A Beginner’s Guide to Buying a Home in Los Angeles
Published by Norma Arujo, Relationship Manager, First Republic Bank:
Given the infamous traffic gridlock in Los Angeles, buying a home is about three things: location, location, location. While some sections of LA’s sizzling hot real estate market have cooled down recently, you still need to be prepared for stiff competition and have plenty of cash at hand—no matter which neighborhood you choose to call home.
The alluring Westside
Homes for sale on Los Angeles’ highly desirable Westside—which encompasses neighborhoods and cities like Bel Air, Beverly Hills, West Hollywood, Santa Monica and Mid-Wilshire—generally sell for $1.8 million, or more, depending on the community. You should not be surprised to be involved in a bidding war or buyers who pay cash for properties well over its asking price.
So, who is the typical Westside buyer? Because many industries thrive in the Westside, you’ll find everything from television studios to professional service businesses to financial institutions housed here. International buyers are also drawn west. Its globally recognized neighborhoods, proximity to Los Angeles International Airport and reputation for having famous residents lend itself to attracting people living in the US for the first time.
Many international students have come to LA to continue their education. The city is home to University of Southern California (USC), UCLA and other universities. It is not uncommon for parents to purchase homes or condos in LA for their children while they finish their education.
The tech industry is also taking off in the West. Major companies like Google, Yahoo and Space X have large presence here helping Los Angeles earn its newest nickname: “Silicon Beach”.
Supply in demand on the Westside
Given the demand, it’s no surprise that real estate values on the Westside have jumped seven to 15 percent since 2013. Experts predict, however, they may have reached their peak or are getting close.
It’s an area in which paying $800,000 or $900,000 cash for old bungalows, tearing them down and then replacing them with sprawling single-family homes that sell for upwards of $2 million is still commonplace.
During this real estate boom, multiple offers would pour in for a single home, sparking bidding wars. Now that prices have soared so high, developers are increasingly moving on from the Westside.
Drawn to downtown
It’s a different situation in downtown Los Angeles, where billions of dollars in new development is taking place with condos and apartment buildings sprouting up. They’re often part of mixed-used developments, which have retail space on the ground floor and residential units above.
Downtown revitalization was sparked in the early 2000s with the development of the Staples Center sports arena and various financial incentives. This attracted a new kind of LA buyer, urbanites looking for a more city-like neighborhood. Downtown’s proximity to University of Southern California also attracts parents who purchase condos for their children to live in while attending college.
Although real estate development downtown has cooled in recent years, condo prices have jumped 15 percent since 2015, mostly driven by first-time buyers. If looking downtown, you should expect to pay $600 or more per square foot.
Regardless of where you’re looking to buy a home in Los Angeles, you need to be prepared for stiff competition.
If you’re not paying cash, you should obtain preapproval from your lender before you start shopping for your new home. Cash buyers are often more attractive to sellers because there is no wait for the lender to approve a loan.
You will need to have a cash down payment to cover at least 20 percent of the sale price, and you still may face a bidding war for the home of your dreams.
Living in Los Angeles comes with other expenses as well. It’s a car-dependent city with limited public transportation so having a personal vehicle is recommended. Overall, the cost of living in Los Angeles indexes 32 percent higher than the national average. That does, however, come with perks reserved for few places in the US. Its proximity to beaches, business opportunities and world-class entertainment keep Los Angeles as one of the most desirable major cities to call home.