DTLA Condo Prices Dropping? Polaris Says No

LOS ANGELES—Last week, the Mark Co. produced a report showing that condo prices in Downtown Los Angeles dropped 13% year-over-year the month of January, but Polaris Pacific, another research and analytics platform with expertise in the Downtown Los Angeles condo market has research refuting the Mark Co.'s statistics. According to Rhonda Slavik, director of business development at Polaris Pacific, condo pricing in the Downtown Los Angeles market is on a steady year-over-year incline.

“When you really look at the core of Downtown, pricing has actually gone up year over year consistently,” she tells GlobeSt.com. “You really have to understand the specifics of the data to get an accurate picture, and I don't believe that they analyzed the data enough before making that statement. It is a nuanced situation to understand, and you see a higher spectrum of product coming online. Unless you are really looking at true comps and what is going on within a product type, it is really easy to put out information that [Erin Kennelly of the Mark Co.] interpreted incorrectly.”

Polaris' most recent data is for December 2015 versus the Mark Co. data for January 2016; however, the data shows the average sale price in 2014 at $607 per square foot for the month and December pricing hoping up to $653 per square foot on average for the month. Looking at new construction, condo pricing in December 2014 hit $868 per square foot, and dropped down to $811 per square foot in December 2015. Although there is an inconsistency in these numbers from the Mark Co. report from the same time, Slavik says the greater issue is the analysis of the data. “You have to compare product type to product type, and that is a key element to understanding the Downtown Los Angeles market,” she says. As an example, she says that when pulling condo comps, MLS will pull outside true downtown market from downtown adjacent neighborhoods, like City West and Pico Union.

Erin Kennelly, director of research at the Mark Co., also noted a growing delta between resale product and new construction product as one of his concerns, but Slavik says that there is always premium for new construction product. “If you look at the re-sales, they are trading in the $700s to $800s per square foot, consistently, and in this cycle, we have seen a 15% premium for new product over resale,” she adds. “If you add that increase to new product, you are right in line with where pricing should be.”

Over the past year, the Mark Co. monthly reports have shown the condo market to be incredibly volatile, with prices climbing one month and falling the next, but Slavik says that this is another case of misanalysis. “Technically, that is true. The challenge is that because there is so little inventory, you will have some months where only three units trade in a specific submarket,” she says. “It is very easy to have a 10% drop in pricing one month and a 30% increase in pricing the following month. Unfortunately, because there is so little trading, the month-to-month metrics can paint an entire market with really just a couple of comps in some months. That is what is difficult about sending out that information to the mass market, because it is very easy to look at it and see a lot of volatility in the market when really, there is not that much trading.”

Overall, Slavik wants to assure developers that condo prices are not plummeting in the downtown market, and actually that there continues to be a healthy demand and an undersupply of product. “There are only two projects currently under construction, Ten50 and Metropolis, that will come online this year and early next year, and then it is almost two years until anything else comes online,” she explains. “We think there is plenty of demand for more condo product and that the market is massively under supplied. We are very optimistic that the projects will launch and be incredibly successful.”

LOS ANGELES—Last week, the Mark Co. produced a report showing that condo prices in Downtown Los Angeles dropped 13% year-over-year the month of January, but Polaris Pacific, another research and analytics platform with expertise in the Downtown Los Angeles condo market has research refuting the Mark Co.'s statistics. According to Rhonda Slavik, director of business development at Polaris Pacific, condo pricing in the Downtown Los Angeles market is on a steady year-over-year incline.

“When you really look at the core of Downtown, pricing has actually gone up year over year consistently,” she tells GlobeSt.com. “You really have to understand the specifics of the data to get an accurate picture, and I don't believe that they analyzed the data enough before making that statement. It is a nuanced situation to understand, and you see a higher spectrum of product coming online. Unless you are really looking at true comps and what is going on within a product type, it is really easy to put out information that [Erin Kennelly of the Mark Co.] interpreted incorrectly.”

Polaris' most recent data is for December 2015 versus the Mark Co. data for January 2016; however, the data shows the average sale price in 2014 at $607 per square foot for the month and December pricing hoping up to $653 per square foot on average for the month. Looking at new construction, condo pricing in December 2014 hit $868 per square foot, and dropped down to $811 per square foot in December 2015. Although there is an inconsistency in these numbers from the Mark Co. report from the same time, Slavik says the greater issue is the analysis of the data. “You have to compare product type to product type, and that is a key element to understanding the Downtown Los Angeles market,” she says. As an example, she says that when pulling condo comps, MLS will pull outside true downtown market from downtown adjacent neighborhoods, like City West and Pico Union.

Erin Kennelly, director of research at the Mark Co., also noted a growing delta between resale product and new construction product as one of his concerns, but Slavik says that there is always premium for new construction product. “If you look at the re-sales, they are trading in the $700s to $800s per square foot, consistently, and in this cycle, we have seen a 15% premium for new product over resale,” she adds. “If you add that increase to new product, you are right in line with where pricing should be.”

Over the past year, the Mark Co. monthly reports have shown the condo market to be incredibly volatile, with prices climbing one month and falling the next, but Slavik says that this is another case of misanalysis. “Technically, that is true. The challenge is that because there is so little inventory, you will have some months where only three units trade in a specific submarket,” she says. “It is very easy to have a 10% drop in pricing one month and a 30% increase in pricing the following month. Unfortunately, because there is so little trading, the month-to-month metrics can paint an entire market with really just a couple of comps in some months. That is what is difficult about sending out that information to the mass market, because it is very easy to look at it and see a lot of volatility in the market when really, there is not that much trading.”

Overall, Slavik wants to assure developers that condo prices are not plummeting in the downtown market, and actually that there continues to be a healthy demand and an undersupply of product. “There are only two projects currently under construction, Ten50 and Metropolis, that will come online this year and early next year, and then it is almost two years until anything else comes online,” she explains. “We think there is plenty of demand for more condo product and that the market is massively under supplied. We are very optimistic that the projects will launch and be incredibly successful.”