Sad Facts About Current LA Real Estate

1. You will likely have to overbid to be in the running

2. Rents are super high everywhere

3. Cash buyers are lowballing and Sellers are taking the bait (but then Sellers do a multiple counter back and drive the price right back up)

4. Unless your budget is about 1Mil (Eastside) and 2Mil (Westside), you will likely be getting a less than perfect looking house

5. Prepare to downsize from what you originally wanted

6. Prepare to expand your search into areas you never thought you'd venture into

7. Prepare to submit noncontingent offers

8. Expect to forego any requests for repairs--Sellers are basically not wanting to deal with buyers who pick apart the property

9. Prepare yourself for a possible rejection or what seems to be an unreasonabl counteroffer to your offer

Some Of Us Are Wishing For a Bubble

This is crazy, but I've heard more homeowners and renters wish for a bubble lately. Yes, even homeowners. (Note: these are the same folks who bought in the crash and will do it again every time--I know I would).

When things crashed, there were many jumping ship, and just as many were clamoring to scoop up one, two or more properties. It sounds like crazy speculation but really, it's logic. These same properties at the crash were selling for crazy low prices such as $200-400k. Previously they sold for double those numbers. When you know that demand for these homes were there at double the price, why wouldn't you buy that property when it's half the price?

That's the past, and with no real bubble in sight for the next 2-3 years, prices are high. Some say it's unsustainably high, but that's all relative. Our friends in NY and London and SF are laughing at LA prices because they are so "low." In fact, folks from these cities are buying a second home in LA.

So what hope is there when inventory is low and prices are high and you want an investment property or a first home because renting sucks?

Two things:

1. You have to take advantage of the still very low interest rates

2. You have to give up the fantasy of buying a 3+2 in Silverlake or a 2000sf loft in DTLA for $600k.

Hot areas that are half dumpy but cleaning up:

1. Frogtown
2. Atwater Village
3. Glassell Park
4. El Sereno
5. West Adams
6. Leimert Park
7. Lincoln Heights
8. Garvanza
9. Hermon

Areas that people say are hot but will probably take 10+ years to see ROI:

1. Boyle Heights
2. East LA
3. Inglewood
4. Compton
5. Cypress Park (Some parts)

Areas that are so hot, it's over:

1. Echo Park
2. Mt. Washington
3. Montecito Heights
4. Highland Park

Pocket Lease at Eastern Columbia

Beautiful 12th floor unit facing the glorious Orpheum Theater. Off market! $4200/mo. Nearly 1500sf! Viking Kitchen, Kelly Wearstler bathroom, chic+luxe DTLA living.

Sneak peek below:

AirBnB Causing High Rents?

More and more articles are coming out stating that AirBnB is contributing to the high rents. It's hard to say if this is true across the board, but there seems to be some merit it it. What it comes down to is that Landlords are laughing and renters are getting salt poured on wounds. Activists in LA and NY are taking measures to fight AirBnB.

According to the NY Times:

In Manhattan’s Hell’s Kitchen and Chelsea neighborhoods and the Midtown Business District, which accounted for about 11 percent of all Airbnb listings in New York City in 2016, average monthly rents increased by $398 between 2009 and 2016, of which $86, or 21.6 percent, was a result of Airbnb’s presence, the report said. In Greenpoint and Williamsburg in Brooklyn, the study said, rents went up 18.6 percent in those years because of Airbnb listings.

Airbnb makes it easy to rent apartments to tourists, taking units off the market for full-time residents, the report said.

“For years, New Yorkers have felt the burden of rents that go nowhere but up, and Airbnb is one reason why,” the city comptroller, Scott M. Stringer, said in an interview. “It’s just simply supply and demand. Fewer apartments to rent means higher prices, and that’s the Airbnb effect.”

According to the Wall Street Journal:

Researchers looked at rents and home prices in the 100 largest metro areas in the U.S. between 2012 and 2016. They found that a 10% increase in Airbnb listings leads to a 0.39% increase in rents and a 0.64% increase in house prices.

From the LA Times:

The rental crisis is real: Far too few units are available, and residential rents are far too high. Airbnb does contribute to the problem. Landlords remove rental units from the long-term market because they can make more money from short-term Airbnb rentals. Reduced supply, coupled with constant demand, means higher prices.

What really matters, however, is not whether Airbnb drives up rents — it's by how much. And the truth is that we don't know the magnitude of the problem, because it's been insufficiently studied.

Airbnb critics often cite a 2016 article in the Harvard Law and Policy Review that claims the service has caused rent increases approaching 3% in some Los Angeles neighborhoods. 

Are We In A Bubble?

What a crazy time in real estate--again. Prices are high, inventory is low, people with cash are buying left and right, open houses on good homes are a zoo and bidding wars are still happening.

What's the difference between now and 2007? A lot.

1. Inventory is very, very low. Sellers aren't selling. That's a lot of why good properties in good areas are mobbed by buyers who are ready to go.

2. Rents are super high. Unlike the last time, when rents were very low, right now, rents are super high. LA is having affordability issues. (Well, not compared to NY and SF). More renters are in the buying market because they are sick of paying skyrocketing rents.

3. Interest rates are still low, and while lending is getting more creative again, it's still hella conservative compared to the last time. I remember when I refinanced my place in 2006, and they basically didn't ask for any paperwork except a bank statement and property tax info. The appraiser didn't even come out to the property--they just did it using the MLS and google maps. Things have changed.

That said, it's important to know that the days of buying low and selling high within 1 or 2 years are pretty much gone. If you're buying now, the only way to gain substantial equity is to buy and hold for 5-7 years, or buy a fixer and do some rehabbing to add value. Example: My client just bought a Culver City adjacent dump for about 5k. Recent solds on the same street are $1Mill. With real estate, what you do and when you do it are very key.