It’s a Buyer’s Market as Peninsula Home Prices Tumble : Real estate: Younger families are taking another look at an area that was once beyond their economic grasp. This could revitalize the school district.
The real estate boom in the 1980s priced young families right out of the housing market on the Palos Verdes Peninsula.
For many under age 50, the peninsula’s breathtaking ocean views and quasi-rural lifestyle were out of reach. Without the young, schools closed, children’s clothing stores disappeared and Little League enrollment declined.
Now housing prices in one of Southern California’s most desirable regions have fallen, raising hopes that a younger population will add vitality to the area. Real estate agents and brokers say sales to young people still amount to a trickle, although they have increased slightly and the trend could gain momentum if the buyer’s market holds.
In what one broker described as the “shocker of all shockers,” for the first time since 1987, a house on the peninsula has been put up for sale for a sliver under $300,000, a milestone considering that the low mark hovered around $500,000 just three years ago. It’s no fire sale, but a hallmark nevertheless in an area with some of the nation’s priciest houses.
Median home prices on the hill have steadily declined from a peak of $665,000 in 1990 to $475,000 in the first three months of this year. And while the majority of houses on the market are still above $600,000, most of those sold go for below $500,000, real estate agents say.
Just how affordable it has become surprised John Alexander, a 43-year-old advertising executive, who this month will move from Marin County to Palos Verdes Estates with his wife and two children, 8 and 12 years old.
“We could have gone to Orange County and gotten 50% more house for the same price,” Alexander said. “But we decided we wanted a 10- or 15-minute commute (to Torrance). And the kids don’t have to ride a bus to school. They’re very comfortable there.”
Alexander bought a $427,000 house near Lunada Bay on the west end of the peninsula. The price was $150,000 less than what it was a year ago.
“We would have been priced out of the market then,” he said. “We’re lucky enough now to be able to consider Palos Verdes. It’s still a lot of money, but it gets to be a relative thing after awhile.”
Software engineer George Koppich is preparing to buy a house priced at $699,000 in Palos Verdes Estates, down about $100,000 from a year ago. If he gets the 2,400-square-foot house he has his sights set on, Koppich would move with his wife and two children, 5 and 9 years old, from the Mar Vista area of Los Angeles.
“It’s easier now, especially with the interest rates,” said Koppich, 40. “But we wouldn’t have been able to do it a few years back.”
He has wanted to live in the area because of the ocean view, low crime rate and schools.
“(The schools) were the factor that played the greatest role,” he said. “I was impressed by the national and state test scores. Palos Verdes was one of the best districts.”
Real estate agents attribute the declining prices to a number of factors. Some aerospace workers who lived on the hill have their lost jobs in the industry bust and must quickly sell their houses. In addition, the recession has left consumers with limited buying power, meaning sellers have to cut the asking prices of their property.
The more affordable the houses get, the better for some real estate agents who have an easier time selling them.
“It was always, ‘The hill is unaffordable,’ ” said Carolyn Malmquist, a Palos Verdes Estates real estate agent. “Now we’re getting buyers with kids in grade school coming in. This is going to add energy to the area.”
Malmquist added, “We have fewer offerings at the low end, but that is where all the sales are. We are affluent, but that doesn’t mean there’s not affordable homes here.”
Late last year, Malmquist teamed with five other agents to attract buyers hoping to capitalize on lower-priced peninsula houses. The House Hunters, as they called themselves, created a video tour of the peninsula, an 800-number and a catchy slogan, “It’s more affordable than you think!”
Younger families who previously could only afford Torrance or Redondo Beach now find themselves looking at the hill, although the lowest priced houses are tract houses, not the grand, customized homes usually associated with the peninsula.
“But it’s a pretty area,” said Larry Moore, a Torrance-based agent who sells peninsula properties.
Young families moving to the peninsula could alter a lifestyle that has been defined by affluent, older residents.
More students would be welcome news to the Palos Verdes Unified School District, where declining enrollment has forced the closure of two high schools, four intermediate schools and five elementary schools since 1980. Enrollment peaked in the early 1970s with 19,000 students, but by last year it had dropped to 8,600.
