Lots of buyers who've decided they want to buy in DTLA are asking me key questions before they take the leap. As a homeowner and investor in downtown myself, here are my answers to these questions:
"Am I buying at the height?"
Understandable question since prices have been steadily climbing to near-2007-peak prices--and in some super-desirable buildings (think Eastern Columbia, Biscuit Company Lofts, Barker Block)--beyond peak prices. I always tell my clients the same thing: "This isn't the height." What's so sublimely different now than what happened back in the crash of 2009 is the inventory is super low in DTLA. Supply and demand always affect prices, and there is a great demand for condo and loft housing right now yet the pickings are slim. Buildings that were once slated to be condos (e.g. The Chapman, The Roosevelt, Apex, etc.) became rental-only buildings because of the crash--and the owners of these buildings are happy to just rake in the continuously increasing rents. Most of the new developments such as One Santa Fe in the Arts District, 8th & Hope near South Park, and Ava in Little Tokyo for example, are all rentals. It's no wonder the newest phase of Barker Block is nearly sold out with only 7 units left as of today.
"Is there a bubble that will burst?"
Two reasons the climate is different from that of the 2007-2009. First, the loose lending practices that dominated the height of the market are now gone. It's been a lot more difficult for buyers to get qualified for a loan and many lenders are requiring a larger down, the upside being that this has helped buyers have instant equity as soon as they've purchased. While this means some buyers who have little savings for a downpayment or bad credit might experience hurdle and blocks, those who can qualify for a loan will be buying what they can actually afford, and this should help prevent short sales and foreclosures. Secondly, the the investment happening in DTLA right now is from businesses, NOT just homebuyers and residential developers. Back in the bubble days, a bunch of buyers/investors scrambled to buy a condo due to speculation, but business investment was pretty much non-existent (Except for good old Ralphs and Cedd Moses' bars such as Seven Grand and The Golden Gopher). Now, there are more developments and new businesses that have and will create jobs, such as The Bloc, Clean Technology Incubator, Gensler Architects, One Santa Fe, The Ace Hotel, The JW Marriott, The Residence Inn, the upcoming Case Hotel, Arts District "Mall", Urban Radish, 7th & Fig. And this is just the tip of the iceberg.
"Is all this building around DTLA going to affect my purchase?"
Depends on what you're buying to do. If you're planning on living in your home, then you've got it made. Enjoy the rise in values as DTLA continues to revitalize. If you're buying to invest and rent out, this gets more tricky because in the near future, beginning this Fall, there will be an influx of new rental-only buildings. (Think Ava Little Tokyo, Olive & 9th, 8the & Hope, Avant, One Santa Fe). You'll have competition with these new developments that will attract tenants who want the newest place to live. That said, some condo buildings will always be in demand by renters because of their uniqueness and location, such as The Residences at The Ritz Carlton, Barker Block, Molino Lofts, Biscuit Lofts, Eastern Columbia, The Rowan, to name a few.
