I recently received a request for my opinion on the potential effect of the war on Real Estate in the San Gabriel Valley. I am certainly not an expert on political matters. However here is my take on the situation as it pertains to real estate.
The Iran war doesn’t directly change real estate. However it can move prices indirectly through interest rate fluctuations, inflation, and buyer psychology. In places like San Marino, Arcadia, Pasadena, La Canada, those indirect effects can be amplified or muted depending on the price tier.
In lower priced areas or lower price ranges in each market, buyers are very rate sensitive. Buyers will step back unless there is a compelling reason to buy. Already we are seeing less offers. Buyers ask for credits and are tough if inspections reveal issues. So things fall out of escrow. We are starting to see sellers offering 2/1 buy downs: the seller pays a fee and the buyer gets a 2% reduction of the interest rate in year one and a 1% interest rate reduction in year two. It is often promoted by listing agents as being “better than a lower purchase price” Frantkly that is a matter of opinion. HIgher purchase price means higher tax basis.
Investors are hyper-focused on quick turn-around properties. If they use hard money, the rates are very high and it makes them nervous. I receive about 10 texts a week from investors asking me to represent them on “off-market” deals so they can secure a better price, which benefits them. To be clear, if I have a listing agreement with the Seller, I have a fiduciary duty to the Seller.
The higher end market is not as affected by interest rates, as the buyers use cash. That being said, if the buyers haven’t yet liquidated stocks to raise the cash, a volatile stock market can be disturbing. We are seeing less volume and fewer offers. Softening market conditions are noticed in price reductions which are often needed to move properties during times of uncertainty. And for the more expensive homes, the price reductions can be significant….
But on the flip side, some buyers decide to move into hard assets and that includes real estate. This is noticed more in the upper ranges. When I was marketing my over $6 million listing, every buyer was all cash and everyone was buying “another property”. And this was early 2026 before the Iran war. It’s even more evident now.
The effect of oil price spikes and the accompanying high gas prices hits LA, which is very car dependent, hard. It translates into higher cost of living, especially for those who are commuters. Again lower-end buyers are more affected than the upper range buyers. However the shift makes investors wary.
The psychology of war: people become nervous. Historically, geopolitical instability can push global wealth into U.S. real estate. Middle East instability has previously driven overseas investment into global property markets. There is a high presence of international buyers in the LA markets. Some pundits think the high-end SGV market may see an additional influx of foreign money. But I’m not seeing that. I’m seeing price softening. That being said, if prices are set below Fair Market Value, they get multiple offers and the price is driven up. That pricing psychology still works.
Lastly, the cost of goods for construction. The war has impacted and will continue to impact materials and supply chains. Higher fuel costs, increased prices for building materials, and delayed delivery of construction materials are causing issues. People who before would consider a fixer are thinking differently. Investors are taking that into account.
I could ramble on but that’s probably enough for now.
