We’ll discuss the recent trends in the Southern California housing market as well as the Los Angeles housing market. Following the impact of the pandemic, which temporarily stalled the market, we saw the first signs of recovery in property sales in June of last year. Since then, home prices and sales in Southern California have been increasing year over year, with Los Angeles being no exception. The housing market in Southern California has been booming since last year, thanks to factors such as the desire for more space and historically low-interest rates.
Southern California home prices rose again in the previous month, though some data point to a slight slowdown in demand. In July 2021, the six-county region’s median sales price — the point at which half of the homes sold for more and half sold for less — was $760,000, according to C.A.R.’s recent resale report. This is up 22.1 percent from a year ago, but it is slightly lower than the median price of June ($766,000).
The median home price in Southern California has risen by double digits for the twelfth month in a row. C.A.R.’s resale report for July 2021 shows that at the regional level, all major regions of California posted a dip in sales from a year ago when home sales began to surge as mortgage rates continued their downward trend. The Southern California region held up relatively well with a minor decline of -1.4 percent from last year. Similarly, the Los Angeles Metro Area posted a decline of -2.1% in sales of existing single-family homes while LA county recorded a YTY sales growth of +6.4% (highest among all the six counties). The median sales price in LA county was $809,750, up 1.7% MTM and 22.6% YTY.
Orange County’s sales increased by just 1.1 percent over the previous year. It shows that things are becoming slightly less hot as we enter the fall season. Only two counties, Riverside (-9.9%) and San Bernardino (-13.2%) posted a decline in sales as compared to last July. It is self-evident that low-interest rates have not been sufficient to motivate sellers who are unable or unwilling to list their properties due to job losses caused by the underlying recession. This has resulted in a shortage of housing inventory, which has pushed prices to unsustainable levels when compared to the previous year.
The apparent slowdown in housing sales and price growth over the previous month is minor, and buyers may simply have an easier time getting offers accepted without having to waive contingencies. The median home price of the Los Angeles metropolitan region rose to $731,000, 23.9% higher as compared to July 2020. On the supply side, the number of active listings is still quite low as compared to the housing demand. Months Supply of Inventory (MSI) is a calculation that quantifies the relationship between supply and demand in a housing market.
Months Supply of Inventory (SFH) for Southern California is now 1.9 months.
Months Supply of Inventory (SFH) for the Los Angeles Metro Area is now 1.9 months.
Months Supply of Inventory (SFH) for the Los Angeles County is now 2.0 months.
Months Supply of Inventory (SFH) for Orange County is now 1.7 months.
Months Supply of Inventory (SFH) for Riverside County is now 1.8 months.
Months Supply of Inventory (SFH) for San Bernardino County is now 2.2 months.
Months Supply of Inventory (SFH) for San Diego County is now 1.7 months.
Months Supply of Inventory (SFH) for Ventura County is now 1.9 months.
Generally, a balanced market will lie somewhere between four and six months of supply. Inventory is calculated monthly by taking a count of the number of active listings and pending sales on the last day of the month. If an inventory is rising, there is less pressure for home prices to increase. With 1.9 months of supply left, it is well short of what economists say is needed for a balanced market. Hence, the Southern California housing market will continue to see upward pressure on home prices in 2021.
There are around 218 cities in LA County where Realtor.com has properties listed for sale. We have already discussed the supply and demand imbalance in the county and metro area and how the monthly supply of inventory is down to 1.9 months. Realtor.com’s July 2021 statistics show that Los Angeles County is a seller’s market, which means that more people are looking to buy than there are homes available. They take into account two aspects of the housing market. The market demand, as measured by unique viewers per property on their website, and the pace of the market as measured by the number of days a listing remains active on their website.
In July 2021, the median list price of homes in Los Angeles, CA was $799K, trending up 6.7% year-over-year. The median listing price per square foot was $531. The median sale price was $825,000. The sale-to-List Price Ratio was 102.37%, which means that homes in Los Angeles sold for 2.37% above the asking price on average in July. A seller would prefer this ratio to be 100% or more. On average, homes in Los Angeles sell after 50 days on the market.
If a region’s housing market is balanced it means that there is enough demand from buyers to equal the supply from sellers. Based on the supply-demand dynamics, the real estate appreciation rate in Los Angeles is predicted to remain strong in 2021. The strong demand and tight inventory should put upward pressure on the prices. According to several real estate experts, the home values in the Los Angeles housing market will continue to appreciate over the next 12-months.
Southern California Housing Market Trends 2021 (Describes July)
The Southern California real estate market is having a boom since last year with a surge in home sales and prices. Housing sales are driven by people who are looking for more space after their workplaces have closed down due to the pandemic. People are looking for spacious houses as they need more space to work from home. Another factor is the low interest rates on mortgages which is helping buyers to save on monthly mortgage payments. Rising demand and tight inventory have made it a seller’s market. Part of the lack of supply issue being experienced is due to the lack of new construction.
Southern California home prices soared in July, rising by double digits for the twelfth straight month as a pandemic-fueled housing boom continues to go strong. The six-county region’s median home price increased 22.1% from a year earlier to $760,000, according to the data released by the California Association of Realtors. The number of existing single-family houses was slightly down (-1.4%) from the previous year. The month’s supply of inventory of single-family homes has decreased to 1.9. Homes are selling fast. The median days on market is 8, which is 9 days less than a year ago. Some industry watchers predict that this year’s sales will see a smaller bump than in 2020 while some experts say it’s too soon to forecast whether the market will actually lose steam.
