Los Angeles Real Estate Market & Investment Overview 2021
US Housing Market Forecast 2021: Will It Crash or Boom?
Housing data by C.A.R. Forecast is an estimate based on data from multiple sources. While it is deemed reliable, it is not guaranteed.
We will discuss the Los Angeles housing market trends and forecast for 2021. After the impact of the pandemic, which halted the market for a while, we saw the first rebound in home sales in June of last year. Since then the home prices & sales have been accelerating year-over-year across the Southern California housing market and Los Angeles is no exception.
It is a no-brainer that low-interest rates haven’t been enough to motivate sellers who are unable or unwilling to list their properties in light of the job losses stemming from the underlying recession. This has resulted in a tight housing inventory, accelerating prices to unsustainable heights compared on a year-over-basis.
C.A.R.’s December 2020 resale housing report shows that sales increased by double-digits in all major regions in December. The San Francisco Bay Area remained on top with the highest gain of 40.2 percent over last year, followed by Southern California (31.4 percent), The Los Angeles Metro housing market posted a year-over-year increase of 31.6% in single-family home sales. Compared to November 2020, sales were up by 14.3%.
The median home price of the Los Angeles metropolitan region remained at $625,250, a slight drop of -0.8% from November but it is still 13.7% higher as compared to Dec of 2019. The monthly drop is a seasonal trend when prices and sales tend to dip from October to December. The inventory remains very tight. Months Supply of Inventory for the Los Angeles Metro Area is 1.4 months. Months Supply of Inventory (MSI) is a calculation that quantifies the relationship between supply and demand in a housing market.
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 1.4 months of supply left, the Los Angeles Metro housing market will continue to see upward pressure on home prices in 2021.
In December, all six counties of the Southern California houisng market saw massive double-digit increases in sales of existing single-family homes as compared to the previous year, with LA county recording a YTY sales growth of 30.5%. Venture topped the list with a growth of 41.7%. Compared to the previous month, SFH sales in LA county were up by 22.1%. The median sales price in LA county was $709,500, up 6.8% MTM and up 10.6% YTY.
Now let us take a look at the current market trends of Los Angeles City. There are around 82 neighborhoods in LA 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 1,4 months.
The city is no exception. Realtor.com’s December 2020 statistics show that Los Angeles is a seller’s market, which means that more people are looking to buy than there are homes available. In December 2020, the median list price of homes in Los Angeles, CA was $950K, trending up 11.9% year-over-year.
The median listing price per square foot was $557. The median sale price was $835K. The sale-to-List Price Ratio was 100%. Homes in Los Angeles, CA sold for approximately the asking price on average in December 2020. A seller would prefer this ratio to be 100% or more. On average, homes in Los Angeles sell after 64 days on the market.
The trend for median days on market in Los Angeles, CA has gone up since last month, and slightly down since last year. 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 Los Angeles will continue to appreciate — the modest forecast hovers around 5% for the next 12-months.
Table of Contents
Southern California Housing Market Trends
The Southern California real estate market is having a boom 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 record-low interest rates which are helping buyers to save on monthly mortgage payments.
Rising demand and tight inventory have made it a seller’s market. The month’s supply of inventory of single-family homes has decreased to 1.3. Homes are selling fast. The median days on market is 10, which is 18 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.
Here is the tabulated data of the Southern California housing market for existing single-family homes. The region posted a single-family sales growth of 31.4% YTY and 12.4% MTM. The median price increased by 13.0% YTY to reach $650,000. However, it was a little lower (-1.2%) than November’s median price of $657,820. Sales in all the counties except Ventura have grown on a month-on-month basis.
Source: CALIFORNIA ASSOCIATION OF REALTORS®
The median condo price increased in Southern California increased by 9% YTY and 15 MTM to reach $485,000. Condo sales in all the counties grew at a massive rate from the previous year with San Bernardino County recording the highest growth of 69%.
