Housing Sales Go Through the Roof
Bill Booth is frustrated. For months now, he’s been trying to buy a house in the San Gabriel Valley. “I just want to get on the merry-go-round,” says the 30-year-old marketing manager. “I want to begin to establish some equity. I want the tax benefits.”
But whenever he gets ready to put his money down, the property just seems to disappear--like a desert mirage.
Take a house that interested him in April. It was a two-bedroom bungalow in Altadena, selling for about $200,000. “The day after I looked at it, I called the broker with a couple of questions,” said Booth, who works for an Eagle Rock computer software company and rents an apartment in Pasadena. “It was already sold. The house had gotten seven bids that day, four of them above the asking price.”
It’s a familiar story among real estate brokers in the San Gabriel Valley, where old hands are describing the recent market as the hottest in memory. According to the experts, prices are going up in the region at a sizzling pace; foreign investors are racing local buyers to put their money down, and desirable homes are being snapped up like bait in a tidal pool.
“It’s almost beyond our comprehension to keep up with the prices,” said William Podley, president of the Pasadena-based Podley Caughey Associates. “The market’s as strong as I’ve seen it in 15 years in the business.”
The buying spree is going on all over Southern California, driven by relatively low interest rates and a virile economy. But the San Gabriel Valley offers a peculiar combination of circumstances that is putting an extra squeeze on available housing, local experts say.
Among these are a burgeoning slow-growth movement, the availability of comparative housing bargains and the introduction into the market of Asian investment capital, which is creating what one real estate broker described as “a silent inflation situation not necessarily reflected in the (consumer price index).”
“We’ve been hearing stories about people walking in with suitcases full of money and paying cash for $300,000 or $400,000 homes,” said Alex Turner, president of the San Gabriel Valley Board of Realtors. “That’s no longer fiction. It’s happening.”
At the same time, brokers say, the San Gabriel Valley economy is thriving, with new businesses opening in the eastern and western ends of the region, and affordable housing is becoming increasingly scarce on the Westside.
Some also cite the supply-and-demand dynamics created by a general scarcity in the San Gabriel Valley of two-bedroom “starter” homes in the $200,000 range, like the Altadena house that slipped out of Booth’s grasp.
“It’s very difficult to find anything under $200,000, which means that all the other price categories get pushed up,” said Podley. “People are pulling large chunks of equity out of those moderate-priced homes and making jumps to twice the value, from $200,000 to $400,000.”
Prices seem to be rising rapidly all over the region. From Pasadena to the Diamond Bar-Walnut area, brokers report price increases of 20% or more in the past year.
There are dozens of examples. “I sold a three-bedroom house with a pool last year for $122,000,” said Phyllis Papen, broker from Diamond Bar Realty World. “The same property would go for about $160,000 today.”
Sale Precedes Listing
Papen added that houses in her area--near the hub of Riverside, San Bernardino and Los Angeles counties--are frequently sold before they reach the area’s multiple listings book, which usually lists available properties within two weeks of their introduction to the market.
“There are a lot of relatively new homes here,” contended Papen. “You get a lot of house for the dollar.”
In some affluent areas on the western end of the San Gabriel Valley, where there is easy access to downtown Los Angeles, prices have appreciated by up to 40% in a year, said Berton M. Tibbett, president of the Pasadena-based Tibbett Group, a real estate firm. “We’ve got commuters moving back to Pasadena from the east, because they’ve been hitting a wall in Azusa,” he said. “Rather than fight the traffic every day, they’re moving back.”
Podley tells of a three-bedroom Spanish-style Pasadena house on which he brokered a sale for $152,000 in November, 1985. “Nine months later, the new owner sold it for $190,000,” Podley said. “It was just resold for $290,000. In a little less than two years, the price went up $100,000. That’s pretty typical.”
Turner’s organization, whose members work in a wide swath of the San Gabriel Valley, from Covina to San Gabriel, reports that the average selling price for a house is now $143,000. That includes anything from a townhouse to a multi-bedroom estate, said a spokesman for the group. Two years ago, the average was $122,000.
Though the buying spree appears to extend across the San Gabriel Valley, there are some hot spots. Some parts of the greater Pasadena area, for example, with their tile-roofed Spanish-style houses on leafy plots, are getting a spillover of upscale buyers from the Westside. “We looked in Santa Monica,” said financial planner David Henney, who just clinched a deal for a $650,000 home near Caltech. “For $500,000 or $600,000, you could, at best, buy yourself an empty lot.”
Magnet for Asians
At the same time, Monterey Park and adjoining cities, recent targets of Asian migration, are drawing Asian investors. Asians have discovered real estate in a big way, says Monterey Park broker Allen Co. “A lot of people are realizing that it’s a good investment, not only because you’re getting yourself a shelter, but also because you’re getting appreciation on your capital investment.”
American monetary policy has added to the incentives, Co said. “The dollar, compared to the Japanese yen or the Taiwanese dollar, has depreciated anywhere from 25% to 35% in the past year,” he said. “That means your buying power increases by 25% to 35% in the United States.”
While the western end of the San Gabriel Valley draws Asian investors and upscale home buyers, the eastern communities draw commuters attracted by the area’s tri-county location, and mid-San Gabriel Valley cities draw bargain-hunters.
Profitable Direction
“We’ve got here what the Germans called drang nach osten --a ‘push to the East,’ ” contends Turner. “The theory goes, ‘Well, dear, we can sell our house (on the Westside), buy an equivalent house, and have 100 grand in the bank. All we have to do is move 10 miles east.’ ” Turner says that, in some cases, the equivalent of a $400,000 house on the Westside can be found in his area (the central part of the valley) for $200,000.
“It’s been a fact of life for many years,” he said.
Although home buyers snap up most of the available houses, builders are scouring the area for oversized lots, local city officials report. In Arcadia, for example, former chicken farms with two or three houses are being converted to six-house cul de sacs. So intense has been the expansion there that the city just passed a restrictive new building code to stop builders from putting big homes on small plots.
“We had 35-foot houses going onto lots as narrow as 60 feet,” said Planning Director Bill Woolard.
Supply and Demand
No one is certain what effect slow-growth activities in the area have on buying. But some observers contend that moves by some cities to put caps on residential development must contribute to the supply-and-demand pressures. “It goes back to ‘Economics 1-A,’ ” said Pasadena Development Director William Reynolds. “Put an artificial limit on supply, and you get certain results.”
Whatever the root causes of the phenomenon, buyers are feeling the pressure. “There doesn’t seem to be any slackening in demand,” says Podley. “People are saying, ‘We don’t like the smog out here, but everything else about the area is wonderful.’ ”
Everything is wonderful, that is, but the limited supply of housing, suggests Bill Booth. “It’s frustrating,” says the youthful marketing manager. “I can’t even enter the market.”