Southern California Single-Family Homes – Prices & Sales
In Southern California’s housing market, prices and sales of single-family homes are soaring in all the counties of the region.
In Los Angeles County, the median price rose 22.6% to $809,750 in July, while sales increased by 6.4%
In Orange County, the median price rose 23.9% to $1,090,000, while sales increased by 1.1%.
In Riverside County, the median price rose 23.4% to $570,000, while sales decreased by -9.9%.
In San Bernardino County, the median price rose 25.7% to $440,000, while sales decreased by -13.2%.
In San Diego County, the median price rose 19.6% to $860,000, while sales increased by 1.4%.
In Ventura County, the median price rose 14.6 to $825,000, while sales increased by 1.9.%.
Here are the tabulated data of the Southern California housing market for existing single-family homes.
Source: CALIFORNIA ASSOCIATION OF REALTORS®
Southern California Condos and Townhomes
The median condo price increased in Southern California increased by 19.5% YTY and 1.8% MTM to reach $557,000. Condo sales in all the counties grew from the previous year except for Riverside and Ventura Counties, which posted negative growth in sales. Los Angeles condos sales were up by 24.9% from the previous year. The months’ supply of condos in Southern California is 1.7, down since last year when it was 2.6.
Source: CALIFORNIA ASSOCIATION OF REALTORS®
Los Angeles County Housing Market Trends 2021
C.A.R.’s July 2021 resale housing report shows that Los Angeles County saw high demand in July. Homes are moving fast as compared to last year. The sales of both existing single-family homes and condos positive gains from last year. If you’re looking to buy a house in LA’s hot real estate market, you will likely end up paying more than the asking price. Due to low mortgage rates, buyers are to bidding up the prices of homes.
Single-family median house prices grew by 22.6% to $809,750.
Single-family sales grew by 6.4% YTY but were down -13.5% MTM.
The condo market also showed a strong buyer turnout.
Sales of existing condos were up 24.9% YTY but down -2.7% MTM.
The median Los Angeles condo price grew by 20.2% to reach $565,000.
Infographic Courtesy of CALIFORNIA ASSOCIATION OF REALTORS®
Los Angeles Metro Rental Statistics 2021
The Zumper Los Angeles Metro Area Report analyzed active listings in July 2021 across 29 metro cities to show the most and least expensive cities and cities with the fastest-growing rents. The California one-bedroom median rent was $1,842 last month. Newport Beach was the most expensive city with one-bedrooms priced at $2,990 while Hawthorne was the most affordable city with one-bedrooms priced at $1,550. Beverly Hills rent had the largest drop since this time last year, falling 10.9% while Oxnard experienced the biggest monthly rental decline, falling 5.1%.
The Fastest Growing Cities in the Los Angeles Metro Area For Rents (Y/Y%)
Riverside had the fastest-growing rent, up 21.6% since this time last year.
Newport Beach saw rent climb 18.7%, making it the second-fastest-growing.
Irvine ranked as third with rent increasing 15.5%.
The Fastest Growing Cities in Los Angeles Metro Area For Rents (M/M%)
Santa Ana had the largest monthly rental growth rate, up 5.3%.
Huntington Beach’s rent increased 5.1% last month, making it second.
Riverside was third with rent climbing 5% last month.
Credits: Zumper Los Angeles Metro Area Report
Los Angeles Real Estate Market Forecast 2021-2022 (Latest Projections)
What are the Los Angeles real estate market predictions for 2021 & 2022? Los Angeles has a track record of being one of the best long-term real estate investments due to high price appreciation. Realtor.com published a housing market report that showed which metro areas have had the biggest increase in median list prices. Their report provided data for the 50 largest metropolitan areas in the U.S., across several metrics. The Los Angeles metro area ranked at #5. The median list price in the Los Angeles-Long Beach-Anaheim, Calif. Metro in 2020 was $999,050, up 13.90% year-over-year.
Let us look at the price growth recorded by Zillow, a leading real estate marketplace. Zillow Home Value Index is an adjusted measure of the typical home value and market changes across a given region and housing type. It reflects the typical value for homes in the 35th to 65th percentile range. ZHVI also represents the whole housing stock and not just the homes that list or sell in a given month. The typical home value of homes in Los Angeles is currently $863,957.
It indicates that 50 percent of all housing stock in the area is worth more than $$790,721 and 50 percent is worth less (adjusting for seasonal fluctuations). Using this methodology, Los Angeles County home values have appreciated by nearly 116% since Jan 2012 ($366,000). Similar growth has been recorded by NeighborhoodScout.com as their data also shows that in the past ten years, Los Angeles real estate appreciated 105.06%. This amounts to an annual real estate appreciation of 7.35%, putting Los Angeles in the top 10% nationally for real estate appreciation.
During the latest twelve months, Los Angeles’ property appreciation rate has been hovering around 5.1% and in the latest quarter, it has been 1.81%. If it remains steady, it would amount to an annualized rate of 7.42%. Tight supply and steady demand from home buyers have boosted home values across the Los Angeles metro area. Prices rose steadily over the past year, despite the economic slowdown brought on by the pandemic. A large number of millennials entered their 30s in 2020, a trend that will continue for several years.
According to Danielle Hale, chief economist at Realtor.com, such demographic factors are one reason the company is forecasting strong price appreciation across the U.S. in 2021, including a 7.3% increase in the combined Los Angeles-Orange counties metro region. Realtor.com predicts 2021 price growth will be slightly greater in the Los Angeles-Orange counties metro area than in the more suburban Inland Empire of Riverside and San Bernardino counties.
