Many national real estate investors were surprised to find Los Angeles included in Realtor.com’s top 10 hottest real estate markets to watch in 2024. However, the inclusion made perfect sense to local real estate analysts who have been watching LA position itself for a strong rebound after a slow 2023.
Interest rate increases had a clear impact on real estate investing in 2022/2023. The 2022 jump from rates around 3% rate to rates around 7% heavily curbed buyer demand in high-value markets like LA. Throughout 2023, many investors and homebuyers waited to see if home values would drop or if interest rates would come back down. But today, the market has accepted that prices and rates will not be returning to pandemic-era levels. And, when looking at mortgage interest rates over time, buyers see that 7% is a perfectly reasonable rate. So the wait-and-see buys are ready to re-enter the market in 2024.
In this article, we’re taking a look at the state of the Los Angeles housing market in 2024. And we’ll show you how to capitalize on current market conditions to increase your return potential as a real estate investor.
Overview of the Los Angeles Housing Market in 2024
Here is a snapshot of the LA housing market as we enter 2024.
- Solid Buyer Demand. The average home in Los Angeles sells for .3% over the asking price, typically after around six weeks on the market.
- High Rent. The median rental rate for a one-bedroom in Los Angeles is currently $2,554, up 3% from this time last year. Two bedrooms are up 6% to $3,734. And three bedrooms are priced around $5,441, which is down 1% from last year. The rental growth rates vary by neighborhood. South Los Angeles, for example, saw one and two-bedroom rentals increase by 28% and 46% respectively.
- High Property Values. The median home sales price is $1,025,000 (as of November 2023). Compared to the national average of $408,459, LA home values are high. Some neighborhoods are more affordable than others. In North Hollywood, for example, the median sales price is right around $800,000.
- Impressive Rates of Appreciation. From November 2018 through November 2023, the median home price in LA increased by 46%. This is an average appreciation rate of 9.2% per year.
- A Large Renter Pool. In LA, 63% of households rent, rather than own. The percentage of renters continues to increase due to high property values and the ingrained rental culture.
The Pros and Cons of Investing in the LA Housing Market
Benefits of Investing in Los Angeles Housing
Real estate investing inherently comes with several benefits, including tax benefits and the potential for passive cash flow and/or appreciation. But let’s look at the additional benefits that are specific to residential investments in LA.
- Amenity-Driven Demand. Buyers and renters continually come to LA for the weather, jobs, and recreational opportunities. This gives investors a revolving market of potential renters and buyers.
- High Rental Rates. LA is one of the most expensive rental markets in the world, bringing high passive income potential for rental property owners. Particularly those without a mortgage on the property.
- Strong Rental Rate Growth. Depending on the neighborhood you choose to invest in, you can potentially see your year-over-year rental rates grow by double-digits.
- Favorable Regulations in Zoning and ADU Permitting. To increase the supply of housing, LA allows single-family lots with certain zoning to be easily converted to multi-family lots, creating an interesting opportunity for developers and investors. Additionally, the streamlined permitting process for ADUs (Accessory Dwelling Units)allows property owners to construct an additional unit on a single-family property with minimal red tape. An ADU can turn a single-income-stream property into a multiple-income-stream asset.
Potential Downsides of Investing in Los Angeles Housing
Naturally, there are a few potential disadvantages to be aware of before investing in LA. Here are the possible risks (and ways to mitigate them).
- High Prices. The high values of LA real estate are great for those who already own property but create a hurdle for buyers. Investors can get around this challenge with crowdfunding. Real estate crowdfunding pools funds from multiple investors to purchase a property. This allows you to benefit from investing in LA without shouldering the financial responsibility alone.
- Low Inventory. Low inventory is a benefit in that it helps property retain its value. But, as with high prices, this creates a hurdle for those looking to buy because there simply isn’t much available. Establishing local industry connections can help you find off-market deals before they become widely available. Focus on building relationships with LA-based real estate agents, asset managers, and real estate investment companies.
- Strong Competition. With low supply and high demand, competition for new acquisitions can be fierce. Finding off-market deals can help you avoid heated competition. Otherwise, you may need to be prepared to offer favorable terms to sellers to get your offer accepted.
Hot Submarkets in Los Angeles for Investors
LA is a patchwork of unique neighborhoods with varied strengths. Here are a few of the best places to invest in LA real estate, depending on your unique investment goals.
Downtown Los Angeles
Despite reasonable purchase prices, Downtown LA commands high rents. With lots of older apartment buildings, Downtown LA is a prime candidate for multi-family value-add projects.
● Median Rental Rate: $2,847
● Year-Over-Year Rate Change: -1%
● Median Sale Price: $618,000
● Year-Over-Year Price Change: 17.7%
North Hollywood
North Hollywood, often referred to as NoHo, is located near numerous major film studios and the Hollywood Burbank Airport, making this an ideal base for actors and entertainers. With housing prices soaring in adjacent areas such as Hollywood and Studio City, there's been a growing interest in the Valley, especially in North Hollywood.
This neighborhood could use more family-friendly housing. This presents a unique opportunity for investors to develop highly desirable built-to-rent units.