Now, officials are predicting a slight increase in enrollment of about 50 students.
“You never know until the kids are actually here,” said school district Supt. Michael W. Caston. “But we are seeing more young families. The increase (this fall) would be very minor, but compared to a decline, that would be just great.”
Overall, the population of the peninsula has been graying over the years. The median age in the area rose from 36.6 years in 1980 to 42.3 in 1990, and was expected to rise to 46.2 years by 1998, according to PV 2000, an analysis of census figures conducted by a citizens group. Out of 67,500 residents, 8,000, or 12%, are 65 years or older.
Longtime residents have noticed some of the subtle changes, such as a slight drop in the number of Little League teams. There also has been changes in the makeup of the retailers at Peninsula Center and The Shops at Palos Verdes, two major shopping centers on the hill.
“There used to be sporting goods stores selling baseball gloves and softballs,” said Gordon Shellberg, 53, an actuary and president of the Palos Verdes Peninsula Chamber of Commerce. “When people get older, they stop buying stuff. They might buy a home in Palm Springs or for their grand kids, but they are not buying for themselves.”
If the young buyers return en masse, he said, “You’ll have two populations you need to respond to. That’s the challenge.”
Still, there’s a downside. The drop in prices of houses on the market has meant lower values for the rest of the houses, angering longtime residents who fear that their home equity nest eggs are evaporating. They still stand to make hefty profits if they sell, but some had anticipated higher equities before prices started to fall.
“There’s a lot of anger out there,” Malmquist added. “We’ve had comments like, ‘It degrades the community. Our home values will fall.’ That is the bad part. There’s a lot of stress in the market.”
Martin Tynan, 57, who bought his Palos Verdes Estates house in 1974, said that his house’s value has dropped 15% to 20% from the late ‘80s. With property taxes and other fees, he and his wife have thought about moving.
“It would be even worse had I not bought before Proposition 13 (the 1978 state initiative limiting property taxes),” said Tynan, an airline pilot, who wonders how the younger people will fare. “If a young man comes in here with all the right credentials, meaning an MBA and a good job, he could do just fine. But it takes bucks. It’s a beautiful area, but you have to ask yourself, ‘Is it worth what you have to pay?’ ”
The benefits of a rejuvenated population might be offset by aerospace and defense cutbacks, which has meant severe job losses in the South Bay as companies leave or scale back their business. An uptick in interest rates could also slow home buying.
In a sign of the times, as of last week 300 houses were in bank foreclosure and default on the peninsula, compared to about 100 a year ago, said Larry Arman, broker and owner of RE/MAX Realty in Rolling Hills Estates.
The foreclosures have included posh houses in gated areas. One estate sold for $2.8 million in January, compared to its price of $5.3 million two years ago.
Yet residents and real estate agents know exactly who is the worst off in the price shift: the homeowner who purchased at the peak. Often if they sell, they will take a loss because the price has fallen below what they owe.
“Our advice is, ‘If you don’t want to be competing with foreclosed properties or whatever else is out there, don’t sell,” said Moore, the Torrance agent. “There’s no sense in mucking up the market. Eventually things will balance out and prices will stabilize, but now it’s a crazy time.”
Crazy as it may seem, the new home buyers are satisfied.
Said buyer Alexander, as he packed up for his move to Palos Verdes Estates from Fairfax in Marin County, “It has similarities to Marin County and it’s more rural than other parts of L.A. We just like living near the fresh air.”
Home Prices on the ‘Hill’
* The median price of a Peninsula home for sale in the first quarter was $475,000, compared to $558,750 in all of 1992, $615,000 in 1991 and $665,000 in 1990.
* Almost half of all homes on the market in the first quarter sold for $700,000 and up, yet only 15% of sales were in that range.
* Only 23% of the homes on the market were listed below $500,000, but more than half the sales were in the $300,000 to $499,999 range.
* The number of homes sold fell to 478 in 1992, compared to 488 in 1991, 485 in 1990 and 637 in 1989. But 1993 sales exceed the pace of a year ago. In the first quarter this year, 104 homes were sold, compared to 91 in the same period a year earlier.
Source: RE/MAX Palos Verdes Realty
