LOS ANGELES REAL ESTATE REPORT

The LARE Report

Last Update: February 25, 2026

Mortgage Rates Edge Higher Amid Tariff Ruling and Economic Data

A quick note from us

This week brought a notable shift in the mortgage market as the Supreme Court struck down tariffs imposed last year. This decision immediately pushed mortgage rates slightly higher due to concerns about a potential increase in the budget deficit and the need for the government to issue more bonds. The economic data released was mixed; GDP growth slowed sharply in the fourth quarter of 2025 to 1.4% annualized, well below expectations, reflecting weaker consumer spending and exports. Meanwhile, housing starts rose to their highest level in five months, with single-family starts at their best since February. However, home builder sentiment remains negative, with many builders offering sales incentives and cutting prices. These dynamics create a complex environment for buyers and sellers navigating the current market.

What this means for buyers: Buyers should be prepared for slightly higher mortgage rates in the near term and remain vigilant about market conditions as government policy and economic data continue to evolve. The increase in housing starts may offer more options, but persistent builder caution suggests pricing and incentives could remain favorable for buyers.

What this means for sellers: Sellers face a market with rising borrowing costs and cautious builder sentiment, which may temper demand. Pricing strategies and marketing will be critical to attract buyers who are weighing higher rates and increased housing supply.

Economic Growth Slows Sharply

The latest GDP report showed U.S. economic growth slowed to an annualized rate of 1.4% in the fourth quarter of 2025, down from 4.4% in the previous quarter. This was the lowest growth rate since early 2025 and fell well short of forecasts. Consumer spending and exports were notably weaker, signaling a cooling economy.

What this means for buyers: Slower economic growth may lead to more cautious lending and buying activity, so buyers should be strategic and patient in their search.

What this means for sellers: Sellers may encounter more selective buyers and should consider realistic pricing and flexible terms to close deals in a slower growth environment.

Housing Starts Reach Five-Month High

December data revealed a 6% increase in overall housing starts from November, reaching the highest level in five months. Single-family starts climbed to their best level since February. Building permits also rose to the highest level since March, indicating potential for continued construction growth.

What this means for buyers: Increased housing starts could translate into more inventory and choices, potentially easing competition for buyers.

What this means for sellers: More new construction may increase competition, so sellers need to differentiate their properties and price competitively.

Builder Sentiment Remains Negative

Despite rising housing starts, the NAHB builder sentiment index stayed below 50 for the twenty-second consecutive month, indicating ongoing pessimism. Many builders are using sales incentives and cutting prices to stimulate demand.

What this means for buyers: Buyers may benefit from incentives and price reductions as builders seek to attract buyers in a challenging market.

What this means for sellers: Sellers should be aware that builders are aggressively pricing and incentivizing, which could impact resale competition.

Market Reaction to Tariff Ruling

The Supreme Court's decision to strike down tariffs caused concern among investors about reduced government revenue and a potential increase in bond issuance. This led to slightly higher mortgage rates as bond yields rose.

What this means for buyers: Buyers should anticipate modest upward pressure on mortgage rates, which could affect affordability and borrowing costs.

What this means for sellers: Sellers may see some dampening of buyer enthusiasm due to higher financing costs, emphasizing the need for clear value propositions.

Upcoming Economic Reports

This week will feature key reports including Consumer Confidence, Durable Orders, and the Producer Price Index. These will provide further insight into economic trends and inflation pressures that influence mortgage markets.

What this means for buyers: Staying informed on these reports can help buyers time their purchases and understand market conditions.

What this means for sellers: Sellers should monitor these indicators as they can impact buyer sentiment and financing availability.

Closing Remarks

Every buyer and seller enters the market with different priorities. For some, it is achieving the strongest possible price. For others, it is timing, certainty, or aligning the sale of one property with the purchase of another. In a market where mortgage rates are adjusting, inflation remains elevated, and new construction is increasing competition, strategy matters more than ever. The way a property is priced, negotiated, and managed from contract to closing can directly influence both your financial outcome and your timeline. The difference between a disciplined plan and a reactive one can equate to tens, and in some cases hundreds, of thousands of dollars. If you would like clarity on your home’s value in today’s rate environment, or a thoughtful plan for what you can confidently purchase as conditions evolve, we would welcome the conversation.