Strong Economies and Income Growth
We believe the greater Los Angeles investment property market 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 in the Los Angeles investment property market.
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 the Los Angeles investment property market is an attractive option for single-family investors.
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.