Los Angeles Home Price Forecast for 2017: About Average

A recent home-price forecast for the Los Angeles housing market in 2017 suggests that prices will rise by around 3% over the next 12 months, from January 2017 to January 2018.

That matches the annual historical average for U.S. home-price gains going back several decades. So Los Angeles could have an “average” year, at least where house values are concerned.

Los Angeles Home Price Forecast for 2017

According to the real estate information company Zillow, home prices in Los Angeles, California rose by nearly 9% over the last 12 months (January 2016 – January 2017). Those gains were higher than average, and were largely the result of limited supply in many parts of the metro area.

But residents probably shouldn’t expect to see that kind of increase in 2017. According to the company’s 2017 home-price forecast for Los Angeles, house values are expected to rise by a more modest 3% over the next 12 months (through January 2018).

This mirrors the housing forecasts being issued for many California cities. Across the state, local real estate markets are expected to cool down to some degree in 2017. Pick a city, any city, and you’ll probably find that the 2017 outlook for home values is a fraction of the previous year’s gains.

From an economic standpoint, this is actually a good thing. The rapid home-price appreciation that occurred in Los Angeles (and other California cities) over the last few years was unsustainable. House values were rising much faster than household income, creating affordability issues in many cities. So the more modest home price forecasts for 2017, in Los Angeles and elsewhere, could be seen as a return to normalcy.

Higher Loan Limits Due to Rising House Values

Los Angeles home buyers will have higher loan limits to work with in 2017, for FHA, VA and conventional mortgage loans. At the end of 2016, federal housing officials announced they would raise loan limits for Los Angeles County. This change was made in response to home-price gains that occurred in California and across the country during 2016.

The loan limit for FHA, VA, and conventional mortgage loans rose to $636,150 in 2017, for a single-family home purchase. That’s for all of Los Angeles Country. Anything above this level is considered a “jumbo” mortgage loan.

Here’s a list of limits for all counties in California.

Competition Among Buyers Still High

Despite the forecast for slower home-price gains in Los Angeles during 2017, the real estate market will probably continue to be very competitive. So home buyers entering the market in 2017 should be prepared for it.

In the summer of 2016, Bloomberg published a report that showed Los Angeles was one of the least affordable cities in the country. It ranked third in this category, behind Honolulu and San Jose. Prices rose to this level largely due to high demand and limited supply, and we are still seeing some of those conditions today.

The bottom line is that home buyers entering the Los Angeles real estate market in 2017 should be prepared for a high level of competition. Having a budget in mind, and arranging your financing ahead of time, will give you a much-needed advantage.

Disclaimer: This article contains housing market and home-price forecasts for Los Angeles in 2017. These projections were made by third parties not associated with our company. We have compiled and presented them here as an educational service to our readers.