SOCAL MULTIFAMILY REAL ESTATE SNAPSHOT MAY 2014 ~ RENTS AS BIG AS A MORTGAGE

April 29, 2014 on 9:11 pm | In Buyers, Charts + Statistics, Economy, Fascinating Information, fUNNY...mONEY, Investment Opportunities, Market Snapshot, New Developments, Rents, Sellers, Trends, Uncategorized, WOW | 5 Comments

by Jodi Summers

See all those new units going up around town? They’ll soon be for rent. So, although Los Angeles apartment owners will continue to enjoy relatively tight vacancy in 2014, new construction will be applying pressure on operations in the western stretches of the county by the end of the year.

The new canyons of Marina del Rey are something to ponder as research firms like Marcus & Millichap expect top-tier rental demand to be lower than the pace of construction. New apartment development around Los Angeles will see 6,000 rentals finished – a 0.6% stock gain for the 2nd year in a row.

A plethora of high priced units are expected to lift the overall vacancy rate around town and push management to offer concessions to attract elite renters. It is anticipated that vacancy rates will rise 4.3% this year. By year-end 2014, effective rents will reach $1,726 per month, an annual rise of 1.2%.

Expect job growth in the county to accelerate bringing overall payrolls within reach of the pre-recession level for the first time in 7 years…so tenants can hypothetically afford those lofty rents…or not so much. ..

Rents in L.A. are close to a mortgage payment. Investment savvy Millennials who don’t have a half-million to spend living at the beach are going east to Culver City, Mar Vista and the historic Village Green – owning their homes, building their financial portfolios. Los Angeles zip codes like 90034, 90066, 90025, 90230, 90016 and 90046 are well-located equity-building locations.

For investors, average cap rates are near historical lows, which means we could see more inventory; but keep in mind, the current West Side buying frenzy is attributable to unproductive alternative investment vehicles rather than property fundamentals. An abundance of cash, fear of a stock market correction, and low interest rates favor the acquisition of low-yielding apartments. When interest rates move higher, the experts expect investors to rethink the current strategy and explore alternative options.

Additionally, first-time investors are drooling to get into the Silicon Beach multifamily market, and are willing to accept early returns below 5% in long-term hold plays.

Stiff competition is driving desirable buildings are going into multiple offer scenarios, driving down cap rates, leaving many investors reliant on Southern California real estate renowned rapid appreciation.

For more information please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – jodi@jodisummers.com or 310.392.1211, and let us move forward together.

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http://www.marcusmillichap.com/research/researchreports/reports/2014/01/06/los-angeles-apartment-research-report

http://www.socalmultiunitrealestateblog.com/?p=2678

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  1. An 8-acre parcel in Beverly Hills next to the iconic Beverly Hilton on Merv Griffin Way is once again changing hands.

    The Los Angeles Times reported Thursday that the site of the 62-year-old building which most recently housed the Robinsons-May department store a decade ago is back on the market.

    The property at 9900 Wilshire Blvd., “one of the most desirable pieces of real estate in the country,” the Times says, “has seen multiple owners who have so far been unable to bring a condominium complex designed by a famous architect to life.”

    In 2010, Hong Kong private equity firm Joint Treasure International bought the parcel for $148 million. Experts in the Beverly Hills real estate market suggest the parcel is now worth somewhere in the mid-$300-million range.

    The owners intended to complete an existing plan to build 235 condos on the site. It’s unclear why they are now selling it. It’s also unclear how much they want for it.

    A major selling point of the property is an existing condominium complex design by Richard Meier, architect of the Getty Center, which was successfully navigated through Beverly Hills’ torturous city planning process, according to the Times.

    Comment by L.A. Biz — May 1, 2014 #

  2. Known as a nation of renters, only around 43 percent of those living in Germany own their property, but the number is slowly increasing.

    The Institut der deutschen Wirtschaft Köln (IW) has conducted a five-year analysis of all 402 counties and cities in the country to find out where it’s worth it to buy property.

    Residential property in Germany’s cities is overvalued around 25 percent, according to an index released Thursday by the VDP Association of German Pfanbrief Banks.

    Prices are rising across the country, especially for new-built units.

    IW concluded that buying a house or apartment made financial sense in only 27 percent of the regions examined.

    Comment by Inman News® — May 16, 2014 #

  3. Census statistics show that fewer people are buying single-family homes, too: the seasonally adjusted annual rate of single-family house sales in March was 384,000, 13.3 percent lower than the same month last year.

    Meanwhile, construction of residences with five or more apartment units—multiplexes, condominiums, high-rises—have reached their highest share of overall construction since 1973 (aside from an outlier year in 1985). “These days the market is driven much more by people who are either choosing to live in the city or in the near-in suburbs, particularly people who are just getting their first job or don’t have confidence that their job is going to last long enough to warrant buying a home,” says Ken Simonson, chief economist for the Associated General Contractors of America. “The multifamily building trend is happening everywhere.”

    Americans are experiencing an urban renaissance of unanticipated proportions, as young people graduate college and flock to cities, delaying buying a home and perhaps rejecting the suburban ideal altogether.

    Comment by Time — June 8, 2014 #

  4. Gen Y is a little more unified in terms of their preferences. the Facebook generation wants to be plugged in 24/7—with both technology and each other.

    Millennials want a living environment that sort of matches their lifestyle, and the current housing doesn’t do that. You need those products that facilitate a lifestyle that is tech driven and socially driven because of Facebook.

    Technology is also becoming a large factor as many empty-nesters begin their search in the rental housing market.

    Comment by GlenBrill — July 12, 2014 #

  5. A study in the journal Psychological Science finds that young adults who come of age during recessions are much less narcissistic than those who come of age during economic boom times.

    Comment by Science News — July 21, 2014 #

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