A Guide to the Los Angeles Housing Market

Purchasing a home, particularly for the first-timers, is an adventure filled with excitement and challenges. It's about finding that perfect place you'll call home and doing whatever it takes to make it yours. Embarking on this journey in Los Angeles presents its own unique set of challenges. Navigating the housing market in the City of Angels can be tough, and it's not just the prices that pose hurdles. Prospective buyers often grapple with questions about where to begin their search, determining a realistic budget, securing financing, and exploring creative strategies to make their dream home a reality.

To make you feel less alone in the pretty (but tricky maze) that is the Los Angeles housing market, we’ve written up a guide to give you a running start.

Overview of Los Angeles’ Housing Market 

According to the Los Angeles housing market forecast for 2021, L.A. Metro home values will rise by around 12 percent in the next 12 months. And given that Los Angeles homes are in a state of constant demand, prices for these residences are also said to rise by double digits over the coming year.

L.A.’s Average House Price 

Zillow's data shows the median home price in Los Angeles County hovering around $790,000. This figure, while not the peak price in California, requires a closer look. It encompasses both starter homes and compact living spaces designed for one or two people, possibly skewing perceptions of the area's overall affordability. Reflecting on November 2020, the median listing price was about $440,000. For a standard single-family home, especially one spanning around 2,000 square feet, the actual cost could significantly surpass these median estimates provided by Zillow.

The price of homes in Los Angeles varies greatly from one neighborhood to another, indicating that the real estate market is highly localized. In some areas, the median price calculated by Zillow might be on the lower end, whereas in others, it could be substantially higher. And if you're considering a more modest dwelling, such as a small bungalow, the question becomes how much space and comfort you're willing to trade off for affordability.

Why so Pricey?

Los Angeles is a city many dream of calling home, which means its allure consistently keeps the cost of purchasing property on an upward trajectory. The days of the housing bubble that preceded the Great Recession are long behind us. Today, securing a spot in L.A. comes with a significant price tag.

What Kind of Homes can you buy in Los Angeles? 

Los Angeles, a city celebrated for its iconic Spanish-style and mid-century modern homes, offers a wide array of housing options. The push by city officials to enhance dense housing developments, especially near public transit areas, is diversifying the types of homes available. Here’s a snapshot of what you might find:

• Single-family Homes: The quintessential American dream, these homes often feature their own plot of land, sometimes complete with the picturesque white picket fence.
• Condominiums: These are owned apartments, offering a blend of personal ownership within a community setting, often resembling apartment complexes in their structure.
• Duplexes and Triplexes: Multi-unit properties that house several families, each in their own separate living space. These types of homes are increasingly becoming a favorite among investors.
  
  

Exploring housing options in Los Angeles reveals a rich tapestry of choices, catering to various preferences and lifestyles. Here's a brief guide to some of the distinct types you'll encounter:

• Townhomes: These homes share walls with neighbors, resembling single-family homes in appearance yet operate under a structure similar to condominiums.
• Small Lot Homes: A concept somewhat specific to Los Angeles, these residences offer the look of townhomes but afford the independence of single-family homes. Though individually separated, they share communal outdoor spaces.
• Cooperative Housing (Co-ops): Offering a more budget-friendly alternative to condominiums, co-ops involve purchasing shares in a collectively managed association, granting living rights within the community.
• Tenancy in Common (TICs): Gaining traction in Los Angeles, TICs offer an entry point to homeownership, transforming existing rental buildings into shared ownership opportunities, ideal for first-time buyers.
• Vacant Land: For those dreaming of custom-building their home, purchasing a vacant lot is an option. While navigating the regulations can be complex and the investment significant, the payoff is a home tailored to your unique vision.

What’s the Deal with the Down Payment?

If you're in the fortunate position to buy your new home with cash, hats off to you! That's an incredible achievement. However, if you're like many of us and planning to finance your purchase, it's time to start saving for a down payment and brace yourself for the journey ahead.

Securing a 20% down payment is often cited as the gold standard in home buying, especially in a high-cost area like Los Angeles. Yet, it's important to remember that this isn't a strict requirement across the board. Many lenders offer options that require as little as 10% down—or even less.

Feeling stretched at the thought of a 10% down payment? Don't fret. There's a wealth of assistance programs designed to support buyers who might not have a hefty sum saved up. For first-time homebuyers, the Federal Housing Authority offers loans with more accessible terms. The Home Possible Mortgage program caters to individuals with lower to moderate incomes, making homeownership more achievable. Additionally, veterans and active military members can benefit from VA loans, which often offer favorable terms to thank them for their service.

Are Real Estate Agents Really Necessary?

You may think you don’t need a real estate agent but imagine successfully navigating the tangled web of real estate on your own… Especially if you’re a first-time homebuyer, real estate can truly be an overwhelming challenge without a professional by your side. Not only can real estate agents help you find the property of your dreams, but they’ll also be by your side through the bidding process, price negotiations, and more.

Is a Bidding War Likely?

We're inclined to give a nod to the affirmative here. Reports from the California Association of Realtors highlight that properties in Los Angeles often fetch prices well above their listed rates. So, what's the takeaway for you? Essentially, it indicates a competitive market where sellers are often presented with several bids, urging you to pull out all the stops to stand out as the top choice among potential buyers.