If There's Any Good News About L.A.'s Housing Crisis, It's Home Value
If you bought a median-priced home in L.A. 30 years ago, it would be worth about $520,000 today, according to real estate website Trulia. Considering that the median price in 1986 was $116,061, that represents a 348.1 percent return on your investment.
So if there's any good news about the Los Angeles housing crisis, that's it. Buying a home here is beyond a solid investment. It's a wealth creator. The bad news is that it's pretty much impossible for median-income families to afford a place in L.A., so this dividend only serves to exacerbate our widening gulf between rich and poor.
Trulia looked at home values over 30 years in the nation's 100 biggest cities for its new report, Rich City, Poor City: How Housing Supply Drives Regional Economic Inequality. For the analysis, it parsed its own data as well as that of the Federal Housing Finance Agency’s House Price Index.
It concluded that in places like L.A., real estate prices are one of the driving factors behind the growing wealth gap. "Longtime homeowners in the most expensive markets have had a much better return on their investment than homeowners in the least expensive," the report states.
Trulia also found that while Los Angeles real estate is a sure thing, the cover charge remained one of the highest in America.
"The top 20 most expensive markets hasn’t actually seen much change over that 30-year period," Trulia spokeswoman Cecilia Xia said. "L.A. was 12th of 20 in 1986. It’s seventh of 20 today."
Indeed, the top American region where the rich get richer with real estate is the West Coast, the site found. "Of the 10 markets with the largest 30-year change in home value, nine are in the West," Trulia stated.
Those include San Francisco (which gave home buyers a nation-topping 557.6 percent return since 1986), San Jose, Oakland, Orange County, L.A. and San Diego — pretty much all of California's big urban centers. The entire list is here:
The analysis touches on a burning issue in Los Angeles: development. There's a political war brewing in town that essentially has two sides: those who believe building more housing will make traffic worse, block more views and contribute to a decline in our quality of life; and those who say we need more apartments and homes to alleviate high rents, impossible prices and low vacancy rates.
Trulia says that slow housing development in places like L.A. could be exacerbating the growing gap between haves and have-nots.
"A lack of housing construction in many metros may be driving nationwide wealth disparities through persistent supply-induced home price appreciation," the report states. "This is emphasized by the fact that those who bought homes in the most expensive metros in the U.S. have realized significantly higher returns on their investment than those that bought in the least expensive, and that supply elasticity is strong correlated with house-price appreciation. These findings are meaningful, since wealth is often passed down to future generations, who in turn might use such inheritance to also purchase homes, which continues the cycle of wealth accumulation."
Get the ICYMI: Today's Top Stories Newsletter Our daily newsletter delivers quick clicks to keep you in the know
Catch up on the day's news and stay informed with our daily digest of the most popular news, music, food and arts stories in Los Angeles, delivered to your inbox Monday through Friday.