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Deke's Investment Blog - July 10, 2020

Updated: Oct 18, 2021

Economic disruption impacts LA’s normally stable apartment market. Since the start of Covid apartment vacancies have increased,,averaging 5.6% Vacancies in high-end apartments stands at 12%. Vacancies in affordable apartments is under 5%. Demand for apartments will suffer until public health and economic recovery improve. Rents are declining for the first time in a decade. Analysts predict rent losses of 10% to 20% before rents start to grow again. Apartment sale transactions have dried up and pricing is expected to fall in the second half of 2020.

The road ahead looks uncertain. Unemployment has spiked and the end of job losses is not yet in sight. The high cost of housing has caused some people to move away. Nevertheless there are fundamental elements that point to growth in Los Angeles. According to current views economic recovery may turn up by mid-2021 or early-2022. Consider this, about 50% of LA’s 3,300,000 households are renters, one of the highest renter ratios of any major city in the US. In spite of Covid supply constraints define the LA apartment market. Strong demand for rental housing in LA will continue for the foreseeable future. For long-term investors the pandemic will likely provide good opportunities for new acquisitions.

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