Shortage of supply and an increase in the demand for housing from new homebuyers will push the prices higher in the next twelve months. The pricing of homes is trending higher and is more attractive for sellers in the current phase. Low mortgage rates will bolster the home buying market and continue pushing up home price growth. For sellers, now is the opportune time to put their Los Angeles home up for sale. As more listings come on the market the sales will also increase.
Zillow’s forecast updated in July 2021 also predicts that LA Metro home values will rise by around 12% in the next 12 months. Given the supply-demand imbalance, the home prices in this region could also rise by double digits over the next 12 months. They have updated the forecasts but only for the metro areas. Nevertheless, prices are going to rise at the same or even rapid pace in LA county.
Los Angeles-Long Beach-Anaheim Metro home values have gone up 19.3% over the past year and Zillow predicts they will rise 12.8%in the next twelve months.
Los Angeles County home values have gone up 18.9% over the past year and will continue to rise at a slower pace in the next twelve months.
Orange County home values have gone up 20.1% over the past year and will continue to rise at a slower pace in the next twelve months.
San Diego County home values have gone up 26% over the past year and will continue to rise at a slower pace in the next twelve months.
San Bernardino County home values have gone up 24% over the past year and will continue to rise at a slower pace in the next twelve months.
Ventura County home values have gone up 21.2% over the past year and will continue to rise at a slower pace in the next twelve months.
The chart below, created by Zillow, shows the growth of typical home values since 2011 and their forecast until July 2022.
Courtesy of Zillow.com
Here is the historical change in home prices for Los Angeles-Long Beach-Glendale, CA for the three time periods. The highest annual change in the value of houses in the Los Angeles Real Estate Market was 32% in the twelve months ended with the 3rd Quarter of 2004. The worst annual change in home values in the Los Angeles Market was -23% in the twelve months ended with the 4th Quarter of 2008. The historical change in home values has been calculated until the 3rd Quarter of 2018 by LittleBigHomes.com.
Time Period
Los Angeles MSA Real Estate Appreciation
Last 5 Years
48%
Last 10 Years
46%
Last 20 Years
229%
These numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller? It is quite evident that the ongoing pandemic has had a major impact on home sales. In spring, the stay-at-home orders had completely frozen this market. Many sellers pulled their homes off the market after stay-at-home orders took effect. Los Angeles home sales dropped sharply in April from both the previous month and year as the housing market began to feel the full impact of the coronavirus outbreak and the state’s stay-at-home order.
In fact, for the entire state of California, April 2020 saw the worst month-to-month sales decline in more than four decades. The southern market is now showing signs of heating up after a coronavirus-induced slump but sales are still way below the levels of last year. Compared to last year, the home sales in December were up in all six counties, with Ventura recording the highest sales growth of 32.8% YTY. LA County also saw a jump of 30.5% YTY and 22.1% MTM in sales of existing single-family homes.
The month of July 2021 showed some signs of seasonal softening in demand as sales of single-family homes and condos declined from the previous month in most of the counties of Southern California tracked by CAR. The total sales gain across this region was 80% higher than the previous year crunching the supply to as low as 1.8 months. During this pandemic, the real estate industry has been adapting to the current environment by conducting business using technologies such as virtual showings and e-signing to help buyers and sellers with their housing needs in the face of these challenges. Low mortgage rates are helping the buyers to purchase their dream homes which in turn is driving the sales up.
Do buyers have any advantage? It the right time to buy a house in Los Angles? This is a never-ending question with no definitive answer. Buyers believe it is a very good time to buy a home in Los Angeles. Mortgage applications to purchase a home are increasing with the easing of restrictions. More houses will soon be listed in the coming months which may bring down the pace of appreciation to some extent.
On the other hand, a huge number of job losses and unemployment claims have kept new homebuyers away from the market, so that means there would be less competition for buyers to purchase their ideal home. Affordability is a big issue in Los Angeles County as nearly three in four residents can’t afford to buy a median-priced home in the area.
According to HousingWire, an index that combined median income and median home prices made Los Angeles the least affordable city in the country, and several younger residents said they were concerned they will never be able to afford a house. Home shoppers are leaving Los Angeles for cheaper metros, the most popular being Las Vegas.
Real estate market forecasts given in this article are just an educated guess and should not be considered financial advice. Real estate prices are deeply cyclical and much of it is dependent on factors you can’t control. Many variables could potentially impact the value of a home in LA in 2021 (or any other market) such as big changes in the distressed, new-construction, or luxury home segments. There are also a wide variety of economic and political factors that can and do impact real estate markets. Most of these variables are difficult to predict in advance.
Impact of Pandemic on the Los Angeles Housing Market
From Jan to Feb of 2020, the median sold price in the Los Angeles Metropolitan Area increased by 2.1 percent. This beginning of 2020 was good for Los Angeles single-family homes. The shutdown had an impact on the California economy and the real estate sector well. Southern California home sales fell 26.6% in April compared with a month earlier, while year-over-year sales were down by 31.5%. The median sold price of existing single-family homes in the Los Angeles Metro Area was $550,000, a year-over-year increase of 2.5%, according to the CALIFORNIA ASSOCIATION OF REALTORS.
As compared to March the median sold price decreased by 1.1%. Home sales in the Los Angeles metro housing market decreased by 30.9% as compared to the previous year. As compared to March the home sales decreased by 21.2%. In Los Angeles County, the median sold price of single-family homes rose 3.9% to $565,170, while sales dropped 30.6%. As compared to March 2o20, the median sold price in Los Angeles County decreased by 0.5%, while sales dropped by 15.5%. In the city of Los Angeles, the median sold price of existing single-family homes rose by 0.5% to $839,000, while sales dropped by 48.1%.
