The California housing market is one of the hottest and most profitable in the United States. In California, the Los Angeles housing market is considered as one of the premier markets for both investors and homeowners. As Los Angeles home prices remain an all time high, is 2020 the right time for wealthy investors to invest in the Los Angeles real estate?
In this article, our focus will be on the Los Angeles real estate market trends and investment opportunities in 2020. Home prices in the Los Angeles housing market have risen steadily in the precious year and will continue to rise in 2020 as well. However, the real estate appreciation rate in Los Angeles is predicted to remain modest throughout 2020.
Los Angeles is home to around four million people. It is the largest city in California and the second largest in the United States. 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. According to several real estate experts, the home values in Los Angeles will continue to rise in 2020, but at a significantly slower rate than the nationwide average.
In the latest quarter, the Los Angeles property appreciation rate has been around 0.75%. If it remains steady, the annualized appreciation rate would be around 3%, which could trigger good interest in the Los Angeles real estate investment opportunities. That is good sign for buyers and investors as far as affordability is concerned as nearly three in four residents of Los Angeles County can’t afford to buy a median-priced home in the area.
However, 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.
In this article, we shall discuss some more important reasons why you may want to consider buying Los Angeles investment properties in 2020. Please note that there are many variables that can potentially impact the value of a home in Los Angeles (or any other market) and some of these variables are impossible to predict in advance.
Los Angeles Real Estate Market Forecast 2020
What are the Los Angeles real estate market predictions for 2020? Los Angeles housing market 2020 is shaping up to continue the trend of the last few years as one of the strongest markets in the United States.
According to Zillow.com, the Los Angeles housing market is currently a neutral market which means there is a healthy balance between the no. of qualified buyers in the market place and homes for sale. The current median home value in Los Angeles is $717,583.
The home prices have risen by 2% over the last year. Looking forward in this year, the Los Angeles real estate market forecast is that home prices will continue to increase by 4.2%. Since Jan 2015, the median home price in Los Angeles has increased from $538,000 to $747,000.
Here is the Los Angeles, CA real estate price appreciation graph by Zillow. It shows us the current home price appreciation forecast of 4.2% till Dec 2020.
The median list price per square foot in Los Angeles is $549, which is higher than the Los Angeles-Long Beach-Anaheim Metro average of $444. Zillow reports that 6.9% of the listings in Los Angeles had a price cut in Dec 2019, which is a good thing for buyers. The median price of current listings in Los Angeles is $850,000.
Homes are selling below their asking prices as the median price of homes that have been sold out is $722,800. It shows sellers were willing to negotiate on prices as they were finding it more and more difficult to sell homes at asking prices. The median rent price in Los Angeles is $3,550, which is higher than the Los Angeles-Long Beach-Anaheim Metro median of $3,200.
Here is a snapshot that shows the median home values in the neighborhoods of Los Angeles.
Los Angeles Housing Market Forecast 2019 – 2021
Here is a short and crisp Los Angeles housing market forecast for the 3 years ending with the 3rd Quarter of 2021. The accuracy of this forecast for Los Angeles is 78% and it is predicting a positive trend. The LittleBigHomes.com estimates that the probability for rising home prices in Los Angeles is 78% during this period. If this price forecast is correct, the Los Angeles home values will be higher in the 3rd Quarter of 2021 than they were in the 3rd Quarter of 2018.
Check this page each quarter for updates to the Los Angeles, CA Real Estate Market Forecast.
Los Angeles Real Estate Market Trends
We shall now discuss some of the most recent housing trends in the Los Angeles area and compare it with past couple of years. We shall mainly discuss about median home prices, inventory, economy, growth and neighborhoods, which will help you understand the way the local real estate market moves in this region. 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.
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. The association reports that the median price of an existing (not newly built) single-family home in LA County was $566,010 in January – up less than half a percent in the last year. Prices for all types of homes typically dip during the winter months, but this year’s seasonal swing has been especially dramatic for Los Angeles single family homes.
Trulia has currently 6,086 homes for sale in Los Angeles, CA, including open houses, and homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The median price of sold homes in Los Angeles is $880,000 and home are selling for about $684/sqft.
As per the real estate company called Neigborhoodscout.com, the median house price in Los Angeles is $655,688, which indicates that home prices in Los Angeles are well above the national average for all cities and towns in the United States. One and two bedroom high rise apartments 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, row houses and homes converted to apartments. Los Angeles has a mixture of renter-occupied and owner-occupied housing units.
Currently, there are 3014 single family homes for sale in Los Angeles, CA on Zillow. Additionally, there are 2328 single family homes for rent in Los Angeles, CA. Under potential listings, there are about 29 Foreclosed and 1127 Pre-Foreclosure homes. These are the delinquent properties that may be coming to the market soon but are not yet found on a multiple listing service (MLS).
Following the housing market decline in 2007, single family rental properties became favorable options for investors, saving in construction or refurbishment prices. The quick turnaround for an owner to rent out their property means cash flow is almost immediate. Single family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single family rental units.
