Ep.5 - Where Could You Buy a Starter Home in LA in the Last 9 Years?

Where can you buy a starter home between $600k and $700k in each of the past 9 years. The findings may shed some light on where the LA housing market is headed.

I am going to explain the trend with the nine graphs below.

Nuance time! The price range in this analysis is between $600k and $700k, for it is a realistic range for a starter home in 2017. The square footage ranges from 1,000 to 1,750.

1) What does each picture show?

Each picture shows all the sold single-family homes between the range of $600k and $700k for that year. Each year corresponds to a unique color.

2) What does each dot/circle represent?

Each circle represents a sold single-family house.

3) What does the size of the circle represent?

The size of the circle corresponds to cost per square foot. It represents how expensive it is compared to other houses across the 9 year time frame. Simply put, when the circle is smaller, it means a better deal.

2009 – 2012:  The Best Time to Buy On the Westside

If you had the cash, you could’ve made a killing between 2009 and 2012, because that was the best and only time to buy a house under $700k. Now it is at least twice as much. In the 3 years running up to 2012, Santa Monica, Venice, Playa Del Rey were the hottest neighborhoods to buy.

Between 2010 and 2012, Culver City and Silver Lake gain traction rapidly. Culver City became a hot neighborhood for those who commute to the beach cities. Silver Lake became a hot neighborhood for those who work near Downtown or any of the major studios in Burbank.

 

2013 – 2014:  Hipsters and northEast LA Set the Housing Trend

Along with South LA’s proximity to the beaches, Playa Vista (which will be a hub for tech jobs), it also sits along the Expo Transit Line, LAX transit line and accessible to the new RAMs stadium in Inglewood.

Very quickly, by 2013, people were priced out of the Westside and found very few homes under $700k. Where did they go instead? They moved to Northeast LA : Los Feliz, Echo Park, Silver Lake, Highland Park, Mount Washington, and etc. By 2014, Highland Park made the news because the first million-dollar home was sold.

Now, I want you to scroll up to the map and pause on the picture of 2014, then closely look at the size of the circles.  The circles in Highland Park and Mount Washington are significantly smaller than those in Culver City and Silver Lake. In other words, by 2014, people were happy to buy bigger houses in Northeast LA once they got themselves familiarized with the neighborhoods.  Just two years prior, people barely knew about it. 

 

2015 – 2017:  South LA is the new NorthEast LA

In 2015, some of the hidden gems in South LA were discovered by people who were priced out of NorthEast LA.  These neighborhoods are West AdamsLeimert ParkJefferson ParkWindsor Hills, View ParkView Heights, and Morningside Park in Inglewood.

By 2016, you need to COMPLETELY forget about the Westside, Culver City and Silver Lake.  South LA’s price advantage really shines compared to Northeast LA for many reasons. Along with South LA's proximity to the beaches, Playa Vista (which will be a hub for tech jobs), it also sits along the Expo Transit Line, LAX transit line and accessible to the new RAMs stadium in Inglewood. All of them position South LA to be a desirable and “affordable” neighborhood in the next few years.

Don't just take my word for it. According to Tami Pardee from Halton Pardee + Partners, the number one real estate broker on the Westside, "Places such as West Adams, Mid-City, Baldwin Hills, and the La Cienega/Jefferson area contain relatively undiscovered neighborhoods, which also have a nice stock of older, traditional homes.”

 

What Will Happen in the Next 2-5 Years?

Home prices in Northeast LA will continue to grow rapidly, and it is inevitable in the next 2-5 years it will be out of reach for most first time homebuyers. If you want to buy in Northeast LA, time is essence.

South LA is slightly more affordable than Northeast LA. The price buildup in South LA is about 3 years behind Northeast LA.  If you flip  the pictures back and forth on 2016 and 2013, you will notice the amount of homes and the size of the circles in South LA in 2016 are eerily similar to Highland Park in 2013. If you are looking to buy a home within the next two years, definitely do not skip your research in South LA. Aside from all the amenities and development I mentioned above, don’t forget you are getting a bigger and nicer home.

 

What if you are thinking about buying a home in the next couple of years, but not now?

I don’t see a stop in the housing appreciation until 2022. I will detail it further in another episode. Since South LA is about 3 years behind East LA, you can still get something decent this year and possibly early next year under $700k. But by the end of 2018, you need to start with a budget of $700 and above.  If you are set on buying a home and you have all your finances in order, you should not wait, because housing price will only go up for the next 5 years.

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