The Los Angeles housing market steals the title of “least affordable real estate market in the US” from San Francisco. This is according to the National Association of Home Builders and Wells Fargo Housing Opportunity Index which reveals a growing affordability issue for first-time homebuyers in Los Angeles as well as the California real estate market as a whole. At the same time, this reveals an opportunity for real estate investors.
Los Angeles: The Least Affordable Housing Market in the United States
Real estate market data from Q4 of 2019 revealed that only 11.3% of homes sold were affordable to residents in the Los Angeles-Long Beach-Glendale metro area. This is based on the median income of the area which is $73,000.
According to Mashvisor’s data, the median property price in the Los Angeles housing market is $1,045,697. With a price to rent ratio of 26, it’s clear that most residents find it more affordable to live in a Los Angeles rental property than to buy a home of their own. So it’s no surprise that NeighborhoodScout’s statistics reveal that 64% of the population rents their homes.
Related: Los Angeles Real Estate Market Predictions for 2020
What This Means for Real Estate Investors
As a residential real estate investor, areas where rental housing is in high demand and the average first-time homebuyer is priced out of the market can hold some of the best investment opportunities. The Los Angeles housing market could be a good place to buy a rental property for you. Mashvisor’s average return on investment data shows that a Los Angeles investment property earns a high rental income and good cash on cash return:
- Monthly Traditional Rental Income: $3,373
- Average Cash on Cash Return: 1.1%
Of course, that data only shows the average returns city-wide. Data from Mashvisor’s Rental Property Finder shows traditional investment properties for sale in Los Angeles with a cash on cash return as high as 13%. Check out these Los Angeles real estate listings here.
Besides the kind of return on investment you can get, Zillow also labels the Los Angeles housing market as a neutral market, as opposed to a seller’s or buyer’s market. This makes sense as a real estate investor won’t face competition from homebuyers in the area. Redfin gives Los Angeles a Compete Score of 66, which means the real estate market is “somewhat competitive” where homes for sale receive 2 offers on average and sell for 1% below listing price. These are all favorable conditions for someone looking to buy an investment property in Los Angeles in 2020.
Still, there is no denying that Los Angeles real estate is expensive. However, if you are a real estate investor with a budget for buying rental property here, then it can be well worth it. Start your investment property search in these top-performing neighborhoods in Los Angeles (data provided by Mashvisor):
1. Lake Balboa
- Median Property Price: $645,956
- Price per Square Foot: $460
- Price to Rent Ratio: 16
- Monthly Traditional Rental Income: $3,411
- Average Traditional Cash on Cash Return: 2.5%
2. Wilmington
- Median Property Price: $572,254
- Price per Square Foot: $360
- Price to Rent Ratio: 16
- Monthly Traditional Rental Income: $2,957
- Average Traditional Cash on Cash Return: 2.3%
3. Sun Valley
- Median Property Price: $602,955
- Price per Square Foot: $465
- Price to Rent Ratio:19
- Monthly Traditional Rental Income: $2,724
- Average Traditional Cash on Cash Return: 1.8%
4. Elysian Park
- Median Property Price: $2,824,950
- Price per Square Foot: $470
- Price to Rent Ratio: 22
- Monthly Traditional Rental Income: $10,494
- Average Traditional Cash on Cash Return: 1.8%
5. Harbor City
- Median Property Price: $766,768
- Price per Square Foot: $419
- Price to Rent Ratio: 18
- Monthly Traditional Rental Income: $3,567
- Average Traditional Cash on Cash Return: 1.7%
How to Find Los Angeles Investment Properties for Sale
If you do have the budget to break into the Los Angeles housing market, be sure to invest in a profitable rental property. You can easily find one using Mashvisor’s real estate investment tools. Start your search now.
Sign up now to Mashvisor to stay updated on real estate news around the US.