We'll discuss the recent trends in the Southern California housing market as well as the Los Angeles housing market. Following the impact of the pandemic, which temporarily stalled the market, we saw the first signs of recovery in property sales in June of the pandemic year. The housing market in Southern California has been booming since last year, thanks to factors such as the desire for more space and historically low-interest rates.
Southern California home prices continue to rise and break records. In May 2022, the six-county region's median sales price — the point at which half of the homes sold for more and half sold for less — was $841,920, according to C.A.R.’s recent resale report. This is an increase of 11.9 percent from a year ago, and 0.5 percent more than the median price of the previous month when it was $837,500.
The median home price in Southern California has risen by double digits for the 20th month in a row. C.A.R.’s resale report for May shows that at the regional level, sales in all the major regions of California dipped from a year ago. The Southern California region also saw a decline of 14.3 percent from last year and 3.0 percent from the previous month. All the six counties of Southern California posted a decline in sales from last year with Orange County posting the highest decline of 22.6 percent.
The Los Angeles Metro Area posted a decline of -14.5% year-over-year in sales of existing single-family homes. The median home price in the Los Angeles metropolitan region was $802,780, 10.7% higher compared to May 2021, when it was $725,000. The Los Angeles county also recorded a YTY sales decline of -11.2% and a MTM decline of 1.3%.
The median sales price in LA county was $798,720, down 0.4% MTM and up 10.1% YTY. Orange County's sales decreased by 22.6 percent over the previous year (highest among all the counties of Southern California). It shows that things are continuously becoming less hot as compared to the previous year.
A shortage of housing inventory is pushing prices to unsustainable levels year over year. On the supply side, the number of active listings is still quite low as compared to the housing demand. Months Supply of Inventory (MSI) is a calculation that quantifies the relationship between supply and demand in a housing market. It has decreased considerably across all the counties of Southern California.
- Months Supply of Inventory (SFH) for Southern California is now 2.2 months.
- Months Supply of Inventory (SFH) for the Los Angeles Metro Area is also 2.2 months.
- Months Supply of Inventory (SFH) for Los Angeles County is now 2.3 months.
- Months Supply of Inventory (SFH) for Orange County is 2.0 months.
- Months Supply of Inventory (SFH) for Riverside County is also 2.0 months.
- Months Supply of Inventory (SFH) for San Bernardino County is now 2.7 months.
- Months Supply of Inventory (SFH) for San Diego County is 1.9 months.
- Months Supply of Inventory (SFH) for Ventura County is now 2.0 months.
Generally, a balanced market will lie somewhere between four and six months of supply. Inventory is calculated monthly by taking a count of the number of active listings and pending sales on the last day of the month. If an inventory is rising, there is less pressure for home prices to increase. With 2.2 months of supply left, it is well short of what economists say is needed for a balanced market. Hence, the Southern California housing market will continue to see upward pressure on home prices.
There are around 218 cities in Los Angeles County where Realtor.com has active listings right now. We have already discussed the supply and demand imbalance in the county and metro area and how the monthly supply of inventory is down to about 9 weeks. Realtor.com's April 2022 statistics show that Los Angeles County is a seller's market, which means that more people are looking to buy than there are homes available.
They take into account two aspects of the housing market. The market demand is measured by unique viewers per property on their website, and the pace of the market is measured by the number of days a listing remains active on their website. In April 2022, the median list price of homes in Los Angeles County was $850K, trending up 6.4% year-over-year.
The median listing price per square foot was $570. The median price of sold homes was $875,000. The sale-to-List Price Ratio was 103.23%, which means that homes in Los Angeles sold for 3.23% above the asking price on average. A seller would prefer this ratio to be 100% or more. On average, homes in Los Angeles sell after 46 days on the market.
If a region’s housing market is balanced it means that there is enough demand from buyers to equal the supply from sellers. Based on the supply-demand dynamics, the real estate appreciation rate in Los Angeles is predicted to remain strong. The strong demand and tight inventory should put upward pressure on the prices. According to several real estate experts, the home values in the Los Angeles housing market will continue to appreciate over the next 12 months.
