What’s Happening Locally in our Multi-Family Market?
In our July column, we recapped single-family residence (SFR) sales over the first half of 2022 in San Pedro, Rancho Palos Verdes, and the South Bay. Since then, we received numerous requests for updates on multi-family sales (2-4 units) in San Pedro and the South Bay. Rental property is a significant investment for many in San Pedro and a nice portion of our business, which we have a passion for. For the purposes of this update, we will focus on 2-4 unit sales. This is the largest segment of multi-family sales in San Pedro and also popular with many landlord/owner occupants due to being easier to manage than larger buildings (5+ units), affordability, and availability of attractive financing options.
Through the first six months of 2022, there were 49 multi-family sales (2-4 units) in San Pedro (based on available local MLS data). The unit breakdown for the 49 sales was as follows: 17 – 2 units (duplex), 15 – 3 units (triplex), and 17 – 4 units (quadruplex). The average sales price for all sales was $950,000 with avg. days on market (DOM) of 17 days. In 2021, there were 57 multi-family sales (2-4 units) with the following unit breakdown: 19 – 2 units, 21 – 3 units, and 17 – 4 units. The average sales price was $825,000 with an avg. of 16 DOM. The average sales price in 2022 was up $125,000 (year over year) or 14.3% with a decrease of 15% in units sold.
In the Greater South Bay, there were 234 multi-family sales (2-4 units) over the first six months of 2022. The unit breakdown was as follows: 126 – 2 units (duplex), 49 – 3 units (triplex), and 59 – 4 units (quadruplex). The average sales price for all sales was $1.1MM with avg. days on market (DOM) of 15 days. In 2021, there were 257 multi-family sales (2-4 units) with the following unit breakdown: 139 – 2 units, 54 – 3 units, and 64 – 4 units. The average sales price was $1.06MM with an avg. of 16 DOM. The average sales price in 2022 was up $40,000 or 3.7% with a decrease of 9.3% in units sold. 15 DOM remained unchanged year over year. Interestingly, the trend of being up in sales price and down in units sold is parallel to the trend in the single-family residence market.
When the pandemic hit in March of 2020, the City of Los Angeles quickly declared COVID-19 a “State of Emergency.” Since that time, the City Council has taken extreme measures to protect tenants from evictions and rent increases. Any rental property (2 units or more, including condos and townhouses) located in the City of Los Angeles that was built on or before Oct 1, 1978 is subject to rent control laws.
Under current rent control laws, a landlord can raise rents annually by a percentage. In years past, this has been in the 3-4% range. However, landlords have been prevented from raising rents since March of 2020. According to the Los Angeles Housing Department (website: https://housing.lacity.org), the City Council extended the “State of Emergency” Declaration on July 29, 2022. The site indicates that tenant “eviction protections for non-payment of rent due to COVID-19 economic impact are in effect until August 2023.” Further, “rent increases are currently prohibited for rental units subject to the City of Los Angeles Rent Stabilization Ordinance (RSO) until 1 year after the expiration of the City’s Emergency Declaration Period.”
Residential income property remains a solid investment due to appreciation potential and passive income earning ability from ongoing rents. It’s a great way for someone to own a property, while having some or most of the mortgage subsidized with rents paid by tenants.
Mike Harper and Peter Hazdovac are both licensed Realtors® with Keller Williams Realty. For more info., visit www.harperhazdovac.com