I at present reside in Los Angeles, for higher or worse. Sure, there’s crime. Sure, there’s a homeless downside. And sure, it’s unfriendly to enterprise, even the movie enterprise.
However the meals is world-class, the climate is unbeatable, the tradition is numerous, the seaside is close by, and so are the mountains. As one developer I met put it: “Los Angeles is the most-amenitied place in America.”
As of 2024, California is the world’s fourth-largest financial system, with a GDP of $4.1 trillion, forward of Texas ($2.7 trillion) and New York ($2.3 trillion). However how a lot of this GDP is from the Bay Space and Silicon Valley, residence to among the most useful corporations on Earth? We should draw a distinction between the economies of every metro and see the place Los Angeles falls in line.
Evaluating LA to Silicon Valley
The 2023 GDP of the Bay Space (the San Francisco-Oakland-Berkeley, CA MSA) was about $779 billion in 2023, and Silicon Valley (the San Jose-Sunnyvale-Santa Clara, CA MSA) was about $423 billion. If it’s honest to mix these two markets, the final Bay Space-Silicon Valley market had a GDP of about $1.2 trillion, with a mixed inhabitants of 6.7 million.
Comparatively, the Los Angeles MSA (Los Angeles County and Orange County) had a GDP of about $1.3 trillion in 2023 with a inhabitants of 13 million; an analogous GDP with a better inhabitants depend means a smaller GDP per capita. We will see this after we take a look at GDP per capita on the county stage.
The primary 4 counties on this bar chart make up the Bay Space and Silicon Valley. You’ll be able to see every county has a better GDP per capita than Los Angeles (and its neighboring county, Orange).
In conclusion, the Bay Space and Silicon Valley have a better GDP per capita than Los Angeles, indicating the native financial system is extra productive on a per-person foundation in Silicon Valley than in LA.
Los Angeles’s Economic system
Now, let’s do a deep dive into Los Angeles’s financial system and job market. The LA metropolitan space’s job market has barely damaged via its 2019 document:
Let’s dive deeper into why by taking a look at job occupations:
Just about each job class has shrunk in comparison with their 2019 ranges, besides for personal training and well being companies.
This shouldn’t come as a shock for those who’ve consumed any headlines concerning the California exodus. Take a take a look at this dialogue within the BiggerPockets boards a couple of research predicting job losses. (It was posted 9 years in the past, and extra or much less obtained it proper.)
Digging deeper, I found that as of 2024, California has extra Fortune 500 corporations than Texas or New York (57 corporations, in comparison with Texas and New York, which each had 52). Nevertheless, the overwhelming majority of those corporations are within the Bay Space and Silicon Valley. Solely the next are based mostly in Los Angeles or Orange County:
- Walt Disney (in Burbank)
- Molina Healthcare (in Lengthy Seashore)
- Stay Nation Leisure (in Beverly Hills)
- Edison Worldwide (in Rosemead)
- Farmers Insurance coverage (in Woodland Hills)
- Pacific Life (in Newport Seashore)
- Chipotle (in Newport Seashore)
- A-Mark Treasured Metals (in El Segundo)
- Skechers (in Manhattan Seashore)
Silicon Valley is residence to nearly all of Fortune 500 firm headquarters, with 46, in comparison with Los Angeles and Orange County’s 9 (the remaining two are in Ventura and Riverside County). The present increase in synthetic intelligence (AI) expertise is more likely to hold Silicon Valley as a thriving financial system. And even when AI tech is a bubble that pops, San Francisco has all the time been a boom-and-bust market that bounces again.
However what about Hollywood? In response to a latest research revealed by Otis Faculty of Artwork and Design, employment within the leisure business remains to be under its 2022 peak and should not attain this peak once more anytime quickly. However employment within the arts has appeared to stabilize for essentially the most half (not less than for now, it has stopped shrinking).
However why isn’t it worse, given you may produce content material from nearly anyplace on the planet? It’s seemingly as a result of giant expertise base— the identical cause many tech corporations have remained headquartered in Silicon Valley). For now, Los Angeles remains to be a network-affected hub of leisure (and exported tradition).
So no, the Los Angeles financial system shouldn’t be in a Detroit-style doom spiral of employment loss. Not less than, not so long as creatives need to reside there. However not less than 50 corporations have relocated their HQs away from Los Angeles from 2018-2023 as a result of unfavorable enterprise local weather.
Because of this, I don’t assume Los Angeles is using a rising tide like Austin, Texas; Dallas, Nashville, Tennessee; Phoenix, Raleigh, North Carolina; or Boise, Idaho. I do assume LA as a complete is experiencing financial headwinds that can decelerate the appreciation of its actual property.