Southern California Housing Market Trends 2022
The Southern California real estate market had a boom last year with a surge in home sales and prices. Housing sales were driven by people who were looking for more space after their workplaces have closed down due to the pandemic. People were looking for spacious houses as they need more space to work from home. Another factor was the low-interest rates on mortgages which was helping buyers to save on monthly mortgage payments. Rising demand and tight inventory made it a seller’s market. Part of the lack of supply issue being experienced is due to the lack of new construction.
Southern California home prices soared in May 2022, rising by double digits for the twentieth straight month. The six-county region’s median home price increased 14.3% from a year earlier to $841,920, according to the data released by the California Association of Realtors.
The month's supply of inventory of single-family homes has decreased to 2.2 months. Homes are selling fast. The median number of days on market is 9, which is 2 days more than a year ago. Most industry watchers predict that this year’s sales will see an annual decline as compared to 2021 while some experts say it’s too soon to forecast whether the market will lose steam.
Southern California Market Update – Single-Family Homes
Here are the tabulated data of the Southern California housing market for existing single-family homes.
Southern California Market Update – Condos and Townhomes
Los Angeles County Housing Market Trends
C.A.R.’s May 2022 resale housing report shows that in Los Angeles County, homes are still moving fast. The median days on market is just 9. The sales of existing single-family homes were down 11.2 percent from the previous and 1.3 percent from the previous month. If you’re looking to buy a house in LA’s real estate market, you would likely end up paying more than the asking price. The sale price to list price ratio in LA is 104.2%. However, the rising mortgage rates in 2022 may lead to less number of buyers bidding up the prices of homes.
- The single-family median price went up by 10.1% to $798,720.
- Last month the median home price was $801,680.
- Last year at this time the median home price was $725,680.
- Single-family sales were down 1.3% MTM and down -11.2% YTY.
- The condo market also showed good buyer turnout than last month.
- Sales of existing condos were down 6.9% MTM and -17.6% YTY.
- The median condo price in Los Angeles still grew by 14.8% YTY to $630,000.
- Last year at this time the median condo price in Los Angeles was $549,000.
Los Angeles Metro Rental Statistics 2022
The Zumper Los Angeles Metro Area Report analyzed active listings across 25 metro cities to show the most and least expensive cities and cities with the fastest growing rents. The California one bedroom median rent was $2,018 last month. Laguna Beach was the most expensive city with one-bedrooms priced at $2,990 whereas Hawthorne was the most affordable city with one bedrooms priced at $1,650.
The Fastest Growing Cities in the Los Angeles Metro Area For Rents (Y/Y%)
- Glendale had the fastest growing rent, up 30.9% since this time last year.
- San Clemente saw rent climb 30.1%, making it the second fastest growing.
- Fullerton ranked as third with rent jumping 27.3%.
The Fastest Growing Cities in Los Angeles Metro Area For Rents (M/M%)
- Redondo Beach had the largest monthly rental growth rate, up 5%.
- Ventura, West Hollywood & Laguna Beach rents all increased 4.6% last month, making them tied for second.
- San Clemente & Long Beach were third with rents both climbing 4.6% last month.
Los Angeles Real Estate Market Forecast 2022-2023
What are the Los Angeles real estate market predictions for 2022 & 2023? Los Angeles has a track record of being one of the best long-term real estate investments due to high price appreciation. Realtor.com published a housing market report that showed which metro areas have had the biggest increase in median list prices. Their report provided data for the 50 largest metropolitan areas in the U.S., across several metrics. The Los Angeles metro area ranked at #5. The median list price in the Los Angeles-Long Beach-Anaheim, Calif. Metro in 2020 was $999,050, up 13.90% year-over-year.
Let us look at the price growth recorded by Zillow, a leading real estate marketplace. Zillow Home Value Index is an adjusted measure of the typical home value and market changes across a given region and housing type. It reflects the typical value for homes in the 35th to 65th percentile range. ZHVI also represents the whole housing stock and not just the homes that list or sell in a given month. The typical home value of homes in Los Angeles County is currently $884,093.
It indicates that 50 percent of all housing stock in the area is worth more than $884,093 and 50 percent is worth less than it (adjusting for seasonal fluctuations). Using this methodology, Los Angeles County home values have appreciated by nearly 137% in the last decade (Apr 2012).
