The Los Angeles housing market is experiencing a remarkable resurgence, attracting both national and global attention. With its exceptional performance and desirability, Los Angeles has become the go-to market for real estate investors worldwide. According to the Association for International Real Estate Investors (AFIRE), Los Angeles is one of the top three global cities where investors are looking to increase their investment exposure. The city's past performance and optimistic trends have instilled confidence in investors and created a thriving marketplace for buyers, sellers, and real estate investors.
Image: Los Angeles housing market
The introduction of COVID-19 had a significant impact on the recent trends in the Los Angeles housing market. Initially, the market experienced a setback, but it quickly rebounded due to pent-up demand, historically low interest rates, and rapidly appreciating assets. The pandemic created a unique window of opportunity for those interested in buying, selling, or investing in Los Angeles real estate.
Los Angeles Real Estate Market 2022 Overview
Here's an overview of the current trends in the Los Angeles real estate market:
- Median Home Value: $928,320
- Median List Price: $941,667 (-5.9% year over year)
- 1-Year Appreciation Rate: +15.9%
- Median Home Value (1-Year Forecast): +14.3%
- Weeks of Supply: 7.4 (-3.8 year over year)
- New Listings: 1,006 (-22.4% year over year)
- Active Listings: 8,555 (-39.3% year over year)
- Homes Sold: 1,178 (-6.6% year over year)
- Median Days on Market: 37.7 (-3.8 year over year)
- Median Rent: $2,644 (+11.0% year over year)
- Price-To-Rent Ratio: 29.25
- Unemployment Rate: 6.2%
- Population: 3,979,576
- Median Household Income: $62,142
The Los Angeles housing market is characterized by high demand, limited supply, and increasing rental rates. The median home value is expected to continue its upward trajectory, albeit at a slower pace. Interest rates are projected to rise, which may impact buying activity. Renting is becoming more popular due to affordability constraints, leading to higher rental prices. The prevailing market conditions favor long-term exit strategies for real estate investors.
Los Angeles Housing Market Forecast 2022
The Los Angeles housing market is expected to follow national trends, driven primarily by indicators influenced by COVID-19. Here are the key forecasts for the Los Angeles housing market:
- Home Values Will Increase at a Slower Pace: While the median home value experienced a significant increase of 15.9% last year, it is unlikely that this level of appreciation will continue. Factors such as new listings, potential interest rate hikes, and limited room for growth suggest a more moderate increase of around 13.7% for the median home value in the coming year.
- Interest Rates Will Rise: After a mild increase of 0.33% in interest rates on 30-year fixed-rate mortgages last year, further rate hikes are expected due to potential inflation risks. Initially, the threat of rising interest rates may spur buying activity, but it could decline as borrowing costs increase.
- The Cost of Renting Will Increase: The lack of available inventory has driven up home values by 15.9% in the past year, leading to an 11.0% increase in rental rates. As more people are priced out of the buying market, demand for rental properties is expected to rise, resulting in double-digit rent increases.
- Investing Indicators Will Favor Landlords: The aftermath of the pandemic has created an environment that favors long-term investment strategies. Rental properties, with their lower profit margins and higher acquisition costs, offer a promising path for investors in 2022.
- Negative Net Migration: The increasing home values in Los Angeles have priced out many buyers, leading to a decline in population and an exodus from the city. More people are seeking affordable alternatives outside the city, resulting in negative net migration.
Los Angeles County Housing Market Trends 2022
The Los Angeles County housing market has experienced a significant shift due to the impact of COVID-19. Appreciation rates have soared, driven by inventory shortages, high demand, and low borrowing costs. However, these market conditions have made homes prohibitively expensive, causing buyers to turn to renting as an alternative. Rental demand has increased, leading to higher rental rates. The market dynamics have changed, and both buyers and renters face significant challenges in finding suitable properties.
How COVID-19 Affected the Los Angeles Real Estate Market
The Los Angeles housing market, like many others, initially faced challenges due to the COVID-19 pandemic. The market came to a temporary standstill as unemployment soared and consumer spending declined. However, the housing sector quickly rebounded when the Federal Reserve announced historically low interest rates and implemented stimulus measures. Pent-up demand fueled the market, but the shortage of inventory led to intense competition among buyers, resulting in rising prices. Despite the high unemployment rate, the Los Angeles real estate market has shown resilience. However, an exodus from the city is expected as remote work becomes more prevalent, leading to increased demand for suburban homes.
Los Angeles Foreclosure Statistics 2022
Foreclosure filings in the United States have been on the rise due to the expiration of government assistance programs. Lenders are now allowed to begin foreclosure actions on vacant and abandoned properties, leading to an increase in filings. In the third quarter of last year, Los Angeles had the highest number of foreclosure starts in California. The expiration of government assistance is expected to result in more delinquencies, leading to a further increase in foreclosure filings. Real estate investors in Los Angeles should be prepared to seize opportunities and assist distressed homeowners.
Los Angeles Median Home Prices 2022
The median home value in the Los Angeles housing market has been on an upward trajectory for nearly a decade. The pandemic has accelerated this trend, with home values increasing by 24.1% since the onset of COVID-19. The median home value now stands at $928,320, with further increases expected. However, the pace of appreciation is likely to slow down, projecting a 14.3% increase in the coming year. The convergence of limited inventory, high demand, and low borrowing costs will continue to drive prices upward.
Los Angeles Real Estate Market: Should You Invest?
The Los Angeles real estate market has become a hotspot for investors worldwide, thanks to its thriving economy and constant demand. Foreign investors, in particular, are attracted to the city due to its status as a global entertainment hub. The growth of the market is expected to continue, albeit at a slower pace. Rental properties offer significant potential returns, given the correlation between rental rates and demand. With a price-to-rent ratio of 29.25, renting is more affordable than owning in Los Angeles, increasing the demand for rental properties. Real estate investors with cash-flowing rental portfolios are well-positioned to benefit from the current market conditions.
Buying real estate in Los Angeles can be a good investment, given the historic appreciation rates. Although the market is relatively expensive, rental properties offer a lucrative opportunity. Low interest rates make borrowing money more affordable, and rental income can offset higher acquisition costs. The Los Angeles housing market, with its unique attributes and long-term potential, remains attractive to investors.
5 Best Los Angeles Neighborhoods for Rental Properties
If you're looking to invest in rental properties in Los Angeles, consider these five neighborhoods:
-
Wilmington
- Median Home Value: $617,500
- 1-Year Appreciation Rate: +13.3%
-
Boyle Heights
- Median Home Value: $660,000
- 1-Year Appreciation Rate: +18.7%
-
Canoga Park
- Median Home Value: $730,000
- 1-Year Appreciation Rate: +29.2%
-
Northridge
- Median Home Value: $1,000,000
- 1-Year Appreciation Rate: +18.3%
-
Winnetka
- Median Home Value: $800,000
- 1-Year Appreciation Rate: +19.0%
These neighborhoods have demonstrated strong rental returns and show potential for future growth, making them excellent choices for building a rental property portfolio.
Summary
The Los Angeles housing market is expected to continue thriving and attracting buyers, renters, and investors from around the world. Despite the challenges posed by the pandemic, the market has shown resilience and remains poised for growth. Investing in rental properties offers a promising opportunity, considering the high demand and increasing rental rates. While the market may be relatively expensive, the potential returns and favorable borrowing costs make it an enticing option for real estate investors. To take advantage of the current opportunities in the Los Angeles real estate market, consider expanding your knowledge through online training classes.
