The California housing market is one of the hottest and most profitable in the United States. In California, the Los Angeles real estate 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 2019 and will continue to rise in the next year as well.
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.
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.
The real estate appreciation rate in Los Angeles is predicted to remain modest throughout 2020. If you are an investor, Los Angeles real estate has a record of being one of the best long term investments in the nation.
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.
Is Los Angeles going to be one of the hottest real estate markets for investors in 2020? To answer this question, let’s take a look at the latest Los Angeles housing market trends and find out the prospects of investing in the Los Angeles real estate in 2020.
Table of Contents
- Los Angeles Real Estate Market Forecast 2020
- Los Angeles Real Estate Market Trends
- Los Angeles, CA Single And Multi-Family Homes Statistics
- Los Angeles Foreclosures And Bank Owned Homes Statistics
- Best Neighborhoods to Invest in Los Angeles Real Estate
- Is Real Estate a Good Investment in Los Angeles, California?
- Los Angeles Real Estate Investment: The Conclusion
- Best Cities To Buy Investment Property In California
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, currently, the Los Angeles housing market is a buyers’s market. The median home value in Los Angeles is $696,900. Los Angeles home values have risen by 2.3% over the past year and their Los Angeles real estate market forecast is that the prices will continue to rise by 2.5% within the next year.
Here is the Los Angeles real estate price appreciation graph by Zillow. It shows us the current home price appreciation forecast of 2.5% till Sep 2020.
Graph Credits: Zillow.com
The median list price per square foot in Los Angeles is $543, which is higher than the Los Angeles-Long Beach-Anaheim Metro average of $440. The median price of homes currently for sale in Los Angeles is $849,900 whereas the median price of home that have been sold is $710,400.
Zillow reports that 14.9% of the listings in Los Angeles had a price cut in Sep 2019, which is a good thing for buyers. 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 $3,607, which is higher than the Los Angeles-Long Beach-Anaheim Metro median of $3,200.
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.
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. 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.
Currently, Trulia has 7,419 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.
Graph Credits: Trulia.com
In the past month, 2429 homes have been sold in Los Angeles, CA as reported by Redfin.com. In addition to houses in Los Angeles, there were also 2252 condos, 558 townhouses, and 1619 multi-family units for sale in Los Angeles last month. The median price per square foot in Los Angeles has increased by 4.1% over the past year.
According to their statistics, the Los Angeles housing market is somewhat competitive. Homes in Los Angeles receive 2 offers on average and sell in around 49 days. The average sale price of a home in Los Angeles was $750K last month, up 6.4% since last year.
The average sale price per square foot in Los Angeles is $482, up 4.1% since last year. Homes typically receive 2 offers. Homes sell for about 1% below list price and go pending in around 49 days. A hot listing in Los Angeles can sell for about 2% above list price and go pending in around 27 days.
Here is the latest Los Angeles housing market data for the month of Oct 2019 from Redfin.com. The sale to list price ratio shows us that it was buyer’s market in the past month.
Los Angeles Housing Market Trends
- Median List Price: $899,000
- Avg. Sale / List: 99.5%
- Median List $/Sq Ft: $542
- Avg. Number of Offers: 1
- Median Sale Price: $750,000
- Avg. Down Payment: 28.3%
- Median Sale $/Sq Ft: $482
- Number of Homes Sold: 2429
There are 6,012 homes for sale in Los Angeles on Realtor.com. The new listings are 310. The asking price of Los Angeles single family homes can start from $165,000 and can go up to $225M for a luxury property in Bel-Air.
Additionally, there are 4,845 Los Angeles rental properties for sale, and their rent price can go from $390 to $370K per month. The median rent in Los Angeles is $3,900. There are 718 new construction homes for sale in Los Angeles within a price range of $439,000 to $65M.
According to their statistics, in October 2019, Los Angeles housing market was a balanced market, which means there was a healthy balance of buyers and sellers in the market.
Graph Credits: Realtor.com
In October 2019, the median list price of homes in Los Angeles, CA was $998K, trending up 11% year-over-year. The median listing price per square foot was $598. The median sale price was $840K.
On average, homes in Los Angeles, CA sell after 64 days on the market. The trend for median days on market in Los Angeles, CA has gone down since last month, and slightly up since last year.
The median list price in Los Angeles is $1,125,000 on Movoto.com. The median list price in Los Angeles went down 2% from October to November. Los Angeles’s home resale inventories is 3,136, which increased 29 percent since October 2019.
Median Price Per Sq Ft | Movoto.com
The median list price per square foot in Los Angeles is $677. In October 2019 it was $676. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in November.
Los Angeles, CA Single And Multi-Family Homes Statistics
Following the real estate market decline in 2007 in the U.S., single family rental homes 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 properties 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.
U.S. single-family rental market has seen steady rent increases between 2010 and 2019. According to CoreLogic’s latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas, it shows a national rent increase of 3% in April 2019, as compared to 2.8% in April 2018.