Similar growth has been recorded by NeighborhoodScout.com as their data also shows that in the past ten years, Los Angeles real estate appreciated 138.99%. This amounts to an annual real estate appreciation of 9.10%, putting Los Angeles in the top 10% nationally for real estate appreciation.
During the latest twelve months, Los Angeles' property appreciation rate has been hovering around 18.84% and in the latest quarter, it has been 6.99%. If it remains steady, it would amount to an annualized rate of 31.02%. Tight supply and steady demand from home buyers have boosted home values across the Los Angeles metro area. Prices rose steadily over the past year, despite the economic slowdown brought on by the pandemic. A large number of millennials entered their 30s in 2020, a trend that will continue for several years.
According to Danielle Hale, chief economist at Realtor.com, such demographic factors are one reason the company is forecasting strong price appreciation across the U.S. in 2022, including a 4.8% increase in the median house price in the Los Angeles-Orange counties metro region. Realtor.com also predicts that sales growth in LA MSA will be negative at 1.6%.
Shortage of supply and an increase in the demand for housing from new homebuyers will push the prices higher in the next twelve months. The pricing of homes is trending higher and is more attractive for sellers in the current phase. Higher mortgage rates will decrease home sales. For sellers, now is the opportune time to put their Los Angeles homes up for sale.
Zillow's forecast updated also predicts that LA Metro home values will rise by 8.6% by May 2023. Given the supply-demand imbalance, the home prices in this region could also rise by double digits over the next 12 months. They have updated the forecasts but only for the metro areas. Nevertheless, prices are going to rise at the same or even rapid pace in LA county.
- Los Angeles-Long Beach-Anaheim Metro home values have gone up 20.6% (current = $948,029) over the past year.
- They are predicted to rise by 8.6% by the end of May 2023.
- Los Angeles County home values have gone up 17.7% over the past year and will continue to rise in the next twelve months.
- Orange County home values have gone up 26.6% (current = $1,098,015) over the past year and will continue to rise at a slower pace in the next twelve months.
- San Diego County home values have gone up 26.2% (current = $936,472) over the past year and will continue to rise at a slower pace in the next twelve months.
- San Bernardino County home values have gone up 21.9% (current = $531,569) over the past year and will continue to rise at a slower pace in the next twelve months.
- Ventura County home values have gone up 22.6% (current = $880,688) over the past year and will continue to rise at a slower pace in the next twelve months.
The chart below, created by Zillow, shows the growth of typical home values in these counties since 2012 and their growth.
These numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller? During this pandemic, the real estate industry has been adapting to the current environment by conducting business using technologies such as virtual showings and e-signing to help buyers and sellers with their housing needs in the face of these challenges. As discussed above, compared to last year, the home sales in May were down in all the six counties, with Orange county recording the highest sales decline of 22.6% YTY. LA County also saw a decline of 11.2% YTY in the sales of existing single-family homes.
Do buyers have any advantage? Is it the right time to buy a house in Los Angles? This is a never-ending question with no definitive answer. Buyers believe it is not a very good time to buy a home in Los Angeles due to rising mortgage rates and home prices. On the other hand, it is definitely a good time to sell so you can expect more inventory due to increasing seller optimism.
More houses are expected to be listed in the coming months which may bring down the pace of appreciation to some extent. Affordability is a big issue in Los Angeles County as nearly three in four residents can’t afford to buy a median-priced home in the area. According to HousingWire, an index that combined median income and median home prices made Los Angeles the least affordable city in the country, and several younger residents said they were concerned they will never be able to afford a house. Home shoppers are leaving Los Angeles for cheaper metros, the most popular being Las Vegas.
Real estate market forecasts given in this article are just an educated guess and should not be considered financial advice. Real estate prices are deeply cyclical and much of it is dependent on factors you can’t control. Many variables could potentially impact the value of a home in LA in 2022 (or any other market) such as big changes in the distressed, new-construction, or luxury home segments. There are also a wide variety of economic and political factors that can and do impact real estate markets. Most of these variables are difficult to predict in advance.
