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PaperclipPerfector  18d ago (text post)   2376 thread views

Small-Scale Question Sunday for March 23, 2025

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I'm going to buy a house in Southern California (LA area) sometime in the next 3 years. I'd like to time the market a bit, and I'm wondering if anyone has any insights to what housing prices might look like in the Trump admin?

My naive analysis is that prices will trend downward for a couple of reasons:

  1. if immigration goes down then there will be more supply and prices will go down,
  2. interest rates have gone up recently, and that drives house prices down, and the market is still catching up to this trend (I'm more concerned about the overall price than the monthly payment for various reasons).

I'm going to buy a house in Southern California (LA area) sometime in the next 3 years.

If you're purchasing a house outside the city, my first concern would be wildfire risk.

That's a good point, thanks. I'm guessing that insurance costs are up, and it'll be hard to get a reliable quote before actually purchasing.

What I've seen over the past few years is that higher interest rates don't drive house prices down at all -- instead it causes would-be sellers to wait it out. You'll see a dearth of supply.

On number 1, I don't think less immigration will have anything to do with LA home prices. Illegal immigrants (and most legal immigrants for that matter) are not purchasing multimillion dollar homes in Los Angeles.

On number 2, I do think house prices are still adjusting to higher interest rates and that means prices still have further to fall. The problem is this doesn't apply to all geographies; California in particular is its own fucked-up brand of real estate. Rent control, the continuation of Prop 13, and horrendous inability to build new housing in CA skew the market so badly, higher or lower interest rates seem almost a non-factor. Now with that said, if you think a recession is likely in the next few years, which I think is a real possibility, I would expect mortgage rates to fall as the fed cuts rates. So while you may not see home prices fall, you can end up with a 4 or 5% mortgage rate instead of a 6 or 7% one.

My prediction: home prices in CA stay flat or fall very slightly. Buyers are priced out due to price leaving a smaller pool of buyers able to afford homes. However, the demand for LA real estate is so strong, even this limited pool of buyers will keep prices propped up. That, coupled with the low tax rates caused by Prop 13 (and the downstream effect of homeowner's not needing to sell due to low tax rates and thus limiting the supply) keeps prices steady. I do think tariffs and the chaos of the Trump admin may cause economic damage leading to rate cuts, so you may be able to snag a cheaper mortgage.

But who knows. California real estate is insane and we're living in a wild political time. If you have the money today, I wouldn't necessarily try to time the market. Just buy the house you can afford in the area you want to live in. Or rent. Renting in CA is an awesome deal compared to anywhere else in the US.

On 1, I will caution you that if Trump follows through on his promise for more high skill immigration but deporting illegals, house prices will not fall- illegals live in shitbox apartments or in trailer parks, not in houses, but high-skill immigrants are competition for housing stock.

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