Even the ‘Elite’ Can’t Buy in ‘Fantasyland’ : Annual Salary of $75,000 Isn’t Enough
You’re a member of Los Angeles County’s elite, among the 11% of households that earned at least $75,000 in 1988. Your career is on the rise and you’re ready to buy your first home. You’re looking for a prestige location, a good neighborhood, clean air and a relatively short commute to work. You’re looking on the Westside.
But unless you get a raise soon, you’re living in Fantasyland.
Repeat-Buyer Market
Economists and real estate brokers say the area is almost completely closed now to first-time buyers. They refer to the Westside almost exclusively as a repeat-buyer market, a place where only those who have built up enough equity in another home can afford to shop, although mortgage payments are high enough to discourage some homeowners from trading up.
A family with $100,000 in equity in their home shopping for a modest three-bedroom Santa Monica house could easily spend $450,000. The estimated $3,300 monthly mortgage, tax and insurance payments would require an annual income of nearly $120,000.
“What you’re really talking about on the Westside is an extremely exclusive real estate market,” said Joel Singer, the chief economist for the California Assn. of Realtors. “The main access point into that market for most people is previous gains in real estate. The prices today are just too high for most others.”
The others include people like Jim and Michael Padden, brothers in Santa Monica who have been looking to buy a house or a duplex on the Westside. Between the brothers and Jim’s wife, they earn nearly $150,000 a year, but since they began looking in 1988, they’ve seen prices rise more than $100,000 for properties “you wouldn’t even consider renting,” Jim Padden said.
Their house-hunting tale is typical of people who have looked at Westside real estate. The Paddens started looking in Santa Monica, their first choice, and quickly realized that it was out of their reach. Then they moved their house hunt to neighboring communities, and were amazed at prices in once-affordable areas like Westchester and Mar Vista. Then they began looking in El Segundo.
Today, their search is on hold.
‘It’s Crazy’
“It’s like running on a treadmill,” Jim Padden said. “The prices are moving so fast that you can’t catch up. We’d see places and I’d say to myself, they want $350,000 for that! And then six months pass and you find out that the same place sold for $400,000. It’s crazy.
“It’s depressing because you end up thinking that you’ll never be able to make enough money to afford one of these places. It’s not like we’re trying to buy a place in Beverly Hills.”
Although they realize that they can afford nice homes in nearby communities in the South Bay and in parts of the San Fernando Valley, the Paddens have been holding out for a Westside property because of its central location and easy access to their jobs.
“We’re from here and after living on the Westside, with the weather, nice neighborhoods, the shops, the restaurants and the ease of getting to work, it’s hard to give it up,” Michael said. “I’m willing to pay a lot more money to get a lot less house to live where I want to live.”
A Very Small House
Households earning $90,000, three times the median income in Los Angeles County, are now often limited to a very small house, a condo, a major fixer-upper, a probate sale or “something nestled under the freeway,” according to one Westside real estate agent.
Prospective Westside home buyers are helpless onlookers in the endless battle between supply and demand. According to economists, the limited amount of land available for new home construction in the Westside has increased the number of buyers bidding on available housing.
For people like the Paddens, who grew up in West Los Angeles, the surging home prices are particularly disappointing. They say that they are being priced out of the neighborhoods where they were raised.
‘They Were Dumps’
“The most frustrating thing is the realization that you may never be able to do it,” Michael Padden said. “Some of the places we could afford, but they were dumps. And the longer you wait, the more the prices go up.”
His brother said that after a while, soaring prices “reach a point of diminishing return” where house shoppers wonder whether it’s worth spending in excess of $400,000 for a place that they don’t really want.
Both brothers live in rent-controlled apartments in Santa Monica. Today they’re wondering whether they are going to have to stay in them.
“You end up saving all of your money and all you can afford is a 900-square-foot house with one bathroom,” Jim Padden said. “You just wake up one day and you realize that you’ve been squeezed out of your neighborhood.”