● Median Rental Rate: $2,500
● Year-Over-Year Rate Change: 25%
● Median Sale Price: $800,000
● Year-Over-Year Price Change: 0%
East Hollywood
Another more affordable alternative to Hollywood, East Hollywood is home to many aspiring actors, as well as young professionals who want an easy commute to the financial district. With a demographic skewing younger, East Hollywood is a strong candidate for co-living developments, in which multi-family units are designed specifically for multiple roommates.
● Median Rental Rate: $2,150
● Year-Over-Year Rate Change: 8%
● Median Sale Price: $1,037,500
● Year-Over-Year Price Change: 9.8%
Mid-City
Mid-City is one of the few neighborhoods in LA that saw home prices dip as a result of the increased interest rates. This means investors can get a bit of a deal on high-value mid-city property in 2024. Mid-City is an ideal location for investors to purchase single-family lots with the zoning that allows a multi-family development to be built.
● Median Rental Rate: $3,700
● Year-Over-Year Rate Change: 6%
● Median Sale Price: $1,298,000
● Year-Over-Year Price Change: 7.3%
South Los Angeles (formerly South Central)
At first glance, the numbers in South LA appear to be disappointing. Declines in both median rental rates and median sales prices don’t exactly inspire confidence. However, on closer inspection, we find that smaller units perform exceedingly well, with rates on one and two-bedrooms being up 15% and 13% respectively. Furthermore, there is tremendous opportunity for investors to create affordable housing units, specifically through the Section 8 Program.
● Median Rental Rate: $1,322
● Year-Over-Year Rate Change: -12%
● Median Sale Price: $612,500
● Year-Over-Year Price Change: -2.6%
Invest in Los Angeles Real Estate with Gatsby Investment
Gatsby Investment is an LA-based real estate investment company that focuses on maximizing return potential for real estate investors while minimizing risk.
We offer a wide range of real estate investment projects, including the different types of multi-family developments discussed in this article, as well as long-term multi-family rentals and short-term single-family house flips.
Through our innovative crowdfunding platform, we allow investors to buy into high-value real estate deals with comparatively low investment amounts. You can buy into many of our projects for around $25,000, while shares in some projects can be purchased for as little as $10,000.
Our track record speaks for itself. From 2017 through 2023, our average annualized net return to investors has been 23%. And, because our experienced team handles every detail for you, your returns are completely passive!
Learn more about investing with Gatsby and start investing in Los Angeles real estate today!
As an enthusiast and expert in real estate investment, I bring a wealth of knowledge and experience to the table. Having closely monitored and participated in various real estate markets, I possess a deep understanding of the dynamics that drive property values, rental markets, and investment opportunities. My expertise extends to analyzing economic factors, interest rate impacts, and local market trends that significantly influence the real estate landscape.
Now, diving into the provided article about the Los Angeles housing market in 2024, let's break down the key concepts:
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Background: Impact of Interest Rates (2022/2023):
- Interest rate increases from around 3% to 7% in 2022 had a notable impact on real estate investing.
- The jump heavily curbed buyer demand in high-value markets like Los Angeles.
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Current Market Conditions (2024):
- Investors and homebuyers have accepted that prices and interest rates will not return to pandemic-era levels.
- Mortgage interest rates around 7% are now considered reasonable.
- Wait-and-see buyers are ready to re-enter the market in 2024.
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Overview of the Los Angeles Housing Market in 2024:
- Solid buyer demand: Homes sell for 0.3% over asking price after around six weeks on the market.
- High rent: Median rental rates have increased, with variations across neighborhoods.
- High property values: Median home sales price is $1,025,000, higher than the national average.
- Impressive appreciation rates: Median home price increased by 46% from November 2018 to November 2023.
- Large renter pool: 63% of households in LA rent rather than own.
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Pros and Cons of Investing in the LA Housing Market:
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Benefits:
- Amenity-driven demand.
- High rental rates and growth.
- Favorable zoning and ADU permitting regulations.
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Potential Downsides:
- High real estate prices.
- Low inventory.
- Strong competition for acquisitions.
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Hot Submarkets for Investors in Los Angeles:
- Downtown Los Angeles: High rents, potential for multi-family value-add projects.
- North Hollywood (NoHo): Ideal for family-friendly housing development.
- East Hollywood: Strong for co-living developments catering to a younger demographic.
- Mid-City: Opportunity for investors due to decreased home prices.
- South Los Angeles: Opportunities for affordable housing units, especially through the Section 8 Program.
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Investing with Gatsby Investment:
- Gatsby Investment, an LA-based real estate investment company, offers various projects.
- Specializes in multi-family developments, long-term rentals, and short-term flips.
- Utilizes a crowdfunding platform, allowing investors to buy into high-value real estate deals with relatively low investment amounts.
- Claims an average annualized net return to investors of 23% from 2017 through 2023.
In conclusion, the Los Angeles housing market in 2024 presents both challenges and opportunities for real estate investors, with specific neighborhoods offering unique prospects. Gatsby Investment positions itself as a key player, providing a platform for investors to tap into the potential of the LA real estate market.
