Local real estate market stays hot while apartment prices remain high

Local real estate market stays hot while apartment prices remain high

By Thomas Leffler, SMDP Staff Writer

Although the Santa Monica real estate market has continued a hot streak into 2024, apartment prices continue to be daunting for potential renters, according to new reports.

For the local housing market, information by Construction Coverage noted that the city’s median home sale price went up considerably in 2023, a major contributing factor to the website ranking Santa Monica 164th out of 451 "small" cities in the United States (population under 150,000 residents) as far as "hottest" real estate markets. Another report by Zumper provided statistics about Santa Monica apartment rent prices compared to other cities in the Los Angeles metro area, stating that the city is the second-most expensive for renters in the metro.

The Construction Coverage analysis used data from real estate brokerage Redfin to determine locations with the hottest real estate markets, equally weighing five metrics from 2023 annual numbers: One-year change in median sale price (from December 2022 to December 2023), share of homes that sold above asking price, median number of days a home is on the market, an average sale-to-list percentage and a share of listings with price drops.

While the report noted that 2023 "marked a notably more subdued year for U.S. real estate compared to the preceding years," Santa Monica trends far exceeded national ones. As of December 2023, the median home sale price in the city was $2,025,750, which was a jump of 29.9% from December 2022. The national median home sale price was 4% higher than the previous year, rebounding in the second half of the year from an April low point. Price growth initially exploded during the COVID-19 pandemic due to low interest rates and high investment returns, but higher interest and limited budgets due to inflation in other sectors "significantly decelerated market activity," according to the report.

Another key metric in the housing report was the fact that 37.6% of Santa Monica homes sold over their asking price in 2023 after spending a median of 48.7 days on the market. Santa Monica is just one of many California cities to experience a hot real estate market, as four of the top five ranked "large" cities (population of 350,000 residents or more) were San Jose, Oakland, San Diego and Long Beach.

While local home sellers are enthused by the recent news, the Zumper report is another round of disheartening statistics for local apartment renters. The website’s Los Angeles Metro Area Report analyzed active apartment listings that hit the market within the last month, and found that Santa Monica’s median price for a one-bedroom apartment was $3,250, the second-most expensive of 29 cities in the report. Only Newport Beach ($3,300) topped the Santa Monica price, and the one-bedroom pricing increased 1.2% from the previous month, as well as 6.2% year-to-year.

For two-bedroom apartments, the Santa Monica median price was $4,520, only topped by Beverly Hills ($4,590) and Newport Beach ($4,450). For Santa Monica, this was a decrease of 0.7% from the prior month, but was still a 5.1% increase year-to-year.

Apartment availability itself, however, has been boosted by adaptive reuse, with 2,442 apartment units in the Los Angeles-Long Beach-Anaheim metro area in the pipeline from converted office space, according to new data from RentCafe. This figure places the metro fifth nationwide in the 2024 office-to-apartment pipeline, with 6,660 total future conversions planned. The transition from office spaces to apartments accounts for 36.7% of the metro’s reuse conversions, with large projects scheduled for spots like 695 South Vermont Avenue in Koreatown, which is set to offer 255 apartment units.