Los Angeles has some cramped living situations thanks to many people doubling up or moving in with mom and dad as adults. Renting and purchasing a home are both expensive propositions. However, I love getting updates on small homes and seeing how people try to justify current prices. One of the pick-up lines used to sell these homes is the “condo alternative” narrative. Why be a condo loser when you can actually own a single family closet instead? At least that is the line of reasoning in these ads. Many hipster areas where homes were built back in the days prior to the Great Depression need a lot of revamping. Sure, the cosmetics might look good but how are the underlying structural bones of the place? In L.A. most are only focused on the outside and really don’t care about these technical issues. Today we look at a home in Glassell Park that was built back in 1926. One option for avoiding rental Armageddon is buying a closet sized home.
Does it feel like more renters exist in California? It should feel that way because over the last ten years we have gained a net of 1,000,000 households that rent while seeing homeowners decline by over 200,000. California has always been one of the states with a large renting population. In fact, in places like San Francisco the ownership rate is in the 30 percent range. In the last 10 years there has been a dramatic shift in the number of households that rent in California. In the last 10 years we have gained 500,000 households in California. However, most of this growth has come in the form of renter households. What are the implications of this change when it comes to voting or even how residents view their neighborhoods? We have 2.3 million adults living at home with parents because they can’t afford rents let alone venture out and purchase a home on their own. If we look at the raw figures, what we find is that renting has been trouncing home buying for the last 10 years in California.
Some people are looking at cashing in their housing lottery ticket. While many are hunkering down preparing for the rental apocalypse, some are gearing up to capitalize on the crap shack hungry lemmings ready to bite. I remember during the days of the last housing mania getting e-mails about Culver City being the next Beverly Hills. Culver City is not Manhattan Beach or Beverly Hills. I think people need to actually look at the property before making that kind of assessment. I saw a property hit the market recently with a list price of nearly $1,000 per square feet. The house is nothing special and of course with some nice Photoshop filters and some HGTV inspired ideas, someone is trying to cash in big. 920 square feet for $900,000 – or you can drive down about one mile in the same zip code and pickup a fixer upper for $325,000. Rehab work takes time but are people seriously that lazy to leave this much money on the table?
California like the rest of nation has gained a large number of rental households. Many of these households were formed from the ashes of the 1 million completed foreclosures. Over the last ten years the nation has lost 1 million net homeowner households and has gained a whopping 10 million rental households. L.A. County with roughly 10 million residents is predominately a renter county. Over the last ten years the large gain in California households has come in the form of rentals. Maybe you find living with roommates deep into your 30s and 40s as awesome or maybe you enjoy living a Spartan lifestyle just so you can pay your monthly rent while hearing helicopters overhead in your hipster neighborhood. Every piece of research simply shows that people are being pushed into spending more money on housing. Some say move out. Well guess what? Many middle class Californians are doing just that. The rental and housing market has gone into full on financial Armageddon mode yet in typical California fashion, the sun keeps glowing brightly. Ironically over time people think it is normal to dump every nickel you have into housing. Let us look at three trends impacting the rental market in California.
Some people think that all parts of Los Angeles are created equal. Areas with poor performing schools and hundreds of crap shacks suddenly become the next gentrification hub. Most professionals and especially those with young children are not in the mood to send their kids to poor performing schools. But somehow, every area of Los Angeles is now a safe haven with no crime, top notch schools, and fantastic housing opportunities. Whenever you hear this you rarely get a glimpse of what is happening on the ground. When we pulled data for an entire block in Torrance, people suddenly realized that most of the stucco boxes were bought for low prices pre-mania days. When a house does hit the market, we get this new narrative although we are in the midst of a big jump in the stock market, very favorable interest rates, and an economy that is plugging forward. Things ebb and flow and California is boom and bust central. 2.3 million adult “kids” live at home with their parents. People are doubling or tripling up into units to cover rent. So maybe you want to buy your first single family home? Let us look at some deals in Pacoima.