In June, we saw the first rebound in home sales. In Metro Los Angeles, the jump in sales was 48%. The home prices rose $18,000 or 11.6% to a new level of $553,000. All the six counties of southern California saw an increase in sales as compared to May. The no. of existing single-family home sales in Los Angeles County equaled 2880, which is a decline of 19.3% from last year’s June.
Active listings increased dropped by a whopping 44.9% as compared to last year while the median price increased by 1.8% to $610,000. If we talk about the city of Los Angeles, the median price of the existing single-family homes has reached $865,000, an increase of 1% from last year. Home sales dropped by 25.9%.
Sales across the six-county Southern California region jumped 43.5% from May, the largest increase ever from May to June in a data set that dates from 1988. Sales were still at a record low for June and down 15.2% from a year earlier, but deals had declined 45% year over year in May and fell 31.5% in April. The median home price in Los Angeles County has increased by 11.60% as compared to the previous month and home sales have increased by 37.5%.
In August 2020, the six-county region’s median price reached $640,000, up 12.9% from a year earlier. In Los Angeles County, existing single-family home sales dropped by 3.9% from July and fell by 5.2% from August 2019. The median price rose by 7.9% from a year earlier to $677,260. Orange County sales the biggest jump in sales (13.7%) from a year earlier. The median price rose by 14.8% from a year earlier to $930,000.
The Metro Los Angeles housing market posted a year-over-year increase of 4.4% in sales. Compared to July, sales decreased by 1.7%. The median home price of the LA metropolitan region rose to $615,000, up 12.8% from last year. Compared to July, the median price increased by 4.2%. The sales figures are still lagging if we compare them to last year. The rise in home prices and sales has shifted the market conditions to a balanced one. The inventory remains tight. The Unsold Inventory in Los Angeles Metro Area is 2.3 months.
Existing single-family home sales dropped by 5.2% year over year.
The median price went up by 7.9% to $677,000.
Active properties for sale in the county dropped by 34.3% year over year.
The median days on market were 13.
In November, the Los Angeles Metro housing market posted a year-over-year increase of 30% in single-family home sales. Compared to October 2020, sales dropped by 9.2%. The median home price of the Los Angeles metropolitan region remained at $630,000, a slight drop of 0.4% from October but it is 14.5% higher as compared to November of 2019.
The monthly drop is a seasonal trend when prices and sales tend to dip from October to December. The inventory remains tight. The Unsold Inventory for the entire Los Angeles Metro Area is 2.1 months. In November, all six counties of the Southern California houisng market saw an increase in sales as compared to the previous year, with LA county recording a YTY sales growth of 10.5%.
Compared to the previous month sales declined by -17.6%. The median sales price in LA county was $664,160, down 8.8% MTM and up 11.7% YTY. The November 2020 statistics by Realtor.com also show that the Los Angeles area is a balanced real estate market, which means there is a healthy balance of buyers and sellers in the market.
***The latest market trends (May 2021) have already been discussed above***
Los Angeles Real Estate Investment Overview 2021
Now that you know where Los Angeles is, you probably want to know why we’re recommending it to real estate investors. Investing in real estate is touted as a great way to become wealthy. Should you consider Los Angeles real estate investment? Many real estate investors have asked themselves if buying a property in Los Angeles is a good investment? You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2021 & 2022.
Los Angeles is a moderately walkable city in Los Angeles County. It is home to around four million people. It is the largest city in California and the second-largest in the United States. Los Angeles Metropolitan Area is a 5- region that includes Los Angeles, Orange, Riverside, San Bernardino, and Ventura. The L.A. metropolitan area with over 13 million people rivals New York in population as the largest in the country. However, being a huge real estate market is not reason enough to invest here.
The Los Angeles real estate market is considered one of the premier markets for both investors and homeowners. It is also touted as the nation’s least affordable housing market. If you look in the long-term, it’s always a good investment to buy in Los Angeles. It is said that you will always get your money back or you would make a profit, as Los Angeles has a track record of being a great long-term investment.
According to Neighborhoodscout.com, a real estate data provider, one and two-bedroom large apartment complexes are the most common housing units in Los Angeles. Other types of housing that are prevalent in Los Angeles include single-family detached homes, duplexes, rowhouses, and homes converted to apartments.
Single-family homes account for about 40% of Los Angeles’ housing units. In April 2020, the single-family homes posted their biggest percentage gains of the year so far in the Los Angeles metro area. House prices increased by 4.9% in Los Angeles County, 3.7% in Orange County, and 5% in the Inland Empire.
The Los Angeles housing market has been hot for years. In 2018, the home prices in Los Angeles reached record heights, climbing to levels far above those recorded in the years leading up to the Great Recession. If we check historical data, in Los Angeles and Orange counties, year-over-year price increases peaked at 8.2% in April 2018 and have declined every month since. In October 2018, the home prices in Los Angeles and Orange counties rose 5.5% over the previous year, according to the latest available data from the closely watched S&P CoreLogic Case-Shiller index.
A big factor, according to experts, is that many would-be buyers are increasingly priced out. But real estate agents also say a growing number of people who could buy, like Saavedra, have decided they don’t want to pull the trigger at the top. Home values in Los Angeles are up less than 3 percent since last year. After years of steady escalation, home prices in Los Angeles County are tapering off, according to a new report from CoreLogic.
