Real Estate Downturn Hits Home : Properties: A survey of San Gabriel Valley real estate boards shows a 30% drop in sales for the first nine months of 1990.
It all started when Dean Borton was suddenly, as he put it, “blessed with early retirement.”
In other words, the public relations firm Borton worked for, “gearing down” for some expected losses, decided to give the 64-year-old copywriter a head start on his Golden Years.
Borton and his wife Meredith had a plan. They’d sell their Diamond Bar house at a nifty profit, they thought, and go back home to a lake in Michigan, where the living is cheap and unstressful.
The Bortons had bought the house--a stucco-walled hillside home with a shake roof, a swimming pool shaped like a big footstep and a scintillating view of the San Gabriel Mountains--for $160,000 in 1984. Considering the way property values had risen in the late 1980s in the San Gabriel Valley, they figured they’d sell for $290,000. Easy.
That was in January. Since then, they’ve dropped the price by $10,000, gone into escrow twice--both sales fell through--and taken over the brokerage duties themselves. And still the house is unsold.
Nowadays, after Meredith goes off to her job at a direct marketing firm, Dean busies himself manicuring an already weed-free yard and thinking about that lake in Michigan. “I’m getting a little edgy,” he says. “I’m at the point now where I’m going to have to find something else to keep my nimble mind busy.”
The real estate downturn, which has thrown a wet blanket on the housing market all over the United States, has arrived with a vengeance in the San Gabriel Valley. Interviews with agents and brokers show:
* Houses--particularly in the $300,000 to $500,000 range--have been languishing with “For Sale” signs on their front lawns for a year or more.
* The infusion of foreign capital, particularly from Asia, that kept the San Gabriel Valley market hot through most of the 1980s has slowed considerably.
* Houses that do sell are often going for far less than equivalent houses sold for a year ago. Brokers say that there is a widening gap between asking price and selling price.
Except in the low end of the market, in which houses sell for under $200,000, buyers are scarce.
Most real estate agents don’t like talking about the down side of their business. “We’re talking ourselves into a recession,” said broker Alex Turner, a former president of the East San Gabriel Valley Board of Realtors. “Marginal people are being scared out of the market because there’s too much negative talk.”
But a survey of the real estate boards in the San Gabriel Valley shows that, for the first nine months of 1990, sales are down throughout the region by 30%, compared with the equivalent period last year. At the same time, the inventory of properties for sale has risen dramatically.
“Weekend open houses are really dead,” said Diamond Bar City Councilwoman Phyllis Papen, an agent for Remax Diamond Bar. “What you get are not buyers but escrow company representatives and lenders, coming by with cookies and cold drinks” to drum up business for themselves.
Most real estate brokers expect the slowdown to last well into next year, when the San Gabriel Valley’s strengths will begin to assert themselves again.
Some agents say they’re experiencing a normal cyclic downturn after several years of soaring prices, just as in any financial market.
“People don’t worry when the stock market has a tremendous surge, then settles back to a reasonable advance,” said Jack Newe, broker-owner of Century 21 E-N Realty in Diamond Bar.
Two years ago, prime properties in the region were being snapped up as soon as they went on the market. Real estate agents talk fondly now of the go-go years, when some houses got seven or eight offers on the day the “For Sale” signs went up.
Now, everybody has horror stories about houses that won’t sell.
Richard and Esther Schuster just sold their house in a well-to-do neighborhood in western Pasadena after it was listed for a year and a half. The couple and their two children moved to a bigger house in the same neighborhood in May 1989 and started paying two mortgages, expecting the first house to sell pretty quickly.
“I had a feeling we’d sell it by the end of the year and get about $700,000 for it,” said Schuster, a manufacturer of biodegradable paper products.
They finally closed the deal for the house in September, selling it for $560,000.
Some real estate agents say the situation appears to be more than a simple market adjustment.
“It’s not just affecting realtors, it’s affecting banks,” Papen said. “The market is tightening up on home equity loans and bridge loans.
