Westside Home Sellers Get a Dose of Reality : Real estate: Soft market has owners reducing prices, enduring long waits. But don't break out the hankies.

By KENNETH J. GARCIA

Oct. 7, 1990 12 AM PT

TIMES STAFF WRITER

No more long lines of wild-eyed clients writing checks on the sidewalk. No more open-ended bidding wars. No more weekend frenzies involving capacity crowds at open houses.

Reality has set in on Southland real estate--even on the property-rich Westside, where last year the $340,000 two-bedroom, one-bath fixer became a familiar part of the coastal landscape.

But analysts and real estate agents say it’s not quite time to break out the hankies for property owners in the Westside and other high-end housing areas. While home prices in other parts of the country are sliding down like pinballs, Westside real estate still remains decidedly out of reach for most. However, for the first time in years, a soft market has led to a glut of homes for sale, forcing sellers to reduce prices or face long waits as potential buyers hunt for bargains.

Rather than predicting doom--the latest Newsweek cover story focuses on the national real estate bust--economists say that there will continue to be a gradual decline in the California housing market, although the cycle may shift again by this time next year.

“What’s happening now is very predictable, since real estate is such a cyclical industry,” said Michael Salkin, an economist and senior vice president at First Interstate Bank. “We haven’t seen the bottom yet, but I don’t think it will slip much further. The market will bottom out, and then it will shift upwards again.”

Salkin said the low end of the market, which on the Westside means homes in the $300,000 to $400,000 range, will continue to do reasonably well, whereas the higher-priced models, between $400,000 and $1 million, will move very slowly during the ongoing recession.

That assessment is borne out by the latest figures on single-family home sales reported through multiple-listing services. The “more affordable” Westside homes--ones in Westchester, Culver City, Mar Vista and West Hollywood--sold more quickly, and proportionally closer to their asking price, than other more expensive Westside properties.

Compared with the frenzied market last year, however, homes in those neighborhoods remained on the market nearly a month longer. Real estate agents in those communities, searching for ways to deal in a buyers market, say they are increasingly turning to lease options or asking sellers to price their homes for a quick sale.

At the same time, the million-dollar mansions in Beverly Hills, Bel-Air, Malibu, Pacific Palisades and Brentwood show a widening discrepancy between asking and selling prices. In Beverly Hills, the difference was $1.1 million; the listing and selling gap for a Malibu beach house was $1.7 million. Figures compiled by Jon Douglas Co. show that the average single-family home in those communities remains on the market an average of four months, nearly 40% longer than during the third quarter of 1989.

Despite the slowdown, analysts agree that the market for homes priced over $1 million remains largely recession-proof, since those rich enough to afford those estates are rarely concerned about their next paycheck.

“In a normal world, where people have regular jobs and work every day, the market is weak,” said Burl East, a securities analyst at Bateman, Eichler, Hill and Richards. “When you’re dealing with homes $1 million and up, it’s not Buffy and Chip working as lawyers anymore. You’re talking about people whose financial status is not driven by normal parameters. These are newly minted starlets and people concerned about whether their latest movie is a hit. I call it the la-la factor.”

Agents working in the “estate divisions” for large real estate firms say the general slowdown has been fueled in part by homeowners reluctant to sell unless they get a large profit--the offshoot of the frenzy that saw people bidding much more than the asking price during the 1988-89 peak.

“People are still moving, but it’s just not booming like it was,” said Elaine Young, a partner with Alvarez, Hyland & Young. “When it’s slow, people just spend more time looking for great buys. But recently, I’ve noticed that a lot of speculators have begun buying again, and that usually indicates a good market is not far off.”

Analysts said the current economy is just forcing Westside homeowners to accept a simple fact in the post-boom market: They can no longer expect an annual 25% appreciation in their houses. Still, they say, if homeowners bought their properties well before the peak last year, they will probably still earn a sterling profit when they sell.

“It’s all very time-specific and very geographic-specific,” said Salkin, who also serves as the risk manager for the real estate division at First Interstate. “If you bought right at the peak, then obviously you won’t make as much money, and you might hold on to your property longer. And million-dollar homes in Beverly Hills and Bel-Air will always hold their value because industrialists and capitalists from all over the world want to live there.”

Since there is little room for new housing on the Westside, the demand will continue to outpace the supply, keeping prices out of reach for all but 10% of the residents in Los Angeles County.

Economists say that as long as interest rates are down, prices won’t drop that much, so a home selling for $350,000 during the peak months probably won’t go for less than $325,000 in the current market.

“Prices are just returning to real life,” East said. “During the peak, they just got way out of line. But when the economy rebounds, the trend will shift, and prices will rise again.”

And if that happens, the average beach home in Malibu will list for more than $3 million. The average single-family home in Santa Monica will approach $1 million. And modest homes in former blue-collar communities such as Westchester will cost $400,000.

“Holding the geographic location constant in the real estate market, there will always be a tremendous demand for housing (in the Westside),” Salkin said. “The problem is affordability.”

AVERAGE PRICE OF HOMES Figures bases on samples taken by Jon Douglas Co. between April 3 and Oct 3, 1990. Average figures are given for list and sale prices, followed by the number of days on the market.

Beverly Hills

List: $2,579,158

Sold: $1,481,777

Time: 131 days

Culver City

List: $338,309

Sold: $327,909

Time: 88 days

Pacific Palisades

List: $1,140,333

Sold: $986,475

Time: 121 days