Hotter than Beverly Hills 90210
The across-the-board gains enjoyed in recent years by homeowners from Palmdale to San Pedro and Covina to Calabasas may no longer be a given.
When economists with the UCLA Anderson Forecast last week offered their latest outlook for the California economy, they emphasized that the record home appreciation of the last few years could soon be a thing of the past.
A close look at Los Angeles County’s real estate market reveals that in the second half of 2004, cracks were already beginning to show, primarily on the upper end of the scale. By and large, the less expensive areas of the county remain red-hot, but some pricier areas have seen significant cooling.
While more affluent buyers have begun biding their time, looking for deals, those in the huge pool of prospective first-time buyers are taking advantage of rising but still low interest rates to get into the market.
On a price-per-square-foot basis, DataQuick Information Systems analyst John Karevoll said that close to one-third of county ZIP Codes with high sales volumes ended up on the negative side of the ledger in the latter half of 2004. He said this shift, largely at the top, portends a more general cooling in the months ahead, changing the dynamics of what has been a prolonged sellers’ market.
“Now, we’re in the final stages of that [up] cycle,” Karevoll said, “where you also see the higher end affected first.”
Economist Edward Leamer, director of the UCLA Anderson Forecast, said high-end sellers today are having a harder time getting their asking prices.
“Expensive specialty properties are more vulnerable when the market softens,” he said. “What’s happening is that sales volumes are emphasizing lower-priced homes.”
The numbers tell the story.
Of the 220 ZIP Codes in the county that registered sales of 250 or more existing homes in 2004, 28%, or 62 ZIP Codes, experienced declines from July to December in the median price paid per square foot of living space, according to DataQuick.
Some of the weakest-performing ZIP Codes in the second half of 2004 were among the most expensive in the county, DataQuick said. They included Beverly Hills 90210, down 11.8%; Pacific Palisades 90272, down 11.7%; and Pasadena 91106, down 7%.
On the other hand, neighborhoods where values were below the county median saw the greatest appreciation: Among the strongest performers were Lincoln Heights 90031, up 39.6%; El Monte 91731, up 30.6%; and Compton 90222, up 26.7%.
Another area that saw prices soar was Lynwood 90262, where the median price per square foot shot up 19.8% in the latter half of 2004.
That’s good news for Lynwood homeowner Hodges Pittman, 67, a retired plumber, but not for his nephew, Rodney Cooper, 42, a ramp agent for Southwest Airlines who, despite steady employment, has seen homeownership slip further from his grasp.
Taking a break from fertilizing the lawn in front of the Shirley Avenue house that Pittman’s family purchased in 1969 for $24,000, uncle and nephew ruminated on changes in the neighborhood.
“I’m saving and I had a two-year plan, but that’s changed a little bit,” Cooper said. “I thought prices would come down, but they keep going up.”
What he’s increasingly seeing, Pittman said, are families pooling their resources to buy and share homes in the neighborhood.
“A house across the street sold for $400,000, and it wasn’t even one of the nicer houses in the neighborhood,” he said. “The average income around here is about $30,000 or $40,000 -- and that’s two people working. How is someone like that going to afford a $400,000 home?”
It’s instructive to keep these price-per-square-foot numbers in perspective. The mix of homes sold can distort the picture. And even with its recent gains, the median price per square foot in Lynwood was $290 at the end of the year, still under the countywide median of $319.
Meanwhile, Beverly Hills 90210 ended the year at $604 per square foot. And many areas that lost value in the second half of 2004, at least on paper, were backing down from a lofty perch early in the year and still registered healthy overall gains. The median value of a home in 90210 went up 28% in 2004, so it’s not exactly down and out in Beverly Hills.
Moreover, DataQuick reported that the median price of a single-family home in L.A. County soared to a record $414,000 at the end of 2004, up a staggering 22.8% from 2003.
But cut the year in half and one sees a somewhat different picture. DataQuick’s Karevoll said that although the average county home appreciated by $74,000 in 2004, more than 80% of that gain was realized between January and June.
