Year End Stats for DTLA

Since the crash in 2008, the market has been steadily increasing in L.A. and downtown in particular. There's a lot of speculation about what's to come in 2017. Interest rates are supposed to be lowered, causing more demand for houses and as a result, prices to continue going up. 

So will it be a good time to sell? 

- Yes. 

Should I rent out my condo?

- If you're planning on renting out your unit, then expect a lot of competition from the many rentals that will be on the market so your place may sit longer than 30 days on the market before getting rented. 

Will it be a good time to buy? 

- If you're planning on holding for 3-5 years then yes. 

- If you're planning on flipping in 1-2 years, then no.

Year        Average Sold Price/SF

2016        $636/SF  

2015        $614/SF

2014        $554/SF

2013        $494/SF

2012        $384/SF

Buy, Sell or Hold?

Downtown (and LA in general) prices are up, per usual, inventory is low, and it's a Seller's market. Prices have well surpassed the 2007 height, and are now beginning to stabilize due to the holidays.

So what to do, BUY, SELL or HOLD?

Assuming you have equity, if you need the cash to upgrade, relocate or just to have liquid for whatever, SELL. It's a good time because prices are higher than ever before and buyers are pent up because inventory has been low for at least 12 months.

If you're buying to invest in the short term, don't. If you're buying to invest in the long term, then BUY. Prices are high, but they are going to be stabilizing into next year, so if you're planning on holding for a while (5-7 years) or you're sick of renting (I predict rental prices will continue to increase again next year in DTLA), then BUY. Why pay a landlord when you can pay yourself while gaining equity?

If you are not planning to do anything with the equity money, then HOLD. DTLA is getting lots of good investment in terms of qualified resident buyers, businesses looking to expand, companies relocating, and developers that are looking to be in one of the most unique parts of LA (e.g. The Row, At Mateo, Oceanwide Plaza). This will only help continued growth and revitalization.

The Upside of "Older" Properties in DTLA

One thing about those 10-year old condos and the 80-year old loft conversions that were done in the mid 2000s is that the square footage of what was selling was a lot larger than the average brand new home today. Nevermind that the price/sf has gone up all over the city. It's that now, 900sf is the size of a 2-bedroom and 1-bedrooms are more like 650sf.

However, back in 2004-2006 when so many lofts and condos were built/converted, the average 1 bedroom was about 800sf. What this means is that if you have a large 1 bedroom, you can think of converting these into 2 bedrooms later on, or marketing them as potential 2-bedrooms. Permits needed, of course.

The moral of the story? Buy a condo or loft that was built 10 years ago if size matters. 

Market Up From Last Year, But Prices Stabilizing

Since the crash, the market has rebounded greatly. Congrats to all my clients who bought in 2010, 2011, 2012, 2013 and 2014! You can rest assured your money was better spent on housing than on stocks. A lot of those who bought in 2015 are also reaping some profits since then though not yet as exponentially. But hold onto the real estate and you can expect more gains in the future. This goes for the Los Angeles market in general.

For those who want to cash out, now is the time. For those who want to enter the market, think long term--like 5-7 years. We're approaching a time where prices are stabilizing as building has started again, and there is a bit more inventory (though still slim pickings in a lot of neighborhoods o LA).

As they say in real estate, sell high and buy two.

Deals in DTLA

With prices averaging about $650/sf in downtown, it's hard to find a "deal" these days. Prices have been increasing since 2009 and are expected to increase a further 3-5% next year. That's unless the interest rates go up then things may finally plateau.

For now, the deals are basically anything under $550/sf. See below:

Flower Street Lofts #115 - 2 bed, 2 bath, 2 parking, 2149sf - $950k (or $442/sf)

Vero Condos #535 - 1 bed, 2 bath, 2 parking, 1120sf- $575k (or $508/sf)

Grand Lofts  #A602 - 2 bed, 2 bath, 2 parking, 1740sf - $920k (or $528/sf)

Elleven  #406 - 1 bed, 2 bath, 2 parking, 1700sf - $910k (or $535/sf)

Eastern Columbia  #M11 - 2 bed, 2 bath, 2 parking, 1830sf - $999k (or $545/sf)

Micro Dip in Downtown + Neighborhood Market Conditions

There's no question it's a seller's market right now in downtown. We're up from 2007 prices, inventory is low, and the area keeps evolving into an exciting destination. We've gone from the low of $300/sf to about $625/sf on average today. And while the prices are pretty stable, there have been some price drops. Bidding wars have slowed down and the units that have been priced in a greedy way have shown price drops. Buyers who've been looking are not having to overbid as much. We don't know how much this micro-dip will last, but in any case, Sellers still hold the power right now because the inventory remains low.

In the near future, South Park will be getting the most condo inventory because of condos like TEN50 and Metropolis coming on the market--and everyone wants the latest and greatest.

Historic Core and Financial Districts remain desirable because of low inventory and lots of business regeneration (The Bloc, Grand Central Market).

Arts District is one of the hottest areas due to low inventory, but there are tons of apartments being developed. Good for condo owners, not as great for investors.