Los Angeles Real Estate Investment Overview 2022
Now that you know where Los Angeles is, you probably want to know why we’re recommending it to real estate investors. Investing in real estate is touted as a great way to become wealthy. Should you consider Los Angeles real estate investment? Many real estate investors have asked themselves if buying a property in Los Angeles is a good investment? You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2022.
Los Angeles is a moderately walkable city in Los Angeles County. It is home to around four million people. It is the largest city in California and the second-largest in the United States. Los Angeles Metropolitan Area is a 5- region that includes Los Angeles, Orange, Riverside, San Bernardino, and Ventura. The L.A. metropolitan area with over 13 million people rivals New York in population as the largest in the country. However, being a huge real estate market is not reason enough to invest here.
The Los Angeles real estate market is considered one of the premier markets for both investors and homeowners. It is also touted as the nation’s least affordable housing market. If you look in the long-term, it’s always a good investment to buy in Los Angeles. It is said that you will always get your money back or you would make a profit, as Los Angeles has a track record of being a great long-term investment.
According to Neighborhoodscout.com, a real estate data provider, one and two-bedroom large apartment complexes are the most common housing units in Los Angeles. Other types of housing that are prevalent in Los Angeles include single-family detached homes, duplexes, rowhouses, and homes converted to apartments.
Single-family homes account for about 40% of Los Angeles' housing units. In April 2020, the single-family homes posted their biggest percentage gains of the year so far in the Los Angeles metro area. House prices increased by 4.9% in Los Angeles County, 3.7% in Orange County, and 5% in the Inland Empire.
The Los Angeles housing market has been hot for years. 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 Los Angeles county’s median home price was $579,500 in January, down slightly from December’s median price of $581,500. That’s a 2.6 percent increase over the same time last year. By this comparison, prices shot up nearly 8 percent between January 2017 and January 2018. Prices continued to rise through much of 2018 but began to drop heading into Q4 2018. In Q4 2019, home prices were still slightly higher than a year earlier, but the spread has narrowed.
2018’s FRM interest rate increase decreased the principal amount homebuyers can borrow while making the same sustainable mortgage payment. The National Association of Home Builders and Wells Fargo Housing Opportunity Index has given the title of least affordable housing market to Los Angeles. In Los Angeles-Long Beach-Glendale region, only 11.3% of homes sold during the fourth quarter of 2019 were affordable to families earning the area’s median income of $73,100.
The 2020 pandemic had its impact on the market bringing down the rent prices while houisng prices reached record highs. Los Angeles real estate market isn’t the most affordable in the country, but it’s a market with ample investment opportunities for those who can afford the median price of over 700K.
However, this number doesn't apply to every part of the Los Angeles real estate market. There are some neighborhoods where prices are much cheaper and completion between buyers is much lesser. The high rate of appreciation has not prevented real estate investors from realizing a great return on investment. Instead of flipping rehabs, you should consider investing in rental properties.
Let’s find some factors that make LA a good place to invest for wealthy investors. We’ll address the biggest factor pulling people to the Los Angeles housing market next. In this section, we're not taking into account the short-term impact of the pandemic on the economy and housing market.
Los Angeles Hidden Real Estate Deals
Distressed sellers exist in every real estate market. If you do find an ideal property in the Los Angeles housing market, the increased selection of properties means you’re far less likely to end up in a bidding war. If you’re looking for other great deals, check out Vermont Vista, Hyde Park, Wilmington, and Cypress Park, where the asking prices are below the Los Angeles median price. In December 2020, the median list price of homes in Vermont Vista was $580K while the median sale price was $566K.
Foreclosures can be a great way to snap up Los Angeles real estate at a bargain price. Foreclosure rates, though, vary wildly. Note that for every home in foreclosure with the bank, there is probably another that is approaching that point and would be sold at a discount by a distressed seller who wants to avoid foreclosure. In distressed neighborhoods, fix and flip may be an option. So is buying the Los Angeles real estate cheap and renting it out in a market starving for affordable rental units.
Single-Family Rental vs Multi-Family Investment
Years of appreciation have led the Los Angeles real estate investors to favor rentals over flipping. This market favors rental property owners. In the city of Los Angeles alone, renters live in more than 600,000 apartments spread across 118,000 properties, according to the city’s Housing and Community Investment Department. In late 2019, California became the second state (after Oregon) to pass a statewide rent control law. It covers all multi-family rental units built more than 15 years ago. The state law applies on top of any stricter local ordinances.
