In the Valley, the Market for Mansions Is Still Poor : Real estate: High-end homes languish as many well-heeled buyers see better value on the Westside.

It’s been a tough decade for the million-dollar-home trade. But while $1-million-plus home sales are finally reviving in Beverly Hills and on the Westside, part of that demand seems to be diverting traffic from the near-dormant market for luxury homes in the San Fernando Valley.

“For the first time, I’m actually seeing some Valley clients who are considering moving to the Westside,” says Ron Prechtl, a broker with Century 21 in Northridge. “They know prices have gone down there, and they have the resources to make it happen.”

In Beverly Hills, 85 homes sold for $1 million or more through August of this year, a pace that would make this the best year since 1991, when 142 homes sold for seven figures in Beverly Hills, according to TRW Redi Property Data.

It’s the opposite story in the San Fernando Valley. Only 57 homes sold for $1 million or more last year, down from 106 homes in 1991, and through August a mere 28 million-dollar homes changed hands.

With the average Valley house sale price down about 30% since 1990, the number of homes justifying seven figures north of Mulholland Drive has fallen dramatically. Near Prechtl’s office in Northridge are massive homes that sold for $1.5 million in the late ‘80s. Now they are worth half that price.

Even some home prices in Beverly Hills, Brentwood and Pacific Palisades have tumbled 40% since the market peaked, says realtor Melissa Hyams of Celebrity Properties in Beverly Hills. But the difference is that the sharply lower prices on the Westside have brought them within range of some well-to-do buyers. The cooler temperatures, frequently better public schools and proximity to the beach seem to exact a toll on the luxury Valley market.

Buying your way into a safer place is another basic lure of any expensive neighborhood. “It’s why a lot of families sacrifice” and buy a small house in Beverly Hills--in the $350,000 range--”to have their child in a Beverly Hills school,” Hyams says. Another advantage, she says, is the Beverly Hills Police Department’s supposed three-minute response time. “At the LAPD,” she says, “they’re so overworked you’re lucky if you see them.”

Despite the economic slump that’s hammered Southern California, realtors still see attorneys, entrepreneurs, entertainers and the occasional doctor--though not as many as before health care reform--who can pony up $1 million for a home.

In the past year, Prechtl has sold three million-dollar homes in the Valley. The most expensive was $1.8 million: a 10-bedroom, eight-bath, 10,000-square-foot mansion in the Encino hills bought by a rap record company executive.

The history of this Valley home tells a tale of the roller-coaster real estate market. Its previous owner bought the home in the late ‘80s near the peak of the market, the property was hammered by the Northridge quake, and by the time a bank foreclosed on the place, the mortgage was more than $2 million.

After quake repairs, the home still has its basic allure: a view, space and privacy. The property has a tennis court, guest house and pool. The land runs “all the way up to Mulholland Drive,” Prechtl says, and has “total seclusion with spectacular Valley views.”

As is often the hallmark of such homes, this one has ostentatious solid-wood double-front doors that, Prechtl says, are 2 1/2 stories high. “I have not seen Ritz-Carlton lobbies as grand as this house,” he says.

For a bank, the basic math on a $1-million home is as follows: With an 8% mortgage and a 20% down payment, the buyer faces $7,000 a month in mortgage payments, interest, insurance and taxes. And with banks limiting loans to around 40% of the borrower’s income, that would-be buyer probably has to earn more than $18,000 a month.

Finding those buyers hasn’t been easy. The Mountain View Estates development in Calabasas opened in January, 1990, just as the real estate market started its descent. “We opened at the worst time,” says Lynn Rivera, a broker at the development.

Back then, she says, the top-end homes in this gated hillside community were priced at $1.4 million; now the top price is $1.2 million. The biggest homes are 7,300 square feet, with six bedrooms, six baths and many with views. But as the market tightened, Rivera says, the developer took out some features in later models to trim costs, such as simplifying interiors and the multi-pane glass around the houses, and installing fewer sliding doors.

“We have done well, not wonderful,” Rivera says. “The market has been so skittish over the past five years, it’s been subject to every little jerk in the economy and natural disasters.”

