Southern California, especially near the coast, has long been a hotbed for real estate, attracting buyers from all over the world. It’s a bustling hub where luxury meets convenience and where homes tell tales of style and vision. However, with the tariff initiatives of the Trump Administration, many wonder what’s going to happen going forward. How could these tariffs change home price in Los Angeles, Orange County and closer to home – Long Beach?
The Problem: Rising Costs from Tariffs
Worldwide tariff initiatives pose a significant challenge to what we pay. Regardless of what you hear on the news. A higher cost on imported goods from places like China, Canada and Mexico will ripple through our national and local economies, especially in the surrounding cities in Los Angeles, the South Bay and Long Beach.
For Real Estate, hiking remodel and construction costs due to rising lumber, tools and labor will affect the market in the short term. Homes may become more expensive without adding any real value. To the Coastal and Luxury marketplace, essential materials like lumber, aluminum, steel, finishes—could see significant price increases (not to mention the after-sale items (furniture, appliances and home expenses).
Translation – A considerably change the landscape for buyers, sellers, and those with investments abroad.
So, What Does This Mean for You?
Home Buyers
Prepare for more choices in properties and fewer multiple offers as home inventories increase. Home prices will also increase, but by a smaller percentage than in the past few years.
As material costs rise and investors become cautious, the cost of new construction homes will climb. This increase in costs may be offset by a noticeable rise in inventory in the past 6 months.
At some point, home prices in many neighborhoods will reach a peak here in Southern California. Then again, continual instability will make stability elusive.
Homeowners Looking to Move
Making a move in this environment will need to include monitoring national and local market trends closely. Higher costs including everything from interest rates, building materials, furnishings and finishes could push buyers to pause or sideline themselves from the market.
Investors and Professionals
Local professionals and those looking to purchase second homes will also feel the pinch. Tariffs could strain your wallet as higher construction costs are passed down through the price of new homes.
Facing such uncertainty, it’s easy to feel uneasy. But staying informed is key.
Navigating this Evolving Real Estate Market
Understanding how to navigate these changes can help make the transition smoother. Here are some key insights:
1. Why Do These Market Trends Matter?
Higher costs due to tariffs matter because they can impact both new construction and renovation projects contractors and builders will look to offset increasing material costs.
2. What Are the Current Market Conditions?
Recent trends point to a slowing in real estate market throughout California. Home sales have decreased by 6% from last year, with prices below their 2021 peaks. While tariffs add another layer of uncertainty, understanding these trends can help buyers and investors make informed decisions.
3. How Should Buyers, Sellers, and Investors Respond?
- • Buyers: Consider acting now rather than waiting for market conditions to stabilize. If you’re in a position to purchase a home, locking in current prices might be a smart move.
- • Sellers: Given the potential for increased construction costs and uncertainty, now might be the time to list your property, particularly if it’s in a desirable neighborhood.
- • Investors: Stay cautious and diversify your investments. Look into domestic and international markets and understand how tariff changes affect each.
4. What If Tariff Trends Continue?
If tariffs persist, prices might continue to climb. This could create a bottleneck of delayed or canceled construction projects, reducing the number of luxury homes available. However, the limited supply could also raise the value of existing properties.
How to Stay Ahead of the Game
- ✔ Stay Updated and On Top of the Economic News and Forecasts: Shifting policies will have a short term or “knee-jerk” effect on the market, but over time, stability is the best remedy for the real estate values and trends. Monitoring these changes helps you make informed decisions.
- ✔ Keep an Eye on Construction Costs: Understanding current prices for materials and how they change can help anticipate price shifts in luxury home markets.
- ✔ Lock into a Rate or Consider 2/1 Buydown: If interest rates rise due to economic changes, consider fixed-rate mortgages to avoid surprises. Please note there are ideal situations where creative forms of financing (for example: 2-1 Buydowns) would make dollars and sense.
- ✔ Diversify Investments: Don’t put all your eggs in one basket. Having a varied investment portfolio helps you cushion against unexpected market shifts.
When All Is Said And Done
Right now, we seem to be at the beginning of a shift in the market… a “crossroads” of sorts. There is little doubt among local Southern California economic experts that tariff policies will put pressure on the real estate market. As a luxury home buyer, local professional, or first time seller and/or buyer, understanding these dynamics will lead to solid strategic planning and sound decision-making.
