Bankruptcy Takes Luster off O.C. Housing Market : Fallout: Brokers in neighboring areas count the fiscal crisis as a selling point. All’s fair, they say, in real estate.

Such traumas as riots, earthquakes and random acts of violence have driven thousands of Angelenos from their homes and into the relatively safe, master-planned arms of Orange County in recent years.

But with the widespread uncertainty and fear sparked by the nation’s largest municipal bankruptcy, some Los Angeles County real estate brokers along the Orange County border are taking advantage of a once-in-a-lifetime opportunity to woo home buyers back.

Concerned about reduced social services, the specter of higher taxes and possible cutbacks to education, some buyers these days are thinking twice about moving into an Orange County dream home, brokers said. Agents are quietly chuckling with glee as Orange County real estate brokers--who for years have touted their area’s lower crime rate, quality of schools, standard of living and newer infrastructure--are now at a disadvantage.

“Sure, Los Angeles realtors are using the bankruptcy as a selling tool,” said Patricia Neal, a Garden Grove agent and former president of the California Assn. of Realtors. “I know the Orange County realtors sure used the riots, so I guess now it’s a tit-for-tat.”

Already, some agents in Los Angeles County are discreetly mentioning to clients the possible fiscal fallout of Orange County’s bankruptcy. Cities that hug Orange County’s northern edge, such as Bellflower, Cerritos and Long Beach, might even see a slight boost in sales as nervous home buyers decide to wait before moving to Orange County or others decide to leave the county, some brokers hopefully suggested.

“We’re seeing Orange County buyers come back into the L.A. markets due to the bankruptcy. They are concerned about what will happen to the schools there and they don’t think we have the same problems,” said Yvonne Kelly-Brazell, a real estate agent with Prudential California Realty in Long Beach.

Calling the fears created by the Orange County bankruptcy an “excellent selling point,” for Long Beach, Kelly-Brazell said the buyers she represents don’t want to be faced with any added costs after paying for a new home.

“In Long Beach you’re not going to be levied with any surprise extra tax, either sales taxes or property,” she said. “And the buyers I deal with are afraid of the unknown.”

Richard Gaylord, a two-time president of the greater Long Beach Assn. of Realtors, which represents 1,650 brokers, said for a few of his clients already considering a move from Orange County the bankruptcy was a “final straw factor.” Two families he represents have recently decided to move from Orange County neighborhoods.

And that, said Gaylord, is only fitting. After the 1992 riots in Los Angeles, Orange County cities such as Irvine ran large advertisements in Long Beach newspapers touting the benefits of Orange County life, he recalled.

“So now, I think it’s only fair for Long Beach to have its day,” he said.

That’s just plain hogwash, said Bill Cote, a real estate broker with Cote Realty Group in Newport Beach. An Orange County broker for 26 years, Cote said Los Angeles County just doesn’t have the benefits offered by Orange County.

“People still want to move here because even as a bankrupt county we have a better school system than Long Beach,” said Cote, who specializes in homes in the $500,000 to $1-million range. “The quality of life here is 10 times better than it ever will be in Los Angeles. That’s why so many people live here and commute to Los Angeles every day.”

While most Los Angeles County-area brokers did not want to reveal the nature of their spiel on Orange County to clients, some say the bankruptcy is having, if anything, a slightly positive effect on sales north of the Orange County line.

In Long Beach, Coldwell Banker real estate agent Gregory Baker, who said his office is not using the bankruptcy as a selling tool, said some buyers once considering leaving the area for a bigger home in Orange County are thinking again.

“A lot of folks, if they were thinking about moving in the direction of Orange County, are having second thoughts,” Baker said. “People who might have moved from Long Beach to Orange County and bought a bigger house may decide to just stay right here.”

Real estate agents in Long Beach, Bellflower, Paramount, Cerritos and Whittier said while the full effect of bankruptcy fallout is yet to be felt in Orange County, some potential home buyers want to stay in areas where the local governments at least seem a little more solid.

“If you move to Bellflower you can still work in Torrance or Fullerton and get there in minutes,” said Nancy Prigmore, a real estate agent with Prigmore Realty in Bellflower. “It’s easy access to the freeways and you don’t have to sit around wondering when your neighborhood school is going to go bankrupt.”

