I at the moment reside in Los Angeles, for higher or worse. Sure, there’s crime. Sure, there’s a homeless drawback. 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 economic 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, house to a few of the most dear firms 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 overall 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 rely means a smaller GDP per capita. We will see this once 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 economic 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 economic system and job market. The LA metropolitan space’s job market has barely damaged by way of its 2019 file:
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 schooling and well being providers.
This shouldn’t come as a shock if you happen to’ve consumed any headlines concerning the California exodus. Take a take a look at this dialogue within the BiggerPockets boards a few 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 firms than Texas or New York (57 firms, in comparison with Texas and New York, which each had 52). Nevertheless, the overwhelming majority of those firms 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 Seaside)
- Reside Nation Leisure (in Beverly Hills)
- Edison Worldwide (in Rosemead)
- Farmers Insurance coverage (in Woodland Hills)
- Pacific Life (in Newport Seaside)
- Chipotle (in Newport Seaside)
- A-Mark Valuable Metals (in El Segundo)
- Skechers (in Manhattan Seaside)
Silicon Valley is house 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 preserve Silicon Valley as a thriving economic 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 line with a current research printed by Otis Faculty of Artwork and Design, employment within the leisure trade continues to be beneath its 2022 peak and should not attain this peak once more anytime quickly. However employment within the arts has appeared to stabilize for probably the most half (a minimum of for now, it has stopped shrinking).
However why isn’t it worse, given you may produce content material from just about wherever on the planet? It’s probably as a result of massive expertise base— the similar purpose many tech firms have remained headquartered in Silicon Valley). For now, Los Angeles continues to be a network-affected hub of leisure (and exported tradition).
So no, the Los Angeles economic system isn’t in a Detroit-style doom spiral of employment loss. At the very least, not so long as creatives need to reside there. However a minimum of 50 firms 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 driving 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 an excellent place to reside if you happen to’re a renter (on account of favorable tenant legal guidelines) or if you happen to occupy your major residence (on account of favorable property tax legal guidelines), given you may truly afford housing there. However it’s arguably one of many worst locations to be a enterprise proprietor except your online business is reliant on the native leisure expertise drive or wants year-round good climate (otherwise you’re a enterprise proprietor who loves residing in Southern California and can proceed to reside and work there, it doesn’t matter what).
Actual Property Worth Appreciation in Los Angeles
Let’s now take a take a look at the primary purpose 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 could be very unfriendly to new development. Builders should bounce by way of many hurdles and years of allowing to construct new residences.
So long as folks proceed to demand housing and provide is tough 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 house 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. If you happen to hover over a ZIP code, you’ll get extra data as nicely:
For these unfamiliar with Los Angeles, simply know that the darker ZIP codes (indicating increased value progress) are principally across the ocean or the hills.
Ought to You Spend money on Los Angeles?
There are actually simpler markets to put money into, with decrease obstacles to entry, landlord-friendly legal guidelines, extra progress, and in some markets, even increased appreciation (see this pink state versus blue state breakdown I carried out for more information).
I need to repeat: If we’re simply wanting on the share progress of the median value, sure pink state metros have overwhelmed the Los Angeles metro over a 20-year interval. I’ll reuse a map I beforehand printed to additional emphasize the purpose:
Worth is a operate of provide and demand. Los Angeles will proceed to have restricted provide. However demand for pink state metros seems to be rising at such a better charge 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 frame.
For all of the headwinds I’ve identified, I believe the golden period of Los Angeles residential actual property appreciation is behind us, with one large, obtrusive, millionaire-making exception: world-class neighborhoods.
Los Angeles Is a Hyperlocal Recreation
The metro nonetheless has arguably the most effective year-round climate on Earth (except you want a bit of extra humidity, wherein case you’ll love San Diego, otherwise you favor a barely cooler local weather, wherein case you’ll love the Bay Space). And LA continues to be one of many world’s cultural scorching spots as America’s epicenter of movie and music.
Folks can pay loads of cash to reside right here, particularly in a pleasant space with low crime, good colleges, and shut entry to fashionable eating places and outside facilities just like the hills or the ocean. There aren’t too many neighborhoods with all these qualities relative to the overall housing stock in LA. It’s no shock that they recognize in worth probably the most.
I’m calling these “world-class” areas (“luxurious” areas additionally works), as they’ve a few of the biggest combos of qualities you discover in America (if you happen to consider climate, care about being close to the ocean, and recognize 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 house value is about $1 million. And that’s simply the median. There actually aren’t any properties in respectable neighborhoods price lower than $1 million.
If you happen to’re buying a house right here, you’re probably already within the high 1%. If that’s the case, you may afford to beat the large regulatory hurdles of investing in Los Angeles.
This leads me to the conclusion: Is investing in Los Angeles price it? It is dependent upon what sort of investor you’re. 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 in case you are an lively and native fix-and-flip or BRRRR investor, you’ll have to preserve 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 total 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 business. Let me know within the feedback if you happen to’d like an evaluation of Los Angeles CRE.
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