Hopeful Buyers, Desperate Sellers Watch Real Estate Prices Plummet : ‘Location, location, location’ can no longer be counted on as a selling point. Cutting the price is a way of life for people who really want to sell.
Daniel Simon and a Bel-Air estate owner named Bob have the same problem, but on a different scale: One is trying to sell a $260,000 condominium, the other a $2.9-million mansion.
They have another thing in common: Both admit that they are going to take a bath selling their properties.
Simon’s West Los Angeles condo was first listed at $309,000, and now he’ll drop some more just to unload it. And Bob--who asked that his last name not be used--had initially hoped to get $4.9-million for his estate.
“There’s no buyers around,” he said last week. “We’ll keep dropping until we sell it.”
Whoever said real estate is “location, location, location,” forgot to take into account another word: recession.
In May, when The Times interviewed real estate agents, homeowners and buyers about the economy, the consensus was that the Westside’s location and affluent client base would ensure a quick rebound.
Some even said the turnaround already was at hand, sparked by the end of the Persian Gulf War and the perception that prices were as low as they were likely to get. There was an initial rush of activity after the war, lasting several months.
“Then people really started getting scared,” said real estate broker Jon Douglas. “It almost became a psychological thing--unemployment was up, and consumer confidence got about as bad as it’s ever been since they’ve been keeping track.”
Houses now sit on the market for months. And some commercial complexes remain half-empty despite fire sale prices.
“On the Westside, we’ve always been a little sheltered from the shock waves of the market,” said broker Michelle Mehterian. “But nothing is selling at what they’re asking, that’s for sure.”
Condo owner Simon, who now lives in Malibu, has been trying to sell his Amherst Avenue unit for six months. But no matter how low he goes, no one’s biting. “I’m just trying to get out,” he said last week, “and I can’t.”
The way Simon sees it, everybody is waiting because they are afraid that the economy and real estate market are going to get worse, or are waiting for it to get worse so they can squeeze a better deal out of desperate sellers.
Bob’s estate has been on the market for four months. Even though he has cut the price $2 million and his classified ads clearly say “recession bargain,” he has not had one serious offer, he said.
Real estate brokers, perhaps the most closely attuned to the market, say there has been some recent activity thanks to some of the lowest mortgage rates in decades--7% and lower for 30-year fixed-rate loans.
The result, some real estate professionals say, is the best buyer’s market in years. Others, such as Beverly Hills loan specialist Scott Epstein, say the lower rates are merely prompting people to refinance what they already own at better rates.
But is the market getting any stronger?
Lola Levoy, president of one of the Westside’s oldest escrow companies, has survived several recessions in her 27 years of Westside real estate business, but she says it will take more than low interest rates to beat back the recession.
“In all my years, I’ve never seen it this bad, this deep, for so long,” Levoy said. “I still think we’re in this for another year and a half.”
In commercial real estate, the situation is perhaps even worse.
Vacancy rates throughout the Westside now average a record high of 20% for direct-lease space and 21% when subleasable space is included, according to a study released Thursday by Grubb & Ellis. And lease rates have dropped so low in some of the posh towers in Century City that they are on par with buildings in the South Bay, analysts at the commercial brokerage firm say.
“It’s definitely a tough time,” said Jeff Reinstein, marketing director for Atria West, an office complex that will open next month on Santa Monica Boulevard in West Los Angeles. So far, Atria West has yet to sign one tenant. “We’re eager to make deals,” Reinstein said.
Vacancy rates are expected to decline steadily but not until “1993 and beyond,” the Grubb & Ellis study said. One reason it will take so long is that more than 1.5 million square feet of new office space has been dumped on the market in the past year. In addition, many companies leasing huge chunks of space have moved, downsized or gone out of business.
Among the hardest-hit areas is Beverly Hills, which still hasn’t recovered from the demise of its two big junk-bond highfliers: Drexel Burnham Lambert and Columbia Savings. Office vacancy rates in the city now exceed 23%, according to Grubb & Ellis.
Century City has been rocked by layoffs, closures and other problems at law firms. It ended the year with a 14% vacancy rate, almost twice the usual rate.
And because more than 1 million square feet of office space opened in Santa Monica last year, the vacancy rate there currently surpasses 25%.
As in the residential market, buyers have a distinct edge when negotiating for leasable space in commercial office buildings, say brokers. But most brokers say the Westside’s traditional strengths will guarantee a rebound fairly soon.
“The bottom line is that prices, and the market, will go up no matter what you hear about the recession,” said Bruce Schuman, a vice president at the Julien J. Studley Inc. brokerage firm. “Even if the recession stays for another two years, there’s a limited amount of prime, first-class office space around, and most of it is on the Westside.”