Therefore, rent control applies to Los Angeles rental properties if they are multi-family units. Single-family detached homes rarely fall under rent control ordinances. They are generally not subject to LA Rent Control. The only exception is when two or more dwelling units are located on the same lot; then rent control rules are likely to apply. The simplest solution to this is to only buy single-family Los Angeles rental properties. Never buy a property with a separately rented granny flat or upstairs apartment you could rent out, as well.
On the other hand, homeownership rates in California have been declining for years. The sea change has been the growth of renting among the middle and upper classes. For example, a third of Los Angeles residents with incomes over $100,000 rent instead of own. Baby Boomers downsizing their homes choose to rent condos and homes that others maintain. Millennials who have a good income often say their parents lose their homes in the Great Recession and choose to rent instead.
This is driving demand for the luxury Los Angeles real estate market, whether condos, apartments with concierges, or luxury homes rented instead of purchased so that the resident can easily move if they lose their jobs. Only San Jose and San Francisco have more high-income residents that rent than the Los Angeles real estate market. Although apartment prices are high and rising, they’re lower in Los Angeles than in California.
That’s one bright spot in an otherwise tough rental market for Los Angeles renters. The latest data from Zumper shows that the rents have been declining because of the pandemic. A one-bedroom apartment rents for around $1,940 (-14.2% YTY) and a two-bedroom apartment rents for $2,700 (-10.9% YTY). The average rent people pay is around $2400 a month.
The Military also adds renters to the Los Angeles housing market. Any military base will pump renters into a real estate market. The Los Angeles real estate market is simply notable for having a large military population but a job market so diverse that the closing of a base won’t hurt the area’s home prices overall.
The Los Angeles AirPort Base, Edwards Air Force Base, and smaller facilities dump many renters into the Los Angeles housing market. Those with families often choose to rent Los Angeles rental properties instead of life on base. On top of that are defense contractors like Raytheon in Long Beach and El Segundo who pay people a premium to live here.
Current Rent Prices: Before the pandemic, the average rent for an apartment in Los Angeles was $2,524, growing by 2% YTY, according to RENTCafé. The average size for a Los Angeles, CA apartment is 792 square feet. 40% of the households in LA are renter-occupied while 60% are owner-occupied. Studio apartments are the smallest and most affordable, 1-bedroom apartments are closer to the average, while 2-bedroom apartments and 3-bedroom apartments offer more generous square footage.
As of June 26, 2022, the average rent for a 1-bedroom apartment in Los Angeles, CA is currently $2,374. This is a 19% increase compared to the previous year. Over the past month, the average rent for a studio apartment in Los Angeles increased by 1% to $1,695. The average rent for a 1-bedroom apartment decreased by -1% to $2,374, and the average rent for a 2-bedroom apartment remained flat.
- The average rent for a 2-bedroom apartment in Los Angeles, CA is currently $3,200. This is a 16% increase compared to the previous year.
- The average rent for a 3-bedroom apartment in Los Angeles, CA is currently $4,250. This is a 7% increase compared to the previous year.
- The average rent for a 4-bedroom apartment in Los Angeles, CA is currently $5,250. This is a 23% decrease compared to the previous year.
Some of the most affordable neighborhoods in LA are:
- Jefferson Park, where the average rent goes for $1,355/month.
- El Sereno, where renters pay $1,396/mo on average.
- Vermont Knolls, where the average rent goes for $1,445/mo.
- Glassell Park & Cypress Park, where the average rent goes for $1,485/month.
- Cypress Park, where renters pay $1,396/mo on average.
- North Hills, where renters pay $1,530/mo on average.
Rising Prices: Construction Isn’t Meeting Housing Demand in LA
The Los Angeles housing market has seen a bump in residential construction. This has helped to satisfy some demand from renters. However, due to increasing demand, the new supply hasn’t brought prices down. The current supply of existing single-family homes is 1.4 which is insufficient to meet the demand. This also suggests that any new wave of construction will at most result in rental rates remaining steady instead of causing them to fall.
