$500,000 question
HALF-a-million dollars doesn’t buy what it used to.
Prospective buyers looking in that ballpark a decade ago were a semi-exclusive group with their pick of the best Los Angeles County neighborhoods and a huge inventory of lovely, single-family homes.
Nowadays, $500,000 is right around the median price of a home in the county -- and buyers in that range know all too well that the middle of the road is not an easy place to be. In many neighborhoods, it buys only a starter home or condominium, and the competition for those properties is strong.
“There’s more demand in the mid-market and entry market than there is in the prestige or move-up markets,” said DataQuick analyst John Karevoll.
Richard and Funmi McFalls are among those who are engaged in the ongoing scramble for homes priced around the half-million mark.
The thirtysomething couple, renters in Silver Lake, have been eyeing the market for more than a year, crunching the numbers again and again, trying to figure out how they’ll afford a midrange house. Just about everything below the median, Funmi said, is either too far away from their jobs -- she works as an administrative assistant in Century City and he does marketing for a music distribution company in Burbank -- or unsuitable because it’s too small, it’s in crummy shape or the neighborhood is unsafe.
“It’s difficult for people like us, who are at the median level, to find something decent,” Funmi said.
Listings often tell only part of the story. A recent sampling offers a glimpse of what’s out there: $499,000 for a one-bedroom, one-bath condo in Rancho Park; $499,000 for a two-bedroom, one-bath home in North Hollywood; $499,000 for a two-bedroom, one-bath home near Silver Lake; $495,000 for a two-bedroom California bungalow in Eagle Rock; $490,000 for a three-bedroom, one-bath house in Montebello.
The home near Silver Lake, for example, would seem to be a good fit for the McFalls. But it is on the eastern side of the Golden State Freeway, nowhere near the shops, restaurants and culture that have made Silver Lake a favored address for young creative types and professionals. The charming cottage sits in a densely populated neighborhood where single-family homes and gritty, low-rent apartment buildings are in equal supply.
Still, the agent for the Silver Lake house, Mona Midani of Regal Estates & Properties, said interest picked up considerably once the owner lowered the asking price from $525,000 to $499,000.
“It’s not an out-of-the-way location,” Midani said, “and it’s a neighborhood that slowly and surely is on its way up.”
Perhaps, but not soon enough for the McFalls.
On a recent Sunday, they were among a steady stream of people checking out a compact, two-bedroom house on an attractive street lined with mature magnolia trees in Inglewood, near where Richard grew up.
Although it had been spruced up, the 82-year-old home was a bit worn, the bedrooms were small and the outside was painted an arresting shade of red approaching the color of pomegranate juice. The asking price for the 1,080-square-foot home was $485,000.
The McFalls were not among those making an offer, but Crosby Lanham of ERA/Marina Bay Realty Group, the listing agent, said that two open houses had yielded three bids on the Inglewood home.
“It’s a good value when you compare what’s available in this price range,” Lanham said.
The McFalls agreed that the home rivaled what they’d seen in Silver Lake, Glendale and a few other communities, but they weren’t sold on it. Nonetheless, Richard said, he and his wife are getting increasingly antsy to become first-time homeowners, having seen prices rise by about 20% in the last year.
“It doesn’t make sense to wait much longer,” he said. “A year ago, we thought we’d wait, but prices have just continued to go up. We’re not counting on a decline now.”
Most real estate experts are predicting a letup in the rate of appreciation over the next 12 months, but few believe home prices will dip during that time.
“We expect the appreciation rate to come down to 10% by spring, but it’s very unlikely price levels will be lower,” Karevoll said. “The price gains that have happened so far are here to stay.”
With prices rising so rapidly, a lot of buyers who started off looking for houses are reluctantly shifting to the condominium market, real estate agents say. The advantages are more square footage per dollar and the option of living in a more desirable neighborhood.
The same day as the Inglewood showing, Courtney Macker was across town, pulling chocolate chip cookies out of the oven in preparation for an open house at her Rancho Park condominium. The real estate agent was selling her one-bedroom unit, which is on the second floor of a six-unit, midcentury building on a leafy street just a stone’s throw from Fox Studios.
The condo has a modernized kitchen and an open layout that makes it seem larger than its roughly 1,000 square feet. Even on a gray day, it is warmed with natural light from large picture windows on two sides. The living room looks out onto a broad jacaranda tree. Asking price: $499,000.
“It’s a one-bedroom, and that makes it a little tougher to sell, but we think it’s well priced,” Macker said. “This is a neighborhood of million-dollar homes. Even some of the condominium units sell for more than $1 million.”
Few homes in Eagle Rock fetch anywhere near that price, but a recent listing for a two-bedroom California bungalow still drew a lot of attention for its $495,000 price tag in an L.A. community where the median price of a home sold in September was $640,000. Perched high above the street with concrete steps leading to a porch that affords views of the surrounding neighborhood, the two-bedroom home contains just 744 square feet of living space. There’s ample room to add on, but the steep angle of the property will make building costly.
“In this price range, you are probably not going to find anything larger than 1,000 square feet in a neighborhood like Eagle Rock,” said Fred Guapo, the Coldwell Banker listing agent.
One visitor to the Eagle Rock house, Connie Velazquez, knows that all too well. Living solo since a divorce, the Echo Park renter hoped to find a place to buy nearby. But she’s found herself priced out of once-affordable Echo Park and has reluctantly expanded her search.
Velazquez liked the character of the 1920s-era house, with its wood floors, built-in cabinetry and overhanging eaves.
“Put some paint on it, clean it up and it’s a beautiful home,” she said.
A parent-education advisor for a local school district, Velazquez said even this small house would tax her ability to cover expenses after monthly mortgage payments.
She’s not alone. The California Assn. of Realtors estimates that today only 13% of L.A. County households can afford a median-priced home.
“It’s a shame what’s happened in L.A.,” she said. “You find you can’t get into a home.”
