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.
Showing posts with label bubble. Show all posts
Showing posts with label bubble. Show all posts
Tuesday, May 1, 2018
Friday, July 7, 2017
It's Been a Long Real Estate Wave in DTLA, and Still Going
Crazy to think that prices have been increasing in DTLA (and most of LA for that matter) for about 270 weeks straight. Prices went up exponentially between 2012-2014, then less exponentially from 2015-2017. But still, prices kept going up.
In downtown, even with all the construction of condos and the increase of apartments for rent, the fact remains, there's still not enough inventory to buy, causing demand to remain high. True, properties are sitting on the market longer, average about 60 days, mainly due to the higher prices and lending restrictions, but they do sell in the end.
DTLA has reached a critical mass where now I'm getting contacted by DTLA homeowners who want to buy a second property as an investment. People who already own in the area want to own another, and that's hugely telling. It's a desirable place to live, and the rents are even more desirable.
One key change from about 7 years ago: You'd buy an $900k property and expect to rent it out at $2000/mo. Now, you buy a $900k property and expect to rent it out for about $3500/mo. The math pencils out much better.
Hence the influx of people from NYC, Chicago, SF buying either a second home or investment property because it's still affordable compared to those areas. And yet it's reminding them of Brooklyn, SF's Mission or Wicker Park in Chicago a few years ago. Heck, even Detroit...nuff said.
In downtown, even with all the construction of condos and the increase of apartments for rent, the fact remains, there's still not enough inventory to buy, causing demand to remain high. True, properties are sitting on the market longer, average about 60 days, mainly due to the higher prices and lending restrictions, but they do sell in the end.
DTLA has reached a critical mass where now I'm getting contacted by DTLA homeowners who want to buy a second property as an investment. People who already own in the area want to own another, and that's hugely telling. It's a desirable place to live, and the rents are even more desirable.
One key change from about 7 years ago: You'd buy an $900k property and expect to rent it out at $2000/mo. Now, you buy a $900k property and expect to rent it out for about $3500/mo. The math pencils out much better.
Hence the influx of people from NYC, Chicago, SF buying either a second home or investment property because it's still affordable compared to those areas. And yet it's reminding them of Brooklyn, SF's Mission or Wicker Park in Chicago a few years ago. Heck, even Detroit...nuff said.
Monday, June 16, 2014
DTLA Real Estate Climate as of June 2014
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.
"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.
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