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LA’s Rising Home Prices Puts Pressure on MF Supply
The median home value in Los Angeles has increased 42% since 2008 from $427,400 to $674,600. Rising home prices has meant more people are unable to buy.
JLL’s Henry Gjestrum points out that the current home ownership rate is 51.9%, well below the U.S. average of 64.2%. As in many large cities, people are delaying having families. Furthermore, a preference for urban living near transit lines is halting the expansion into more affordable suburbs.
Gjestrum notes all these factors are driving the demand for multifamily dwellings.
Vacancy is currently at a historic low of 4.5%, down from 5.7% just a year ago. Developers have stepped into high gear with 33,000 multifamily units under construction, which could help to alleviate the shortage of rental units. Given that living expenses are increasing more rapidly than wage growth, and that home affordability continues to decrease, apartment fundamentals are likely to strengthen even more, predicts Gjestrum.
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