The Case for a Playa Vista Real Estate Market Correction (Part 1)

The possibility of a real estate market crash or significant correction has been debated for years. Many believe housing is overvalued given current economic conditions. Memories of the Great Recession, though driven by different factors than exist today, still linger. Could it happen again?

For this article, a “correction” is defined as a 20% drop in median values over two years. Here, I outline a scenario in which Playa Vista’s median value could fall from about $1.43M to $1.14M between Q4 2025 and Q4 2027. This is not necessarily my personal forecast, but one plausible outcome. A counterargument will follow next month.

Affordability Challenges

The biggest driver of a potential correction is poor affordability and diminished investor appetite due to high costs. Rising interest rates, HOA dues, and insurance premiums have eroded buying power. Over the past three years, average rates jumped from the low 3% range to the high 6% range. On a $1.4M home with 20% down, a 3.5% rate increase (3.25% to 6.75%) raises the payment by about $2,390/month, while early principal reduction is roughly half what it would be at the lower rate. Buyers in 2025 pay 50% more each month than in early 2022 while building less equity. Playa Vista Parks and Landscape HOA dues rose nearly 23% during this time, with individual HOAs and insurance also increasing. With these costs on the rise, renting or living in less expensive areas has become more attractive.

Supply Increases

While, during this time, supply has remained relatively low, in large part to owners being locked in to their pre-2022 low rates, by the summer of 2025, active inventory has increased approximately 25% year over year, creating a more competitive environment for sellers and more options and less urgency for would-be buyers. While financial distress is minimal and owners with low rates may continue to hold onto their properties when they move, and sometimes cash flow by renting them out, many homeowners, including existing landlords who are no longer in the black, will be motivated to sell below peak pricing. This creates new comps, lowering the bar for future appraisals and new asking prices.

Employment Loss and Uncertainty is Shrinking the Demand Pool
Many tech and entertainment jobs, which are key buyer segments in Playa Vista, are experiencing layoffs. In entertainment, on-location shoot days in Q2 2025 fell 6.2% year-over-year and are 32.5% below the five-year average (L.A. Times). Over the past decade, local production dropped nearly 40% (Washington Post), cutting jobs for talent, crew, and support staff. Additionally, a FilmLA study finds California’s share of qualified projects has fallen from 23% in 2021 to 18% in 2023.

The tech job market has also struggled in the once-thriving tech hub dubbed “Silicon Beach.” Many local positions have been eliminated in layoffs by Activision, Google, and others. Reduced venture capital has caused a number of tech start-ups to pause hiring or close altogether. Cyclical uncertainty and the rise of artificial intelligence are causing companies to invest in fewer entry level roles. The lack of confidence by major national tenants in keeping existing or investing in more space, including Meta’s recent decision to attempt to sublease of half of their Playa Vista office space, is reflected by Playa Vista’s office availability, which in 2024 was as high as 37%. If major employers continue to reduce headcount or leave L.A., it would hurt buyer demand for homes in tech-focused, lifestyle communities like Playa Vista.

Real Estate is Cyclical

Several years ago, property values were heading towards a plateau following a multi-year appreciation cycle. Then the pandemic arrived and changed the nature of work from home options and artificially depressed interest rates for two years, extending and heightening the trajectory of the cycle. Real estate values declined in the early ‘90’s, the late ‘00’s, and we are now about 15 years past the last extended “down” portion of the cycle. If you zoom out, it would be consistent with past cycles to see a market than went up by over 100% since 2011 decline 20% or more before stabilizing, even when very few owners, who are psychologically attached to peak prices, are forced to sell.

Final Thoughts

While we might not be heading for a “crash”, a correction with minimal distress, resulting in a significant decline in housing values could be beginning. Life changes result in people needing to move and sell. Anyone who has owned property in Playa Vista for over 10 years will still have significant equity gains, even leveraged multiples of what they put down to buy their homes, and can afford to do so. Once incomes catch up to affordability, which could take some time and require policy decisions to allow for borrowing costs to decline, demand will begin to exceed supply and values will go back up.