John Aaroe doesn't go for that ordinary daredevil stuff. He doesn't bungee jump from cliffs, race the Formula One circuit or trek through the Himalayas looking for Bigfoot. The man doesn't even smoke.
"I'm totally risk-averse," he confesses.
Yet, last January, Aaroe did something many would find even more daunting. In the midst of Southern California's worst real estate recession in decades--with housing prices in some cases hundreds of thousands of dollars below their level of five years ago--Aaroe abruptly left the Jon Douglas Co., where he had worked for 18 years, to open his own residential realty firm in Beverly Hills.
The move did not meet with overwhelming acclaim. Some of Aaroe's friends and acquaintances, to put it bluntly, thought he soon would be selling shirts instead of homes. "They said it was a terrible thing to be doing," Aaroe recalled.
Not any longer. After several years of downward mobility, the city's housing market finally seems to be on the road back from nowhere. And Aaroe, who correctly surmised that Southern California's slumping market was about to shape up, is suddenly a man with vision.
Since his opening, Aaroe has more than doubled his work force--from 19 to 44 employees--and his firm has an inventory of 90 Westside homes worth about $145 million. On one busy day two weeks ago, Aaroe's realtors sold $4 million worth of property. His second office will open next week in Brentwood.
"I could see a market that was changing," said Aaroe of his decision to strike out on his own--made just two weeks before he opened for business. "You could feel there was slightly less inventory and a few more buyers with consumer confidence."
No, prosperity may not be just around the corner for Westside residential real estate. But from Hancock Park to West Los Angeles to Malibu, real estate agents report a dramatic increase in home sales and say their hands are full with properties that, for the first time in months, are receiving multiple offers.
It may not be enough to entirely lift Los Angeles out of its economic quagmire, but, for now, the quickened pace is providing hope for the once-moribund housing market. Compared with one year ago, the percentage of listed homes that sell throughout Los Angeles has nearly doubled--from 19% to 34%--with the bulk of the increase attributable to single-family homes.
Realtor Jon Douglas said his overall sales of homes were up 40% in March over the previous year, and broker Fred Sands said his firm's home sales in March were greater than in any month during the last four years. April, he added, proved nearly as busy.
"March and April were gangbusters," Sands said. "There's four years of pent-up demand."
In a city whose mantra is real estate, the prospect of a rebound is being received with guarded enthusiasm. Real estate agents acknowledge that the sales increase has not been accompanied by a rise in home prices and is mostly a result of first-time buyers purchasing less-expensive homes. But they nonetheless forecast modest appreciation for most homes in 1994. Moreover, compared to the industry's long dearth of home purchasing, any activity on the part of buyers, they say, bodes well.
Real estate experts give several reasons why buyers are suddenly scurrying into homes. Perhaps the biggest factors have been the slight rise recently in interest rates, coupled with a sense that the housing market has finally bottomed out. Both factors, they say, sent messages to potential home buyers that the only place for rates and prices to go was upward.
Literary agent Bill Douglass, for example, recently bought a two-bedroom, two-bathroom residence in the "$400,000 range" in south Santa Monica after a scant two weeks of looking. Why? Partially for tax reasons, he said, and partially because of a perception that finally "the market was going up."
Another, less tangible reason, brokers say, is the feeling among many Angelenos that the area's economy is improving, even though the economics of the housing market have not drastically changed.
"It's really attitude," said Tim Corliss, an Re/Max realtor and past president of the Los Angeles Assn. of Realtors. "(A few months ago), prices and interest rates were still low but the buyers were still scared. Now there's a confidence."
And buyers wading into the market take with them more than confidence--they also are armed with a great deal of buying power. In spite of the newfound activity, the median prices of homes in many areas have declined. Overall on the Westside, the median sales price of a single-family home in 1994 is about $35,000 less than it was a year ago; for condominiums, the median price fell $13,000.
Some of the price drop is to be expected, given the decade of dizzying market appreciation--20% yearly in some areas--that preceded the recent recession. In fact, this was the only downturn in the past 30 years to result in lower housing prices, which usually stabilize during lean times.
