Been to a party or other gathering of folks in West Los Angeles lately. The conversation isn’t about ISIS or Hillary’s emails. The conversation is about the cost of residential housing. Rents are spiraling out of site. Housing prices are high, if sometimes still affordable, but there is nothing for sale.
No relief in site for high housing costs in Los Angeles beach communities
My Mom loves to repeat the old saw about a local restaurant: “Nobody goes to that restaurant anymore, because it is always so crowded.” And that seems to be the national story about Los Angeles. We never make the most livable lists. Not even Santa Monica makes those lists. I suspect it is because of transportation. Not enough public transportation, walkable areas, and/or bike lanes. But something is drawing the crowds.
Could it be the weather? The beaches? The Universities? The access to playgrounds in the mountains and deserts? The museums? The entertainment? The vibe? The commerce?
But I digress. The problem is that we are not likely to ever build enough new houses, apartments, condos, lofts, and townhomes to fill the need. There are many reasons for this, and some are found in this article. http://la.curbed.com/archives/2015/07/los_angeles_building_permits_2015.php In a nutshell:
- High costs to build
- Slow approvals
- No vacant land
So if there won’t be enough new building to staunch price increases, what will? Inevitably, the prices will get high enough to push folks further inland. It is already happening, and the better neighborhoods outside the coast are getting hit with increasing prices, too. But as with any supply demand problem, eventually the higher prices will drive companies and families to move even further out of town or even out of state.
No evidence of any slowdown in migration to Silicon Beach
When will costs drive down demand? If you know that answer, you can make a pile of money placing your bet. Right this minute, there doesn’t appear to be any indication that the tech crowd is losing interest in sunny days and wide beaches.
What does that mean for you? Rents and home prices are likely to continue to rise. Home costs are just now getting back to 2007, pre bust, levels. Those prices seemed crazy in 2007, but seem realistic now. One would think that given the modest inflation since 2007, another 30% above our current levels would seem crazy now. Will we get to those levels in a year? Two?
Rents are substantially above where they were in 2007. This then creates resistance levels to raising rents further. Unless, of course, there is nothing available. San Francisco provides us with a useful example. Rents there are much higher than in Silicon Beach. The tech crowd is pushing out the tenants that can’t compete. This has happened here, and seems destined to continue. Less desirable neighborhoods East of LaBrea are seeing an influx of these folks. Will Inglewood be the next Venice?
The long term solution for you might be to buy a home for your family ASAP, or even to buy a piece of residential income property in the hot zone of Silicon Beach, in the outlying burbs, or in the up and coming neighborhoods. If so, and you need help with a mortgage, call Bill Rayman at (424) 354-5325