Los Angeles, CA Real Estate Market Trends & Analysis [Updated 2021]

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The Los Angeles real estate market is at the forefront of a national recovery and a 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 on capital as recently as 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 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 2021 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 real estate market trends are directly correlated to the introduction of COVID-19. While local real estate experienced a setback at the onset of the pandemic in the first quarter, 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 Overview

  • Median Home Value: $768,046

  • 1-Year Appreciation Rate: +9.0%

  • Median Home Value (1-Year Forecast): +8.3%

  • Median Rent Price: $3,500

  • Price-To-Rent Ratio: 18.28

  • Unemployment Rate: 15.1% (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 7,767 (1.2%)


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LA housing market trends

2021 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.”

However, it is worth noting 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 because of the unique correlation between rental rates and demand. With a price-to-rent ratio of 18.28, 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. However, of particular importance to real estate investors are the economic fundamentals in place keeping their units filled.

At this point in 2021, 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 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, the Fed’s latest announcement should paint a clearer picture. In an attempt to stimulate the housing sector in the face of the pandemic, interest rates on institutional loans are now lower than ever. According to Freddie Mac, the average commitment rate on a 30-year fixed-rate mortgage is 2.81%; that means it has never been cheaper to borrow money. Consequently, lower borrowing costs will simultaneously justify purchasing at today’s higher prices, increase cash flow, and lower monthly mortgage obligations. When all is said and done, 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. However, years of appreciation have not prevented real estate investors from realizing a great return on investment. Expensive market conditions 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: $513,500

  • 1-Year Appreciation Rate: +9.7%

  • 1-Year Appreciation Forecast: +8.4%

  • Median Rent Price: $1,918

  • Price-To-Rent Ratio: 22.31

Boyle Heights

  • Median Home Value: $532,913

  • 1-Year Appreciation Rate: +13.2%

  • 1-Year Appreciation Forecast: +9.3%

  • Median Rent Price: $2,151

  • Price-To-Rent Ratio: 20.64

Canoga Park

  • Median Home Value: $570,600

  • 1-Year Appreciation Rate: +9.3%

  • 1-Year Appreciation Forecast: +7.8%

  • Median Rent Price: $1,789

  • Price-To-Rent Ratio: 26.57

Northridge

  • Median Home Value: $780,545

  • 1-Year Appreciation Rate: +9.8%

  • 1-Year Appreciation Forecast: +8.5%

  • Median Rent Price: $2,147

  • Price-To-Rent Ratio: 30.29

Winnetka

  • Median Home Value: $635,634

  • 1-Year Appreciation Rate: +10.3%

  • 1-Year Appreciation Forecast: +8.3%

  • Median Rent Price: $2,553

  • Price-To-Rent Ratio: 20.74

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 last year, “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 Los Angeles 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 real estate 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 15.1%, local unemployment hasn’t come down enough from the initial spike. As a result, there’s still a large percentage of the population being held back. Therefore, 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.

2021 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 too 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. 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 September, in fact, only one in every 7,767 homes has been deemed distressed (default, auction, or bank-owned). At that rate, the city currently boasts a foreclosure rate somewhere in the neighborhood of 1.2%. The foreclosure rate for the United States, on the other hand, is 0.7%.

Despite the city’s relatively low foreclosure rate, improvements are still being made. LA posted a year-over-year decrease of 66.0% at the end of the third quarter. From August to September alone, LA saw foreclosure filings decrease by as much as 30.0%. The month-over-month drop appears to be the result of fewer pre-foreclosures primarily. Down 41.7% from the prior month, pre-foreclosures still make up 42.7% of the city’s distressed inventory. As a result, the Los Angeles real estate investing community should pay special considerations to pre-foreclosures, as they are one of the best ways to find a deal below market value.

Here’s a look at what Los Angeles real estate market trends looked like earlier this year:

Foreclosures in Los Angeles

Data Provided By RealtyTrac

2021 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. Thanks—in large part—to increasing demand, low interest rates, and a lack of available inventory, the median home price is now upwards of $768,046.

Today’s median home price is the result of more than eight consecutive years of appreciation. As recently as the first quarter of 2012, when the recession started 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 by 94.9%. To put things into perspective, the median home value in the United States increased 60.4% over the same period of time.

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 has 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 ask 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 to increasing demand and a lack of available inventory, appreciation rates are 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:

Los Angeles home values

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 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 outlier neighborhoods skewed historically high rents. 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 in 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 could 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 by 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 in the 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 participate in the market actively. 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 LA neighborhoods

Summary

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. 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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*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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