Los Angeles: Real Estate and Market Trends

Los Angeles: Real Estate and Market Trends


As one of California’s most desirable cities, Los Angeles continues to remain near the forefront of the current housing sector rebound. Like San Diego, Los Angeles boasts a prosperous housing market that should promote a healthy amount of activity for the foreseeable future. Gains in the last three years have helped to pull the local market out of the post-recession price weakness. Zillow has already forecasted a 6.2% increase in median home values over the next 12 months. The encouraging projections are due, in large part, to employment growth in the region.

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The median household income in the Los Angeles metro area is approximately $59,424, more than $5,000 over the national average. The seasonally adjusted unemployment rate in Los Angeles County was unchanged over the month at 8.1% in July 2014 from a revised 8.1% in June 2014 and was less than the rate of 10% one year ago. Job creation is atypical of past cycles and should continue to reduce vacancies, increase consumer confidence and permit perspective buyers to actively participate in the market. For all intents and purposes, Los Angeles is poised to remain one of the leading hubs for housing activity. In fact, the only markets that look like they may outpace Los Angeles are Houston and the rest of the Texas markets.

Real estate investors, in particular, should continue to benefit from the greater Los Angeles area, as interest rates continue to benefit those who take advantage of them. The average rate on a 30-year fixed-rate mortgage continues to rest around 4%. The Federal Housing Administration (FHA) conforming loan limit in L.A. has reached $625,000, the same as the rest of the country. Most buyers in this particular market have access to government-backed financing. Perhaps even more importantly; investment activity in Southern California should remain relatively high, as bargain hunters will look to avoid the already saturated markets of San Francisco and Seattle.

According to Trulia, the average Los Angeles home is worth about $481/sqft. That price represents an increase of 7.8% over the same period last year. Conversely, the median home price rests at $420,300. Compared to the same period one year ago, the median home price increased 0.9%, and the number of home sales decreased 24.5%. Price appreciation and principal payments in the last three years have boosted total equity growth since the recession. Over the last three years (12 quarters), houses have appreciated 43.8%. For a more comprehensive breakdown of equity, refer to the following:

  • Homeowners who purchased one year ago established an average of $48,297 in equity.
  • Homeowners who purchased three years ago established an average of $141,178 in equity.
  • Homeowners who purchased five years ago established an average of $132,381 in equity.
  • Homeowners who purchased seven years ago lost an average of $118,994 in equity.
  • Homeowners who purchased nine years ago lost an average of $14,295 in equity.

However, while prices are up from a year ago, the rate in which they are appreciating has begun to ease.

The Los Angeles market consists of 3,785 resale and new homes, including 246 open houses, as well as 4,746 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The number of new foreclosure filings by foreclosure type is as follows:

  • Pre-foreclosures have increased by 13.6% over the past year.
  • Auction homes have decreased by 9.4% over the past year.
  • Bank owned properties have increased by a whopping 37.3% over the past year.

These properties now have a strong influence over inventory levels, especially on a local level. Rising inventories, through distressed sales, place a downward pressure on median home prices – supply and demand at its very best.

Los Angeles Market Summary:

Current Median Home Price: $420,300
1-Year Appreciation Rate: 11.1%
3-Year Appreciation Rate: 43.8%
Unemployment Rate: 7.4%
1-Year Job Growth Rate: 2.1%
Population: 9.9 Million (26% of the entire state)
Average Days On Market: 57
Percent Of Underwater Homes: 11.6%
Median Household Income: $61,632
Total Listings: 20,879

Los Angeles Housing Market Q1 Update:

The Los Angeles housing market is one of the hottest in the country. However, that being said, affordability has become a major issue. A recent survey issued by Redfin suggests that affordability is the largest impediment to owning a home – not just in L.A., but also on a national level. The prospect of saving enough money for a down payment is daunting to say the least. The median home value in the area is more than double the national average. Moreover, Los Angeles apartments demand some of the highest rents in the country: great for buy and hold investors, but bad for first-time buyers.

“Many homebuyers have recoiled from the dramatic increase in house prices in urban centers posted over the past three years,” Redfin Chief Economist Nela Richardson said in a statement. “They are now searching for more affordable places farther out.”

Los Angeles is one of the most expensive markets in the country. High-end neighborhoods, in particular, are even more unaffordable than they were prior to the bubble. Values in Beverly Hills, Santa Monica and Bel Air have exceeded their pre-recession peaks. In fact, Los Angeles had the strongest price growth in all of Southern California at the beginning of the year. As recently as January, the Los Angeles housing market demonstrated a 12.6% price increase over the same period last year. With the growth, Los Angeles County now has a median home value of approximately $460,000. Conversely, the weakest growth witnessed in Southern California was in Orange County, where the median grew 2.3% to $562,500. To put things into perspective, Los Angeles easily outpaced cities like Seattle and Denver.

Historically high appreciation rates have been felt across the entire Los Angeles real estate market. Ever increasing prices and a tight inventory have culminated in fewer existing home sales at the onset of 2015. However, there will always be a steady supply of demand to fill homes in the area. Despite several headwinds, the Los Angeles real estate market is primed to have a strong 2015.

Los Angeles Statistics:

Los Angeles market statistics

Los Angeles County Map:

Map of Los Angeles neighborhoods