The geography of this region also limits the supply. The Los Angeles metropolitan area is perched between the ocean and the mountains. You obviously can’t build on water. There’s only so far you can build into the hills when mudslides and earthquakes limit how much you can build there. The Los Angeles real estate market is further constrained by the vast national parks around L.A. like the Angeles National Forest. These areas simply cannot be turned into residential areas.
Los Angeles' Strong Economic and Job Growth
Two of the most fundamental economic indicators are employment and income. Home sales usually are directly tied to an economy's health and rise and fall with economic activity. As economies slow, the supply of money tends to become more restrictive. What makes Los Angeles unique is the employment market. Want to work in Hollywood? Move to L.A. Want to work for a production company or in fashion? Come to L.A. If rent is too high, share an apartment or single-family home with friends. In terms of home prices, income, and employment indicate whether people can afford current and future increases.
The Golden State added 310,300 jobs in 2019, a 1.8% increase, to a total of 17.61 million, according to data released by the California Employment Development Department. The previous year’s increase was 1.6%. In Los Angeles County, nonfarm jobs grew by 67,800 to a total of 4.65 million. That was a 1.5% rise, led by healthcare and social assistance (up 28,000) and construction (up 8,500). The unemployment rate was 4.4% in December, down from 4.7% a year earlier.
Note that due to the ongoing pandemic, Los Angeles County’s unemployment rate has increased. It fell to 11% in November from a revised 12% in October amid seasonal hiring gains in retail and logistics, according to the State Employment Development Department. It was 19.6 percent in April 2020. Every major sector of the county’s economy suffered significant job losses during the past 12 months, led by accommodation/food services, which shed 120,000 payroll jobs.
Where To Invest in Los Angeles Real Estate Market?
In any property investment, cash flow is gold. California has the 6th largest economy in the entire world. This is largely driven by its innovative production, the heavy tech sectors in the state, and more. The Los Angeles real estate market has many points in its favor beyond its sheer size. The strong market fundamentals make the Los Angeles housing market a good place to invest if you’re looking at buying real estate in California.
How good is it to buy a Los Angeles investment property? Not every real estate investor wants to enter the most expensive and competitive Los Angeles real estate market. For buyers, the affordability is dropping and only 30% of LA county residents own a home. Home Prices are so high and out of reach for many buyers – many consider LA homes grossly over-priced.
While Los Angeles home prices may be increasing slightly over the next year, the fact remains that there are many homes available at fair prices. Growing household formations, ongoing job creation, and rising wage growth are fueling housing demand,” said NAHB Chief Economist Robert Dietz. “But a record-low resale inventory, coupled with underbuilding as builders deal with supply-side constraints, continue to put upward pressure on home prices even as interest rates remain at low levels.”
There’s still a strong opportunity for rental property investment in Los Angeles. There is a strong and continuous demand for apartments for rent in LA. This is fueled by always tight inventory, severe competition from tenants, rising wages, and a good economy. Therefore, for a great opportunity for rental income for investors. Good cash flow from Los Angeles investment properties means the investment is, needless to say, profitable.
A bad cash flow, on the other hand, means you won’t have money on hand to repay your debt. Therefore, finding a good Los Angeles real estate investment opportunity would be key to your success. If you invest wisely in Los Angeles real estate, you could secure your future. The best investment is now looking for a rental property that will generate good cash flow. Your best tenants would be the retirees who intend to relocate to Los Angeles and want to purchase property to rent out.
The running costs for owning and managing a Los Angeles rental property should not be high. While hiring a property management company you should expect to give up roughly ten percent of the rent for each property they manage. Remember to factor this loss into your calculations when budgeting for a new rental property. The three most important factors when buying real estate anywhere are location, location, and location. The location creates desirability. Desirability brings demand.
There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your Los Angeles investment property and you should be able to get a good return on your investment over the long term. The neighborhoods in Los Angeles must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools, and shopping malls.
A cheaper neighborhood in Los Angeles might not be the best place to live in. A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio. Los Angeles real estate prices are well above average cost compared to national prices. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals such as duplexes and triplexes in Class A neighborhoods. The inventory is low, but opportunities are there.