“You used to be able to get a home equity loan, then go out and buy a second piece of property. But those are a lot harder to get now.”
There is still a strong market for “starter” houses, agents say. “If there is such a thing as a $150,000 house, it’ll sell--yesterday,” said Monrovia broker George Baker.
But “move-up” sellers--those seeking to cash in on middle-level properties in order to move up to a larger, more expensive house--are finding buyers scarce.
“About two thirds of our sales are in the move-up category,” said William Podley, president of the Pasadena-based Podley Caughey & Doan Associates. “We’re especially active in the $300,000 to $1 million range. Our sales are off by more than 30%.”
“There are three elements to a sale--a buyer, a seller and financing,” said Newe. “We’ve got interest rates at less than 11%, and there are sellers willing to sell. But the buyers--they’re holding back, convinced that bad times are here.”
Others are convinced that the buyers are out there. The secret to finding them is “proper pricing,” real estate agents say.
“The sellers are going through a re-education process,” said Fran Barrington-Dryden, an agent for Coldwell Banker in San Marino, who expects her income to be the same this year as it was last year. “Of course, they all hoped that prices would continue to escalate. But they just couldn’t.
“It’s a little shock to them to think that a house four doors down sold a year ago for $100,000 more than they can get now.”
Few sellers are actually losing money, Barrington-Dryden and others say. They’re just reaping lower profits than 1988 sellers pulled in.
The Schusters, for example, conceded that they sold their Pasadena house at a profit. They had bought the house 10 years ago for $230,000, and they sold it for twice that amount.
“We made a good profit on the house,” said Schuster. “It’s just that it was $200,000 less than we expected.”
Maria DiMassa, an agent with Century 21 Lake Realty in Pasadena, calls that expectation of maximum profits “the California mentality.”
“People think, ‘If my neighbor got $200,000 a year ago, I should get $30,000 or $40,000 more. I deserve it,’ ” she said.
Barrington-Dryden says money from Asia is still coming into the San Gabriel Valley real estate market. “I have five escrows (for Asian buyers) right now in San Marino, South Pasadena and Alhambra,” she said.
But like other buyers, Asian investors are becoming more cautious, DiMassa said.
“Everybody is just waiting a minute,” DiMassa said. “The inventory is good, there are good bargains to be had. There’s no rush.”
Real estate brokers say the San Gabriel Valley’s strengths will pull the region out of the doldrums sooner than other markets.
There’s a plentiful supply of attractive houses in the area; it continues to be a market of choice for Asian immigrants, and it’s closer to Los Angeles than, for example, the Inland Empire or Antelope Valley, both of which have built up recently.
As gasoline prices rise, proximity could become the decisive factor, some say. “When you’re paying $1.35 for regular and $1.60 for super, you’re going to be looking closer to reduce that transportation cost,” said Berton M. Tibbett, president of the Pasadena-based Tibbett Group.
The bright side of the picture is the buyer’s side.
An Altadena couple who own a dry cleaning business just bought an attractive house across the street from a golf course.
“We were looking to get into a good neighborhood in a house that would appreciate over time,” said the man, who asked that his name be withheld.
Largely because of the tepid market, the couple was able to bargain the seller down, from $395,000 to $370,000.
“It’s good time to buy, if you can afford to,” said the happy buyer.
THE REAL ESTATE SLUMP
Sales within jurisdictions covered by San Gabriel Valley real estate boards
Percent Board 1990 1989 change Pasadena 1,230 1,639 -25 San Marino-South Pasadena 453 635 -40 East San Gabriel Valley* 1,975 2,924 -32 Arcadia 1,161 1,675 -31 Monrovia 342 512 -33 Azusa-Glendora 989 1,258 -21 Pomona Valley 1,217 1,473 -17 Hacienda Heights- 2,167 3,391 -36 Rowland Heights- Diamond Bar West San Gabriel Valley* 2,348 3,631 -35 Total 11,882 17,138 -31
* Figures are for sales through August. All others are through September.
