Greatest Rent Increases (5-6%) Are in Areas Bordering Fires

Areas like Santa Monica and Pasadena has seen the biggest rent growths as fire victims move around within these neighborhoods on 12-month leases or shorter term leases. Pasadena rents have risen about 6.2% from last year, and Santa Monica rents have risen about 5.1% from last year. All other parts of LA has risen on average of 1.3% since last year.

Prices Creeping Up in DTLA

While DTLA was pretty stagnant price-wise since the pandemic began, the end of 2021 showed more turnover and a pickup in sales. 2022 has started off strong for DTLA, with an increase in prices, which is great for sellers. Buyers will have some competition as more people are coming out of the woodwork to buy their first home and or invest in a second property. 

A lot of buyers who had bought their main home are now looking to buy a second property to take advantage of the low interest rates--before they increase even more. With the stock market a little unstable recently, and the increased projection of renters and rental prices, real estate is looking like an excellent hedge compared to other assets. 

Sounds Crazy, But Renting More Affordable Than Buying in LA

The rent increases in LA have been unreal. For $2500/mo, you might find a 650sf studio in Downtown without parking.

If you think Renters have it bad, Buyers actually have it worse. The most recent Home Price Index from CoreLogic showed home prices increased 7% from November 2016 to November 2017.

"Renting is now more affordable than buying a home in the nation’s top 14 most populated counties including Los Angeles County, California; Cook County, Chicago area, Illinois; Harris County, Houston area, Texas; Maricopa County, Phoenix area, Arizona; and San Diego County, California."

Rent prices are also continuing to rise, though, so ultimately, it's still more ideal to own and get into a 30-year fixed mortgage rather than dealing with the 4-6% rent rises LA has been experiencing every year. 

Glut of Lease Only Buildings Will Make Condos More Valuable

The downtown skyline is full of cranes--nothing new. But a big part of what's being built are apartments for lease only. What about all the condos that people want to buy? All the investment in shopping centers (At Mateo, The Bloc, Fig 7th, Oceanwide Plaza, The Row, etc.) but few condos available.

A shakedown is going to happen. I feel it, and it's going to be a good one.

Condo owners will see continued appreciation over time due to basic supply and demand. Some of those condo owners who own property that's being rented out, will have rental competition to deal with. These folks are going not like the competition and unload their condos to the long line of buyers who want it to be their primary residence. (That said, there will always be investors in downtown because it is not under Rent Control Ordinances) This is going to create healthy appreciation with stakeholders who live in DTLA, which is the long term goal for a city center.

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.

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.

Rent Prices in DTLA in the Newest Buildings

According to Downtown News, rent prices are higher than ever in DTLA. Not surprising since it's become a destination as well as a neighborhood with an ever-growing list of amenities. And most of all, the ability to walk and bike everywhere within minutes. This lifestyle is new for LA, and it's become one of the most desirable things about DTLA, and a lot of people agree. The demand for housing in downtown has become so great that rent prices, as well as condo prices, have increased dramatically in the past few years. And there are no signs of slowing down.

A snapshot of rent prices in these newly constructed buildings, according to Downtown News:

The Emerson
800sf - Approx $3,295 a month. That’s $4.12sf.
Corner two-bedrooms averaging 1,175sft are $4,995 a month, or $4.25sf.

Ava Little Tokyo 
625sf, for $2,510, or $4.02sf.
A two-bedroom unit with 964sf was offered for $2,798, or $2.90sf.

One Santa Fe
$2,010 for 526sf, or $3.82sf.
Two bedrooms start at $2,635 for 899sf, or $2.93sf.

Hanover South Park
709sf for $2,335, or $3.29sf.
Two-bedroom units with 1,050sf were listed at $3,330, or $3.17sf.

Avant
694sf for $2,162, or $3.11sf.
A $2,957 two-bedroom had 1,045sf, for an average of $2.83sf.

Rents in condo buildings in DTLA:

Higgins Building
$2200 for 750sf, or $2.95/sf

1100 Wilshire
$2500 for 750sf, or $3.33sf

Eastern Columbia
$2900 for 1120sf, or $2.59sf

Mura
$2800 for $1240sf or $2.26/sf

Flower Street Lofts
$3000 for $1420sf or $2.11sf

Elleven
$2400 for 970sf or $2.47/sf

Barker Block
$2500 for 890sf or $2.81sf
$4900 for 2630sf or $1.86sf