Even as Los Angeles home prices have reached new heights, the market remains attractive to residential real estate investors. As they continue to compete for potential investment properties at the lower end of the market, the challenges for first-time homebuyers will remain. The homebuyers won’t be able to outbid real estate investors and would end up renting.
Home prices in Los Angeles are well below the national average for all cities and towns in the United States. According to Realtor.com, there are around 83 neighborhoods in Los Angeles. Bel Air has a median listing price of $4.7M, making it the most expensive neighborhood. Sunland-Tujunga is the most affordable neighborhood, with a median listing price of $695K.
Investing in more affordable neighborhoods (at least some of them) can give you a bigger return on investment in a shorter period of time. Here are some of the best neighborhoods in Los Angeles for buying investment properties.
El Sereno is a densely urban neighborhood (based on population density) located in Los Angeles, California. It is a predominantly Latino neighborhood northeast of Downtown Los Angeles. It is bordered on the north by Highland Park and South Pasadena, on the east by Alhambra, on the south by East Los Angeles, and on the west by Lincoln Heights and Montecito Heights. The average rental price in El Sereno is currently $1,921, based on NeighborhoodScout's exclusive analysis. Rents here are currently lower in price than 75.6% of California neighborhoods.
El Sereno real estate is primarily made up of small (studio to two bedrooms) to medium-sized (three or four bedrooms) single-family homes and small apartment buildings. Most of the residential real estate is occupied by a mixture of owners and renters. Demand for real estate in El Sereno is above average for the U.S. and may signal some demand for either price increases or new construction of residential products for this neighborhood.
What You’ll Pay in El Sereno: According to Realtor.com, in October 2021, the median list price of homes in El Sereno was $765,000 while the median sale price was $839,000. Homes in El Sereno sold for 3.26% above the asking price on average in October. On average, homes in El Sereno sell after 49 days on the market. The trend for median days on market in El Sereno has gone up since last month, and slightly up since last year.
Wilmington is a neighborhood in the Harbor region of Los Angeles, California. Wilmington shares borders with Carson to the north, Long Beach to the east, San Pedro to the south and west, and Harbor City to the northwest. The community of Wilmington is one of the oldest in Los Angeles. It is a modern and progressive community with a long and proud history of being the gateway to Los Angeles and the rest of Southern and Central California. There are historical museums, military installations, parks, and waterfront attractions to visit. Click on the image below to see some postcard images from the past.
Highland Park is a neighborhood in Los Angeles. It is bordered on the south and east by the 110 freeway and stretches west almost all the way to Eagle Rock Boulevard. The neighborhood is in the midst of a renaissance, which has made it an affordable alternative for young professionals who find themselves priced out of central Los Angeles. It has been undergoing gentrification over the last 10 years and has seen an influx of trendy shops and restaurants, new parks, nightlife, and vibrancy.
What You’ll Pay in Highland Park: According to Realtor.com, in October 2021, the median list price of homes in Highland Park was $938,000, trending up 7.9% year-over-year. The median listing price per square foot was $711. The median sale price was $1.1M. Homes in Highland Park sold for 4.92% above the asking price on average in October.
What You’ll Pay in West Hills: The median home value in West Hills is $936,065 and home values have gone up 22.8% over the past year. According to Zillow, it is a sizzling hot neighborhood based on three metrics: the list-to-sale price ratio, the prevalence of price cuts on home listings, and time-on-market. All these metrics show that buyer demand is very high in this neighborhood. Mashvisor also lists West Hills among the top three neighborhoods to purchase long-term Los Angeles investment property.
Mid City West is quite an appreciating neighborhood. For a prime city location, it's very safe, and in the residential areas, it's pretty quiet. This area is the true LA experience. It's diverse and much of it reaches into what people consider part of West Hollywood. Since 2012, the property prices have appreciated every year in this neighborhood. The current median home value in Mid City West is $1,913,156 and home values have gone up 5.6% over the past year.
What You’ll Pay in Mid City West: The good thing for new buyers is that the market has cooled off. The competition is less (as of now) so you can negotiate the deal down to the standard. Rental properties in Mid City West are in high demand right. The average rent for a 1-bedroom apartment in Mid City, Los Angeles, CA is currently $1,795. This is a 6% increase compared to the previous year.
