North Hollywood Multifamily Market Report
North Hollywood Market Overview
This annual market report extensively explores the transactional and investment dynamics within the North Hollywood, Valley Village, and Valley Glen submarkets. Analyzing the multifamily transactions of 2023 allows investors to discern the evolving market landscape, enabling better preparation for 2024. This North Hollywood report aims to provide a comprehensive analysis of the real estate market in these submarkets, offering valuable insights to stakeholders.
2023 North Hollywood Summary
In the dynamic real estate landscape of 2023, noteworthy trends and transactions shaped the market. The total sale volume for the year amounted to $154 million, reflecting a significant 47.7% decrease from the robust $294 million recorded in 2022. Transactional activity mirrored this decline, experiencing a 41.6% drop from 77 transactions in 2022 to 45 in 2023, indicating a discernible shift in the market.
In specific terms, average cap rates increased by 42 basis points, from 4.11% in 2022 to 4.53% in 2023. Q1 2023 emerged as a pivotal period, contributing 40% to the overall annual sale volume and accounting for 24% of total transactions. Real estate cap rates displayed a substantial uptick, ascending by 98 basis points compared to the Q4 2023 average of 5.09%.
Examining the impactful events that defined the market in 2023, four interest rate hikes led to a 1% rise in the federal funds rate. Implementing Measure ULA in April triggered a concentration of transactions in Q1 2023. Five major bank failures occurred, such as the First Republic and SVB in CA, which further limited available capital and pushed to a more conservative lending environment. Policy changes promoting co-living arrangements, tiny homes, and accessory dwelling units (ADUs) became integral to market dynamics. Additionally, the anticipation of the first rent increase in three years, scheduled for February 2024, added another layer of complexity to the landscape.
One of the standout metrics of the year was the bid-ask spread. In Q4 2022, it measured at 4.3%, escalating significantly to 16.6% in Q1 2023. As the year progressed, sellers demonstrated adaptability, aligning with market pricing and reducing the bid ask spread to 10.5% by the conclusion of Q4 2023. These trends provide valuable insights into the evolving dynamics of the real estate market throughout the year.
2024 North Hollywood Outlook
In the anticipated real estate landscape of 2024, there lies a heightened level of competitiveness and dynamism, bringing forth transformative trends that demand the attention of owners and investors in 2024.
Rent Growth
A recalibration is anticipated in rent growth, which exhibited robust expansion in 2022 and 2023. In 2024, this surge is expected to moderate, driven by factors such as an increased supply, decelerated job growth, and softer economic conditions.
Federal Reserve Projections
The Federal Reserve’s projections of reduced interest rates in 2024 stand as a pivotal development. With the announcement of three anticipated interest rate drops, the Federal Reserve aims to engineer a soft landing, strategically setting the stage for a more favorable market condition as the election season approaches.
Market Competition
A surge in marketing competition is on the horizon, propelled by a more favorable market. Sellers, previously “on the fence” in 2023, are gearing up to leverage the improved market conditions, actively promoting and seeking value for their properties. Anticipating a potential influx of new supply that may reshape market dynamics, contributing to a further narrowing of the bid-ask gap.
Legislative Activity
For those immersed in the Los Angeles real estate scene, rent and tenant protection takes center stage in 2024. RSO properties are slated for a 4% rent increase (6% with utilities) between February and June. Additionally, legislative activity will be a focal point, with various proposals set for the ballot. One was the AIDS Healthcare Foundation initiative, a significant move seeking to repeal the Costa Hawkins Rental Housing Act of 1995, signaling a notable shift in regulatory dynamics. This will mark the third time it hits the ballot, previously on propositions 10 (2018) & 21 (2020), strengthening the city’s position and direction. It will be the next if it won’t pass on this bill.
Agent Insight
In navigating the 2024 market, successful brokers play a crucial role in bringing substantial value to their clients. For those ready to sell, it’s imperative for a broker to prioritize pricing to sell rather than merely listing. Mismanaged expectations regarding timing and pricing often lead to prolonged market presence and significant reductions. A skilled broker engages in candid conversations, setting realistic expectations aligned with the current market sentiment and the enthusiasm of active buyers.
Opportunity costs are a pivotal consideration in maximizing returns. Property owners sometimes hesitate to transact due to familiarity with their current holdings. A proficient broker not only articulates but also illustrates the value of the present scenario, emphasizing the cost of missed opportunities. One intersection that should be noted is between cap rates and interest rates.
In dynamic markets, a multi-faceted broker is indispensable. Clients should seek professionals capable of donning the hats of both owner and investor, focusing on the business plan. Beyond securing properties at favorable cost bases in desirable locations, the true value lies in having the foresight to extract optimal value from each property. A successful broker goes beyond the transaction, demonstrating a strategic vision for maximizing property value.
