After red tags: a rebound
Jesus and Lupe Vasquez cringed at the red tags -- official notices practically screaming the word “uninhabitable” -- affixed to neighbors’ front doors, just steps from their unscathed Eagle Rock home, which they put up for sale a couple of weeks earlier for $649,000.
“Will buyers want to live on this hillside now?” Jesus Vasquez wondered aloud right after a late-February squall sent mud streaming down the steep slope behind the homes of his neighbors, who were forced to evacuate. “I’m worried.”
Vasquez’s concern -- shared by many homeowners in hillside areas -- is understandable but may be brief, real estate experts say. The Southland storms, which had dumped almost 34 inches of rain as of Thursday and resulted in the red-tagging of nearly 90 homes in the city of Los Angeles, may disrupt sellers’ plans for a short while, but home values in the affected neighborhoods should remain steady, based on realty rebounds following previous natural disasters.
Home prices, even for properties next to uninhabitable structures and in mudslide areas, are expected to ride out the storm because of the continuing strong demand for Southland homes, especially ones with views, said G.U. Krueger, an economist for the real estate investment advisory firm IHP Capital Partners in Irvine.
Nationwide studies of homes damaged by earthquakes, fires, floods, storms, tornadoes and hurricanes have found no ill effects on home values from these natural disasters, said John Karevoll, an analyst at La Jolla-based DataQuick Information Systems.
“Household income, job growth and migration patterns play 100 times more of a role in the ups and downs of home prices,” Karevoll said. “After a slide, the impact on subsequent sales over time is virtually unnoticeable.
“There might be a temporary lull in real estate activity” in the affected areas after natural disasters, he added, “but it always kicks back into gear.”
That has been especially true of properties such as the Vasquez house. The four-bedroom home with a guesthouse, situated at the bottom of a hill with homes perched above it, has weathered a couple of El Nino seasons and survived an upslope neighbor’s 1984 pool leak, which sent a cascade of water into the Vasquezes’ living room. Taking experts’ advice at the time, the Vasquezes built a hillside retaining wall and installed an extensive outdoor drainage system, which easily handled the recent voluminous rainfall.
Such work -- sometimes covered by insurance -- can add value to homes remodeled or rebuilt to higher standards, thus producing a “Santa Claus effect,” said Randall Bell, a Laguna Beach real estate appraiser who specializes in disasters.
“You can find buyers willing to pay full value even if neighbors had problems,” Bell said. “They get the land tested by geologists and make a decision based on that.”
The effect of the recent storms on home prices and neighborhood desirability could last from one day -- in areas with minimal mudslides and high buyer appeal -- to four years, the time it took buyers to return to La Conchita after the March 1995 slide, said Camarillo Re-Max Gold Coast agent John Heard. Nine homes were destroyed in the ’95 slide; 12 more homes vanished in January’s slide, which killed 10 people.
Since the last El Nino storms in 1997-98, which dumped 31.02 inches of rain and severely damaged some Malibu homes, buyers there have scrutinized geology and drainage systems more closely, said veteran agent Jack Pritchett of Pritchett-Rapf Realtors. His office and other Malibu agents routinely attach the “Malibu-Topanga Disclosure Addendum” to purchase contracts, a document that lists every possible area hazard, including fires, landslides and tsunamis. Serious buyers, however, are not dissuaded from canyon and hillside purchases, Pritchett said, even after slides and fires.
“The prices don’t go down,” Pritchett said. “Sales stall but only until the next sunny day.”
In 1998, several half-million-dollar homes on Via Estoril in Laguna Niguel were destroyed and scores damaged in a landslide captured on live television. About two years later, after geological testing, bulldozing and rebuilding, many homes in that neighborhood had regained their full value, appraiser Bell said.
“In some cases, properties a street or two away from the slide sold immediately after for full value,” Bell said. “There are great ocean views and there is a healthy demand for real estate in that market.”
The biggest impediment to future building and sales in La Conchita and other areas where homes were completely destroyed will be obtaining homeowners’ insurance and building permits, Camarillo agent Heard said. If cities and counties eventually allow rebuilding in high-risk areas, however, there will be no lack of interest from buyers.
