Los Angeles, CA Real Estate Market Trends & Analysis [Updated 2020]

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The Los Angeles real estate market is not only at the forefront of a national recovery, but also a global recovery. If for nothing else, real estate in Los Angeles has performed so well for investors in recent history that the world is starting to take notice. No other city in the world, for that matter, has captured the attention of international investors more so than The City of Angels. Touted as one of the world’s most desirable cities to invest in over the last few years, the Los Angeles housing market has officially become the most desirable market to investors across the globe.

According to the Association For International Real Estate Investors (AFIRE), real estate appears to offer the best opportunity for capital appreciation in 2020. “Los Angeles, Paris and Boston are the top three global cities where investors would like to increase their investment exposure,” according to the organization’s latest survey. Investors have taken notice of the city’s past performance, and appear confident trends will continue for the foreseeable future.

Global attention is expected to increase activity across LA, which should bode incredibly well for everyone looking to participate in the 2020 marketplace: buyers, sellers, and real estate investors. Even in the face of historic appreciation, the Los Angeles housing market looks poised to benefit savvy investors for years to come.

Los Angeles Real Estate Market 2020 Overview

  • Median Home Value: $723,783

  • 1-Year Appreciation Rate: +2.7%

  • Median Home Value (1-Year Forecast): +4.3%

  • Average Days On Market (Zillow): 75

  • Median Rent Price: $3,500

  • Price-To-Rent Ratio: 17.23

  • Unemployment Rate: 4.0% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 3,990,456 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $58,385 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 6.71%

  • Foreclosure Rate: 1 in every 2,743 (3.6%)

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Los Angeles housing market

2020 Los Angeles Real Estate Investing

The Los Angeles real estate market has captured the attention of investors around the globe. Thanks, in large part, to a thriving economy deeply rooted in the entertainment industry, LA is not only the beneficiary of strong fundamentals, but also constant demand. At the very least, the city’s most desirable features will continue to attract people from around the world.

“For three years in a row, Los Angeles has been the top market in the country for foreign capital,” said Robert Sulentic, chief executive of CBRE. “Foreign investors tend to like the big gateway markets and L.A. has been particularly big because of the entertainment industry.”

It is worth noting, however, that the last three years of growth aren’t expected to come to an abrupt end. Real estate in LA should continue to remain attractive to investors, at least over the course of the next year.

“Next year we’ll see slower growth, but some growth. We won’t have a recession and our industry will continue to perform well. The value of real estate assets will likely hold up,” according to Sulentic.

Of the exit strategies investors are considering, none currently hold more potential than rental properties; that’s because of the unique correlation between rental rates and demand. With a price-to-rent ratio of 17.23, it is considered cheaper to rent in LA than to own. As a result, more people will be inclined to rent. Even those who can afford to buy may be relegated to renters due to the lack of available inventory. When all is said and done, the Los Angeles housing market should see an increase in renters.

According to Attom Data Solutions, “Renting is the more affordable option in 36 of the 43 counties with a population of at least 1 million or more (84 percent) — including Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; Maricopa County (Phoenix), AZ and San Diego County, CA.

The resulting demand should serve as a rising tide for every well-positioned rental property owner in LA. Of particular importance to real estate investors, however, are the economic fundamentals in place keeping their units filled.

At this point in 2020, average rents are rising faster than median prices in LA, which begs the question: Is buying a condo in Los Angeles a good investment? Today’s rental rates and level of demand would suggest it is. Those who can’t afford to buy are, therefore, forced to rent in a market with ever-increasing prices. Not only that, but average rents are increasing faster than average wages in Los Angeles County, CA, according to Attom Data Solutions. Yet, demand for rental properties persists in the face of less-affordable conditions. Local real estate investors with cash-flowing rental portfolios are currently the beneficiaries of very favorable market conditions, and it’s not too late to get in on the action.

In fact, years of appreciation have led the Los Angeles real estate investing community to favor rentals over traditional flips and wholesales. If for nothing else, deals with attractive profit margins are harder to come by in today’s market. Subsequently, months of cash flow is entirely capable of offsetting today’s higher prices. Under the right circumstances, it is entirely possible to justify higher acquisition costs with years of historic rental returns.

LA is relatively expensive compared to nearly every market across the country, which begs the question: Is it a good time to buy real estate in Los Angeles? The answer is simple: yes, under the right circumstances. However, years of appreciation have not prevented real estate investors from realizing a great return on investment. Expensive market conditions simply require a new approach. Instead of flipping rehabs (which is still a viable option), local investors should really consider investing in rental properties.

2020 Foreclosure Statistics In Los Angeles

Attractive profit margins are becoming harder to come by for the Los Angeles real estate investing community. Nearly a decade’s worth of appreciation has made finding discounted properties harder. Nonetheless, there’s still one place real estate investors may turn to for a deal: the distressed property market. Oftentimes, distressed homes may award savvy investors with discounts. Therefore, if the median home value appears to high on the surface, it may be worth your time to search for distressed assets.

