Developers are betting that Downtown L.A. can become a thriving residential neighborhood with prices to match. But the numbers don’t necessarily back their theory.
Indeed, condo prices in the area decreased sharply in January, dropping by 13 percent compared to the previous month and to 12 percent lower than they were in January 2015, according to a new condo price index released by residential marketing and sales firm The Mark Company.
The index pegs the average price of a Downtown L.A. condo at $701 per square foot, compared to the high of $803 per square foot recorded in December.
“Although January is typically a weak month for condominium sales, a decrease of 13 percent indicates more than just a seasonal decline,” said Erin Kennelly, senior director of research at The Mark Company. “While prices may recover in February and March, which is the beginning of the traditional selling season, last month’s decline indicates that the market for new construction may require new strategies for success following the last several years of strong appreciation.”
Indeed, the decrease in prices is a dramatic reversal of fortune for the Downtown L.A. market, which had been riding high for the last few years as surging demand coincided with a lull in construction. But now that construction has kicked into high gear, some are raising the question of whether demand can rise further to meet it.
Kennelly attributed the drop off in pricing directly to rising inventory, which jumped by 82 percent over the past year. And it’s only set to rise further.
“While all the currently available units are within Metropolis Towers I & II, we expect Ten50 and Oceanwide Plaza to begin selling later this year,” she said.
The report is just the latest to point to a decline in condo values. A recent report by Loftway, a brokerage specializing in loft sales and leases, showed that the number of condo and loft sales Downtown decreased by 14 percent in 2015 and price growth slowed.
A couple of Downtown loft buildings even sold units at lower per-square-foot prices than the previous year.