Real Estate Reeling but Effect May Be Short-Term : Property: Some escrows have been canceled. Agents are working overtime to calm customers’ fears.
When a white contractor called this week about a house for sale in an affluent hillside neighborhood near Baldwin Hills, broker Jo Ramsey took him on a back route to the home so he would not glimpse scenes of destruction on riot-ravaged Crenshaw Boulevard.
“I wanted to make sure he didn’t see any fires,” Ramsey said. “The riots happened all over the city, but the TV cameras are always showing this area,” said Ramsey, who sells high-priced homes in View Park, located in the hills between the charred commercial strips on La Brea Avenue and Crenshaw Boulevard. “We have (expensive) properties around here. But now it’s perceived as some barred-up, dark alley.”
Across Los Angeles, the real estate business is reeling from the aftershocks of the worst civil unrest in the city’s history. Even though single-family homes were largely left untouched by the rioting, areas as far apart as pricey Hancock Park and depressed South Los Angeles are feeling the impact.
Some panicky buyers have gotten cold feet and canceled their escrows. Traffic through real estate offices has slowed markedly. And desperate real estate agents are working overtime to calm fears of nervous customers and to shepherd through deals.
Meanwhile, in the already depressed commercial real estate sector--which suffered the heaviest damage last week--some property owners are packing up and moving their operations to mostly white communities.
The riots could not have come at a worse time for the Los Angeles real estate industry. Before the outbreak, the brutal property market slump had shown signs of easing--on both the commercial and residential fronts--as lower prices and interest rates sparked a new wave of activity.
Although many real estate appraisers, brokers and other experts express confidence that the market eventually will bounce back, they worry about an immediate fall in property values in many parts of Los Angeles. This, they say, would exacerbate a racial divide in housing that had narrowed somewhat as high home prices and longer commuting distances spurred many middle-class whites to return to the city.
Such a disruption in Los Angeles could ripple throughout Southern California, making homes less affordable in outlying suburban areas. It also could further delay the region’s economic recovery, which has been set back by layoffs in the aerospace and banking industries and the troubles of major retailers.
The specter of a weakened real estate market was evident in the anxiety of buyers and sellers who huddled in real estate offices around Los Angeles.
In South Los Angeles, a Latino couple Friday canceled escrow on a two-bedroom home at 57th Street and Western Avenue near the heart of the burning and looting, said Ray Castro, manager of the ReMax Realtors office in Lawndale.
“These people already lived in the area, but they were still scared” to buy, Castro said. “I think they are eventually going to go through with it. It’s just that they want to wait for things to calm down,” said Castro, who said the couple may submit a new offer.
In the Wilshire-Beverly area, Rose Svetly, associate manager of the real estate firm Prudential of California, said her office has had “several homes fall out of escrow” in the past few days, although she wasn’t immediately able to provide details.
Concern, said Svetly, is not confined to certain neighborhoods but “spread out all over . . . the phones are not as busy.”
Among the skittish commercial property owners is Hans J. Karge, a white doctor whose Inglewood dental office near the Forum was not touched by the mayhem.
On Monday, Karge sent his mostly black patients a letter announcing that he was temporarily closing his Inglewood dental office and relocating to the Marina del Rey area. Karge wrote patients that he “is contemplating a move,” permanently, to the South Bay area even though he owns his Inglewood dental offices and attracts patients mostly from the surrounding area.
But for all the fears, some found reason for optimism.
As the rioting spread throughout the Los Angeles area last Thursday, Pat Rollie, a real estate agent at Bliss-Keeler in Pasadena--where there was sporadic looting and several fires last week--actually completed the sale of a home to a client who broke curfew to sign the papers.
Other agents also reported a calming of nerves as the days have passed.
“Initially we had some concerned clients, but they settled down and we haven’t lost any escrows because of the riots,” said Kim Rouse, a broker for ReMax of California in Long Beach, where rioting resulting in at least one death, 333 injuries and more than 400 fires. “As each day passes, the response is getting more and more positive with people cleaning up and everything. If everybody leaves town, that’s not going to solve anything.”
Officials of Lewis Homes, the giant Upland-based home builder, said they are proceeding with plans to build a new tract of $400,000 to $500,000 homes in the integrated community of Ladera Heights, and the firm said calls have not tapered off for the development, which is located about a mile from the intersection of La Cienega Boulevard and Rodeo Road, where an arsonist torched a Wherehouse records store, Kinney Shoes, Trak Auto and a Thrifty drugstore.
“The riots were a big topic of discussion in our offices,” said Randall Lewis, executive vice president in charge of marketing. “But I still think the (Ladera Heights) area will still be perceived as a ‘good’ area. The larger question is what impact will the regional problems and job losses have.”
Following 1960s urban uprisings in Watts, Washington, Newark and Detroit, white flight from the inner-city caused property values to plummet.
After the Watts riots, for example, whites left some Los Angeles neighborhoods that were as far as 10 miles away from the violence, said Deloy Edwards, a black real estate agent whose company prospered from the exodus by selling homes vacated by white View Park residents to a growing throng of middle-class black professionals.
“They left one of the best areas of Los Angeles so they wouldn’t have to live near us” blacks, Edwards said.
Robert A. Steele, a real estate appraiser who has studied the Watts riots, said real estates prices fell in the area by about 20% in the months after the unrest. Today, however, Steele believes the riots might not have as severe an impact on real estate.
“I sensed in the 1965 riots . . . a deep and abiding frustration from every black citizen,” Steele said. “I think that exists on a much narrower plane today. People are rallying to the aid of others who were the victims of the riots. This is a much different situation. We have a black mayor, we have black people on the City Council.”
Indeed, most experts don’t expect a repeat of the kind of long-term economic devastation that left the central business districts of Newark and Detroit near ghost towns after their riots.
Rocky Tarantello, a real estate consultant and business school professor at USC, said “there could be some white flight” but “the underlying demand factors that give validity to the (housing) price structure are likely to remain in place” in Los Angeles.
Hugh F. Kelly, director of economic research for Landauer Associates Inc., a New York real estate consulting firm with offices in Los Angeles, doesn’t see any cause for alarm. He said he draws a distinction between Los Angeles and some other American cities that have suffered urban uprisings.
“In Newark and Detroit, you had a nearly mortal blow to the commercial core following the riots,” Kelly said. “But you have to remember those cities were tied to areas of the economy that were undergoing serious contraction themselves: automobile manufacturing and heavy industry.”
Because Los Angeles’ economy is more diversified, Kelly believes its real estate market will follow the pattern in New York after a 1970s fiscal crisis precipitated a brief exodus of businesses.
“After New York’s fiscal crisis in 1977, there was a large outflow of corporations from the city, but it didn’t have the same kind of mortal blow as in Detroit and Newark because there was a replacement of jobs,” Kelly said. “My suspicion is that L.A. will be able to absorb this blow as a city and get on with the process of piecing its economy back together.”
