Condo Prices Stay Stronger Than SFR Prices

As housing prices continue to climb, condo pricing is among the strongest, and where are the highest concentration of condos? DTLA of course. Condo prices in Downtown LA rose 2.4 percent in the first three months of this year, according to Douglas Elliman.

From January to March, condos in DTLA sold for a median price of $599,000, up from $585,000 in the same time period last year. And, the average DTLA condo spent 67 days on the market—a drop from 82 days in the first quarter of 2016.

There's a huge reason as to why. People are getting priced out of the SFR market, and condos often have a more affordable price point. For instance, a 1 bed condo in WEHO with nice amenities could cost you about $650k, while a 2+1 home will cost about 1.1k. The discrepancy is price is huge and you're not always getting a whole lot more for that upcharge.

In DTLA, you can snag a condo with nice views and parking and amenities like a pool, gym, lounge, concierge, for about $700k. You'd have to plunk down about $850 to get a semi-decent remodeled 2+2 in Highland Park, and you may not even have a garage.

The second reason is the upkeep. Condos are relatively headache free--just maintain your AC unit and keep the plumbing in good shape. While a house needs regular maintenance for the roof, basement, gutters, landscaping, etc, and this isn't for everyone. 

What to Look Out for in a High Market in DTLA

Gone are the days of just snatching up lofts because they were there for the taking.  The prices are going up and the inventory is still very low, keeping prices even higher. So many downtown homeowners are here to stay--with so much now at their doorstep, it's become one of the most exciting places to visit and live. The dilemma for most buyers is inventory is low, prices are high, and it's a risk to wait in case the market goes up.

In these times, you need to look out for the following if you're in the market to buy. If you can get 2 or more of the following ticked off, then you're doing well;

1. Units that have upside potential. Rather than buy a completely remodeled place, look for one that needs some rehab. New kitchen or new flooring perhaps. Or bathroom remodels. Even something as minor as new lighting. By you adding 10k-20k, you can add 50k in value.

2. Look for buildings with great amenities. There are a lot of new lease-only buildings on the market with top notch amenities. That is your competition. A building with amenities is going always have some value.

3. Buy in a building that offers parking. Enough said.

4. Buy a unit that has something unique and special, like a great city view, or overlooking the park. Or one that has an extra bedroom nook. Or that has a balcony. It's hard to get it all without spending over 1M, but if you can get into a unit that has one or two special features that other units don't have, it's going to add value.

5. Buy in a building that has good development around it. Meaning retail, office space, grocery stores, parks, hospitals, Metro access, etc.

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

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. 

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

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.

DTLA is one of L.A.'s Prime Markets

2015 has been a good year for real estate, and very good for downtown.  Check out the numbers for Q3 on condos:

[Neighborhood]  [Avg Sale Price]  [Avg Price Per SF]

DTLA.                         $807,808.                $642!!!
Beverly Hills.            $1,342,739.             $697
Brentwood.               $832,412.                $541
Hollywood.               $1,087,838.             $658
Malibu.                      $939,607.                $595
Mid Wilshire.           $628,684.                $422
Pacific Palisades.     $1,058,011.             $598
Santa Monica.          $1,242,651.             $887
Silverlake.                 $716,657.                $529
Sunset Strip.             $787,375.                $574
Venice.                       $1,468,500.             $739
West Hollywood.     $876,579.                 $629
West L.A.                   $774,557.                $503

Pocket Lease - Eastern Columbia Loft #510 with Balcony

Presenting the beautiful 1200sf loft in the coveted Eastern Columbia building. The open plan loft gets lots of sunlight through oversized windows, and features a balcony that faces West. The L-shaped loft is ideal for separating out a bedroom area. Nice chef's kitchen with stainless steel Viking appliances, an designer bathroom with tons of storage, and dark polished concrete floors. The building has a rooftop pool, gym, a front desk with security, courtyard and grand lobby. 1 covered, garage parking space is included. Within a 3 block radius you have Whole Foods, Ralphs, Ace Hotel, Terroni, APC, Acne, Oak, Aesop, Stocking Frame, Umami, Wood Spoon, Pattern Bar, United Artists Theater, The Orpheum, Spring Arcade, 1810, Austere, Bnkr, Urban Outfitters, New Moon, Verve Coffee, Il Cafe and more. Asking $3300 per month. Contact yuri@mytownsquare.com to schedule a viewing.

Why DTLA is So Hot

The real estate situation in downtown these days can be summed up in two ways: Homeowners are thrilled at the rising prices and buyers are frustrated at the rising prices. Many are wondering when the prices will go down. In my opinion, prices won't go down because prices are similar to the prices in 2007. The same condo bought in 2007 is still around the same price now, if not a bit higher. It's as if prices have stood still for nearly a decade. Now, if you bought in the golden window of 2010-2012 like I advised most of my buyer clients to do (as well as myself), and you still own that property (myself included), then you killed it.

So why is DTLA showing signs of bigger increases than other parts of LA? A few reasons:

1. DTLA is still way more affordable than the Westside. $2500 per month in downtown will get you a highrise condo with a pool, spa, front desk security, parking, and dog run. In the Westside, the same price will get you a 3-story late 60s walkup with carpets and a 90s kitchen.

