Los Angeles (L.A) has already been experiencing home purchasing stagnation, however, the war in Iran has been bolstering this issue.
When mortgage rates stabilized back in February for the first time since before the pandemic, many L.A. residents felt ready and excited to finally purchase their starter homes. However — just days later the war in Iran began — mortgage rates spiked.
L.A. Resident Kaitie Davis went on to say, “I just want a little starter house in El Sereno, but somehow it feels contingent on whether the Strait of Hormuz is open or not.”
Davis is only one of many L.A. residents who are feeling plagued by hopelessness; who have been facing housing stagnation and hesitancy to buy a home.
L.A’s lack of home purchases
The city’s housing market has long gone cold due to a symphony of reasons. A few of which are the surplus of sellers over buyers and an overall sense of hesitancy.
As reported on by the Los Angeles Times, in January only 3,072 homes were traded indicating the lowest monthly total in three years. Just when mortgage rates were dropping, giving potential buyers confidence to go forward with a purchase, the war set the market back.
This uncertainty coupled with the largest gap between buyers and sellers, 630,000since 2013, is completely freezing the L.A. real estate market. When large international shifts occur, such as a war, it’s human nature to proceed with caution.
But a ceasefire, assuming that it holds, could certainly ease a buyer’s nerves and begin thawing L.A.’s housing market.
Perhaps this is the perfect time to purchase
Real estate agent Mathew Hoult expressed that buyers could use the war as leverage to get better deals. When sellers outnumber buyers, their ability to close on a home decreases giving the buyer more power to ask for concessions such as covering costs or asking for a lower sale price.
The war in Iran is already making people fearful about the possible duration of the war spiking mortgage rates, however as Hoult describes, this may actually be worse for sellers than buyers. Each day that the home isn’t purchased could be money lost.
There is also the possibility that the war in Iran continues for far longer, meaning mortgage rates spike even further, pushing buyers into freezing again. With this gamble in mind, buyers could be empowered to ask for more concessions from sellers.
