Hot spots are all over map
FOR Travis and Leryn Davis, the moment couldn’t be better for moving up. The Davises -- with two kids crowding their 1,100-square-foot house -- have the good fortune to live in one of the region’s hottest neighborhoods.
As other real estate markets in Southern California plod, stagnate or worse, the Davises’ Encino ZIP Code continues to march right along, enjoying annual price percentage gains in the double digits.
Through the first four months of the year, single-family homes in the 91316 ZIP Code in Encino experienced an 18.2% jump in price over the same period last year when measured by cost per square foot, according to real estate tracker DataQuick Information Systems. Although most buyers focus on median sales prices, analysts say the price per square foot offers the most reliable snapshot of how a market is performing over a wide area.
Its sizable jump puts 91316 in second place for greatest increases among Southern California ZIP Codes with sales of 25 homes or more for that period. The Southern California median sales price through April for Los Angeles, Orange, Riverside, San Diego, Santa Barbara, San Bernardino and Ventura counties increased 2.2% over the same period last year, according to DataQuick.
So just what areas are hot this year, and which are not?
Despite a seeming jumble of neighborhoods seeing the most gains and steepest declines, DataQuick analyst John Karevoll said that so-called move-up areas are not doing terribly well. In general, it’s the low end and the very high end of the market that are enjoying the healthiest price gains. In addition, core areas -- older, more traditional neighborhoods near urban hubs -- are showing resiliency.
“Those traditional neighborhoods are doing well,” Karevoll said. “The areas that are receding the most are the ones that rose as part of a spillover effect during the surge from 2004 to 2006.”
The best-performing ZIP across Southern California has been 90265 in Malibu, where the median square-foot price of a single-family home was $1,016 -- up 19.4% -- for the first four months of the year. In that ZIP Code, homes go for more than three times the Southern California median of $341 per square foot. Other upscale areas performing well in the first four months of the year were 92660 in Newport Beach, up 15.1%, and 90069 in West Hollywood, up 13.7%. But the top 10 list also includes less affluent areas such as 90710 in Harbor City, which saw a 17.9% gain; 90061 in Los Angeles, up 14.1%; and 90201 in Bell, up 13.7%.
The worst-performing area was 93060 in Santa Paula, in Ventura County, where the median square-foot price of $349 through April was down more than 20% from the same four-month period in 2006. Another mid-price area, 91506 in Burbank, also fared poorly, down 15.8%.
Not every neighborhood is following a pattern, however. Pricier areas such as 90291 in Venice -- down 13.6% -- and 91207 in Ocean Beach, in San Diego County -- down 12.7% -- also saw steep declines at the beginning of the year.
The Davises listed their compact home (with a detached 300-square-foot office) on Yarmouth Avenue for $649,000 the Friday before Memorial Day. Within 10 days, they had received three bids close to the asking price.
“We’ve been very fortunate,” said Travis Davis, an actor and voice-over artist.
That’s putting it mildly. The Davises bought the three-bedroom, 1 1/2 -bathroom house a decade ago for $144,000. The equity they’ve amassed is helping them purchase a $1-million, 2,500-square-foot home closer to their children’s charter school in Woodland Hills. In that neighborhood, however, sellers were not faring quite so well, he said.
“We saw many houses that started $50,000 to $75,000 more than what they ended up selling for,” Davis said. “The house we are buying dropped $50,000 over six weeks.”
A familiar cycle
What will the rest of the year bring? As the market readjusts from the overheated activity of a few years ago to a more reasoned environment, prices in most areas will come down a few percentage points, Karevoll said. The downward trend will be most pronounced, he said, in outlying areas such as the Inland Empire. As other areas began to taper off a year ago, the Inland Empire continued to surge, but that’s begun to change in recent months.
Karevoll likened Southern California real estate to a train that is led by the neighborhoods that are most in demand.
“The market kind of retreats to these core areas when it starts to level off,” he said. “It never levels off at the peak. It will always go down a notch or two.”
That view is shared by Fran Sirota, a realty agent who has worked in the San Fernando Valley for more than 30 years.
“It’s nothing new,” Sirota said. “We have a cycle like this every eight or 10 years.”
In the $2-million-and-above market, Michele Blackmon, who runs Michele Blackmon Estates for Keller Williams Realty, notes that the richest Southern Californians have increased their income at a faster rate than middle- and working-class residents in recent years. The upper end of the market doesn’t necessarily correlate with what’s going on elsewhere, she said.
“These buyers have the money to pay cash, so they don’t worry about interest rates,” said Blackmon, who hopes to close sales this month on two homes on the Venice canals for a combined $6 million. “They find a place where they’d like to live, and they buy.”
Blackmon lives and works in the 90291 ZIP Code in Venice, which was among the worst performers in the first four months of the year. It’s a tremendously diverse area, where multimillion-dollar houses fronting the sand and the canals sit blocks away from a gang-troubled neighborhood filled with dingy apartment buildings and deteriorating homes. Even the less desirable streets are pricey when it comes to detached, single-family homes, and they tend to attract move-up buyers.
“The lower end is not moving as quickly,” Blackmon said. “Condo sales are down and those little fixers that developers buy. That’s bringing the prices down by square foot.”
Burbank 91506 is another area that seems to be suffering from the stuck-in-the-middle syndrome. Despite its proximity to Los Angeles and its appeal to people who work in the nearby studios and entertainment businesses, prices dropped nearly 16% on a square-foot basis in the first four months of the year.
Andrew Lane hopes to take advantage of what has been a trend toward dipping prices in Valencia, another frequent move-up destination. But the 44-year-old music producer and his wife, Monica, are moving from Atlanta, where their $330,000 home is considerably larger than what they are likely to get in Valencia for more than twice the cost. Median sale prices for the area’s two ZIP Codes -- 91354 and 91355 -- were down 4% and 13.1%, respectively, in April compared with last year at that time, and Lane is confident about getting good value.
“We plan to spend three to six months looking. We want to find the right house because we intend to stay there for some time,” he said. “The more you search, the more likely you are to find a hidden gem.”
Karevoll agrees that there is value to be had, as long as buyers can weather a potential short-term downturn. “Right now is a good time to stick to your knitting,” he said. “It’s not a good time to roll the dice.”
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