Los Angeles Housing Market Prices, Trends, & Forecasts 2021-2022

by Than Merrill | @ThanMerrill
Published on Fri, Dec 17 2021

Jump To Los Angeles Real Estate Market Prices, Trends, & Forecasts:


The Los Angeles housing market is at the forefront of both a national and global recovery. Real estate in Los Angeles has performed so well for investors in recent history that the world is noticing. No other city, 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 for investors across the globe.

According to the Association For International Real Estate Investors (AFIRE), real estate in LA was one of the fastest ways to realize appreciation of capital as recently as last year. “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 noticed 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 bodes incredibly well for everyone looking to participate in the marketplace: buyers, sellers, and real estate investors. Even in the face of historical appreciation, the Los Angeles housing market looks poised to benefit savvy investors for years to come.

Current Los Angeles housing market trends are directly correlated to the introduction of COVID-19. While local real estate experienced a setback at the onset of the pandemic, pent-up demand, historically low interest rates, and rapidly appreciating assets have stirred up a lot of activity. Despite the negative impacts of the pandemic, the brief disruption may have actually created a window of opportunity for anyone looking to buy, sell, or invest.

Los Angeles Real Estate Market 2021-2022 Overview

  • Median Home Value: $921,495

  • Median List Price: $926,667 (-6.7% year over year)

  • 1-Year Appreciation Rate: +15.9%

  • Median Home Value (1-Year Forecast): +13.7%

  • Weeks Of Supply: 7.9 (-3.7% year over year)

  • New Listings: 1,050 (-19.5% year over year)

  • Active Listings: 11,486 (-33.3% year over year)

  • Homes Sold: 1,531 (+0.3% year over year)

  • Median Days On Market: 34 (-4.7 year over year)

  • Median Rent: $2,673 (+9.7% year over year)

  • Price-To-Rent Ratio: 28.73

  • Unemployment Rate: 7.1% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 3,979,576 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $62,142 (latest estimate by the U.S. Census Bureau)


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Los Angeles housing market

Los Angeles Housing Market Forecast 2021-2022

The Los Angeles housing market has remained in line with national trends. In particular, recent trends are primarily the result of indicators created in the wake of COVID-19. As a result, we are starting to see evidence in support of clear trends. Consequently, here are the Los Angeles housing market forecasts most likely to come to fruition:

  • Home Values Will Increases At A Slower Pace: Over the course of 2021, the Los Angeles housing market saw its median home value increase as much as 15.9% on the heels of lower borrowing costs, increased demand, and a lack of inventory. These trends will remain intact over the next 12 months, but it is safe to assume appreciation won’t surpass 2021 levels. If for nothing else, new listings are being added to the market, interest rates are expected to increase, and home values don’t have a lot of room for growth. As a result, the city’s median home value will most likely increase somewhere in the neighborhood of 13.7%.

  • Interest Rates Will Rise: In 2021, interest rates on 30-year fixed-rate mortgages increased 0.33%. The increase is considered mild, as the Fed decided to keep rates low to simulate the economy during the pandemic. However, inflation is becoming a bigger threat and the Fed has already announced rates will rise in 2022. It is too soon to tell just how high mortgage rates will rise, but it is safe to assume they will increase more than they did in 2021. At first, the threat of an increase will spur more buying activity, but the interest will wane as borrowing costs increase.

  • The Cost Of Renting Will Increase: Home values have increased about 15.9% in the last year, and rental rates are up 9.7%. The disparity is likely due to the lack of listings on the market. However, more people are expected to rent over the course of 2022. Not only will homes grow prohibitively more expensive, but new builds don’t appear to be ready anytime soon. As a result, even those who want to buy won’t be able to, and instead will be forced to rent. With more demand than in 2021, rents will most likely increase in the double digits.