Map out the 25 best and 25 worst-performing ZIP Codes in the latter half of 2004 on a price-per-square-foot basis and it quickly becomes apparent that the current market momentum lies in the southern and southwestern parts of the county. The square-foot measure, real estate experts say, is a reliable indicator of a market’s strength.
Late last month, agent Eileen Anderson of the Anderson Group represented the seller of what she described as an 1,100-square-foot “total fixer” on Le Sage Street in Lynwood. Listed at $330,000, the nondescript stucco structure drew tremendous interest and numerous offers.
“If I had 10 of them, they would be sold,” said Anderson, who does most of her business in the Orange County community of Newport Beach. “[South Los Angeles] is really hot. It’s the only thing affordable out there, unless you want to live way out.”
Conversely, a band of ZIP Codes where the median price per square foot declined in the last six months of 2004 extends across the expensive foothill communities of Glendale, Pasadena and Sierra Madre and into the San Gabriel Valley neighborhoods of Alhambra, Monterey Park and Temple City.
There’s also a pocket that dipped on the Westside, including in L.A./Mar Vista 90066, West Hollywood 90046 and 90048 and the aforementioned Beverly Hills 90210.
Overall, 16 of the 25 best-performing ZIP Codes for the six-month period were in areas with average square-foot prices below the county median of $319. Just three of the 25 worst-performing ZIP Codes for that period had prices below the county median.
There were exceptions. One of the priciest ZIP Codes in the county, Malibu 90265, saw the average price per square foot climb more than 19%, to $770, in the latter half of 2004. Upscale Redondo Beach 90277 did even better, with prices soaring nearly 28%, to $647, in the second half.
But those exceptions aside, the trend in the last half of 2004 was clearly toward higher appreciation in less-expensive neighborhoods.
Don Beder, an agent with Coldwell Banker in Beverly Hills, said one of the reasons for a slow-down in both rate of sales and appreciation in some high-end areas is that sellers -- emboldened by skyrocketing prices in recent years -- are trying to push the limits.
“After a while, income won’t justify prices, even for very wealthy people,” Beder said. “If you do have a property that’s priced well, it will still get multiple offers. But some people are listing 30% to 40% above market. It’s laughable.”
In its new report, the Anderson Forecast said housing will no longer be able to shoulder the unusually high contribution to local economic growth that it has in recent years. But persistent demand and low interest rates have kept the market on an even keel so far, Leamer acknowledged.
“We think this year is going to be OK for the first couple of quarters,” he said. However, Leamer sees values heading downward in the second half of the year and beyond.
“Price appreciation is already slowing after a record run-up over the last three years,” according to the new Anderson Forecast. “When this appreciation stops, so does the income boost that has fed California’s appetite for consumption of many other services and products that have kept the internal job market moving forward even as incomes were flat.”
A building boom brought on by high prices has done much to address the state’s chronic housing shortage, a factor that will also contribute to lower prices, according to the Anderson Forecast.
Not everyone, however, agrees with that assessment, or with DataQuick numbers that show declines in more expensive areas.
Joe Wilson, a Coldwell Banker agent at the South Lake office in Pasadena, said that in his experience, prices have been steadily rising in the 91103 ZIP Code, which includes expensive homes in the hills around the Rose Bowl. According to DataQuick, the median price per square foot of homes sold in that ZIP Code declined by 13.1% between July and December last year.
“I’d be very surprised if there was a dip,” Wilson said of the home sale prices and activity he has seen in the area. “Things are still selling fast, and the numbers are about the same.”
Karevoll acknowledged that any methodology for measuring a market as large and diverse as that of Los Angeles County has its limitations. But he said restricting the ZIP Codes under consideration to those with at least 250 sales in the year weeds out statistical anomalies and produces a reliable snapshot of market activity.
Leamer agreed, calling the DataQuick numbers “a good sample that should provide reliable figures.”