2. DTLA condos have character. You get a lot more character in a historic former bank building that is designated with the Mills Act than with a 70s aluminum-windowed box. Where else in L.A. can you find such a high concentration of historic buildings?

3. DTLA walkability & transportation. With markets (including Whole Foods), bars, restaurants and shopping centers springing up all around, it's getting easier and taking less time to stroll over to run errands and just enjoy nightlife without thinking of the drive home. Uber and Lyft is highly concentrated in DTLA, and costs about $6 to get from any point within downtown. Plus the Metro will take you straight to Santa Monica soon--it already goes to Culver City and Hollywood!

4. DTLA is just beginning. You know when investors from New York and San Francisco start to snatch things up, things are happening. Savvy investors have seen areas like SoHo, Brooklyn, SoMa go from blight to some of the most expensive real estate in the world. And they are buying up trophy buildings and attracting a new type of retail and commercial clientele. The Ace Hotel is a prime example. Soon after you had Acne, APC, Oak, Aesop and Tanner Goods follow.

5. DTLA and rent control. Investors, this is for you. The fact that so many people spend their hard earned money on a duplex that generates what's essentially 1980s income is beyond me. Because nearly all residential property in DTLA was developed into residential housing well after 1978, rent control rules don't apply. This makes downtown a very nice place to invest.

Great DTLA Historic Lofts on the Market Now - All with Mills Act Designations

What's so great about having property in a Mills Act building? Savings on property taxes. As you know, property taxes in Los Angeles are high. The Mills Act designation helps offset some of this tax burden. This could end up saving you thousands per year in taxes. The Mills Act only applies to select historic buildings.

Eckardt Building

Former warehouse in the Fashion District

Penthouse #1201

1760sf, 3 bed, 2 bath

Private patio, split level, Mills Act

$1.399MM

El Dorado Building

Former Historic Stowell Hotel

#305

1090sf, 2 bed, 2 bath

2 balconies, Mills Act

$749K

Eckardt Building

Former warehouse in the Fashion District

#203

880sf, 2 bed, 1 bath

Private patio, Mills Act

$519,995 

Rowan Building

Former office building in the Historic Core

#617

830sf, 1 bed, 1 bath

Mills Act

$588K

Eckardt Building

Former warehouse in the Fashion District

#208

810sf, 1 bed, 1 bath

Skyline views, Mills Act

$429K

Biscuit Co. Lofts

Former warehouse in the Arts District

#402

617sf, 1 bed, 1 bath

Skyline views, Mills Act

$535K

 

Eastern Columbia Lofts

Former department store in the Arts District

#410, 1200sf, $749k

#707, 1130sf, $749k

#202, 1150sf, $749k

#1009, 1190sf, $899k

Mills Act

More Activity in the Arts District - Barker Block & Biscuit Lofts

DTLA Arts District has become one of the most valuable areas in which to invest. Prices have been steadily rising, and it's no wonder with developments of theaters, galleries, shops, restaurants, GROW market, upcoming SOHO House, Garey Lofts, @Mateo, revitalization of the Coca Cola Building, etc.

Three new lofts available for sale:

Barker Block #542 - 1110sf - 849k

Russell Roney, KW

Barker Block #424 - 1070sf - 750k

Ted Trentman, Realty Source

Biscuit Lofts #114 - 980sf - $748k

Gil Saraf, KW

Activity in the Arts District - Biscuit Lofts and Molino Lofts

The Arts District of DTLA has been hot for a while now. Prices climbing every year, more residents moving to the area, and lots of retail and businesses locating there. Compared to other warehouse districts in NY SF, Austin, Shoreditch in London, it's still a very sparse area. And those who are getting in early are able to snag oversized spaces and units in Mills Act buildings. See below.

Molino Lofts #118
This super loft is currently being used as an office. It is a live/work building and a wonderful investment in a hot area. 2560sf, with original brick walls, updated kitchen, 3 enclosed offices, 2 bathrooms, 1 assigned parking space. Steps from Urth Cafe, Little Tokyo, Zinc, The Springs, Blue Bottle. There is a rooftop pool, gym, sundeck. Asking $1.199MM


Biscuit Co. Lofts #402
This loft in the historic and Mills Act designated building would make for a wonderful pied a terre in the Arts District. 617sf, with original brick wall details, updated stainless kitchen and 1 assigned parking space. There is a lap pool, gym, 24 hour front desk security. Steps from Church & State, Daily Dose, Stumptown Coffee, Bestia, Little Bear, Pour Haus, Zinc, The Springs. Asking $545k.

Split Level Penthouse Warehouse Loft - Barker Block #525

Hard to expect much more from this loft. Great views, privacy, and top floor location, skylight, lofted bedroom, super tall ceilings, 2 bathrooms, parking, etc. Plus it a live/work loft in the Barker Block building, the darling of the Arts District. Developed by The KOR Group, the building boasts a lovely rooftop pool and gym--both with views for miles, courtyard areas and an art exhibition tunnel. Plus it's directly across the street from Urth Cafe, perfect for that morning coffee run. Walk to Black Top Coffee, Zinc Cafe, Bestia, Church & State, Bread Lounge, Stumptown Coffee, Wurstkuche and more. The stunning loft features original wood beams, beautiful wood floors and sleek kitchen. Includes one assigned parking space. 1230sf. Listed at $999k.