Little Tokyo is still very hot due to the location next to the Arts District and all that River Development.

Fashion District is the next up-and-coming neighborhood. Lots of conversion activity from derelict buildings to live/work lofts, plus the development of THE ROW just a few blocks away is going to be a game changer.

Skid Row adjacent, which is essentially the Little Tokyo Lofts and other artist rental lofts, are benefiting from the Fashion District activity.

The Cost of Buying and Selling a Condo

Price goes up, you sell. Price is right, you buy. Sounds simple, but there's more to it. There are closing costs involved on both sides, and this is something that your realtor should go over with you.

SELLERS:
In a nutshell, the average expense to sell a home is about 2% of the sales price. So on an $800k sales price, you're looking at about $16k in escrow fees. This comes in the form of transfer taxes, escrow company fees, doc fees, etc. Then there's the agency commissions. So while you might think there's $200k in profits to be made, remember that anywhere from 2-8% will be shaved off in fees.

BUYERS:
For buyers who are getting a loan, closing costs are about 3% on an $800k purchase price. You're looking at $24k approximately. Most of these are loan and title insurance fees, and these are IN ADDITION to the purchase price. So if you have barely enough to put down on a place, know that you're going to need at least a 3-4% buffer due to these closing costs. Cash purchases cut out the loan and title insurance fees so suddenly you're only needing about .05-1% in closing costs.

Super Lofts Available - 2000sf and Larger

600sf is the new 800sf. What I mean is that new units are getting smaller in scale, and the small 800-900sf 1-bedrooms we used to snicker at are now considered large 1-bedrooms. 1000sf is pretty much consider HUGE. Size is becoming a huge commodity, as land and building costs are rising. Back in 2003-2007, developers were a lot more generous, which is why you often get more square footage for your money in buildings that were either built or converted in that period.

Here are some interesting "super lofts" available for sale now:

1100 Wilshire #3702 - 3000SF - 2 Parking Spaces

$5,950,000

Molino Lofts #213 - 4260SF - 5 Parking Spaces

$1,985,000

  

Barker Block Lofts #102 - 2660SF - 2 Parking Spaces

$1,675,000

Barker Block Lofts #144 - 2460SF - 2 Parking Spaces

$1,795,000

TEN50 PH5 - 2268SF - 2 Parking Spaces

$2,600,000

Flower Street Lofts - 2149SF - 2 Parking Spaces

$969,000

Barker Block Lofts #121 - 2040SF - 2 Parking Spaces

$1,200,000

Luma PH105 - 2001SF - 2 Parking Spaces

$1,995,000

Downtown Area Highlight: Arts District

Downtown really is its own world. While prices have gone up around the country in most cities (5.1% from 2015!), DTLA is in my opinion one of the most exciting and resilient places. Even after the crash of 2008, prices have been steadily rebounding and are now well past the 2007 height. More residents are living in the area. New businesses have arrived. And each week seems to bring about another exciting development.

One of the most thriving areas is the Arts District. I highlight the area because it has seen some serious value gains because of the exciting development and the lack of inventory. There are only FIVE loft/condo buildings in the Arts District, which is keeping demand high. In addition, some of the most exciting developments and destinations are happening in the area: SOHO House, Hauser Wirth Schimmel, At Mateo, Oficine  Brera, Bestia, The Row DTLA, and The Garey Lofts, Church & State, Shinola, Grow, Everson Royce Bar, La Kretz Innovator.

About DTLA Prices and the Investment Potential

Been a busy several months, lots of buyers snatching up the best units quickly since the inventory remains very low. The best units (meaning ones with at least a few of these: corner, higher floor, lots of light, views, building with amenities, parking) are definitely getting multiple offers and driving prices even higher than they should be. Sellers should be realistic and know that just because a unit sold for X price, it doesn't mean their unit will go for the same price/sf. The unit orientation, views, etc. all matter. In fact, there have been some larger units that have sold for less than smaller ones because of the views or layout.

The fact remains, DTLA prices have been climbing, but so have rents. Every year there's an average jump of 6-8% in rent prices in general. And on top of that, no rent control.  It's no wonder investors love DTLA.

Ridiculously High Rents in DTLA

People are really starting to balk at the ever increasing rents in DTLA. Seriously, we are in the $3-$4.50/sf range. What's justifying the high rents is the fact that people keep renting! Why is this happening? A few reasons:

1. DTLA has gotten so popular as a livable, walkable area, people are willing to spend a larger portion of their income on rents.

2. A growing number of residents have high income as evidenced by the demand for luxury rentals and condos in the area.

3. Housing prices have increased so much so that priced-out buyers have no choice but to rent for longer, keeping rental demand high.

This means that it's a great time to invest in DTLA if you plan on renting the place out. If you're planning on buying, then expect to have to hold on to the property before seeing significant gains, since price increases are expected to slow down.

Want Over 1300sf of Space? There are Currently A Few Gems Available.

I keep reiterating that things are getting smaller in DTLA. It's a fact that nearly all the new residential development will have studios and "1-bedrooms" starting around 550sf. That sounds small--because it is. Even the converted historic spaces are getting smaller as land and construction costs are going up, so developers are chopping up the units. Their bottom line is to get as many livable units onto a floor as building codes will allow.