Source: CALIFORNIA ASSOCIATION OF REALTORS®
Los Angeles County Housing Market Trends
C.A.R.’s December 2020 resale housing report shows that Los Angeles County saw high demand in December. Homes are moving fast as compared to last year. The sales of both existing single-family homes and condos recorded massive double-digit growths. Single-family median house price grew by 10.6% to $709,500. The condo market also showed a good buyer turnout. Sales of existing condos were up 10.6% MTM and up 30.4% YTY. The median Los Angeles condo price grew by 12.4% to reach the $500,000 mark.
|December-2020||Median Sold Price||Sales|
|Los Angeles||Dec-20||Nov-20||Dec-19||Price MTM% Chg||Price YTY% Chg||Sales MTM% Chg||Sales YTY% Chg|
Infographic Courtesy of CALIFORNIA ASSOCIATION OF REALTORS®
Los Angeles Real Estate Market Forecast 2021
What are the Los Angeles real estate market predictions for 2021? Let us look at the price growth recorded by Zillow, a leading real estate marketplace. Since 2012, the Los Angeles median home values have appreciated by nearly 100%, from $402,000 to $804,452. Similar growth has been recorded by NeighborhoodScout.com as their data also shows that in the past ten years, Los Angeles real estate appreciated 94.32%.
This amounts to an annual real estate appreciation of 6.87%, putting Los Angeles in the top 10% nationally for real estate appreciation. During the latest twelve months, Los Angeles’ property appreciation rate was 4.51% and in the latest quarter, it has been 1.71%. If it remains steady, it would amount to an annualized rate of 7.0%.
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. in 2020 was $999,050, up 13.90% year-over-year.
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 published in November 2020 also predicted that LA home values will rise 10.5% in the next 12 months. Zillow’s research expects home prices in these areas to rise by double digits over the next year. They have updated the forecast post that but only for the metro area. Nevertheless, prices are going to rise at the same or even rapid pace in the LA county.
- Los Angeles-Long Beach-Anaheim Metro home values have gone up 9.3% over the past year and Zillow predicts they will rise 9.9% in the next twelve months.
- Los Angeles home values have gone up 10.1% over the past year and the latest forecast is that they will increase by 10.5% in the next twelve months.
The chart below, created by Zillow, shows the growth of median home values since 2011 and their forecast until Dec 2021.
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%|
The question now is what happens moving forward. 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. 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. According to the forecast by CoreLogic, home price drops aren’t expected in Southern California. Prices instead are forecast to rise 3% in Los Angeles County by April 2021, 5% in Orange County, and 6% in the Inland Empire. Therefore, this a relatively good time for homebuyers in Los Angeles before prices start ticking up again.
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.
Los Angeles Housing Market 2020 Summary: Prices | Trends | Supply
Let’s do a quick recap of how the LA housing market performed in 2020. We shall mainly discuss median home prices, inventory, economy, growth, and neighborhoods, which will help you understand the way the local real estate market moves in this region.
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 as 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.
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 median price of a single-family home in Los Angeles County was $650,000 in January, representing a sizable 8.5 percent increase over a year earlier. A median-priced condo cost $515,000, a more modest 1 percent uptick over January 2019. The prices dropped off a bit every month, by nearly 5 percent for condos and 0.5 percent for single-family homes.
According to the CALIFORNIA ASSOCIATION OF REALTORS, the unsold inventory in February was equal to 3.6 months for single-family detached homes, up 12.5% MTM and down -29.4% year-to-year. The median price of single-family detached homes was $580,690, down 6% MTM, and up 7.3% year-to-year.
Low-interest rates and strong employment lead to some stellar sales results in February in most counties of California. Data gathered by the California Association of Realtors suggest that single-family homes, in particular, are fetching far lower prices now than they were during the summer when Los Angeles real estate values reached an all-time high.