Interest in La Conchita
“I’ve already had solicitations from brokers who have clients who want to buy in La Conchita,” said Heard, who sold a number of rebuilt homes in the hamlet between 1999 and 2004. “It happened within days [of the recent slide].”
The potential for a rapid rebound is good news for Merly and Paul Burgos, sellers of a two-story, three-bedroom house built in 2003 under a steep Mount Washington slope in a neighborhood where some homes were red-tagged recently. The couple is optimistic about the sale of their $665,000 home, which they have protected with a drainage system and retaining wall that looms above their patio.
Sellers have to disclose known potential hazards of a hillside site, and well-informed buyers will consult the city and a geologist.
“Buyers have to do due diligence when getting a house with a retaining wall,” said Marissa Noble, the Burgos’ E-One Real Estate agent. Noble recommends they hire a geotechnical engineer to have any walls and slopes evaluated.
After this year’s record-setting rains, many buyers of hillside homes may be willing to spend the $2,000 to $5,000 for a typical geotechnical report. A geology report evaluates the risks of certain properties and can help owners and buyers make informed decisions about the land they occupy. Even getting a report doesn’t guarantee a lack of problems on slide-prone terrain.
UC Santa Barbara geology professor Ed Keller said that Southern California, especially L.A., is “one of the biggest landslide areas in the United States.” Ancient landslides -- on the Palos Verdes Peninsula and in Bluebird Canyon in Laguna Beach, for example -- can be reactivated when 20 to 30 inches of rain saturate the soil.
“Any slope can be engineered and made safe,” Keller said. “It all comes down to cost. It’s probably worth $500,000 to fix a Palos Verdes slope that will hold a $10-million home.”
There is no way to predict which hill will slide in the rain, but there sometimes are signs that such an event might occur. Ceiling cracks, or a gap between cabinets and a ceiling, may appear before a slide, Bell said. That was the case with one of the destroyed Laguna Niguel homes. Fissures on hillsides, which capture rain, also can contribute to soil movement and eventual mudslides.
Clogged outdoor drains, over-watering of lawns, inadequately supported hilltop pools, all raise the risk of mudslides, said Dale Scheffler, a Pomona drilling contractor who specializes in landslide repairs and prevention.
Scheffler currently is helping shore up a red-tagged Malibu hillside property whose guesthouse and pool began sliding a week and a half ago. (Building and safety regulations prohibit owners of red-tagged homes from reentering the dwelling until they fix the damage and get clearance from a geological engineer, who certifies that the slide no longer poses a threat.)
Within four days of the owners’ emergency call, Scheffler’s team had installed 16 concrete caissons, which now support the guesthouse. The job has cost about $150,000 so far, and the price tag will triple by the time the problem is resolved, Scheffler said.
“Maintain your property,” Scheffler said. “Whole neighborhoods have to come together to make sure everyone is correctly capturing water and protecting their properties.”
Even then, problems sometimes stem from construction and grading defects. As a result, some homeowners sue their builders and subcontractors. That was the case following the 1998 Laguna Niguel landslide, when hillside homes slipped onto condominiums below. Residents had been complaining for years about cracking walls and sagging fences.
As part of a settlement with Hon Development Co. and J.M. Peters, the developer and builder, the Niguel Summit Community Assn. received $20 million for slope repairs. Also, Hon agreed to buy all 41 condo units from displaced owners for nearly $16 million.
File suits promptly
California owners seeking legal redress from builders must file suits within 10 years of the completion of a structure, said Robert Balmuth, an Irvine attorney who represented owners in the Laguna Niguel litigation. There is an additional statute of limitations, which requires owners who notice problems with their properties to file a lawsuit within three years of the discovery. If, for example, an unusual wall crack or slumping fence were noticed four years after the home was built, the owner must file a lawsuit no later than three years after that. No suit may be filed more than 10 years after construction was completed.
If a home is more than 10 years old and sustains damage from a leaky water main or source other than rain, a homeowner may seek redress from the city, county or company that installed the pipe, Balmuth said.
While keeping a wary eye on the skies, home sellers like the Burgoses in Mount Washington try to remain upbeat.
“If Mother Nature keeps on like it has, it might affect real estate around here,” Paul Burgos said. “You never know, but so far we’ve been quite fortunate.”