The average sales price of new homes sold in the U.S. fell by 1.6% year-over-year in July 2019, to $388,000, according to the U.S. Census Bureau. In fact, the median sales price of new homes sold fell by 4.8% to $312,800 over the same period.
For existing homes, the median price was up by 4.3% to $280,800 in July 2019 from a year earlier, according to the National Association of Realtors. July’s price increase marks the 89th consecutive month of year-over-year gains. Demand remains robust. During the year to July 2019, new and existing home sales increased by 4.3% and 2.5%, respectively.
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.
As per the data from the real estate company called Neigborhoodscout.com, the median house price in Los Angeles is $654,156 and it is above national average. However, the Los Angeles home prices are still cheaper as compared to some of the most expensive areas in the California real estate market.
Large apartment complexes or high rise apartments are the single most common housing type in Los Angeles, accounting for 46.16% of the city’s housing units. One or two bedroom 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, homes converted to apartments and a few row houses. Los Angeles has a mixture of owner-occupied and renter-occupied housing.
After the great recession of 2008, renting a home has increased exponentially across the nation. There are currently over 136.57 million housing units in the U.S.
In 2018, the total number of homeowner households hit an all-time high of 76.2 million. 36.6% of households rent their homes and 64.4% buy their homes (2018 U.S. Census Bureau).
Currently, there are 3,738 single family homes for sale in Los Angeles, CA on Zillow. Additionally, there are 2,355 single family homes for rent in Los Angeles, CA
Under potential listings, there are about 26 Foreclosed and 1,131 Pre-Foreclosure homes. These are the properties that may be coming to the market soon but are not yet found on a multiple listing service (MLS).
Los Angeles Foreclosures And Bank Owned Homes Statistics
As per the Los Angeles foreclosure statistics by Zillow, 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||1,065 (RealtyTrac)|
|Homes for Sale in Los Angeles||2,166|
|Median List Price||$986,500 (1% ⇓ vs Sep 2018)|
There are currently 1,065 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 2,166.
In October 2019, the number of properties that received a foreclosure filing in Los Angeles, CA was 10% higher than the previous month and 19% lower than the same time last year.
Best Neighborhoods to Invest in Los Angeles Real Estate
If you are looking to buy real estate in Los Angeles, you should know the best places to invest in. The three most important factors when buying a real estate anywhere are location, location, and location. Location creates desirability. Desirability brings demand.
Demand would raise the price of your Los Angeles real estate and you should be able flip it for a lump sum profit. When looking to invest in Los Angeles real estate, you need to find places where the expected property appreciation forecast is positive.
The running costs for owning and managing an Los Angeles investment property should be low. 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 and shopping malls. There should be a natural and upcoming high demand for rental properties and a low supply of income properties.
Los Angeles is a moderately walkable city in Los Angeles County. There are 393 elementary schools, 194 middle schools, 189 high schools and 352 private & charter schools. There are 82 neighborhoods in Los Angeles.
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.
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.
These are the 10 best neighborhoods in Los Angeles to invest in real estate because they have the highest real estate appreciation rates (List by Neigborhoodscout.com).
|1||Santa Monica Blvd / N Hudson Ave|
|2||N Western Ave / W Sunset Blvd|
|4||Nolden St / York Blvd|
|5||N Ave 54 / Baltimore St|
|7||Meridian St / N Figueroa St|
|8||Lincoln Blvd / Broadway St|
|9||S La Brea Ave / W Washington Blvd|
|10||W Washington Blvd / Crenshaw Blvd|
Is Real Estate a Good Investment in Los Angeles, California?
Original Photo via Pixabay
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 Is a Good Time to Buy
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.
Los Angeles Real Estate Investment: The Conclusion
Maybe you have done a bit of real estate investing in Los Angeles 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.
A good cash flow from Los Angeles rental property 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 Los Angeles real estate, you could secure your future.
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.
If you are a beginner in the business of cash flow real estate investing, it very important to read good books on real estate. The less expensive the Los Angeles investment property is, the lower your ongoing expenses will be.
When looking for real estate investment opportunitiesin Los Angeles or anywhere in the country, the generally accepted standard is to purchase a property that will give you a modest but minimum 1% profit on your investment.
An example would be: at $120,000 mortgage or investment cost, $1200 per month rental. That would be the ideal equation example. Even with rent increases, buying a $500,000 investment property in Los Angeles is not going to get you $5000 per month on rent.
When looking for the best real estate investments in Los Angeles, you should focus on neighborhoods with relatively high population density and employment growth.
Both of them translate into high demand for housing. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable.
You must also collaborate and learn from savvy real estate investors who have retired early on in their lives by investing in some of the best real estate markets like Los Angeles.
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. 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 2019. 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.
Best Cities To Buy Investment Property 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.L