Screenshot Courtesy of CAR.org
The association reports that the median sold price of an existing (not newly built) single-family home in the Los Angeles Metropolitan Area was $550,000 in February 2020, up 8.9% from last year. From Jan to Feb, the median sold price increased by 2.1 percent. This beginning of 2020 has been good for Los Angeles single-family homes.
Impact of COVID-19 on the Los Angeles Housing Market
The shutdown has 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 have 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 (December 2020) have already been discussed above***
Los Angeles Real Estate Foreclosure Trends
Here are some foreclosure statistics of the Los Angeles housing market. The percent of mortgage delinquency in the Los Angeles housing market is 0.7 percent, according to Zillow. In September, there were 737 properties in Los Angeles, CA that were in some stage of foreclosure (default, auction, or bank-owned) while the number of homes listed for sale on RealtyTrac was 3,238. The number of properties that received a foreclosure filing in Los Angeles, CA was 30% lower than the previous month and 66% lower than the same time last year.
Currently, the zip code with the highest foreclosure rate is 90058, where 1 in every 850 housing units is foreclosed. So, you’d find a lot of distressed sellers in this area and get some discounted off-market deals. 90002 zip code has the lowest foreclosure rate, where 1 in every 2634 housing units becomes delinquent.
|Potential Foreclosures in Los Angeles||737 (RealtyTrac as of Sep 2020)|
|Homes for Sale in Los Angeles||3238|
|Median List Price||$1,050,000 (2% rise vs Aug 2019)|
Los Angeles Real Estate Investment
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.
The Los Angeles housing market has been hot for years. It hit record highs in 2019. 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.
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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 the 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.
The Zumper Los Angeles Metro Area Report analyzed active listings in December 2020 across 30 metro cities to show the most and least expensive cities and cities with the fastest-growing rents. The California one-bedroom median rent was $1,756 last month.
The Fastest Growing (Y/Y%)
- Rancho Cucamonga had the fastest-growing rent, up 15.3% since this time last year.
- Corona saw rent climb 14.8%, making it the second-fastest-growing.
- Ventura ranked third with rent increasing 12.0%.
The Fastest Growing (M/M%)
- Ventura had the largest monthly rental growth rate, up 5.1%.
- Long Beach rent increased 3.2% last month, making it second.
- Beverly Hills, Pasadena & Redondo Beach tied for third with rents all climbing 1.6% last month.
The Least Expensive
- Riverside was the most affordable city with one-bedrooms priced at $1,420.
- Hawthorne was second with rent at $1,500.
- Temecula’s rent fell 0.7% to $1,510 and ranked as a third.
The Most Expensive
- Laguna Beach was the most expensive city with one-bedrooms priced at $2,630.
- Newport Beach saw rent drop 0.4% to $2,600 but remain the second priciest.
- Beverly Hills was third with rent at $2,480.
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 product 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.
- Santa Monica Blvd / N Hudson Ave
- Highland Park
- Nolden St / York Blvd
- N Western Ave / W Sunset Blvd
- N Ave 54 / Baltimore St
- S La Brea Ave / W Washington Blvd
- Meridian St / N Figueroa St
- W Washington Blvd / Crenshaw Blvd
- W Washington Blvd / S Western Ave
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.
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.
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.
Is It The Right Time To Invest In Real Estate? – The national homeownership rate is on the decline for the first time since 2017. As demographics change and baby boomers retire, you’re seeing Millennials who may not be ready to buy houses. In 2018, Millennials made up about 22 percent of the population in the United States. They’re choosing to rent over buying a single-family home or an apartment. Rising home prices and shortage of starter homes have not left Millennials many choices but to delay homeownership. Moreover, it’s even harder to take out a mortgage for those who have student loan debt.
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 studies, 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.
Market Data, Reports & Forecasts
Best Neighborhoods and Statistics
Job & Unemployment Stats
Good time to buy/price predictions
10 Rules of Successful Real Estate Investing