That said, things that are close to 1000sf will become more desirable. An 800sf 1-bedroom is being considered ample now. And anything over 1200+sf is considered spacious. Currently available "oversized" lofts in unique buildings:

Douglas Penthouse #MN

Corner unit, Skylight, rare 2 parking spaces, Mills Act

2100sf, Asking $2.1MM

Little Tokyo Loft #106

End unit, Skylight, 2 parking spaces, Private Outdoor Space, 2 Levels

1800sf, Asking $1.058MM 

Tomahawk Loft #6

Entire Floor Unit (Street to Street), Private Elevator Stop

1640sf, Asking $1.049MM 

Barker Block #443

City Views, Original Rafter Ceilings

1510sf, Asking $995k

Flower Street Lofts #118

2 Levels, 2 Parking Spaces

1420sf, Asking $699k

940 E. 2nd #8

3 Levels, Private Rooftop Deck, Skylight

1330sf, Asking $879k

Sneak Peek of Upcoming South Park Condo - TEN50

First time since the Ritz Carlton was completed in 2012, new construction condos will be available for sale in downtown Los Angeles. Developed by Trumark Urban and designed by TEN50 is located on Grand and 11th, in the prime area of South Park, just a few blocks from the Historic Core and the Fashion District. Target move-in is November 2015. Contact me to preview the floorplans, amenities and finishes.

Just some of the highlights:
- Infinity edge pool
- Outdoor yoga deck
- Theater/Media room
- Corner Penthouse units
- Boutique style building
- Bertazzoni induction range, Bosch ovens, Liebherr refrigerators
- 24/hour reception
- Parking and storage

 

(Rendering from Photographer of TEN50)

(Rendering from Photographer of TEN50)

(Rendering from Photographer of TEN50)

10 Things We Want in DTLA

I did an informal 2016 poll of about 50 clients/friends/neighbors in downtown and these are what the majority of them wish we had in DTLA:

1. TRADER JOES (We have Whole Foods, Om Nom, Grow, and Urban Radish in addition to several farmers markets--maybe TJ's isn't organic enough?)

2. MORE GREEN SPACE (Why is it that most of the parks are well into the northern part of downtown where there are the least amount of residents?)

3. THAI FOOD (Let's not forget Pok Pok LA just opened in Chinatown!)

4. SEPHORA

5. THE HABIT

6. A COUPLE MORE DIVE BARS

7. MUJI

8. APPLE STORE

9. MORE TREES ON SIDEWALKS

10. ROSCOES

DTLA: A Good Investment Or Not?

It sure seems like it is. Take for example, my client who bought in Little Tokyo in 2012. They were told by everyone they knew that they were crazy to buy when the market was still in the dumps. What they found out through me was that the condo they were interested in was going to be surrounding by a slew of new upscale development, so if they were investing, now was the time. Today, their condo has $220k in equity, is cashflow positive by $1200/mo, and rents out in about 2 weeks each time they put it on the market (because it's heavy on the student ratio, and students tend to leave every year, meaning the owners can charge market rental rates each time they have a new tenant since most of the properties in DTLA are NOT under rent control. Sweet investment).

Another client bought a loft in 2014, after living in a rental for 2 years and was getting sick of paying his absentee landlord increased rents every year. He wasn't thrilled that the market had gone up quite a bit when he bought his pad, but decided it was the lesser evil than continuing to pay his landlord. Today, his place has $100k in equity and he is paying himself, not a landlord.

A friend of mine from NYC just bought a DTLA investment pad in 2015, because she felt that she was only just now able to see some substantial investment in DTLA, making her confident about the area. Back in 2007 when everyone was buying like it was going extinct, she waited to see if there would be more growth in residents and necessary amenities to sustain residents, such as supermarkets and restaurants (smart girl). We low-balled and offered to pay for some piddly services such as termite, HOA docs, and Home Warranty, and she got the pad. It's now worth about $85k more than she bought it for.

It's 2016, and several buyer clients are looking for choice properties in DTLA--meaning large size, top floor, good views. Size will be a big deal in DTLA in the near future. What was once considered too small for a 1-bedroom is now considered huge. Nearly all of the new developers are chopping up the units, and the average 1-bedroom is now about 610sf, while back in 2007, the average 1-bedroom was 900sf.

When investing in DTLA, low price is always good, but you also need to look out for what will become the rare, coveted attribute in the long term because this is what will add further value.

Rental and Sales Prices Going Up in 2016

It's 2016, and there's no sign of a housing slowdown according to a UCLA's economist, David Shulman. Rents are expected to climb by 4.5% this year over last year, and housing prices are expected to rise 6% over last year. What's causing the rise in prices is low inventory of homes for sale as owners are holding on for even higher returns. And the recent rise in interest rates are keeping some renters out of the sales market for longer.

The reality is that first time buyers are frustrated. The upside is that interest rates, while up from last year, are still pretty low in general. 2017 could have another interest rate hike which is why some buyers who plan to hold onto their property for a while are buying now before things get worse.