Central City is an affordable neighborhood in LA for buying an investment property. Since 2012, the property prices have appreciated every year in this neighborhood. The median home value in Central City is $569,683. Central City home values have gone up 11.2% over the past year. The competition is less (as of now) so you can negotiate the deal down to the standard. The median listing home price in Central City East was $459.5K in October 2021, trending up 6.9% year-over-year. The median listing home price per square foot was $562.
If you think of investing in LA, you have decided on a long-term investment property. Here are the ten neighborhoods in LA having the highest real estate appreciation rates since 2000—List by Neigborhoodscout.com.
- S La Brea Ave / W Washington Blvd
- Highland Park
- W Washington Blvd / S Burnside Ave
- N Ave 54 / Baltimore St
- Nolden St / York Blvd
- Meridian St / N Figueroa St
- S La Brea Ave / W Jefferson Blvd
- W Washington Blvd / S Western Ave
- W Washington Blvd / Crenshaw Blvd
- Clyde Ave / Hauser Blvd
As with any real estate purchase, act wisely. Evaluate the specifics of the Los Angeles housing market at the time you intend to purchase. Hiring a local property management company can help in finding tenants for your investment property in Los Angeles.
California housing market is the focus of many U.S. and foreign real estate investors. Apart from the Los Angeles real estate market, you can also invest in multiple cities in California. Here are the other two big cities in California where a real estate investor should look into buying investment properties.
San Jose is part of Silicon Valley, a place where $100,000 a year or higher salaries from competing tech firms has driven up the cost of real estate. But what about the San Jose housing market itself? San Jose is the third-largest city in California, home to roughly a million people. It has the highest cost of living in any area in the U.S., and it is one of the most expensive housing markets in the country. If you want to invest in the San Jose rental properties, you may not need to buy and renovate. Instead, if you know of industrial or commercial properties near major employers they may need to convert to employee housing, which you could buy now and hold until it sells.
If that doesn’t happen, you could still turn it into a co-working space. In January 2018, Redfin ranked the ten hottest neighborhoods in the United States. Nine of the ten were in San Jose. When single home prices fall from 1.2 million to 1 million, homes now sit on the market for several days instead of being snapped up immediately. The median price for a new home or condo was $750,000 in 2018, down from a record of nearly $800,000 a few months prior. If you want to invest in the San Jose housing market, you should do it now while things are – relatively speaking – affordable.
The San Diego real estate market offers an ideal mix of limited supply, high demand, and excellent income potential. If you’re going to invest in California, it needs to be in San Diego. The San Diego real estate market has been ranked among the ten most expensive real estate markets in the country, though it ranks below several other West Coast cities. This creates massive demand for San Diego rental properties by those who simply cannot afford to buy homes. The rental market will continue to grow as the city grows an estimated 500,000 by 2050, adding tens of thousands each year.
San Diego also has many tourist attractions. Balboa Park is home to the San Diego Zoo, the Air and Space Museum, the Natural History Museum, the Desert Garden, the local youth Symphony, a Japanese garden, and a golf complex. There’s a SeaWorld in San Diego, an MLB stadium, the USS Midway Museum, and the San Diego zoo safari park. On top of this is the mild weather and proximity to the beach. Any San Diego rental properties in easy reach of these attractions command a premium on rental sites like Airbnb. Demand for rentals in the San Diego real estate market soars during Comic-Con, one of the biggest comic conventions in the country.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Los Angeles.
Consult with one of the investment counselors who can help build you a custom portfolio of turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best housing markets in the country.
Not just limited to Los Angeles or California but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience. We’re standing by to help you take the guesswork out of real estate investing. By researching and structuring complete turnkey real estate investments, we help you succeed by minimizing risk and maximizing profitability.
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Please do not make any real estate or financial decisions based solely on the information found within this article. Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US. This article aimed to educate investors who are keen to invest in LA real estate. Purchasing an investment property requires a lot of study, planning, and budgeting. Not all deals are solid investments. We always recommend doing your research and taking the help of a real estate investment counselor.
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