According to Corliss, Westside housing prices are still down 30% to 50% from their peak of several years ago. He points to one Santa Monica home 10 blocks from the beach that he recently sold for $440,000. Seven years ago, just before the market topped out, Corliss sold a nearly identical home two blocks away for $865,000.
"More sellers are being realistic, and that's enabling buyers to buy," he said.
Jon Douglass agrees: "The sellers understand (that) they're not going to get what they got in 1988."
Because homes are now being priced more realistically, brokers are facing an enviable problem--a lack of available homes for sale. That shortage is now being felt in expensive areas too.
So far this year, says John Aaroe realtor Helene Sherman, 13 homes have been sold in Trousdale Estates in Beverly Hills--more than were sold there all of last year.
Likewise, Sherman says, a Beverly Hills home that was listed for $895,000 attracted 27 offers before it sold for nearly $1.1 million. "If it's priced right, it's going to get activity."
Fred Sands broker Hilda Cohen agrees: "As soon as a good property comes on the market, people swoop down on it."
Not all good properties, however, are seeing their stock rise again. A notable exception in the Westside's incipient market recovery are condominiums, the sales of which have remained stagnant even though they have suffered the same downward sticker shock as single-family residences.
Ironically, one reason may have to do with the recent surge in house sales. Because single-family residences now are competitively priced with condos, buyers--especially first-time home buyers--are opting for houses instead. Even those who would normally consider purchasing a condominium are finding that the maintenance fees required by condos could be better used to buy a larger, higher-priced single-family home.
The result has been a glut of condominiums on the market. Among the high-rise luxury buildings of the Wilshire Corridor, for example, where maintenance fees can easily run more than $1,000 monthly, sales have been virtually nonexistent, even for lesser-priced units.
So far this year, only two sales of Wilshire Corridor condos priced between $180,000 and $250,000 have closed and only 16 have been sold overall. One typical example: a two-bedroom, two-bathroom unit in a full-service building, complete with 24-hour valets, sauna, Jacuzzi and exercise room. Once appraised at more than $325,000, it has now been listed for six months for $100,000 less. No bids have been made on the property and fewer than a dozen people have come to see it.
"People are walking away from a lot of these units," said Sherman, who cites another case of a luxury condo that was bought for $800,000 a few years ago but now will probably sell for less than $500,000, if not lower. "It's going to take years for us to absorb (the glut)," she said.
Just ask Matt Roberts about the state of the condominium market. The Brentwood publicist is attempting, so far in vain, to sell a two-bedroom, two-bath, 1,500-square-foot condo in "great condition." Purchased seven years ago for $215,000, Roberts had the property listed for six months last year at $179,500 with no takers. Now, in what has become a nationwide trend, he plans to give the condo to the winner of an essay contest. Entrants will be charged $200 to write, in 500 words or less, "Why would you want to live on the Westside of Los Angeles?"
Roberts hopes to attract at least 1,000 entrants and to have their entry fees pay off the mortgage. The state attorney general's office has ruled in the past that such schemes are against the law because they constitute illegal lotteries, but Roberts says his contest will be judged by USC and UCLA English professors and that, consequently, it will be a competition based on skill.
Brokers insist that if Roberts can wait it out, the market will turn for condos as well. Once buying becomes the norm again, they say, it will simply be a matter of time before all the choice single-family homes are taken.
Indeed, that was precisely the thinking last January of Joel Secarz, 34, when he purchased his piece of the American dream--a 1940ish, three-bedroom, two-bath home north of Montana Avenue in Santa Monica. Part of Secarz's decision to buy was fueled by his having accumulated a sufficient down payment for the $400,000-plus home. The other part was due to the sudden change in home prices and interest rates. For the best deal, Secarz said, he figured he'd have to act quickly.
"There (are) more houses being sold and there are more buyers out there," said Secarz, a first-time homeowner. "People have finally decided that now is the time."