Why are Prices Still High?

Seriously, doesn't it seem like prices aren't stopping their climb? Because no one is selling. Inventory is super tight and as usual, there are too many buyers.

Here are some reasons why:

1. Believe it or not, some people are still underwater on their mortgages. From the height of 2007, there are a good number of homeowners who borrowed way over their limits and are just barely getting into the black now, but with the costs of selling (transfer taxes, escrow fees, etc), they will still be in the negative. That Echo Park home bought in 2007 for $750k is now worth 815k. After selling fees, you're netting about 0.

2. They can't afford anything else after the sale. Prices are high, and in a high market, unless you really downsize from a single family to a condo, or to Phoeniz AZ, you really aren't making a difference in your expenses. Plus rents are ridiculously high now. It's almost cheaper just to stay put, which is what so many are doing. You can sell your Miracle Mile house you bought in 2007 for 950k for 1.1MM. You've made 150k plus whatever down you put in. That's great, but cut 70k in selling fees. What are you going to upgrade to? Not much. You're going to have to either buy a small 80s style condo in West LA or a studio with a doorman in DTLA for about 600k.

3. Boomers and Empty Nesters, the ones with the homes with lots of equity, who should downsize, are not selling because their children (well into their 30s) are still living with them.

4. Rents are super high. Recession or not, rents have stayed strong in LA. When the housing market collapsed beginning in 2008, the amount of renters increased. To be a renter these days (unless you've lived in that 1940s RSO pad in Santa Monica since 1980 and are now paying $600/mo), is tough. More renters are trying to buy because they are realizing that just adding $200-$300 extra per month could get them a mortgage instead. Hence, more buyers to the market.

Pocket Listing Alert - 2 New Rentals!

Chic Loft at Elleven $2600/mo for 960sf

 

Immaculate loft at the prestigious Elleven building in 

the heart of South Park. Stainless steel appliances, 

separated bedroom area, huge storage closet with 

side by side washer/dryer. Hardwood floors throughout! 

1 assigned parking space included. 

310-869-2655

Million Dollar Views at 1100 Wilshire

$2700/mo for 790sf

Views to the ocean! Beautifully appointed loft with  

frosted glass separation to the bedroom. Bamboo floors,  

2 closets, spacious bathroom, Bosch W/D in the unit.  

Comes with 2 parking spaces in the garage.

310-869-2655

Prime Units and Penthouses Available in DTLA

I mentioned in an earlier post, that in a market with low inventory, it's really hard not to settle. But settling is for short term holds. For a longer term hold on the property, it's best to snag a property that will still be desirable in any market.

Below are available condos that are desirable even in down markets, and why.

940 E. 2nd St #38 - $1.759M

Formerly "Barn Lofts"

WHY: Arts District location, historic pedigree, over 2300sf of space on multilevels, 

rare townhouse style home with parking included.

849 S Broadway

WHY: Historic core location bordering South Park and Fashion District, unique 

Mills Act building with unparalleled amenities for a historic building, attached parking.

#M1 - $1.13M

#202 - $799k

#206 - $799k

#512 - $1.358M

#1210 - $3.98M

PH#1 - $2.385M

PH#2 - $2.475M

PH#4 - $1.799M

1111 S. Grand Ave PH#6 - $1.375

WHY: Central within South Park, larger than average size lofts because it was one of the first ground-up developments in SouthPark, LEED certified building, 

nearby just about everything in DTLA, full amenities.

1850 Industrial #710 - $1.875M

Biscuit Company Lofts

WHY: Uber hot Arts District South, Mills Act building with historic pedigree, 

amenities and in-building parking.

OFF MARKET RENTAL - Eastern Columbia #610

Chic loft with concrete floors, designer bathroom, balcony, upgraded appliances, etc. 1200 sf. 1 parking space included. Asking $3700/mo.

Warm and Inviting Brooklyn Brownstone Style Loft at the Eastern Columbia

Eastern Columbia #202

Enjoy downtown living at its best in this warm, inviting, and charming loft at the famed Eastern Columbia building. Mills Act also gives home owners up o 70% off property taxes. Acne, IL Cafe, Mykita and Om Nom in the building, as well as Ace Hotel, Whole Foods, APC, Umami, Wood Spoon, Stocking Frame, Cooper Building, etc just a couple blocks away. Asking 799k.

Open House 3/14 between 11am-2pm or call 310-869-2655 for showings. 

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.

An Impressive Eastern Columbia Penthouse Coming on the Market Soon

Johnny Depp may have had 5 penthouse units at the marvelous Eastern Columbia, but there's another coming on the market that is larger, has better views, and more outdoor space. The 4-story Penthouse is over 3000sf, making it the largest one at Eastern Columbia.

Beautifully maintained and situated on the Northwest corner of the building, with its own skylight, it is the best Penthouse ever to hit the market in a historic Mills Act building! Will be asking 3.9MM.

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

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.