Affordability Keeps Some Housing Hot : Areas With Bad Reputation Prove Too Good a Bargain to Resist
Willie London wanted to sell his well-kept, three-bedroom Lynwood home and move to a better neighborhood. But who would want to buy a house near areas plagued with gangs and crime, particularly in a depressed real estate market? He listed the price at $172,000, and prayed.
About the same time, a professor at a Long Beach college put his penthouse, beachfront condominium for sale. The asking price: $430,000. A steal, brokers said, for such a gem.
The professor, who asked that his name not be used, received not one offer in four months.
Willie London sold his house in a week.
One word explains both scenarios: affordability.
Among the hottest areas for selling property right now are those with the reputation--rightly or wrongly--of being the worst places to live.
Families are buying where they can afford to: Compton, Lynwood, South-Central Los Angeles, Willowbrook, Watts, and parts of Long Beach, East Los Angeles, Carson, Inglewood and South Gate. In many cases, buyers choose to cope with potential neighborhood problems rather than sacrifice dreams of home ownership.
More prosperous areas of Long Beach and the Southeast, on the other hand, are suffering from the same malaise affecting real estate nationwide.
“We handle Compton and Lynwood,” said LeFrancis Arnold, president of Century 21 Arrow Realty Inc. in Lynwood. “It’s a good market. The things I’m seeing at a national level and in the Southern California area have not affected our market as negatively as it has others.”
Of some 100 Los Angeles County branch offices in his district, Arnold’s is running No. 3 in total transactions and No. 8 in commission dollars earned, despite the smaller commissions that come with less expensive properties. Other Century 21 offices that serve part of the same area also are faring well.
“My average sales price is the lowest of all the Century 21 offices in the region,” Arnold said. “The average sales price for this office last year was $115,000.”
Some of this activity in less prosperous areas involves purchases in gated communities or townhouses with security systems. But the rest of it happens in old, established neighborhoods prejudged to be in mortal decline.
Market conditions could reverse that.
“You’re going to see a change in some of those neighborhoods,” said Earl Bonawitz, director of marketing and training for one of Century 21’s regional offices. “You’re going to see them cleaned up. You’re going to see pride of ownership coming into some of those neighborhoods that you haven’t seen in the past.
“For a while it was all non-owner-occupied properties being bought and sold. Now you’re seeing people buy those properties who want to live in them.”
Said realtor Arnold: “You can get a beautiful home in Lynwood for under $200,000, three or four bedrooms, 5,000-square-foot lot, sometimes a pool. It’s the same with Compton.”
For better or worse, the active low-end market has pushed prices up in that category. “Our average sales price is about $13,000 higher this year than last year,” Arnold said.
In contrast, properties in Beverly Hills are selling, on average, for more than a million dollars less than their listed prices and staying on the market an average of 131 days, according to a recent study by Jon Douglas Co., a realty firm.
But high asking prices have dulled the market well beyond Beverly Hills. Business is slower in La Habra Heights, a desirable, rustic hillside community where horse trails wind between acre lots. Home prices ranging from $400,000 into the millions have brought fewer takers in recent months. About 18 months ago, properties in La Habra Heights took one to six months to sell. Now the more common wait is six months to a year, said Eileen Greene, a La Habra Century 21 real estate agent who specializes in that area.
The picture is not much different in the Whittier area. Brokers there estimate that the marketing time to sell a house has increased from less than six days to 60 or more days. “We used to specialize in selling homes worth $300,000 to a million dollars,” said Dennis Rosas, who owns Home Brokers Inc. in Whittier. “We have now gone back to selling whatever we can get our hands on.”
Whittier homes selling for about $225,000 in early 1989 now go for about $190,000, which would force some recent buyers to take a loss if they had to move, Rosas said. “We have two kinds of sellers: unrealistic and realistic,” he said. “The unrealistic are still trying to tack on that 10% to 12% appreciation per annum, and they’re not going to get it.”
Nor are real estate investors thriving as before, said Maurilio Gonzalez, who buys foreclosed properties, refurbishes them and resells them. He estimated that more than 60% of those who buy homes to resell “are hurting or running scared because of the market change.”