The Los Angeles real estate market has a relatively low foreclosure rate, at least compared to national trends. While real estate is definitely on the more expensive end of the national spectrum, a surprisingly low number of homeowners have found themselves underwater in the Southern California market. As recently as January, in fact, only one in every 2,743 homes have been deemed distressed (default, auction or bank owned). At that rate, the city currently boasts a foreclosure rate somewhere in the neighborhood of 3.6%. The foreclosure rate for the United States, on the other hand, is a slightly less modest 4.4%.

Despite the city’s relatively low foreclosure rate, there has been an increase in the number of foreclosure filings in recent history. Counter to national trends, LA posted a year-over-year increase of 63.0% at the beginning of 2020. Only San Antonio saw a larger increase in foreclosure starts over the last year, according to Attom Data Solutions.

The rate in which the Los Angeles housing market saw foreclosure filings increase was dramatically higher than national trends. As recently as January, “the number of properties that received a foreclosure filing in the U.S. was 13% higher than the previous month and 7% higher than the same time last year,” according to RealtyTrac.

The latest increase may be the result of defaulting homeowners. That is to say, the majority of the city’s distressed properties haven’t even officially entered into the foreclosure process, but are instead at risk of being foreclosed on. Otherwise known as pre-foreclosures, currently defaulting homeowners make up 50.2% of LA’s distressed inventory. As a result, roughly half of the city’s distressed inventory is merely at risk of falling into foreclosure. Nonetheless, these homeowners may represent a great opportunity for the Los Angeles real estate investing community to acquire a deal with attractive margins. The remaining foreclosures are fairly evenly split between auction homes and bank-owned homes—25.6% and 24.2%, respectively.

Even though the Los Angeles housing market has a relatively low foreclosure rate, there are some counties with higher distributions of distressed homes than others. For a better idea of the distribution of foreclosures, here’s a breakdown of where the highest distributions are and what types investors are most likely to find:

Foreclosures in Los Angeles

Data provided by RealtyTrac

2020 Median Home Prices In Los Angeles

Along with cities like Dallas-Fort Worth, Houston, Washington, D.C., and Philadelphia, the Los Angeles housing market set a median home value record in 2019. At the end of last year, the median home value topped out around $719,000, which was higher than it has ever been. It is worth noting, however, that prices have continued to rise in the first quarter of 2020. Thanks—in large part—to increasing demand, an improving economy, and a lack of available inventory, the median home price is now upwards of $723,783, or 0.6% higher than it was at the end of last year.

Today’s median home price is the result of eight consecutive years of appreciation. As recently as the first quarter of 2012, when the recession was starting to wear off, the median home value in the Los Angeles real estate market was around $394,000. Since then, the median home price has increased 83.7%. To put things into perspective, the median home value in the United States increased 53.2% over the same period of time (January 2012 to February 2020).

Dating back even further (to the turn of the century), here’s a list of the neighborhoods in LA that have appreciated the most (according to NeighborhoodScout):

  • Nolden St / York Blvd

  • Garvanza

  • Meridian St / N Figueroa St

  • N Western Ave / W Sunset Blvd

  • S La Brea Ave / W Washington Blvd

  • Highland Park

  • W Washington Blvd / Crenshaw Blvd

  • Santa Monica Blvd / N Hudson Ave

  • N Ave 54 / Baltimore St

  • Lincoln Blvd / Broadway St

Whether or not these are the best neighborhoods in Los Angeles to invest in remains to be seen, but one thing is for certain: there is no denying investors in each respective area haven’t enjoyed a good run. Each of these neighborhoods have been the beneficiary of growth, and there’s nothing to suggest they won’t maintain momentum moving forward.

Due to years of appreciation, many people are asking themselves one important question: Will home prices drop in Los Angeles? While justified, prices aren’t expected to drop. Instead, appreciation rates should temper, but not before a few more increases. Despite historical appreciation rates, real estate is expected to continue rising in price. Due primarily to increasing demand and a lack of available inventory, appreciation rates are actually expected to eclipse 2019, to the tune of 4.3%.

Here’s a look at how home values stack up against the rest of the country over the last decade:

Median home price Los Angeles

Data provided by Zillow

Los Angeles Real Estate Market: 2018 Summary

Los Angeles real estate market news was generally good in 2018. The city cemented itself as one of the premier housing markets for both investors and homeowners in 2018. As with its West Coast counterparts, the City of Angels witnessed rapid price growth in the face of increasing demand. If for nothing else, real estate became the beneficiary of some much appreciated momentum.

