Deke's Investment Blog - August 20, 2015

Residential construction is a strong contributing factor in the current market. According to recent statistics from the Commerce Department, LA had the second fastest rate of residential construction growth in the nation the first half of 2015. Only New York grew faster. What’s more some 72% of LA’s residential construction was apartments.

Why are so many apartments being built? The plane reason is that the demand for apartments is larger than the supply. This supply imbalance is forecast to continue for the foreseeable future. The challenge for builders is to find R3 zoned land that can be bought at a price that pencils out for apartments. LA County total population is just above 10 million and over two-thirds of these people live in rental housing. The cost of buying a home or condo is presently beyond reach for many people. Rents are on the rise and vacancies have been declining for several years. These trends appear likely to continue.