Los Angeles Investment Property Market

Los Angeles Property Market Overview

The Los Angeles metropolitan statistical area (MSA) is a global gateway for trade and tourism, and the sixth1 fastest-growing population in the country with an estimated 13.3 million2 people as of 2016. While LA might be known as The Entertainment Capital of the World, it's also emerging as an entrepreneurial mecca with a flourishing tech industry. In both LA and Orange counties, most industry sectors are expected to add jobs3 through 2018 - the largest number coming from health care/social assistance, administrative/support services and leisure/hospitality.

Strong Economies and Income Growth

We believe the greater Los Angeles metro area is an appealing market for investors seeking total return or capital preservation in a globally iconic region where population, disposable income, and tech startups are on the rise4.

Following a five-year spike, the current number of new single-family home permits has slowed, and is projected to stagnate before dipping slightly through 20205. This expected supply constraint, coupled with above-average occupancy rates of 96.9%6, should drive strong renter demand.

Additionally, SoCal's tech scene is coming of age, with a growing community7 in the heart of downtown LA. In 2016, the City of Angels ranked as the third most active city in the U.S. for entrepreneurs, beating both San Francisco and San Jose8.

Unemployment for both Los Angeles and Orange counties has followed a year-over-year downward trend since 2010,9 and is forecasted to stay below 5% through 201810.

For the greater Los Angeles metro area, both rent and home values are estimated to increase by 4%, which is slightly above the forecasted national average. The 5.5% negative equity rate is half the national average11, indicating less potential for local foreclosures.

Overall, underlying elements that boost housing demand and drive single-family rental investment returns (job, household and income growth) appear steady, and we believe this name-brand market is an attractive option for single-family investors.
  • Major tech industry growth, with LA MSA emerging as a top startup market.12
  • Good 4% appreciation forecasts above the 3.4% national average.13
  • Expected high renter demand, with 96.9% occupancy rates above the 95% national average.14
  • Below-average negative equity rate of 5.5% (national average is 10.5%), indicating less potential for local foreclosures.15
  • Average gross yield is 6.1%, which is below the 9.4% national average.16
  • Higher level of earthquake hazard compared to the rest of the country.17
  • LA is home to Tinder, Dollar Shave Club, Hyperloop One, SpaceX, Hulu, The Honest Company and Snap.
  • The Happiest Place on Earth is also Orange County's biggest job source: Disneyland Resort employs more than 23,000 employees.
  • RMS Queen Mary, a 1936 art deco ocean liner, is permanently docked in Long Beach. The retired vessel is 140 feet longer than the RMS Titanic and said to be haunted.
  • 1 Forbes, The Fastest Growing U.S. Cities
  • 2 Data USA
  • 3 Los Angeles County Economic Development Corporation, 2017-2018 Economic Forecast & Industry Outlook
  • 4 The Mercury News
  • 5 John Burns Real Estate Consulting, Single-Family Rental Analysis and Forecast, March 2017 Data Slides
  • 6 John Burns Real Estate Consulting, Single-Family Rental Analysis and Forecast, March 2017 Data Slides
  • 7 Built in Los Angeles
  • 8 Ewing Marion Kauffman Foundation
  • 9 Los Angeles County Economic Development Corporation, 2017-2018 Economic Forecast & Industry Outlook
  • 10 Los Angeles County Economic Development Corporation, 2017-2018 Economic Forecast & Industry Outlook
  • 11 John Burns Real Estate Consulting, Single-Family Rental Analysis and Forecast, March 2017 Data Slides
  • 12 Los Angeles County Economic Development Corporation
  • 13 John Burns Real Estate Consulting, Single-Family Rental Analysis and Forecast, March 2017 Data Slides
  • 14 John Burns Real Estate Consulting, Single-Family Rental Analysis and Forecast, March 2017 Data Slides
  • 15 John Burns Real Estate Consulting, Single-Family Rental Analysis and Forecast, March 2017 Data Slides
  • 16 John Burns Real Estate Consulting, Single-Family Rental Analysis and Forecast, March 2017 Data Slides
  • 17 California Seismic Safety Commission

Real Estate Investment Insights

Investment Style: Balanced
While each property will differ, this market is likely to have properties that provide a blend of yield and appreciation.
Inventory:
Home Value *
$612,400
$201,900
National Avg
Home Value Growth (YoY)
6.0%
6.9%
National Avg
Rent **
$2,707
$1,430
National Avg
Source: Financial data from Zillow includes single family, condo & cooperative homes, updated on 08/31/2017
Job Growth (YoY)
0.9%
1.5%
National Avg
Household Growth (YoY)
0.7%
1.0%
National Avg
Estimated Months of Resale Supply
3.0%
4.2%
National Avg
Household Income
$63,400
$59,727
National Avg
Supply, Demand & Affordability data includes single family homes only, updated on 10/11/2017
  • Arrows indicate the directional change since the last update. No arrow indicates that there was no change in the data or no previous data is available.
  • * Home Value: includes all types of housing, including primary resident, condos, investment properties, etc.
  • ** Rent: includes all rental properties, including Single-Family Homes, multi family units, etc.