The greater LA area had a median home value of $663,500 just a few years ago. At the time, the median home price was approximately 8.6% higher than it was the previous year, and it only went up from there.

Due, in large part, to more than a half a decade of home value increases, median rent prices witnessed their own impressive ascent. As recently as 2018, the median rent was about $3,490. Of course, it’s worth noting that historically high rents were skewed by outlier neighborhoods. For example, LA’s priciest neighborhood to rent in was Santa Monica, where one-bedroom units went for more than $3,000 a month as recently as a few months ago. Not far behind, similar units in the equally popular Venice neighborhood rented for just a couple hundred dollars less. Even the famed Beverly Hills and Pacific Palisades couldn’t keep up with Santa Monica, at least in terms of rent.

Los Angeles Real Estate Investing 2018

LA had about 1,934 properties that were in some stage of foreclosure 2018. In other words, there were nearly 2,000 homes that were either in pre-foreclosure, default, up for auction, or owned by banks.

Those considering investing in the Los Angeles housing market at the time couldn’t ignore the city’s distressed inventory. Two years ago, foreclosures represented a significant opportunity to secure a deal at a good price. The median sales price of a foreclosed home was about $480,250, or—perhaps even more importantly—an impressive 27.0% less than their non-distressed counterparts. In 2018, foreclosed homes in LA were about $174,750 cheaper than homes that are not at risk of foreclosure. As a result, the Los Angeles real estate investing community was able to capitalize on great deals with plenty of profit margins.

The majority of LA’s distressed properties were in a state of pre-foreclosure, amounting to 53.6% of the entire city’s distressed properties. While pre-foreclosures represented more than half of the city’s distressed properties, they were 4.8% lower than the previous year. An additional 22.6% of LA’s foreclosures were scheduled to be placed up for auction at the time. Real estate investors who were able to acquire these homes were most likely able to capitalize on a great market.

Real estate in LA, not unlike several other major West Coast metropolitan areas, was the beneficiary of a torrid housing market in 2018. Dating back to the depths of the recession, somewhere around 2012, home values increased exponentially. It is important to note, however, that fears of a bubble were overblown. Prices weren’t yet at the same level as they were when the market went under. And, perhaps even more importantly, the same lending practices that got us in trouble in the first place have been reworked.

Los Angeles Real Estate Market: 2016 Summary

  • Median Home Price: $458,000

  • 1-Year Appreciation Rate: 6.3%

  • Unemployment Rate: 4.8%

  • 1-Year Job Growth Rate: 2.6%

  • Population: 13,296,946

  • Median Household Income: $58,860

Los Angeles Real Estate Investing 2016

The median home price in the Los Angeles real estate market saw tremendous growth in 2016. Year-over-year, home prices increased 6.3% compared to the national average of 6.1%, while overall the median home price increased 32.8% in the previous three years. The Los Angeles housing market also benefited from gains in equity, which were almost double the national average. That, in addition to record-low mortgages, made the prospect of homeownership even more enticing.

The economy was on the rise in 2016, as unemployment and job growth continued to fare better than the national average. The current unemployment rate is 4.8% compared to the national average of 5.0%, while job growth in the previous 12 months increased 2.6% compared to the national average of 2.0%.

Los Angeles Real Estate Market: 2014 Summary

  • Median Home Price: $458,000

  • 1-Year Appreciation Rate: 6.3%

  • Unemployment Rate: 4.8%

  • 1-Year Job Growth Rate: 2.6%

  • Population: 13,296,946

  • Median Household Income: $58,860

Los Angeles Real Estate Investing 2014

As one of California’s most desirable cities, LA was at the forefront of the housing sector recovery in 2014. At the time, the Los Angeles housing market boasted attractive indicators that promoted a healthy amount of activity. Gains in the previous three years helped pull the local market out of the post-recession price weakness. In fact, real estate appreciated faster than the national average, and has continued to do so. It was in 2014 when real estate investors became convinced they were int eh middle of something special.

The median household income was approximately $57,190. The unemployment rate was 4.8%, compared to the national average of 5.0%. Job creation was atypical of past cycles and continued to reduce vacancies, increase consumer confidence and permit prospective buyers to actively participate in the market. For all intents and purposes, the city was poised to remain one of the leading hubs for housing activity for the next decade.

Los Angeles Real Estate Market Map:

Map of Los Angeles neighborhoods

Moving forward, the Los Angeles real estate market is expected to continue pacing national trends. While still caught in the wake of its neighbor to the north (San Francisco), LA is still one of the most attractive markets for real estate investors in the country. Not only that, but the city should continue to attract buyers, renters and investors from across the globe for years to come.

Are you interested in joining the Los Angeles real estate investing community? Please let us know your thoghts on real estate in LA in the comments below:

*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no representations, warranties, or guarantees, either expressed or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. FortuneBuilders Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.
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