You Won’t Believe What It Costs To Live In Downtown LA

Proprietary Data Insights

Top Credit Services Stock Searches This Month

0 1 2
Rank Name Searches
#1 Visa 160,662
#2 Affirm Holdings 57,626
#3 Paypal Holdings 43,600
#4 Mastercard 12,948
#5 Ally Financial 11,499

Haves And Have Nots 

As more data rolls in, one thing about our economy continues to become more clear: Large swaths of the population are doing super well with money and large swaths of the population are struggling to get by. 

We’ll take an angle on the relatively well-off in a minute, but first more news that reinforces the reality that, even as housing prices come down and inflation (presumably) eases, quite a few households remain in a world of hurt. 

I’d Like To Finance My Groceries, Please

There’s lots of interest in those Buy Now, Pay Later (BNPL) programs, where, typically, you can split a purchase into four parts. Sometimes interest-free, sometimes not, BNPL tends to require an initial payment upfront followed by subsequent (usually) every other week payments. Some BNPL incarnations, such as Uplift, use traditional monthly payment arrangements over a longer timeframe. 

Interest from consumers, which is The Juice’s focus today, and interest from investors, as evidenced by Affirm Holdings (AFRM) generating the greatest number of searches among credit services stocks, second only to Visa (V), in our proprietary Trackstar database. (Learn more about Trackstar here). 

Source: Google Finance

Affirm stock has crashed for many reasons, but particularly because of fears over increased competition from big names, including another eyeball catcher in Trackstar, PayPal (PYPL)

There’s also concern that these companies will see an increasing number of consumer defaults, as more people in precarious financial situations have trouble making payments. 

Maybe we’re seeing the writing on the wall. 

First, there’s word from Lending Tree that 64% of consumers expressed concern in the last month over being able to afford groceries. That number pushes past 70% among Generation Z and millennials. Not a huge surprise, especially when you consider the cost of food at home has increased 13.5% year over year, as of this morning’s inflation report. (Overall inflation was up 8.3% annually, lower than last month’s number but greater than expectations).

Second, and super concerning: 

  • BNPL company Zip has experienced 95% growth in grocery purchases. More than half of the items Zip users finance are in the grocery or household category. 
  • Another BNPL player, Zilch, says groceries and dining out account for 38% of its transactions. 

The sentiment from these companies: We’re better than credit cards. You can budget out a purchase – even if it’s an everyday purchase such as groceries, dining out, or a cup of coffee (yes, people are BNPLing coffee!) – without being on the hook for 20% interest. 

So, everybody wins? We’re skeptical. However, it remains to be seen. 

One thing we do know. Some of the people who have money are spending it. 

Scroll with us for an extreme example.

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Housing

You Won’t Believe What It Costs To Live In Downtown LA

Key Takeaways:

  • It’s expensive enough to rent the typical apartment, but luxury units – forget about it
  • To afford these rents, you need to make serious bank.
  • The increased cost of home ownership continues to drive up the cost of renting. 

 

Okay, check this out – 

Rent rates

Source: Hope + Flower by Omni

That’s what it costs to rent in a new high-rise development in the heart of Downtown Los Angeles. And it’s representative of pretty much all new construction in DTLA. 

Citywide, the median rent on a two-bedroom in LA is $3,295, up 14% year-over-year. However, the downtown median is just over $4,000 with luxury buildings – obviously – fetching the most money. 

A 1,300 square foot two-bedroom with a den for $6,700. To afford this rent payment – meaning you will commit 30% of your gross pay to rent – you need to make more than $22,300 a month. That’s about $268,000 a year. 

But what do you get for that kind of money? 

Well, admittedly, you get a pretty swanky apartment: 

Image

With a cool kitchen and dining room: 

Image

And solid closet space:

Image

Not to mention an in-unit washer and dryer, plus a spacious balcony with a view:

Image

But you’re dropping like $7,000 a month. 

As buy-and-hold, we put every leftover dollar into the stock market, obsessed investors, sorry, we just can’t do it. 

The Bottom Line: It’s remarkable. Even as housing prices cool, led by declines in pricey markets such as Los Angeles, the cost to own remains or even becomes more expensive. Thanks, largely, to once again rising mortgage interest rates, hovering around 6%. 

Just think about it. 

Maybe you have a great job. You make more than $250,000 a year. You want to live in a big city like LA. But you either don’t have or can’t bear to part with the savings required to make a six-figure or thereabouts down payment to commence a mortgage. 

What are you going to do? You’re going to rent. And, in many cases, you’re going to rent a nice apartment. Because anything else would be slumming it, especially for somebody raking in a quarter of a million bucks a year. 

While this might not be you – or the penny pinchers here at The Juice – it does describe quite a few people running roughshod over this economy. As long as they exist, we’re going to have lots of people BNPLing groceries so they can feel more comfortable making their even relatively modest rent.

 

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