Despite tough times, Rivera says her development has lured buyers who, as “part of the mass exodus from the Valley,” yearn for security and better schools. Mountain View’s residents can send their kids to the Las Virgenes Unified School District, which boasts a lofty reputation.

“Many have children in private schools and are paying upwards of $12,000 to $15,000 [a year]. Now they can utilize [public] schools without suffering an education shock . . . which allows them to spend more for a home,” she says.

The development’s main street is the aptly named Mountain Gate Drive. A guard is posted at the entry gate, a Westec car patrols and No Trespassing signs hang on fences. Most homes look alike, with pastel walls, red tile roofs, three fireplaces, eight-foot doors and often, Jacuzzi whirlpools in the master bedrooms. Many are situated on one-third-acre lots, yet the homes are packed close together, and most are sold without landscaping.

On one street, a new row of homes is going up. Hillside sprinklers on the communal grounds pump away to foster California pepper trees and ground cover, which contrast with the raw, burnt-brown color of the undeveloped hills nearby. A visitor can hear the music of contractors at work. There’s pneumatic tools, staple guns, hammers and electric saws. Forklifts carry lumber, and a truck with Andy Gump portable toilets passes by.

Agents who trade in this elite sector of the housing market have to cope with certain oddities. Million-dollar homes are usually shown only by appointment, and the unwritten rule is to qualify any would-be buyer for a mortgage before taking them into a home; that also weeds out those who “just want to see how the rich people live,” as Hyams puts it.

With any home, though, the question is always: Is it worth the money?

In Beverly Hills, an elderly film star has dropped the price on her home to $1.05 million. It comes with three bedrooms, five baths, a spiral staircase--3,500 square feet in all--a tiny swimming pool and a spit that makes up a yard that could fit inside some garages. One eye-catching feature is in a first-floor closet, where the owner’s best actress Oscar and a few Emmys collect dust.

The statuettes don’t come with the place, of course, but any future owner will get a few earthquake cracks that snake up behind some dingy wallpaper, and sticky handles on a 30-year-old oven.

But realtor Hyams dismisses those flaws. The house is spacious and located in the more prestigious end of Beverly Hills--north of Sunset Boulevard. Whoever buys the place isn’t likely to care about hairline cracks and old appliances. “In most homes in the $1-million price range in Beverly Hills, buyers feel they will need to re-carpet and repaint. They do not want to live with somebody else’s taste,” she says.

For the same money, you can buy a much bigger home in the Valley, but again, that doesn’t mean every property is a bargain.

Broker Prechtl recently visited a five-bedroom, $1.1-million home on top of a hillside in Woodland Hills, on a street with jumbo-sized new homes going up in what could be interpreted as signaling a thaw in the Valley’s luxury market. In the past year, about 200 Valley homes were listed for sale at $1 million-plus and, Prechtl says, at least more people are looking at these properties.

This Woodland Hills home is on what’s known as a flag lot--it has a long, secluded driveway leading to the rest of the property. Inside the 6,300-square-foot home are 25-foot ceilings, marble floors, lead glass windows, the obligatory winding staircase, a sprawling kitchen, a spacious pool, a rainbird sprinkler system atop a tile roof as fire protection, and a clear view of the Valley below.

One oddity is a thick, raspberry sherbet-hued carpet, which contrasts in one room with a black marble fireplace and white walls. “None of my furniture would go with that,” Prechtl said. But he waved off the carpeting, noting that it can be dyed for a few thousand dollars.

More worrisome are the older, smaller tract homes on the streets below that sell for $250,000. This runs counter to an old saw that the best investment in a good neighborhood is the lowest-priced home, whose value is lifted by the more expensive homes--rather than the reverse.

There was another problem. The $1.1-million home is the last one built on a dead-end street. An armed security guard walked by, but it seemed too late. This end of the street was defaced by graffiti. Graffiti had wasted the For Sale signs on vacant lots; graffiti covered a street sign, the curb, road, fire hydrant, a light pole and even the base of a tree.

For a sociologist, graffiti can mean many things. In the real estate trade, it only means trouble. “That’s going to hurt,” Prechtl said.