Rumors of LA County’s Housing Boom May be Greatly Exaggerated
The county is expected to receive a glut of new inventory that will support more affordable prices and a denser urban core, though perhaps not at the pace many anticipate
LA County, once the center of middle-class homeownership with an endlessly growing expanse of low-rise homes, has rapidly moved up the price curve as consumers seek closer proximity to employment centers and the county responds to a scarcity of land with newfound density, a prescription for high- density, transit-oriented development, and a surge of multifamily rental apartment development.
What was affordable is becoming increasingly expensive as newcomers and long-time residents alike seek reasonable cost housing. LA County continues to add jobs and households above pre-recession levels as the homeownership rate continues a steady ten-year decline from approximately 55% to 49% (2005-2015). A precipitous 30 basis point decline in single-family affordability between 2012 and 2014 alone has poised the homeownership rate for a further decline as growth in home prices outpaces wage growth. Millennials are delaying home buying until their thirties and dedicating their funds to paying off student loans and vacations as they recall streets full of for-sale signs during the Great Recession and appreciate the flexibility of renting.
As LA County housing demand continues the shift to multifamily rentals, the overall occupancy rate has declined approximately 200 basis points from its peak in 2009, and the overall average rental rate has reached an all-time high, increasing approximately 24% from 2010 through 2014. The market response is an unprecedented multifamily and condominium new construction pipeline supported by low borrowing costs and urban planning policies that promote high-density, transit-oriented development, and in particular Downtown LA.
Approximately, 28,000 Class A multifamily rental units are planned for completion from 2015 through 2018, which in a county with a population of 10.1 million may not seem to make a difference. However, this represents an approximate 11% increase to Class A 2014 inventory. Approximately 9,500 residential condominium units are currently approved for construction in LA County’s five primary submarkets (Westside, Hollywood, Koreatown, Downtown and Tri-cities) compared to the peak year delivery of 1,900 units in 2007.