They find that the Los Angeles county’s median home price was $579,500 in January, down slightly from December’s median price of $581,500. That’s a 2.6 percent increase over the same time last year. By this comparison, prices shot up nearly 8 percent between January 2017 and January 2018. Prices continued to rise through much of 2018 but began to drop heading into Q4 2018. In Q4 2019, home prices were still slightly higher than a year earlier, but the spread has narrowed.
2018’s FRM interest rate increase decreased the principal amount homebuyers can borrow while making the same sustainable mortgage payment. The National Association of Home Builders and Wells Fargo Housing Opportunity Index has given the title of least affordable housing market to Los Angeles. In Los Angeles-Long Beach-Glendale region, only 11.3% of homes sold during the fourth quarter of 2019 were affordable to families earning the area’s median income of $73,100.
The 2020 pandemic had its own impact on the market bring down the rent prices while houisng prices reached record highs. Los Angeles real estate market isn’t the most affordable in the country, but it’s definitely a market with ample investment opportunity for those who can afford the median price of over 700K.
However, this number doesn’t apply to every part of the Los Angeles real estate market. There are some neighborhoods where prices are much cheaper and completion between buyers is much lesser. The high rate of appreciation has not prevented real estate investors from realizing a great return on investment. Instead of flipping rehabs, you should consider investing in rental properties.
Let’s find some factors that make LA a good place to invest for wealthy investors. We’ll address the biggest factor pulling people to the Los Angeles housing market next. In this section, we’re not taking into account the short-term impact of the pandemic on the economy and housing market.
Los Angeles Hidden Real Estate Deals
Distressed sellers exist in every real estate market. If you do find an ideal property in the Los Angeles housing market, the increased selection of properties means you’re far less likely to end up in a bidding war. If you’re looking for other great deals, check out the Vermont Vista, Hyde Park, Wilmington, and Cypress Park, where the asking prices are below the Los Angeles median price. In December 2020, the median list price of homes in Vermont Vista was $580K while the median sale price was $566K.
Foreclosures can be a great way to snap up Los Angeles real estate at a bargain price. Foreclosure rates, though, vary wildly. Note that for every home in foreclosure with the bank, there is probably another that is approaching that point and would be sold at a discount by a distressed seller who wants to avoid foreclosure. In distressed neighborhoods, fix and flip may be an option. So is buying the Los Angeles real estate cheap and renting it out in a market starving for affordable rental units.
Top 5 Zips For FORECLOSURE RATES
90021: 1 in every 1158
90061: 1 in every 1526
90010: 1 in every 2235
90002: 1 in every 2634
90068: 1 in every 3486
Single-Family Rental vs Multi-Family Investment
Years of appreciation have led the Los Angeles real estate investors to favor rentals over flipping. This market favors rental property owners. In the city of Los Angeles alone, renters live in more than 600,000 apartments spread across 118,000 properties, according to the city’s Housing and Community Investment Department. In late 2019, California became the second state (after Oregon) to pass a statewide rent control law. It covers all multi-family rental units built more than 15 years ago. The state law applies on top of any stricter local ordinances.
Therefore, rent control applies to Los Angeles rental properties if they are multi-family units. Single-family detached homes rarely fall under rent control ordinances. They are generally not subject to LA Rent Control. The only exception is when two or more dwelling units are located on the same lot; then rent control rules are likely to apply. The simplest solution to this is to only buy single-family Los Angeles rental properties. Never buy a property with a separately rented granny flat or upstairs apartment you could rent out, as well.
On the other hand, homeownership rates in California have been declining for years. The sea change has been the growth of renting among the middle and upper classes. For example, a third of Los Angeles residents with incomes over $100,000 rent instead of own. Baby Boomers downsizing their homes choose to rent condos and homes that others maintain. Millennials who have a good income often say their parents lose their homes in the Great Recession and choose to rent instead.
This is driving demand for the luxury Los Angeles real estate market, whether condos, apartments with concierges, or luxury homes rented instead of purchased so that the resident can easily move if they lose their jobs. Only San Jose and San Francisco have more high-income residents that rent than the Los Angeles real estate market. Although apartment prices are high and rising, they’re lower in Los Angeles than in California.
That’s one bright spot in an otherwise tough rental market for Los Angeles renters. The latest data from Zumper shows that the rents have been declining because of the pandemic. A one-bedroom apartment rents for around $1,940 (-14.2% YTY) and a two-bedroom apartment rents for $2,700 (-10.9% YTY). The average rent people pay is around $2400 a month.
The Military also adds renters to the Los Angeles housing market. Any military base will pump renters into a real estate market. The Los Angeles real estate market is simply notable for having a large military population but a job market so diverse that the closing of a base won’t hurt the area’s home prices overall.
The Los Angeles AirPort Base, Edwards Air Force Base, and smaller facilities dump many renters into the Los Angeles housing market. Those with families often choose to rent Los Angeles rental properties instead of life on base. On top of that are defense contractors like Raytheon in Long Beach and El Segundo who pay people a premium to live here.
Current Rent Prices: Before the pandemic, the average rent for an apartment in Los Angeles was $2,524, growing by 2% YTY, according to RENTCafé. The average size for a Los Angeles, CA apartment is 792 square feet. 40% of the households in LA are renter-occupied while 60% are owner-occupied. Studio apartments are the smallest and most affordable, 1-bedroom apartments are closer to the average, while 2-bedroom apartments and 3-bedroom apartments offer more generous square footage.
