To Live and Rent in LA

Curbed LA has sparked an interesting discussion after posting commentary about the Greater LA Area's claim to two of the most expensive rental markets in the US: LA and The OC.

A landlord even weighs in at LA VOICE to note the following:

As the manager of a 4-unit apartment building in North Hollywood, I have seen anxious applicants when I have the occasional vacancy and post a sign indicating that the apartments are $600/month.

They are small and simple, with window AC, no on-site laundry, one off-street parking place -- just a place to hang your hat. However they are not slums -- my family has owned them since the mid 1970s, and we have had some tenants stay for over a quarter of a century. Apartment rental is an intersection of business and peoples' private lives -- but I think some landlords think of it as pure business, and they are in business to make money. The speculation in LA is alarming, however; there is a great deal of development,and I wonder when the population density will reach some sort of critical mass when the environment won't be able to support the inhabitants

— TJ Sullivan in LA

Real Estate Magnate Bids For Trib Co.*

As Los Angeles residents hunkered down in their living rooms Sunday evening to watch the Academy Awards, The New York Times was busy breaking a story for Monday's edition that could greatly impact LA's primary news source — the Los Angeles Times — and, by association, the city as well.

According to the NYT story, Chicago real estate magnate Samuel Zell has made an offer for Tribune Co., which, of course, owns the LA Times. The bid, according to the NYT, "all but eliminates other offers," including those from LA billionaires Ron Burkle and Eli Broad.

Here's an excerpt:

Mr. Zell, 66, has never owned a major media property, but gained the nickname the “Grave Dancer” for his ability to spot and exploit undervalued properties in the real estate business.

His proposal would involve buying the entire company with the participation of an employee stock ownership plan, these people said. Although the deal would be highly leveraged, the employee stock plans have many tax advantages, including the ability to write off interest on debt.

More here.

There's certain to be plenty of people weighing in on this Monday.

*Zell recently sold his office development company for $39 billion, the amount of his bid was not mentioned by NYT.— TJ Sullivan in LA

And the Oscar Goes To...

The 79th annual Academy Awards ceremony is the year of anybody's guess ... And so, I decided to base my pick for Best Picture on something other than statistics, or history...

Read the rest of the new post at Native Intelligence.

— TJ Sullivan in LA

Los Angeles Housing Least Affordable In US

The California Building Industry Association reported today that housing in California remains the least affordable (and therefore the least attainable) in the nation, with Los Angeles at the top of the list.

A pdf download provided by the CBIA lists the least affordable metro areas in the nation. According to that data, in the final quarter of 2006, only 2% of the homes on the market in the Los Angeles region were affordable for households making the median income of $56,200.

The national average is 41.6 percent!

The California Association of Realtors also tracks affordability, but it made some major changes last year in how it calculates affordability. The new math puts a different spin on the data. However, CAR has yet to release its housing affordability index for the fourth quarter of 2006, so there's nothing yet to compare with the CBIA's numbers. However, a year-end report from CAR three weeks ago said:

"Affordability concerns continued to impact the residential real estate market in California, with the share of first-time buyers declining to their second lowest level from 30.5 percent in 2005 to 27.1 percent in 2006."

Here's a brief quote from the CBIA release today:

Despite a cooling housing market where prices have fallen slightly, California still remained the most unaffordable state in the nation during the fourth quarter of 2006, the California Building Industry Association reported today.

CBIA’s analysis of the quarterly National Association of Home Builders/Wells Fargo Housing Opportunity Index found that during the fourth quarter of the year, affordability actually declined in five of the 28 California metro areas surveyed. Adding to the grim picture, in 18 metro areas less than 10 percent of the homes could be afforded by families earning the median income there.

Wes Keusder, CBIA’s Chairman and owner of Costa Mesa-based Keusder Homes, said the report once again verifies what most Californians already know all too well: affording a home in California is becoming more and more out of reach.

“Despite all of the doom and gloom about housing prices dropping, affordability has improved only slightly and only in some parts of the state. A one or two percent drop in price has little effect on affordability.” Keusder said.

Keusder added that the slight decline in prices does nothing to negate the fact that in the entire nation, the nine least affordable places to buy a home in California, as are 18 of the bottom 20.

More on the housing crisis is in a prior post.