  • Investing Indicators Will Favor Landlords: The indicators left over in the wake of the pandemic have created an environment that favors long-term exit strategies. In addition to lower profit margins and higher acquisition costs, rental properties look like the path of least resistance in 2021 and 2022.

  • Negative Net Migration: The Los Angeles housing market saw a decline in its population in 2020, and 2021 doesn’t look like it will reverse the trend. As home values continue to increase, more and more buyers are being priced out of the market. Therefore, it is safe to assume LA will continue to see more people move out of the city, and seek out more affordable alternatives.

Los Angeles County Housing Market Trends 2021

The majority of today’s Los Angeles County housing market trends are the result of COVID-19 and its impact on the real estate market. Not a single buyer, seller, renter, landlord, or investor hasn’t experienced a massive shift in fundamentals over the last two years. Of the many indicators that have shifted, however, none has been more impactful than appreciation rates. Thanks to lower borrowing costs, increasing demand, and a distinct lack of inventory, homes in the Los Angeles County real estate market have appreciated at a blistering pace. Jumping upwards of 15.9%, today’s prohibitively expensive homes have changed the way people look at the market.

Sellers have hesitated to put their homes on the market. While many homeowners are excited to sell their homes at today’s levels, doing so would mean entering the market themselves. Buyers, on the other hand, have been forced to endure steep price increases due to the amount of competition in the Los Angeles County housing market. In fact, competition has increased the number of renters in LA. Not only have expensive homes priced buyers out of the market, but many people simply couldn’t find a home in the first place.

Supply and demand simultaneously drove people away from buying and towards renting. As a result, demand for rental units increased, along with asking rent rates. The cost of renting increased nearly ten percent over the course of 2021, and it’ll probably continue to rise as more people are turned away from buying.

How COVID-19 Affected The Los Angeles Real Estate Market

There isn’t a single real estate market in the United States that hasn’t felt the Coronavirus’s impact. As recently as 2020, “shelter-in-place” orders all but brought the housing sector to a standstill. Fear and uncertainty simultaneously prevented anyone from buying or listing homes, and the Los Angeles housing market was no exception. Real estate in Los Angeles was brought to a screeching halt as unemployment spiked and people were less inclined to spend their money.

It should be noted, however, that the temporary setback was just that: temporary. Within months (if not weeks), Los Angeles housing market trends picked up where they left off. When the Fed announced interest rates would remain near historical lows for at least the next few years, buying a home became too attractive not to consider. Pent-up demand resulting from the shutdown came back in droves, only to be stifled by inventory or lack thereof. If for nothing else, low interest rates and a government stimulus package ignited the housing sector, but the lack of available inventory created a lot of competition. Owners started receiving multiple offers almost immediately, and prices increased as a result. Over the next year, experts expect prices to increase by as much as 8.3% in the wake of supply and demand issues.

All things considered, the Los Angeles real estate market has weathered the Coronavirus storm relatively well. Today, real estate in Los Angeles is firing on all cylinders, except for one: unemployment. While everything else seems to be going relatively well, the local housing market is now being held back by a high unemployment rate. Currently, upwards of 7.1%, local unemployment has come down a bit, but still has a ways to go. As a result, there’s still a large percentage of the population being held back. For LA to truly realize its full potential, unemployment will need to make up a lot of ground.

In the meantime, Los Angeles real estate market trends point to an exodus from the city. With more and more people working from home, there’s no longer a need for many people to live within proximity to their offices. As a result, we are starting to see people trade expensive city apartments for more spacious suburban homes. While it’s too soon to tell, it’s reasonable to assume we will see less demand for urban living spaces for the foreseeable future. On the other hand, suburban neighborhoods may see an uptick in demand, which will ultimately be reflected in rising home values.

Los Angeles Foreclosure Statistics 2021

According to ATTOM Data Solutions’ Q3 2021 U.S. Foreclosure Market Report, “lenders started the foreclosure process on 25,209 U.S. properties in Q3 2021, up 32 percent from the previous quarter and up 67 percent from a year ago — the first double-digit quarterly percent increase since 2014.”