As of August 19, 2021, the average rent for a 1-bedroom apartment in Los Angeles, CA is currently $2,050. This is a 2% decrease compared to the previous year. Over the past month, the average rent for a studio apartment in Los Angeles remained flat. The average rent for a 1-bedroom apartment increased by 3% to $2,050, and the average rent for a 2-bedroom apartment remained flat.
The average rent for a 2-bedroom apartment in Los Angeles, CA is currently $2,795. This is a 3% decrease compared to the previous year.
The average rent for a 3-bedroom apartment in Los Angeles, CA is currently $4,098. This is a 2% decrease compared to the previous year.
The average rent for a 4-bedroom apartment in Los Angeles, CA is currently $6,990. This is an 8% increase compared to the previous year.
Some of the most affordable neighborhoods in LA are:
Jefferson Park, where the average rent goes for $1,355/month.
El Sereno, where renters pay $1,396/mo on average.
Vermont Knolls, where the average rent goes for $1,445/mo.
Glassell Park & Cypress Park, where the average rent goes for $1,485/month.
Cypress Park, where renters pay $1,396/mo on average.
North Hills, where renters pay $1,530/mo on average.
Rising Prices: Construction Isn’t Meeting Housing Demand in LA
The Los Angeles housing market has seen a bump in residential construction. This has helped to satisfy some demand from renters. However, due to increasing demand, the new supply hasn’t brought prices down. The current supply of existing single-family homes is 1.4 which is insufficient to meet the demand. This also suggests that any new wave of construction will at most result in rental rates remaining steady instead of causing them to fall.
The geography of this region also limits the supply. The Los Angeles metropolitan area is perched between the ocean and the mountains. You obviously can’t build on water. There’s only so far you can build into the hills when mudslides and earthquakes limit how much you can build there. The Los Angeles real estate market is further constrained by the vast national parks around L.A. like the Angeles National Forest. These areas simply cannot be turned into residential areas.
Los Angeles’ Strong Economic and Job Growth
Two of the most fundamental economic indicators are employment and income. Home sales usually are directly tied to an economy’s health and rise and fall with economic activity. As economies slow, the supply of money tends to become more restrictive. What makes Los Angeles unique is the employment market. Want to work in Hollywood? Move to L.A. Want to work for a production company or in fashion? Come to L.A. If rent is too high, share an apartment or single-family home with friends. In terms of home prices, income, and employment indicate whether people can afford current and future increases.
The Golden State added 310,300 jobs in 2019, a 1.8% increase, to a total of 17.61 million, according to data released by the California Employment Development Department. The previous year’s increase was 1.6%. In Los Angeles County, nonfarm jobs grew by 67,800 to a total of 4.65 million. That was a 1.5% rise, led by healthcare and social assistance (up 28,000) and construction (up 8,500). The unemployment rate was 4.4% in December, down from 4.7% a year earlier.
Note that due to the ongoing pandemic, Los Angeles County’s unemployment rate has increased. It fell to 11% in November from a revised 12% in October amid seasonal hiring gains in retail and logistics, according to the State Employment Development Department. It was 19.6 percent in April 2020. Every major sector of the county’s economy suffered significant job losses during the past 12 months, led by accommodation/food services, which shed 120,000 payroll jobs.
Where To Invest in Los Angeles Real Estate Market?
In any property investment, cash flow is gold. California has the 6th largest economy in the entire world. This is largely driven by its innovative production, the heavy tech sectors in the state, and more. The Los Angeles real estate market has many points in its favor beyond its sheer size. The strong market fundamentals make the Los Angeles housing market a good place to invest if you’re looking at buying real estate in California.
How good is it to buy a Los Angeles investment property? Not every real estate investor wants to enter the most expensive and competitive Los Angeles real estate market. For buyers, the affordability is dropping and only 30% of LA county residents own a home. Home Prices are so high and out of reach for many buyers – many consider LA homes grossly over-priced.
While Los Angeles home prices may be increasing slightly over the next year, the fact remains that there are many homes available at fair prices. Growing household formations, ongoing job creation, and rising wage growth are fueling housing demand,” said NAHB Chief Economist Robert Dietz. “But a record-low resale inventory, coupled with underbuilding as builders deal with supply-side constraints, continue to put upward pressure on home prices even as interest rates remain at low levels.”
There’s still a strong opportunity for rental property investment in Los Angeles. There is a strong and continuous demand for apartments for rent in LA. This is fueled by always tight inventory, severe competition from tenants, rising wages, and a good economy. Therefore, for a great opportunity for rental income for investors. Good cash flow from Los Angeles investment properties means the investment is, needless to say, profitable.
A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding a good Los Angeles real estate investment opportunity would be key to your success. If you invest wisely in Los Angeles real estate, you could secure your future. The best investment is now looking for a rental property that will generate good cash flow. Your best tenants would be the retirees who intend to relocate to Los Angeles and want to purchase property to rent out.
The running costs for owning and managing a Los Angeles rental property should not be high. While hiring a property management company you should expect to give up roughly ten percent of the rent for each property they manage. Remember to factor this loss into your calculations when budgeting for a new rental property. The three most important factors when buying real estate anywhere are location, location, and location. The location creates desirability. Desirability brings demand.
There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your Los Angeles investment property and you should be able to get a good return on your investment over the long term. The neighborhoods in Los Angeles must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools, and shopping malls.
A cheaper neighborhood in Los Angeles might not be the best place to live in. A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio. Los Angeles real estate prices are well above average cost compared to national prices. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals such as duplex and triplex in Class A neighborhoods. The inventory is low, but opportunities are there.
