As we begin 2026, many headlines are focused on one compelling data point: the United States economy grew at a rate significantly above inflation in the third quarter of last year. On its face, that looks like a strong signal that the economic picture is improving and that confidence in consumer spending, business investment, and overall economic activity is rising. The 4.3 percent growth above inflation sounds impressive and gives many people reason to smile.

But as luxury real estate professionals and as consumers we need to take a deeper look under the surface of these numbers. Growth is measured in different ways and the widely quoted figure does not tell the whole story. There are hidden complexities in how gross domestic product is calculated. Some parts of that growth can reflect strengths in the economy, while other parts might simply be statistical noise or short-term shifts that do not carry sustained momentum. 

For sellers and buyers in the Los Angeles area and on the Palos Verdes Peninsula, understanding how national economic indicators translate to local real estate trends is critical. Local markets do not always move in lockstep with macroeconomic headlines. When you really understand what is driving economic measures like GDP growth you can more confidently guide your decisions around pricing, timing, and overall market positioning.

In this article we will break down what this economic growth data really means, why you should pay attention to the subtler measures that economists watch, and how all of this connects to the real estate market here in Los Angeles and Palos Verdes. Along the way we will provide actionable insights for both buyers and sellers in today’s environment.

What the Big Economic Growth Figure Really Measures

The number that most people saw in the headlines earlier this month was the United States gross domestic product for the third quarter of last year. GDP measures the total value of goods and services produced in the economy. When GDP goes up and outpaces inflation it suggests that the economy is expanding rather than merely keeping pace with rising prices.

However the key caveat is that GDP counts all sorts of activities equally, regardless of whether they reflect real strength in the economy or not. For example GDP increases when inventories rise, but that can happen either because businesses expect higher demand or because they are unable to sell what they already have. It also counts changes in the trade balance and government spending. All of these factors move the GDP figure up or down even when underlying economic realities are unchanged or ambiguous. 

A better measure of the economy’s underlying health is “real final sales to private domestic purchasers.” This is a mouthful, but it boils down to spending by consumers and investment by businesses, both after accounting for inflation. When this measure is rising it means that people are actually buying a broad range of goods and services and businesses are investing in their future growth. According to this metric, growth was still positive in the third quarter, suggesting that the economy is indeed humming along, albeit at a pace that deserves a closer look rather than unquestioned optimism.

Understanding this distinction is important because it shows that headline economic growth figures can be misleading if taken at face value. They are valuable signals, but they are not infallible predictions of what lies ahead in markets like real estate.

Why Economic Growth Does Not Always Translate to Real Estate Momentum

When media outlets report big economic growth numbers, it is easy to assume that real estate markets will follow suit. After all, stronger economies typically mean more jobs, higher incomes, and confidence that can lead to more buying and selling activity in housing markets. But the reality is not that simple.

Economic growth on paper does not necessarily mean that all households are feeling more financially secure or more willing to buy homes. A closer look at how growth is distributed across the economy shows that some households and businesses may still be constrained even as aggregate figures look strong.

In many parts of the country, household budgets are stretched by inflation, particularly when it comes to essentials such as food, utilities, and transportation. These costs can offset nominal income gains and leave consumers feeling financially pressed. In that scenario, even if the economy is technically growing, households may delay or decline to make major purchases including homes. This dynamic has been evident in housing trends over the past few years when strong national economic data coexisted with sluggish home sales and inventory challenges.

The luxury market here in Los Angeles and Palos Verdes exhibits similar nuances. While many high net worth buyers have remained active throughout economic cycles, others watch broader economic confidence, employment trends, and interest rate expectations to determine when and where to transact. In this environment, national growth figures are interesting but not always determinative of local market direction.

How Interest Rates and Consumer Confidence Affect Local Decisions

One of the biggest influences on housing market activity is interest rate behavior. Even in a growing economy, higher interest rates can constrain buyers because they raise the cost of borrowing. For much of the past several years, mortgage rates have been elevated relative to historical norms. While prospects for some easing in rates are being discussed for 2026, especially if inflation continues to moderate and the Federal Reserve adjusts policy, current rates still influence affordability and buyer willingness. 

In the luxury segment most buyers are less impacted by interest rates than in entry level markets, but rates still matter. They affect refinancing decisions, investment property purchases, and the confidence level of buyers who might be choosing between competing opportunities such as stocks, business investments, or real estate.

Here in Los Angeles and Palos Verdes, interest rate expectations are a frequent topic of conversation among serious buyers. Many are waiting for clear signals that rates are moving down in a sustainable way before making major commitments. For sellers, this timing can influence when to list a property to maximize price and buyer competition.

Consumer confidence also plays into local market dynamics. If homeowners and buyers perceive that economic issues such as inflation and job stability are improving, they are more likely to make housing decisions. But confidence can be fragile, influenced by rent and mortgage costs, wage growth, and expectations about economic stability rather than by one quarterly economic report.

Local Market Conditions Remain Distinct From National Headlines

Los Angeles and the Palos Verdes Peninsula have their own housing dynamics that often diverge from national patterns. California in general, and this region in particular, has long faced housing supply constraints that have pushed prices to high levels compared with most of the country. The broader California housing shortage continues to play a central role in local market behavior. There is a persistent need for more housing units, especially given population growth and demand from both domestic and international buyers. 

