LOS ANGELES—Condo prices in Downtown Los Angeles are down 2% for the month of November, according to the latest Mark Co. pricing index report. In October, condo prices in the submarket hit record highs of $803 per square foot, thanks in large part the Metropolis development, which launched sales of the condos in its second tower the same month. It was the first time that condo prices in the market ever surpassed $800 per square foot. The 2% decrease brings condo prices down to $786 per square foot for new product, a year-over-year increase of 8%.

"I don't see any indication that Metropolis is not able to hold values or interest, although their sales seem to have slowed down recently," Erin Kennelly, senior director of research at the Mark Co., tells GlobeSt.com. In the report and interview from last month, Kennelly noted that the Metropolis was the driver of the increased condo prices. There are currently 622 new construction condo listings on the market, most of which are from the newly released Metropolis stock of 514 units. The new construction inventory is unchanged from the previous month, still up 99% year over year.

Resale condos, however, seem to be fairing better. According to the condo pricing index, resale condos are $640 per square foot, a 14% month-over-month increase. This is the first time in several months that resale condo product has had a better pricing increase than new product.  There are currently 98 active resale listings in the market, a 2.9-month inventory at the current sales pace, according to the report.

New construction condo prices have shown volatility over the past few months; however resale condo prices have been on a steady decline, falling by 7% last month and 4% the previous month. The available listings for the month decreased by one, which could be the cause of the 14% month-over-month increase, as well as the annual increase. "I think the volatility is a result of the large gap between the price of older resales selling for $500-$600 per square foot, and new construction prices at Metropolis of approximately $1,000 per square foot," says Kennelly. "This causes uncertainty among both buyers and sellers regarding the fair value of condominiums in Downtown Los Angeles."

Earlier this year, it looked like condo sales in the downtown market would be up 16% for the year, equating to a monthly increase of more than 1% and fueling condo development. Now, condo prices are only up 8% year over year. "The condominium market in downtown Los Angeles is cooling. As a result of several years of strong price appreciation, we are now bumping into limits of what people can afford," says Kennelly. "According to the California Association of Realtors, only 31% of households in the LA Metro Area can afford to purchase the median priced home. The additional inventory coming to Downtown may cause additional cooling, but inventory is not driving this cool down. There have only been 68 new condominiums completed in Downtown Los Angeles in the past 2 years, compared to thousands of new rental apartments."