but business investment was pretty much non-existent (Except for good old Ralphs and Cedd Moses' bars such as Seven Grand and The Golden Gopher). Now, there are more developments and new businesses that have and will create jobs, such as The Bloc, Clean Technology Incubator, Gensler Architects, One Santa Fe, The Ace Hotel, The JW Marriott, The Residence Inn, the upcoming Case Hotel, Arts District "Mall", Urban Radish, 7th & Fig. And this is just the tip of the iceberg.

"Is all this building around DTLA going to affect my purchase?"
Depends on what you're buying to do. If you're planning on living in your home, then you've got it made. Enjoy the rise in values as DTLA continues to revitalize. If you're buying to invest and rent out, this gets more tricky because in the near future, beginning this Fall, there will be an influx of new rental-only buildings. (Think Ava Little Tokyo, Olive & 9th, 8the & Hope, Avant, One Santa Fe). You'll have competition with these new developments that will attract tenants who want the newest place to live. That said, some condo buildings will always be in demand by renters because of their uniqueness and location, such as The Residences at The Ritz Carlton, Barker Block, Molino Lofts, Biscuit Lofts, Eastern Columbia, The Rowan, to name a few.