A Beginner’s Guide to Buying a Home in Los Angeles

Kenneth Yang, Senior Relationship Manager, First Republic Bank
March 15, 2022

The second-most populous city in the nation behind New York City, Los Angeles, California continues to attract young professionals pursuing careers and an outstanding quality of life.

The Los Angeles metropolitan area boasts 75 miles of coastline, mild winters and a vibrant arts, culture and entertainment scene. And home prices reflect the area's appeal. The expansive Los Angeles touts the nation’s most expensive and exclusive real estate housing markets: the median home price in Los Angeles is over $900,000, much higher than the national median home value.

The confluence of high demand, low supply, rising prices and an exciting job market explains the upward motion of Los Angeles’ housing market trends.  

Ready to leap over the hurdles between you and your dream LA home? The following primer can help set up first-time homebuyers in the booming California housing market for success.

A seasoned agent will understand the ins and outs of the neighborhoods you want to pursue and be prepared to offer specific advice throughout the buying process.

Understand the geography

The expansive Los Angeles metro area encompasses numerous neighborhoods and several cities. Understanding the sprawl is important before putting down roots. In an expanse like LA, working in an area far from where you live means long commutes and potential headache. Ask yourself how you envisage your home reflecting your lifestyle:

  • Do you want a walkable neighborhood?
  • Do you want a bigger yard, and room for pets?
  • Do you need to be close to my kids’ school?
  • Do you want to swim or hike before work?

Los Angeles basks in 264 days of sunshine per year, on average. So it’s no surprise that real estate west of downtown and along the city’s beachy corridor is in high demand.

Finding your ideal commute in LA County: After you've zeroed in on a few homes during your house hunting process, aim to visit the property at different times of the day, as well as on the weekend. Visiting the property in the morning, in the afternoon and at night can give you a sense of traffic patterns and what it'd be like to really make the house your home.

Insider tips for first-time Los Angeles homebuyers

Homebuyers in an ultracompetitive market, such as Los Angeles, will want to garner every advantage they can in taking steps to buying a home, including:

Work with a lender before starting house hunting. Most sellers are unwilling to accept even the most attractive offer without a pre-approval letter from a well-regarded financial institution. In the Los Angeles-area, it’s not uncommon to be bidding against all-cash buyers. That means it is up to the buyer to secure solid financing that is unlikely to fall through during the settlement process. The best time to open a conversation with a lender is before you begin shopping for your home.

Get a preapproval letter. A preapproval letter further allows the buyer, seller, lender, and real estate agent to all be on the same page, financially speaking. As the buyer, you'll want to accurately set your expectations so that your real estate agent can narrow the search to homes that fall within the appropriate range.  

Save your 20% down payment. Remember, a 20% down payment is typically considered optimal to avoid having to take out private mortgage insurance (PMI). A borrower seeking a conventional loan with less than a 20% down payment is usually required to get PMI, which protects the lender in case the borrower is unable to pay their mortgage. The premium is most often added to the mortgage payment and can be difficult to cancel. In a hot market, a good rule of thumb is the larger the down payment, the more seriously the seller is likely to consider the bid. 

Recognize that in an ultracompetitive market like LA, some buyers will be paying in cash. Additionally, the likelihood of bidding wars and homes selling for more than the sticker price is high. 

Get closely acquainted with your real estate agentYour agent will be your tour guide through the city, zeroing in on the areas that best suit your needs and budget. A seasoned agent will understand the ins and outs of the neighborhoods you want to pursue and be prepared to offer specific advice throughout the buying process.

An LA realtor can also advise you regarding increased earthquake-related down-payment requirements for buildings constructed of brick, for example.

In the case of a condo, you'll want to ask your realtor whether the HOA is under litigation or whether the condo itself has brick foundations or soft story parking since obtaining financing can be difficult in these situations. 

Take a breath. A search can sometimes span several months, and it’s not uncommon for a first bid to be rejected, an important reality to remember as you navigate the competitive Los Angeles homebuying landscape.

In the end, shopping for a first home is an exciting proposition, but it’s not without its challenges, particularly in the high-demand Los Angeles area. Still, with a little forethought, planning and know-how, you may soon find the home of your dreams.

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