Even as Los Angeles home prices have reached new heights, the market remains attractive to residential real estate investors. As they continue to compete for potential investment properties at the lower end of the market, the challenges for first-time homebuyers will remain. The homebuyers won’t be able to outbid real estate investors and would end up renting.
Home prices in Los Angeles are well below the national average for all cities and towns in the United States. According to Realtor.com, there are around 83 neighborhoods in Los Angeles. Bel Air has a median listing price of $4.7M, making it the most expensive neighborhood. Sunland-Tujunga is the most affordable neighborhood, with a median listing price of $695K.
Investing in more affordable neighborhoods (at least some of them) can give you a bigger return on investment in a shorter period of time. Here are some of the best neighborhoods in Los Angeles for buying investment properties.
El Sereno is a densely urban neighborhood (based on population density) located in Los Angeles, California. It is a predominantly Latino neighborhood northeast of Downtown Los Angeles. It is bordered on the north by Highland Park and South Pasadena, on the east by Alhambra, on the south by East Los Angeles, and on the west by Lincoln Heights and Montecito Heights. The average rental price in El Sereno is currently $1,839, based on NeighborhoodScout’s exclusive analysis. Rents here are currently lower in price than 67.6% of California neighborhoods.
El Sereno real estate is primarily made up of small (studio to two bedrooms) to medium-sized (three or four bedrooms) single-family homes and small apartment buildings. Most of the residential real estate is occupied by a mixture of owners and renters. Demand for real estate in El Sereno is above average for the U.S. and may signal some demand for either price increases or new construction of residential products for this neighborhood.
What You’ll Pay in El Sereno: According to Realtor.com, in December 2020, the median list price of homes in El Sereno was $688.9K while the median sale price was $705K. Homes in El Sereno sold for 1.84% above the asking price on average in December 2020. On average, homes in El Sereno sell after 58 days on the market. The trend for median days on market in El Sereno has gone down since last month, and slightly down since last year.
Wilmington is a neighborhood in the Harbor region of Los Angeles, California. Wilmington shares borders with Carson to the north, Long Beach to the east, San Pedro to the south and west, and Harbor City to the northwest. The community of Wilmington is one of the oldest in Los Angeles. It is a modern and progressive community with a long and proud history of being the gateway to Los Angeles and the rest of Southern and Central California. There are historical museums, military installations, parks, and waterfront attractions to visit. Click on the image below to see some postcard images from the past.
What You’ll Pay in Wilmington: According to Realtor.com, in December 2020, the median list price of homes in Wilmington, CA was $532.5K, trending up 8.7% year-over-year. The median listing price per square foot was $393. The median sale price was $525K. Homes in Wilmington, CA sold for 1.65% above the asking price on average in December 2020.
Highland Park is a neighborhood in Los Angeles. It is bordered on the south and east by the 110 freeway and stretches west almost all the way to Eagle Rock Boulevard. The neighborhood is in the midst of a renaissance, which has made it an affordable alternative for young professionals who find themselves priced out of central Los Angeles. It has been undergoing gentrification over the last 10 years and has seen an influx of trendy shops and restaurants, new parks, nightlife, and vibrancy.
What You’ll Pay in Highland Park: According to Realtor.com, in December 2020, the median list price of homes in Highland Park was $929.4K, trending up 10.8% year-over-year. The median listing price per square foot was $633. The median sale price was $950K. Homes in Highland Park sold for approximately the asking price on average in December 2020.
West Hills is a residential and commercial neighborhood in the western San Fernando Valley region of the City of Los Angeles, California. The percentage of residents aged 35 and older is among the highest in Los Angeles County. Historic landmarks and many city parks are to be found within the community, as are commercial districts, a business district, and religious establishments. Niche.com ranks it #42 in Best Neighborhoods to Live in Los Angeles.
What You’ll Pay in West Hills: The median home value in West Hills is $732,929 and home values have gone up 5.3% over the past year. According to Zillow, it is a sizzling hot neighborhood based on three metrics: the list-to-sale price ratio, the prevalence of price cuts on home listings, and time-on-market. All these metrics show that buyer demand is very high in this neighborhood. The median rent price in West Hills is $3,400, which is lower than the Los Angeles median of $3,500. Mashvisor also lists West Hills among the top three neighborhoods to purchase long-term Los Angeles investment property.
Mid City West is quite an appreciating neighborhood. For a prime city location, it’s very safe, and in the residential areas, it’s pretty quiet. This area really is the true LA experience. It’s really diverse and much of it reaches into what people consider part of West Hollywood. Since 2012, the property prices have appreciated every year in this neighborhood. The current median home value in Mid City West is $1,858,057 and home values have gone up a whopping 11.0% over the past year.
What You’ll Pay in Mid City West: The good thing for new buyers is that the market has cooled off. The competition is less (as of now) so you can negotiate the deal down to the standard. Rental properties in Mid City West are in high demand right. The median rent price in Mid City West is $5,800, which is higher than the Los Angeles median of $3,500.
Central City is an affordable neighborhood in LA for buying an investment property. Since 2012, the property prices have appreciated every year in this neighborhood. The median home value in Central City is $484,326. Central City home values have gone up 10.4% over the past year and Zillow predicts they will rise 1.5% within the next year. The good thing for new buyers is that the Central City market has cooled off.
The competition is less (as of now) so you can negotiate the deal down to the standard. We think this is the right time to buy a property in this neighborhood. Rental prices are higher than the median rent in LA. According to Mashvisor’s calculations, the Median property price is 576,143 and you can get a traditional rental income of $2,591 with a cash-on-cash return of 2%.