In the past month, 2227 homes have been sold in Los Angeles, CA on Redfin.com. In addition to houses in Los Angeles, there were also 1775 condos, 387 townhouses, and 1302 multi-family units for sale in Los Angeles last month. The median listing price is $899,000. According their statistics, the Los Angeles housing market is somewhat competitive. Homes in Los Angeles receive 2 offers on average and sell in around 52 days.
The average sale price of a home in Los Angeles was $760K last month, up 9.5% since last year. The average sale price per square foot in Los Angeles is $475, up 3.7% since last year. A hot listing in Los Angeles can sell for about 2% above list price and go pending in around 28 days.
Here is the latest Los Angeles housing market data for the month of Jan 2020 from Redfin.com. The sale to list price ratio shows us that it was a trending more like a seller’s market in the past month.
Los Angeles Housing Market Trends
|Median List Price||$899,000|
|Avg. Sale / List||99.2%|
|Median List $/Sq Ft||$138|
|Median Sale Price||$760,000|
|Median Sale $/Sq Ft||$475|
Analyzing real estate data from multiple sources gives us a much broader perspective of the direction in which a market is moving. There are currently 8,081 homes for sale in Los Angeles on Realtor.com. The asking price of single family homes can start from $199,000 and can go up to $165M for a luxury property located in Beverly Crest neighborhood in the city of Beverly Hills, CA. Beverly Crest is a popular neighborhood with a median home price of $3.55M.
Los Angeles is a big rental property market. There are currently 6,690 rental properties in Los Angeles and their rent price can go up to $375,000 per month. There are 332 new construction homes for sale in Los Angeles within a price range of $439,000 to $65M. The most affordable new construction homes can found in Watts neighborhood in the city of Los Angeles, CA. Watts is a popular neighborhood with a median home price of $410,000.
According to Realtor.com, in December 2019, the Los Angeles housing market was a balanced market, which means there was a healthy balance of buyers and sellers in the market. Ideally a buyer would prefer a sale to asking price ratio that’s closer to 90%. In Los Angeles, the sellers have held good leverage in these negotiations in the past month. On an average, they could sell homes for 99.56% of the asking price. A seller would always prefer scenarios which can yield a ratio of 100% or higher.
In December 2019, the median list price of homes in Los Angeles, CA was $995K, trending up 13.2% year-over-year. The median listing price per square foot was $581. The median sale price was $900K.
The median list price in Los Angeles is $1,195,000 on Movoto.com. The median list price in Los Angeles went up 8% from January to February. Los Angeles’s home resale inventories is 2,589, which increased 5 percent since January 2020. The median list price per square foot in Los Angeles is $696.
As you can see in the graph, the median price per sq ft in Las Vegas rose to its peak value in Aug 2019, when it was $678. In January 2020 it was $677. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in February.
Los Angeles is a moderately walkable city in Los Angeles County with a Walk Score of 67. There are about 82 neighborhoods in Los Angeles. If you are looking to invest in the Los Angeles real estate, you should that three most important factors when buying a real estate anywhere are location, location, and location. 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 real estate and you should be able flip it for a lump sum profit.
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. Bel Air has a median listing price of $3.8M, making it the most expensive neighborhood. Downtown Los Angeles is the most affordable neighborhood in Los Angeles, with a median listing price of $677K.
Some of the best neighborhoods in Los Angeles are Hollywood Hills West, Brentwood, Marina del Rey, Burbank, Highland Park, Glendale, Alhambra, Woodland Hills, Encino, Tarzana, Granada Hills, Sherman Oaks, La Cañada Flintridge, Los Feliz, San Gabriel, South Pasadena, San Pedro and Reseda.
Los Angeles Foreclosures And Bank Owned Homes Statistics
As per the Los Angeles foreclosure data by Zillow, in Los Angeles 0.5 homes are foreclosed (per 10,000). This is greater than the Los Angeles-Long Beach-Anaheim Metro value of 0.4 and also lower than the national value of 1.2. The percent of delinquent mortgages in Los Angeles is 0.7%, which is lower than the national value of 1.1%.
With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of Los Angeles homeowners underwater on their mortgage is 4.3%, which is higher than Los Angeles-Long Beach-Anaheim Metro at 4.1%.
|Total No. of Foreclosures in Los Angeles||1126 (RealtyTrac)|
|Homes for Sale in Los Angeles||1745|
|Median List Price||$998,000 (1% rise vs Nov 2018)|
There are currently 1,126 properties in Los Angeles, CA that are in some stage of foreclosure (default, auction or bank owned) while the number of homes listed for sale on RealtyTrac is 1,745. In December 2019, the number of properties that received a foreclosure filing in Los Angeles, CA was 14% higher than the previous month and 95% higher than the same time last year.
Is Los Angeles a Good Place For Real Estate Investment?
Should you invest in Los Angeles real estate? If you want to find out whether Los Angeles real estate is a good investment or not, you need to drill deeper into local trends. The Los Angeles real estate trends will tell what the market holds for the year 2020. We have already discussed the Los Angeles housing market forecast 2020 for answers on why to put invest in this market. Purchasing an investment property in Los Angeles real estate is a little different from shopping for your car or primary residence.