Los Angeles seems to be a very good place to reside for those who’re a renter (as a consequence of favorable tenant legal guidelines) or for those who occupy your main residence (as a consequence of favorable property tax legal guidelines), given you may really afford housing there. But it surely’s arguably one of many worst locations to be a enterprise proprietor except what you are promoting is reliant on the native leisure expertise drive or wants year-round excellent climate (otherwise you’re a enterprise proprietor who loves dwelling in Southern California and can proceed to reside and work there, it doesn’t matter what).
Actual Property Value Appreciation in Los Angeles
Let’s now take a take a look at the primary cause anybody considers investing in Los Angeles: value appreciation.
Los Angeles is geographically constrained between the ocean and the mountains; there may be solely a lot you may construct. As well as, the county may be very unfriendly to new building. Builders should leap via many hurdles and years of allowing to construct new residences.
So long as individuals proceed to demand housing and provide is difficult to create, costs will proceed to be pushed up. However like every part in actual property, location issues. Sure neighborhoods are extra fascinating than others, particularly as you get nearer to the seaside or the hills.
Pasadena and South Pasadena are exceptions. These neighborhoods are usually not close to the ocean and never as near the hills as different surrounding neighborhoods, however Caltech and NASA’s Jet Propulsion Lab make their residence right here, undoubtedly pushing up incomes, rents, and costs.
I’ve mapped every ZIP code in Los Angeles and Orange County by their one-year CAGR. For those who hover over a ZIP code, you’ll get extra information as nicely:
For these unfamiliar with Los Angeles, simply know that the darker ZIP codes (indicating increased value development) are principally across the ocean or the hills.
Ought to You Put money into Los Angeles?
There are actually simpler markets to put money into, with decrease obstacles to entry, landlord-friendly legal guidelines, extra development, and in some markets, even increased appreciation (see this purple state versus blue state breakdown I carried out for more information).
I need to repeat: If we’re simply trying on the proportion development of the median value, sure purple state metros have crushed the Los Angeles metro over a 20-year interval. I’ll reuse a map I beforehand revealed to additional emphasize the purpose:
Value is a operate of provide and demand. Los Angeles will proceed to have restricted provide. However demand for purple state metros seems to be rising at such a better price than LA that costs have been pushed up extra, no matter how a lot room for provide there may be. You’ll be able to solely construct a lot in a time period.
For all of the headwinds I’ve identified, I feel the golden period of Los Angeles residential actual property appreciation is behind us, with one big, obvious, millionaire-making exception: world-class neighborhoods.
Los Angeles Is a Hyperlocal Sport
The metro nonetheless has arguably one of the best year-round climate on Earth (except you want just a little extra humidity, during which case you’ll love San Diego, otherwise you want a barely cooler local weather, during which case you’ll love the Bay Space). And LA remains to be one of many world’s cultural sizzling spots as America’s epicenter of movie and music.
Individuals can pay quite a bit of cash to reside right here, particularly in a pleasant space with low crime, good colleges, and shut entry to modern eating places and out of doors facilities just like the hills or the ocean. There aren’t too many neighborhoods with all these qualities relative to the entire housing stock in LA. It’s no shock that they respect in worth essentially the most.
I’m calling these “world-class” places (“luxurious” places additionally works), as they’ve among the biggest mixtures of qualities you discover in America (for those who consider climate, care about being close to the ocean, and respect racial and cultural variety, which not all neighborhoods with good colleges have).
Nevertheless, the barrier to entry in LA is extraordinarily excessive. On the time of writing, in 2025, the median residence value is about $1 million. And that’s simply the median. There actually aren’t any properties in first rate neighborhoods value lower than $1 million.
For those who’re buying a house right here, you might be seemingly already within the prime 1%. If that’s the case, you may afford to beat the huge regulatory hurdles of investing in Los Angeles.
This leads me to the conclusion: Is investing in Los Angeles value it? It is determined by what sort of investor you might be. The straightforward buy-and-hold investor is probably going higher off elsewhere, except you safe a property in an A-class neighborhood (or an A-class property in a B-class neighborhood). However if you’re an energetic and native fix-and-flip or BRRRR investor, you’ll have to hold a detailed eye on your hyperlocal neighborhood market.
Fortunes are nonetheless being made with Los Angeles actual property. I’m simply not satisfied the rewards outweigh the dangers relative to different markets as a result of general financial headwinds—except you put money into one of many world-class neighborhoods right here.
NOTE: This text was written from the residential actual property perspective, not industrial. Let me know within the feedback for those who’d like an evaluation of Los Angeles CRE.
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