— TJ Sullivan in LA

Downtown LA Population Up 21% in 2 Years

Hat tip to LA Observed for pointing out a piece in the Downtown News regarding a study that shows a 21% increase in the population downtown.

Here's an excerpt from the Downtown News:

The study, prepared by the Los Angeles Economic Development Corp., found that:

An estimated 28,878 people live Downtown, and that there are 9,431 market rate residences and 9,568 affordably priced units. A similar DCBID study released in early 2005 found that 23,894 residents lived in the area, marking a 21% population increase.

The median income of households in the new buildings is $99,600, a 3% climb from the 2004 figure of $96,300.

Downtown residents are investing in the community, with 30.2% of area inhabitants buying condominiums. Two years ago, 18% of the respondents had purchased units.

More than three out of four Downtowners have at least an undergraduate degree, and 28% of the local populace has a graduate or professional degree.

The median age of new Downtown residents is 31, and more than 60% of area inhabitants are single. Slightly more than half, 53.5%, are male, and 46.5% are female.

Of the new area inhabitants, 24.3% left the Westside for Downtown. More than half of the residents, 55.1%, also work in Downtown.

— TJ Sullivan in LA

LA Home Sales down 44.6 percent '05 to '06

The California Building Industry Association, in a press release titled "CBIA/HWMI Survey Finds 2006 New Home Sales Down by 29% from 2005," reported this month that single-family home sales in the L.A./Long Beach/Glendale region dropped nearly 45 percent from 2005, to 2006.

Nonethteless, prices continued to climb despite the slowdown, and market trends continue to support the widespread belief that home prices have risen far beyond the reach of working families, who are opting for smaller, non-tranditional homes because it's all they can afford.

From the release:

He [ Patrick Duffy, Managing Director of Consulting for Hanley Wood Market Intelligence] said the data also showed a clear move towards higher-density housing throughout California, with the market share of attached housing such as condominiums and town homes rising to 31 percent versus 24 percent a year earlier.

“For many homebuyers it’s just not practical or affordable to buy a traditional single-family home,” Duffy noted, “so we’re seeing a lot more detached condos on very small lots in the suburbs, high-rise condos in various downtown areas and low-rise condos in mostly built-out communities throughout Southern California and the Bay Area.”

— TJ Sullivan in LA

The Los Angeles Housing Crisis Worsens

A joint study conducted by the Los Angeles County Economic Development Corporation and the Greater LA/Ventura County Chaper of the Building Industry Association makes some important points about why housing prices are likely not to fall in Los Angeles and Ventura counties, and why that is tragic news for many middle- and low-income families.

As real estate writers continue to churn out the same will-the-sky-fall pieces about the housing market, the bigger story contines to go untold.

Housing prices in Southern California, and elsewhere in the US, have risen so quickly in the past few years that incomes have been unable to keep up. The result is a gap that leaves some middle-class families worse off than their low-income counterparts. There are no assistance programs targeting middle-class households, which are increasingly placed in the odd position of earning six-figure incomes, and yet not being able to qualify for 30-year-fixed loans on the median-priced home in the communities where they work.

This snippet of explanation about the LACEDC/BIA study is from a story at CBS2:

Los Angeles and Ventura counties have a serious shortage of housing, continuing a long trend of housing production failing to keep pace with demand, according to a study released Monday by an industry group and the Los Angeles Economic Development Corp.

"There is a serious misconception about supply versus demand in today's housing market," Holly Schroeder, chief executive officer of the Greater Los Angeles/Ventura County Chapter of the Building Industry Association said. "For more than a decade, we have consistently neglected to build enough homes and provide the infrastructure needed to accommodate the people that live and work in this region."

According to the study, titled "Meeting the Housing Challenge in L.A. and Ventura," the rapid population growth in the Southland means that only one new unit of housing was built for every 6.86 new people in Los Angeles County from 1990 to 2006.

That shortage means that the price of housing is unlikely to dip, keeping homes out of the reach of many residents.

"If we remain on this pace, the mismatch will worsen," Jack Kyser, chief economist for the LAEDC said. "This does not bode well for long-term housing affordability. The growing divergence between housing supply and demand in our region has very negative implications for our future economic viability."

— TJ Sullivan in LA