In the past, “all you had to do was sit around and hold the property,” he said. And if an investor purchased a foreclosed house, “it took you, say four, five, six months to evict the people in the property, and the values would go up. A marginal property would become a good property in six months. You didn’t have to be shrewd to make money. Now you do.”
Gonzalez said he prospers because he is willing to work in the poor neighborhoods that many brokers and other investers eschew, places such as Compton and South-Central Los Angeles.
“For me, business is good, because I stay at the bottom end of the spectrum,” he said. “There are a lot of deals, so to speak, not only at foreclosure sales, but also on the market.”
In order to make a profit, Gonzalez said, house investors usually try to turn over a property in six months and raise the price by at least 25%, which contributed to past spiraling home prices. Since the market flattened, overextended investors have been stuck with property they can neither sell for a profit nor make the payments on.
“I personally know at least eight or nine people who have now forgotten about the real estate business and gone on to other things,” Gonzalez said.
Realtors played a part in fueling unrealistic expectations about home prices, said Richard Gaylord, a Long Beach broker and former member of the city Planning Commission. “We have permitted sellers to list their property at far above the market value.”
Two years ago, that practice presented little problem. That is about when Gaylord received a listing to sell a Long Beach monastery whose historic significance should have hindered its market value. There might have been community opposition had the building been torn down or converted to a less pious use. Such factors usually lower a property’s value. As it happened, the property eventually was sold to a Buddhist sect that wanted to save the building, Gaylord said. But there were offers galore.
Gaylord listed the property for $3.2 million. “The appraisals were in the range of $3 million,” he recalled. “I had six offers of $3.5 million within the first week the property was on the market.”
Times have changed in Long Beach. In the last part of 1989, a listed home took an average of 30 days to sell. Currently, it takes about five months to sell a house there.
A four-bedroom home within walking distance of the shore has languished on Gaylord’s listings for two years at a price other brokers once insisted it would sell for. Gaylord long ago advised the homeowner to be more realistic.
The college professor, by contrast, took this advice and found a practical solution. “One of the parties that had viewed my condominium had difficulty selling a townhouse in Irvine. They were desperate and I was desperate. I said, ‘Perhaps we can trade.’ ”
The professor got a home outside the city where he could retire and enjoy golf and tennis facilities. The elderly couple he traded with now have an oceanfront home located closer to family members. And they now live in a building where they no longer have to climb stairs.
With that kind of flexibility and resourcefulness, Gaylord said, sellers can sell and brokers can thrive even in the current market. “It’s taking a lot more work, more preparation and talking to sellers, showing buyers a lot more property,” he said of his profession. “The agents who can’t carry themselves leave the market and leave more for those of us who are working.
“I’ve heard professionals say we’re in a normal market now. What we had before was abnormal,” Gaylord said.
Most brokers talk of an expected thaw in the housing market come spring. After all, the demand for home ownership remains high. No one knows for certain, however, when first-time buyers will be able to afford to purchase en masse again. It is those buyers who fuel the entire home-selling industry, brokers say.
Successful home seller Willie London, 43, bought his first house when he was 25. He paid $27,500. London, an elevator mechanic, doubts that he could afford to buy a first house if he were starting out today. “I feel sorry for the young kids coming up today unless they have some kind of help.”
HOME SALES IN SELECTED MONTHS BY DISTRICT
Downey Board of Realtors
Median Single-Family Date Price Home Sales 9/88 $158,750 117 9/89 No Data No Data 8/90 187,780 51 9/90 167,500 59
Long Beach District Board of Realtors
Median Single-Family Date Price Home Sales 9/88 No Data 423 9/89 $204,500 468 8/90 195,000 163 9/90 200,500 137
Norwalk-La Mirada Board of Realtors
Median Single-Family Date Price Home Sales 9/88 $150,450 103 9/89 186,470 61 8/90 177,730 81 9/90 185,710 52
Rancho Los Cerritos Mirada Board of Realtors
Median Single-Family Date Price Home Sales 9/88 $152,860 477 9/89 176,110 400 8/90 171,150 316 9/90 188,460 222
Whittier District Board of Realtors
Median Single-Family Date Price Home Sales 9/88 $145,000 221 9/89 172,000 145 8/90 182,000 142 9/90 176,360 94
