Rent drops in LA but rises in Inland Empire. Median home price in California hits record

LA’s real estate market is a little confounding right now. While the pandemic is forcing most people to hunker down, some are choosing to move to the suburbs or more affordable locations. Rents are down in some places and up in others. The median price of a home in California just set a record at more than $712,000.

“We have a housing market that is on fire,” says Paul Habibi, a lecturer on real estate at UCLA’s Anderson School of Management and an expert witness for Grayslake Advisors.

That’s partly due to what he calls a perfect storm of record-low interest rates, stock market highs, and a pool of potential buyers who are financially stable amid the pandemic.

Consumers have also shifted from services to goods, he notes. “One of the goods that consumers are now favoring is housing, given that folks are working from home, they're working out at home, their kids are going to school at home. We've really seen a shift that may be temporary, but nonetheless, it's had a significant impact on the housing market.”

Historically, he says it’s tough to build new housing in Los Angeles because there’s not enough land. He notes that certain areas, like downtown, have seen more growth, and that’s due to an expansion of luxury rentals.

But amid the pandemic, Habibi says he’s seen a shift away from dense housing regions like downtown. He believes that comes down to risks of virus transmission and the cost of luxury rentals and for-sale units.

“People don't necessarily need to be downtown at the moment,” he says. “They're having trouble now with absorption and leasing of those units, simply because of the current environment.”

Due to those challenges, Habibi says this might be a good time to find a bargain on higher-end housing.

He notes that on average, rent prices are down about 5% across LA County’s 88 cities and vacancies rates are up. However, despite the overall decrease, areas like the Inland Empire are seeing a boom in demand.

“LA has a lot of hospitality, entertainment, nightlife, food and beverage and retail. And those have been suffering,” he says. “The [Inland Empire] has manufacturing, logistics, e-commerce, wholesaling, and industries that have actually thrived in this pandemic.”