Foreclosure filings are increasing because government assistance is expiring. For the better part of two years lenders haven’t been allowed to foreclose on distressed owners, but assistance is coming to an end. With the pandemic hopefully giving way to a reopening, overdue homeowners will be expected to come current on payments.

“The foreclosure moratorium on government-backed loans has virtually stopped foreclosure activity over the past year,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But mortgage servicers have been able to begin foreclosure actions on vacant and abandoned properties, which benefits neighborhoods and communities. So it’s likely that these foreclosures are causing the slight uptick we’ve seen over the past few months.”

The California real estate market, in particular, saw the most significant number of foreclosure starts in the third quarter of 2021. Over the course of the quarter, a total of 3,434 homes were the subject of a foreclosure filing. Los Angeles was the largest contributor of new foreclosure filings (1,102 foreclosure starts in Q3).

Despite boasting some of the most foreclosure starts in the third quarter of 2021, the Los Angeles housing market will almost certainly see filing increase over the course of 2022. The expiration of government assistance will all but guarantee an increase in delinquencies. As a result, real estate investors in Los Angeles need to start lining up financing immediately. Doing so will simultaneously enable them to help distressed homeowners and secure deals.

Los Angeles Median Home Prices 2021

The median home value in the Los Angeles housing market is the direct result of spending nearly two years in a pandemic. At the very least, the pandemic has created a number of new indicators that drastically impact the performance of the LA real estate market.

For context, home values have been increasing for the better part of a decade. Since the fourth quarter of 2011 (when the economy was just starting to recover from The Great Recession), the median home value in LA has increased approximately 129.7%. For the majority of that time, the increase was due to an expanding economy and improving consumer sentiment. That said, the biggest increases come as a result of the pandemic.

Now more than two years into the pandemic, home values in the Los Angeles real estate market are increasing on the backs of three primary indicators: inventory shortages, increasing demand, and lower borrowing costs. The convergence of these factors have increased local home values 33.1% since COVID-19 was officially declared a global emergency. In the last year alone, the median home value has increased 15.9% and now sits at $921,494.

The median home value has done nothing but test new highs for more than a decade. Despite the increases, however, it looks like the next 12 months will continue the trends—albeit at a slower pace. Over the course of 2022, it is reasonable to assume the median home value in the Los Angeles real estate market will increase somewhere around 13.7%. The increase will be directly correlated to the same indicators which have driven up prices over the last two years.

Los Angeles Real Estate Market: Should You Invest?

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 that the latest growth isn’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 because of the unique correlation between rental rates and demand. With a price-to-rent ratio of 28.73, 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 will be relegated to renters due to the lack of available inventory. When all is said and done, the Los Angeles housing market should see a dramatic increase in renters.

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

Rental prices and home values are rising at an impressive rate, which begs the question: Is Los Angeles real estate a good investment? Today’s rental rates and level of demand would suggest it is. Those who can’t afford to buy are forced to rent in a market with ever-increasing prices. Not only that, average rents are increasing faster than average wages in Los Angeles County, CA, according to Attom Data Solutions. Yet, the 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 are 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.

If that wasn’t enough to convince you that Los Angeles real estate market trends favor rental property owners, today’s borrowing costs might. In an attempt to stimulate the housing sector in the face of the pandemic, interest rates have been suppressed. According to Freddie Mac, the average commitment rate on a 30-year fixed-rate mortgage is 3.07%; that means it is historically inexpensive to borrow money. Lower borrowing costs will simultaneously justify purchasing at today’s higher prices, increase cash flow, and lower monthly mortgage obligations. Now may be the best time ever to start building a rental property portfolio in Los Angeles.

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. 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.