If you think of investing in LA, you have decided on a long-term investment property. Here are the ten neighborhoods in LA having the highest real estate appreciation rates since 2000—List by Neigborhoodscout.com.
S La Brea Ave / W Washington Blvd
Highland Park
W Washington Blvd / S Burnside Ave
N Ave 54 / Baltimore St
Nolden St / York Blvd
Meridian St / N Figueroa St
S La Brea Ave / W Jefferson Blvd
W Washington Blvd / S Western Ave
W Washington Blvd / Crenshaw Blvd
Clyde Ave / Hauser Blvd
As with any real estate purchase, act wisely. Evaluate the specifics of the Los Angeles housing market at the time you intend to purchase. Hiring a local property management company can help in finding tenants for your investment property in Los Angeles.
California housing market is the focus of many U.S. and foreign real estate investors. Apart from the Los Angeles real estate market, you can also invest in multiple cities in California. Here are the other two big cities in California where a real estate investor should look into buying investment properties.
San Jose is part of Silicon Valley, a place where $100,000 a year or higher salaries from competing tech firms has driven up the cost of real estate. But what about the San Jose housing market itself? San Jose is the third-largest city in California, home to roughly a million people. It has the highest cost of living in any area in the U.S., and it is one of the most expensive housing markets in the country. If you want to invest in the San Jose rental properties, you may not need to buy and renovate. Instead, if you know of industrial or commercial properties near major employers they may need to convert to employee housing, which you could buy now and hold until it sells.
If that doesn’t happen, you could still turn it into a co-working space. In January 2018, Redfin ranked the ten hottest neighborhoods in the United States. Nine of the ten were in San Jose. When single home prices fall from 1.2 million to 1 million, homes now sit on the market for several days instead of being snapped up immediately. The median price for a new home or condo was $750,000 in 2018, down from a record of nearly $800,000 a few months prior. If you want to invest in the San Jose housing market, you should do it now while things are – relatively speaking – affordable.
The San Diego real estate market offers an ideal mix of limited supply, high demand, and excellent income potential. If you’re going to invest in California, it needs to be in San Diego. The San Diego real estate market has been ranked among the ten most expensive real estate markets in the country, though it ranks below several other West Coast cities. This creates massive demand for San Diego rental properties by those who simply cannot afford to buy homes. The rental market will continue to grow as the city grows an estimated 500,000 by 2050, adding tens of thousands each year.
San Diego also has many tourist attractions. Balboa Park is home to the San Diego Zoo, the Air and Space Museum, the Natural History Museum, the Desert Garden, the local youth Symphony, a Japanese garden, and a golf complex. There’s a SeaWorld in San Diego, an MLB stadium, the USS Midway Museum, and the San Diego zoo safari park. On top of this is the mild weather and proximity to the beach. Any San Diego rental properties in easy reach of these attractions command a premium on rental sites like Airbnb. Demand for rentals in the San Diego real estate market soars during Comic-Con, one of the biggest comic conventions in the country.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Los Angeles.
Consult with one of the investment counselors who can help build you a custom portfolio of Los Angeles turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best neighborhoods of Los Angeles.
Not just limited to Los Angeles or California but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete Los Angeles turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.
Let us know which real estate markets you consider best for rental property investing?
Please do not make any real estate or financial decisions based solely on the information found within this article. Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US. This article aimed to educate investors who are keen to invest in LA real estate. Purchasing an investment property requires a lot of study, planning, and budgeting. Not all deals are solid investments. We always recommend doing your research and take the help of a real estate investment counselor.
REFERENCES
Market Data, Reports & Forecasts
https://www.car.org/marketdata/data/countysalesactivity
https://www.car.org/en/marketdata/interactive/housingmarketoverview
https://www.zillow.com/losangeles-ca/home-values
https://www.redfin.com/city/11203/CA/Los-Angeles/housing-market
https://www.realtor.com/realestateandhomes-search/Los-Angeles_CA/overview
https://www.zumper.com/rent-research/los-angeles-ca
https://www.littlebighomes.com/real-estate-los-angeles.html
Covid-19 Impact/News
https://la.curbed.com/2020/2/28/21157988/home-prices-los-angeles-report
https://www.latimes.com/homeless-housing/story/2020-07-23/southern-california-home-prices
Best Neighborhoods and Statistics
https://www.zillow.com/
https://en.wikipedia.org/
https://www.neighborhoodscout.com/ca/los-angeles/real-estate/
LA demographics
http://worldpopulationreview.com/us-cities/los-angeles-population
Rent control
https://www.latimes.com/archives/la-xpm-2007-dec-30-re-aptlife30-story.html
Foreclosures
https://www.realtytrac.com/statsandtrends/foreclosuretrends/ca/los-angeles-county
Rental market/Apartments
https://la.curbed.com/2019/2/4/18210857/los-angeles-rental-prices-2019-average
https://www.rentcafe.com/average-rent-market-trends/us/ca/los-angeles
https://la.curbed.com/2019/2/26/18241819/rent-vs-buy-los-angeles-high-income
Job & Unemployment Stats
https://fred.stlouisfed.org/series/CALOSA7URN
https://www.labormarketinfo.edd.ca.gov/file/month/la$pds.pdf
Military market
http://www.laalmanac.com/military/mi05.php
Good time to buy/price predictions
https://la.curbed.com/2018/12/7/18128000/los-angeles-real-estate-market-prediction-2019
https://www.forbes.com/sites/ellenparis/2019/02/23/buyers-should-revisit-los-angeles-and-san-francisco-housing-markets-for-new-opportunities/#47bd1029428c
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