The last year has seen a heavy increase in foreclosures throughout the market, with the latest U.S. Foreclosures Market Report stating that increases were jumping by double-digits been previous year’s quarters, from 32% in the previous quarter and 67% in previous years. These were the first double-digit increases since 2014 and represent major investment possibilities, Mike Bjorkman says.
While it is tragic to see people losing their homes or properties in this way, it was a problem that was bound to happen once government-backed anti-foreclosure loans dried up. With the COVID-19 pandemic still a persistent problem and with Monkey Pox threatening to spread even further, the risk of more foreclosures is ever present and could be a major factor in the Los Angeles real estate market by increasing availability and boosting value.
Mike Bjorkman reports that home values in LA have increased by 131.5% since 2012 and are likely to increase by 24.1% or more since the global pandemic started to hit a median value of $928,320. Rental properties are hot right now, with a price-to-rent ratio of 29.25 in LA at the moment. This ratio means it is far cheaper to rent than it is to buy, which can drive investment trends.
For example, buying a one-family home to sell in LA may yield a higher potential sales price but take far longer to sell because of this higher price. Purchasing a larger rental property may yield a slightly smaller initial value but will be easier to fill. Rent provides a consistent passive income for an investor that helps them consistently make money after purchasing the property.
It is particularly important to invest in neighborhoods where median purchases may be lower, minimizing your payments and improving your return-to-investment ratio. Mike Bjorkman currently suggests five LA neighborhoods as the smartest investment options for 2022: Wilmington, Boyle Heights, Canoga Park, Northridge, and Winnetka.
Each of these properties has more reasonable median home values and a fairly strong one-year appreciation rate. For example, Wilmington has a median home value of $617,500 and a one-year appreciation rate of 13.3%. A home in this area is typically on the market for just 42 days and sells at above the list price 73.8% of the time.
Mike Bjorkman notes that Boyle Heights has a slightly higher purchase median price of $660,000 but a higher one-year appreciation rate (18.7%) and a quicker sale price of around 39 days. However, homes sell above the listing price just 46% of the time in this area. Generally speaking, the higher the home sale price, the lower the above-list percentage. That isn’t always the case because demand can impact this factor.
For instance, Canoga Park has a median sale price of $730,000 and an above-list percentage of 66.7%. By contrast, Northridge has a median home value of $1 million but an above-list-percentage of 70.6%. That higher percentage occurs because Northridge is a more desirable and in-demand market. Mike Bjorkman strongly suggests reviewing these many factors before making a home purchase.
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