Sep 28, 2024, 1:42 AM
Sep 28, 2024, 1:42 AM

California city faces potential house price crash amid market bubble fears

Provocative
Highlights
  • UBS's analysis ranks Los Angeles fourth in housing bubble risk among major cities.
  • The city has an average home price nearing $1 million and has experienced a population decline.
  • Recent interest rate cuts may lead to a rebound in housing demand, particularly from first-time buyers.
Story

Recent analysis by UBS indicates that Los Angeles is facing a significant risk of a housing bubble, ranking fourth among 25 major international cities. The report highlights that despite a hot demand for property, the city's average house price is nearly $1 million, and it has experienced a population decline over the past decade. In contrast, San Francisco's housing market has shown resilience, correcting about 10% after interest rate hikes in 2022. UBS analysts note that Los Angeles has a higher price-to-income and price-to-rent ratio compared to San Francisco, contributing to its elevated risk score. The report also mentions that Miami, Tokyo, and Zurich are at higher risk of housing bubbles, with Miami leading the list due to its luxury real estate market. Although bubbles indicate overvaluation, UBS suggests that recent interest rate cuts could lead to a rebound in the housing market, driven by first-time home buyers. The economic outlook will play a crucial role in determining whether property prices will surge or stabilize.

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