Los Angeles Introduces Anti-McMansion Ordinance

The Los Angeles City Council this week approved a measure that will limit the size of remodeled homes in the city's flatlands to about 3,000 to 4,000 sq ft in most cases. The legislation was sorely needed to retain neighborhood character -- and to prevent egregious cases of over-building, where behemoths of 6,000 sq ft or more were towering over neighboring houses of less than one-third their size. The average home in Los Angeles is now 1,700 sq ft.

The new law restricts owners to building a new improvement no larger than half the size of the lot's square footage, plus a 400 sq ft garage. Many of the city's 304,000 flatland houses have lots in the 5,000 - 6,000 sq ft range. Councilman Tom LaBonge is pushing for similar legislation in the city's 100,000+ hillside homes.

Building groups and the Beverly Hills/Greater Los Angeles Association of Realtors immediately decried the legislation and warned that the ordinance would drive down property values in the city. Council members were not persuaded: the measured passed 12-0.

Jamie Adner
www.adnergroup.com

Los Angeles Apartments Forecasted to Outperform

Los Angeles investors owning rental property can expect robust returns reports Deustsche Bank Group’s April 2008 RREEF Research. Los Angeles – along with Austin, Denver, New York, Portland, San Francisco, San Jose and Seattle – falls in the “out-perform” category, with decreased vacancy and sustained rent momentum projected through 2012.

The apartment sector, which generally underperformed its peers during the economic expansion of the past five years, is well posed for the future. The dominance of the for-sale housing market over the past several years, which culminated in a disastrous bubble that burst, edged out growth in this sector. As the impacts from this bubble unwind, a significant portion of US households will return to being renters. At the same time, favorable demographics will provide a new generation of renter households. While no sector will avoid the impacts of the recessionary economy of 2008, apartments will be the least affected and will be poised for strong growth going forward. This will be particularly true for those markets that avoided the extensive overbuilding of the for-sale housing market.

Forecasts for the Los Angeles Apartment Market:

2008:
Stage – Growth
Vacancy – 3.9%
Rent Momentum: 3 – 4%

2009:
Stage – Growth
Vacancy – 3.7%
Rent Momentum: 3 – 4%

2010:
Stage – Growth
Vacancy – 3.4%
Rent Momentum: Over 4%

2011:
Stage – Growth
Vacancy – 3.9%
Rent Momentum: Over 4%

2012:
Stage – Post-Growth
Vacancy – 3.9%
Rent Momentum: 3 – 4%

In the local market, the credit crunch and more stringent loan underwriting guidelines has reduced the number of qualified buyers, leading to price reductions of some apartment properties. Simultaneously, the number of home buyers has also been reduced, decreasing vacancies and contributing upward rental pricing pressure. Throw into the mix a number of bank-owned properties that are offered “below market” rate, and investors will see that opportunity abounds in the City of Angels when it comes to apartment properties.

www.adnergroup.com

West Hollywood Market Round-Up: April 2008

7 houses sold in April 2008 in West Hollywood – up from 4 sales in March. 2 sales were over $1.9 million, both on Huntley Drive. 2 sales for over $1 million were on Westbourne Drive, one block east of Huntley Drive, showing the enduring popularity and demand in West Hollywood West. The average days on market for a single family home in West Hollywood was 59.

26 condos sold in the West Hollywood area in April 2008, well below the number of condo sales in April in previous years: 37 (2007), 39 (2006), 64 (2005) and 56 (2004). The average days on market was 80. Condos sold for an average of $557/sq ft. The highest priced sale was 818 N Doheny, a 3,000 sq ft 14th floor unit – for $1,795,000. Also at the upper end of the market was an 1,813 sq ft penthouse at 718 N Croft, adjacent to Melrose Place, that sold for $1,395,000. A 1,631 sq ft ground floor unit in the same building sold for $999,000. More than half of the condo sales in West Hollywood were for $515,000 or less.

www.adnergroup.com