Report: Housing recovery in Los Angeles is underway
According to a study released by a senior economist at the University of California, Los Angeles's Anderson Forecast and the UCLA Ziman Center for Real Estate, the Los Angeles housing economy is in the process of rebounding after $7 trillion of wealth was lost during a six-year decline. Homeownership declined from 69 percent in 2004 to 66 percent in 2011, and is forecast to drop even lower by the end of this year. However, the study reported that foreclosures have appeared to peak and existing home sales are on the rise. Foreclosures or short sales account for approximately one third of existing home sales, and economists reported that the steady rise of activity in the housing market indicates recovery is underway.
Economists predicted that the housing recovery will come at a gradual pace. The job market remains extremely competitive, and high unemployment rates have a negative effect on the housing market. Additionally, higher down payment and credit score requirements are making it more difficult for consumers to obtain the financial resources necessary for home ownership. Student loan debt may also impact the rate of recovery since it could prevent potential buyers from having enough disposable income to enter the housing market.
The study reported that the boom in multi-family development has had the greatest positive influence on housing market trends. Only 112,000 multi-family units were on the market in 2009, but that number is forecasted to increase to 260,000 by the end of 2012. Economists said that it would not be surprising to see more than 400,000 units in 2014 since a decreasing rate of homeownership typically creates an increase in renting activity.
Economists reported that the new supply of rental units will combine with existing single family homes controlled by investor groups to eventually outpace consumer demand by 2014 to create a surplus in central core areas. The study reported that those areas will become primed for gentrification as rents increase to reflect the traditional rental housing market. As a response, city planners are encouraging density and relaxing zoning restrictions. California legislators passed the SB 375, an anti-sprawl bill that will allow continued construction of real estate in Los Angeles with fewer zoning requirements. The bill emphasizes the connection between transportation and land use planning, and shifts the focus away from density control maintained by designated open space initiatives in urban areas.