Low inventory relative to demand is a structural factor that supports pricing even when broader economic data is mixed. But it also means that buyers have fewer choices, which can slow transaction volume because serious buyers may be priced out or unwilling to compromise on their must-haves.

In addition, local economic drivers such as tech, entertainment, healthcare, and professional services continue to anchor employment in the Los Angeles area. While these sectors can be resilient, they are not immune to broader economic pressures such as changes in consumer spending, corporate investment decisions, or global economic signals.

Luxury real estate in specific coastal communities like Palos Verdes, Manhattan Beach, or Malibu is influenced not only by local employment but also by lifestyle preferences, climate migration trends, and the ongoing appeal of Southern California as a desirable long-term living destination.

Thus while national economic growth data provides context, the real estate marketplace in Los Angeles and Palos Verdes responds to a unique set of local and regional forces.

What Buyers Should Know in Early 2026

For buyers who are watching national economic statistics and wondering how those might affect their next move, here are a few key points to consider:

1. Economic Growth Numbers Are Not a Mortgage Rate Predictor

Even if the economy is posting strong growth, mortgage rates do not necessarily fall in tandem. They are influenced by Federal Reserve policy, inflation expectations, global capital flows, and market sentiment. Buyers should evaluate mortgage rate forecasts cautiously and think long term rather than reacting to single economic releases.

2. Local Market Conditions Can Diverge From National Trends

In Los Angeles and Palos Verdes, supply constraints and demand from high net worth individuals can keep luxury pricing resilient. It is possible for national economic data to look robust while local markets show differentiated performance in terms of transaction volume or pricing.

3. Affordability Matters Even at the High End

Affordability is often discussed in the context of first time buyers, but it matters up and down the price scale. Luxury buyers have choices beyond the housing market, and if other asset classes feel more attractive due to interest rates or economic risk, it can slow local market activity.

4. Timing Matters More Than Headlines

Successful buyers base decisions on long term personal and investment goals, local market research, and a clear sense of timing rather than on one data point about GDP. A thoughtful strategy that considers broader economic conditions alongside local dynamics is far more effective.

What Sellers Should Consider in This Environment

Sellers in Los Angeles and Palos Verdes need to interpret economic data in light of local conditions and buyer psychology.

1. Price Realistically But With Confidence

In an environment where national data is strong but not uniformly felt at the household level, pricing your home in line with current market realities is essential. Overpricing because of optimism tied to a single economic report can dampen buyer interest and lengthen days on market. Pricing to local comparable sales data and current buyer demand remains the cornerstone of successful listings.

2. Understand That Demand Is Different Today

The buyers who are active in the market in 2026 tend to be deliberate. They are watching interest rates, job stability, and lifestyle trends. They are less likely to purchase based on short term speculation and more likely to make decisions that fit their long term objectives.

3. Highlight What Makes Your Property Exceptional

In a nuanced economy buyers are selective. Unique features, architectural quality, outdoor living spaces, and lifestyle amenities can differentiate your property in ways that matter more than macroeconomic reports.

4. Prepare for Variable Competition

Even with strong national growth data, buyer competition may not be uniform across all price points. In the luxury segment, well positioned and marketed homes will still draw attention, but sellers should be prepared for thoughtful buyers who are weighing multiple factors beyond economic headlines.

What to Watch Next

As we progress through 2026 it will be important to monitor a few critical indicators:

Mortgage Rate Trends

Even modest declines in mortgage rates can stimulate buyer interest. Watch for Federal Reserve announcements and rate movements in the Treasury market that often influence mortgage pricing.

Local Inventory Changes

An increase in inventory in Los Angeles and Palos Verdes could offer buyers more choices and extend selling timelines for homeowners. Conversely low inventory will continue to support pricing resilience.

Employment and Wage Data

Local employment trends remain a leading indicator of consumer confidence. Growth in jobs and wages supports household budgets and increases willingness to transact in the housing market.

Migration and Lifestyle Patterns

Southern California remains a lifestyle destination. In 2026, the desirability of coastal living, walkable neighborhoods, and access to outdoor amenities will continue to drive interest from buyers seeking quality of life alongside economic stability.

The Bottom Line

Strong national economic growth data should be welcomed, but not interpreted in isolation. As the underlying numbers reveal, headline GDP figures include components that might have little to do with actual economic well being or buyer willingness to make large decisions like purchasing a home. Real growth measured by core consumer spending and business investment is important, but still needs to be weighed against local market indicators and buyer sentiment.

For buyers and sellers in Los Angeles and Palos Verdes, local market dynamics matter. Housing supply constraints, lifestyle preferences, interest rate behavior, and regional employment trends all play a central role in shaping real estate outcomes.

Ultimately, thoughtful decision making based on local data, clear goals, and sound strategy will outperform reactions to national economic headlines. Economic growth can be a supporting narrative for confidence in the market, but it should not be the sole driver of your real estate decisions.

Suzanne Dyer
Wall Street Journal/REALTRENDS #59 in California, #204 in the Nation
Luxury Real Estate Specialist
Los Angeles Business Journal Top 100 Realtors in Los Angeles
Top Woman Listing Agent in the South Bay & Palos Verdes 2023
Over 1 Billion Dollars in Career Sales
Top Realtor in Rolling Hills, Rolling Hills Estate, Rancho Palos Verdes, Palos Verdes Estates, and the South Bay
Strand Hill | Forbes Global Properties
CA BRE license #01054310
www.suzannedyer.com
310-528-7480 cell

Source: Homes.com