This kind of talk means war, said beleaguered Orange County brokers, tired of addressing bankruptcy fallout questions that they say nobody, not even William J. Popejoy, the county’s new chief executive officer, can answer right now.

“Time and time again we hear about the bankruptcy from buyers--it’s a constant thing,” said Bob Hackett, of First Team Real Estate in Anaheim Hills. “They’re turned off to the idea of moving to Orange County from the South Bay now. They just want to wait till this thing gets settled.”

For many local residents, the thought of owning an Orange County home is not as pleasant as it once was, a Times Orange County Poll taken in January showed. The number of renters who considered buying a home in Orange County a “good” or “excellent” investment decreased sharply, from 47% to 35% since August, when the Orange County Annual Survey was conducted.

Only half of people who already owned homes in Orange County said buying a house here is an “excellent” or “good” decision, down from 57% in August, the poll showed.

Some people said they were considering leaving Orange County altogether.

In a Times Orange County Poll taken the same week the county filed for bankruptcy in December, 83% of all residents said they were not considering leaving Orange County. That number slipped to 75% in the January poll.

Because of new bankruptcy fallout fears, many would-be Orange County home buyers are taking a sit-and-wait attitude while the county untangles its finances and looks for new revenue sources to help it climb out of bankruptcy. The effects will likely linger through the year, said Walter Hahn, director of Orange County real estate consulting for the Kenneth Leventhal & Co. accounting firm.

“It’s pretty obvious that the bankruptcy is having a negative effect on home sales here,” Hahn said. “Buyers are deciding to postpone decisions.”

That’s bad news for Orange County’s fledgling real estate recovery. After four years of a real estate bust that pushed home prices down by 25% or more, 1994 was a near-record year for home sales in California. Especially strong were sales in Orange County, where new home sales jumped more than 30%.

The boost in sales occurred despite six increases in interest rates, which meant higher mortgage costs for homeowners. The rate hikes also caused nearly $1.7 billion in losses to Orange County’s investment pool, which had borrowed heavily to buy derivative securities that were especially vulnerable to interest rate swings.

Because of the losses, the county was forced to file for bankruptcy Dec. 6. That month, new home sales in Orange County stayed flat. By January, a month that also included record rains and flooding, home sales in Orange County had nose-dived about 27% from the same time last year. Local home sales continued to fall in February; for the first three weeks new home sales dropped about 15% here, Hahn said.

While much of the falloff in California is due to buyers’ concern about economic trends and possible further hikes in interest rates, the drop in Orange County is compounded by skittish buyers also worried about the bankruptcy.

With two children in school, Marjorie Kellen of Norwalk said she was interested in moving to Orange County because she wanted to put her children in better school districts. But, now, she’s not so sure it would be better.

“I feel caught between a rock and a hard place,” the 50-year-old Kellen said. “I’m concerned they might cut school programs in Orange County and lay off teachers, but the schools here aren’t so good either. Also, when I tell friends I want to move to Orange County they say, ‘You can’t! They’ve gone bankrupt.’ ”

In Cerritos, Carolee Walker Davies, a broker and owner of Coldwell Banker Towne Center in Cerritos, said some potential home buyers, especially those from the Asian portion of the Pacific Rim, were weighing home buying decisions between the Cerritos area and Orange County.

Buyers want to know if purchasing in Orange County will eventually mean “more taxes and less police,” Davies said. “We just say we don’t know, but it could happen.”

Davies said that while she never uses the bankruptcy as a selling tool, that fear of the unknown, preyed on by many Los Angeles County agents, is keeping buyers on the fence and out of escrow on Orange County homes.

And, unfair as it sounds, said Jason Hartman, a real estate agent for ReMax of Irvine, using the bankruptcy as a selling tool is all part of the real estate game.

If the bankruptcy had occurred in Los Angeles County, brokers in Orange County areas would be doing the same thing, he said.

“Anybody who is in a competing area is going to use whatever they can,” he said. “We wouldn’t be immune to using it if it had happened in reverse.”