While you still want to get the most for your money, if you are looking to make a profit, you don’t want to buy the most expensive property on the Los Angeles real estate market and expect to make a good profit on rents. Perhaps you are looking for a slightly different hold-over, a turnkey investment property in Los Angeles that you might move into or sell at retirement in the future! Either way, knowing your profit potential and purpose is the first thing to consider.
Let’s take a look at the number of positive things going on in the Los Angeles real estate market which can help investors who are keen to buy an investment property in this city. Here are our top ten reasons to invest in the Los Angeles real estate.
1. It’s a Good Time to Invest in Los Angeles Real Estate
The Los Angeles housing market has been hot for years. In fact, it hit record highs in 2019. However, the market is starting to cool. Prices have been declining since the record highs seen in the summer of 2018. Selection is growing, too, because so many buyers think prices remain at the peak. While home prices may still go up, home prices in the Los Angeles housing market are predicted to go up at only 5% annually, well below the projected 7.7% national average.
2. Real Estate Deals Can Be Found
Distressed buyers exist in every real estate market. The 8% decline in the number of homes sold is creating stress for many owners of Los Angeles real estate. They’re starting to ask for less just to get the property sell. This explains why Los Angeles has seen a wide gap form between the listing price of a home and the price that it sells for. 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.
3. Los Angeles Foreclosures Can Yield Significant Savings
Foreclosures can be a great way to snap up Los Angeles real estate at a bargain price. Foreclosure rates, though, vary wildly. Around one out of every six hundred homes in Lake Hughes, Topanga and Santa Fe Springs are in foreclosure. That’s five times the average rate for Los Angeles County. 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.
4. Los Angeles Has Relaxed Rent Control on Homes
Rent control applies to many Los Angeles rental properties if they are multi-family units. Single family detached homes rarely fall under the rent control ordinances. The only exception is when there are two or more units on the property that are rented out; then rent control rules are likely to apply. The simplest solution to this is to only by single family Los Angeles rental properties, never a property with a separately rented granny flat or upstairs apartment you could rent out, as well.
5. Los Angeles Rental Properties Give Strong Income
In the Los Angeles real estate market, a one bedroom apartment rents for around $1400. A two bedroom apartment is rented out for around $1800. The average rent people pay is around $2400 a month. You would be able to charge much more for a three or four bedroom Los Angeles rental home. For comparison, these rental rates are roughly twice the national average. Nor will the economic headwinds affect this much. Whether it is immigrants moving to Los Angeles for the opportunity or young Americans moving to L.A. for the coolness factor, housing demand continues to grow. This explains why rental rates on Los Angeles rental properties are going up 7% a year.
6. 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. It simply means that the vacancy rate in Los Angeles remains around 3% instead of falling any lower. This also suggests that any new wave of construction will at most result in rental rates remaining steady instead of causing them to fall.
7. Geography Limits 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.
8. Renting in Los Angeles Is Becoming a Way of Life
Home ownership rates in California have been declining for years. The sea change has been the growth of renting among the middle and upper class. 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 home in the Great Recession and choose to rent instead.
This is driving demand for 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.
9. Jobs Keep People Coming
Los Angeles has an unemployment rate of around 4%. 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.
10. The Military Adds Renters to This 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 Air Port 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 live 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.
Investing in Los Angeles Real Estate or Not: The Conclusion
Maybe, you have done a bit of real estate investing in Los Angeles, CA but want to take things further and make it into more than a hobby on the side. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold. Should you consider Los Angeles real estate investment 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. A 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 a key to your success. If you invest wisely in the Los Angeles real estate, you could secure your future.
If you are a beginner in the business of cash flow real estate investing, it very important to read good books on real estate. You must also collaborate and learn from savvy investors who have retired early on in their lives by investing locally in the Los Angeles real estate market. 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. If it is your first time to invest in Los Angeles real estate, then you would have to be aware of common beginner’s mistakes. Beginners would usually follow the media, buy a property and wait for its value to increase. This could be risky. Real estate investing requires research. We recommend doing your own research or hiring a real estate investment specialist for guidance.
You should also join real estate investment clubs in Los Angeles and try to make connections with fellow investors. To be effective in the real estate industry, a concrete marketing design is vital. The real-estate market is constantly changing in their methods on how to look for that right property.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable. 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 area, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing and interest rates.
NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.
The aim of this article was to educate investors who are keen to invest in Los Angeles real estate in 2020. Purchasing an investment property requires a lot of studies, planning, and budgeting. Not all deals are solid investments. We always recommend to do your own research and take help of a real estate investment counselor.
Other Popular Real Estate Markets In California
California real estate 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 of California. Here are the other two big cities in California where a real estate investor should look into for buying investment properties.
1. San Jose Real Estate Market in California
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 of 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, you could buy now and hold until it sells.
If that doesn’t happen, you could still turn it into 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.
2. San Diego Real Estate Market in California
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.
*Remember, caveat emptor still applies when buying a property anywhere. 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, the Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.
Good time to buy / price predictions
Deals can be found
Construction and demand
Renting as a way of life
Market Data, Trends and Forecasts