5 Best Los Angeles Neighborhoods For Rental Properties

The introduction of the Coronavirus has shifted the rental landscape across the country, and the Los Angeles real estate market is no exception. While long-term real estate investments have taken a back seat to flipping and rehabbing strategies for the better part of a decade, 2021 appears ready to shift the balance. That’s not to say flipping won’t remain a lucrative, viable exit strategy in Los Angeles (it will), but rather that today’s market indicators are more conducive to building a rental property portfolio.

Investors looking to take advantage of today’s Los Angeles real estate market trends should look at the best neighborhoods to buy a rental property in. The following neighborhoods have a unique combination of attractive price-to-rent ratios, demand, and value, not the least of which makes them some of the best candidates to start adding to a rental property portfolio:

  1. Wilmington

  2. Boyle Heights

  3. Canoga Park

  4. Northridge

  5. Winnetka

Each of these neighborhoods in Los Angeles have demonstrated a propensity towards landlord returns, and their potential moving forward is just as attractive. The combination of current indicators and future potential enable these five neighborhoods to stand out from the rest of the pack.

Wilmington

  • Median Home Value: $620,244

  • 1-Year Appreciation Rate: +18.0%

  • Median Days On Market: 36

  • Home Sold Above List Price: 66.0%

  • Sale-To-List Price: 102.1%

Boyle Heights

  • Median Home Value: $627,517

  • 1-Year Appreciation Rate: +15.0%

  • Median Days On Market: 48

  • Home Sold Above List Price: 49.1%

  • Sale-To-List Price: 100.0%

Canoga Park

  • Median Home Value: $720,835

  • 1-Year Appreciation Rate: +20.3%

  • Median Days On Market: 34

  • Home Sold Above List Price: 66.7%

  • Sale-To-List Price: 103.2%

Northridge

  • Median Home Value: $965,980

  • 1-Year Appreciation Rate: +20.6%

  • Median Days On Market: 34

  • Home Sold Above List Price: 71.1%

  • Sale-To-List Price: 103.8%

Winnetka

  • Median Home Value: $780,217

  • 1-Year Appreciation Rate: +19.1%

  • Median Days On Market: 32

  • Home Sold Above List Price: 77.4%

  • Sale-To-List Price: 104.1%

Summary

Moving forward, the Los Angeles housing market is expected to continue pacing national trends. While still in the shadow 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. Today’s Los Angeles real estate market trends look to be building momentum, and those who get in now may be happy they did.

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


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Sources

https://www.zillow.com/los-angeles-ca/home-values/
https://www.zillow.com/research/data/
https://www.zillow.com/wilmington-los-angeles-ca/home-values/
https://www.zillow.com/boyle-heights-los-angeles-ca/home-values/
https://www.zillow.com/canoga-park-los-angeles-ca/home-values/
https://www.zillow.com/northridge-los-angeles-ca/home-values/
https://www.zillow.com/winnetka-los-angeles-ca/home-values/
https://www.redfin.com/news/data-center/
https://www.redfin.com/neighborhood/113062/CA/Los-Angeles/Wilmington/housing-market
https://www.redfin.com/neighborhood/247/CA/Los-Angeles/Boyle-Heights/housing-market
https://www.redfin.com/neighborhood/355/CA/Los-Angeles/Canoga-Park/housing-market
https://www.redfin.com/neighborhood/481131/CA/Los-Angeles/Northridge/housing-market
https://www.redfin.com/neighborhood/3099/CA/Los-Angeles/Winnetka/housing-market
https://www.bls.gov/eag/eag.ca_losangeles_md.htm
https://www.census.gov/quickfacts/losangelescitycalifornia
https://www.flipsnack.com/afire/summit-journal-fall-2021-issue-08.html?p=10
http://www.freddiemac.com/pmms/pmms30.html
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https://www.attomdata.com/news/market-trends/foreclosures/attom-august-2021-u-s-foreclosure-market-report/
https://www.latimes.com/business/story/2019-11-25/cbre-chief-executive-robert-sulentic-real-estate

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