One final number offers perhaps the most telling reason why buyers are attracted to Los Angeles’ lower-priced neighborhoods: It’s the number 17. That’s the percentage of households in Los Angeles County that could afford a median-priced home in 2004, according to the California Assn. of Realtors, down from 23% in 2003.
“When the market was really cooking a couple of years ago, you didn’t have much appreciation in those areas” that are now shooting up, Karevoll said. “What you’re seeing is people doing whatever they can to get in.”
Cooper, the Southwest employee, is among those still on the outside looking in.
“I like Lynwood, and I’d love to get a home,” he said. “Right now it’s just hard as heck.”
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The ups and downs of L.A. County home prices per square foot
Although the median price of resale homes in Los Angeles County increased 22.8% in 2004, more than 80% of that gain occurred from January through June. From June 30 to Dec. 31, some ZIP Codes recorded a decrease in the median price paid per square foot. The figures below are based on ZIP Codes that registered sales of 250 or more existing homes.
Top 25 gainers
(Price per sq. ft.)
*--* Community name ZIP code 6/30/04 12/31/04 % price change L.A./Lincoln Heights 90031 $255 $356 39.6% L.A./Baldwin Hills 90008 $270 $373 38.1% L.A. 90063 $215 $295 37.2% Lawndale 90260 $320 $423 32.2% L.A. 90011 $201 $263 30.8% El Monte 91731 $252 $329 30.6% San Pedro 90732 $341 $442 29.6% Redondo Beach 90277 $506 $647 27.9% Bell 90201 $251 $320 27.5% Huntington Park 90255 $233 $297 27.5% Compton 90222 $210 $266 26.7% Long Beach 90814 $422 $531 25.8% L.A. 90037 $203 $255 25.6% Compton 90221 $197 $243 23.4% South Gate 90280 $261 $320 22.6% L.A./August F. Haw 90061 $202 $247 22.3% Inglewood 90303 $246 $299 21.5% L.A. 90019 $332 $403 21.4% El Segundo 90245 $410 $497 21.2% Palmdale 93591 $124 $150 21.0% Lynwood 90262 $242 $290 19.8% Torrance 90502 $323 $387 19.8% L.A. 90018 $237 $283 19.4% Malibu 90265 $646 $770 19.2% L.A. 90039 $449 $532 18.5%
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Top 25 losers
(Price per sq. ft.)
*--* Communi ZIP code 6/30/04 12/31/04 % ty name price chang e Torrance 90503 $479 $409 -14.6% El 91733 $313 $268 -14.4% Monte (South) Agoura 91301 $348 $302 -13.2% Hills Pasadena 91103 $412 $358 -13.1% Montere 91755 $330 $287 -13.0% y Park Alhambra 91801 $326 $286 -12.3% Beverly 90210 $685 $604 -11.8% Hills Pacific 90272 $843 $744 -11.7% Palisad es Long 90813 $299 $269 -10.0% Beach Glendale 91201 $435 $394 -9.4% Sierra 91024 $423 $386 -8.7% Madre Artesia 90701 $326 $298 -8.6% L.A./Hi 90042 $390 $357 -8.5% 91780 $369 $340 -7.9% ghland Templ Park e City Glendale 91206 $386 $356 -7.8% Glendale 91202 $391 $361 -7.7% L.A./Ma 90066 $524 $484 -7.6% r Vista Whittier 90605 $329 $305 -7.3% Pasadena 91106 $470 $437 -7.0% West 90046 $590 $551 -6.6% Hollywo od/L.A. West 90048 $556 $520 -6.5% Hollywo od/L.A. Burbank 91504 $420 $393 -6.4% La 91214 $421 $394 -6.4% Crescen ta Calabas 91302 $396 $372 -6.1% as Whittier 90602 $304 $286 -5.9%
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Source: DataQuick Information Systems
L.A. freelancer Darrell Satzman can be reached at satzman@earthlink.net.
