Saturday, March 24, 2007

Bargain Real Estate in Los Angeles?

The New York Times has discovered an arbitrage opportunity in Los Angeles real estate and was kind enough to report about it in today's paper. I hope the business section begins offering stock tips! This booster article focuses on the "low" prices in the NELA area of Los Angeles and the easy access to downtown but for some strange reason it doesn't discuss the disadvantages of living in this general area.

I have some questions;

1. how many people in Los Angeles work downtown? Kobe works at the Staples Center 41 days a year but he is in the minority. How many people travel to the Los Angeles commute downtown for cultural and shopping opportunities? To be blunt, what is the advantage of being close to downtown?

2. How far is NELA from the beach? How often do "NELA residents" actually go to the beach? The article tries to imply that the West L.A price premium is driven by the desire among upper middle class shlubs to spot celebrities. Perhaps a more satisfying explanation of the West side price premia is proximity to the beach, cooler summer days, and cleaner air.

I would have liked to have seen this reporter quantify these 3 aspects of living in NELA. I can't tell what is the real purpose of this section of the Times. Is it like a high school guidance counselor providing advice to people who don't know what college to apply to? Or is it geared toward middle class intellectuals who want to believe that they can live as well as the rich (even though they are not rich) because perfect substitutes exist (to Beverly Hills) if they can just get the information about these places?

March 25, 2007
National Perspectives
Northeast Los Angeles: Ready for a Close-Up


A PSYCHOLOGICAL barrier still exists among home buyers here. Downtown is the center of an east-west divide, with the established and famous Hollywood Hills the hub of desirability to the west. To the east, there is a historic hilly area. If Angelenos know about it at all, they generally consider it a less attractive part of town.

But as real estate prices have risen sharply over the last five years, home buyers have been migrating east to discover a group of neighborhoods known collectively as Northeast Los Angeles, or NELA. They are being enticed by Victorian homes dating to the 1890s, Craftsman and Mission Revival homes from the turn of the 20th century and newly desirable midcentury homes, designed with an orientation toward the outdoors.

Eagle Rock, Mount Washington and Highland Park — with a total population of 82,000, according to the 2000 census — are three of the better-known NELA neighborhoods. They are all within Los Angeles proper, in the northeast hills, which were first settled in the late 1800s. And despite rising prices, most houses there are still relatively affordable compared with similar homes in West Los Angeles.

“A $450,000 house in NELA would cost $750,000 in West Los Angeles,” said Bob Taylor, founder of Bob Taylor Properties, who has been a broker in NELA for 27 years. “And it only takes 15 minutes to get downtown from here. In West Los Angeles, it could take 30 minutes or more.” Creative types who work in the film and television industry enjoy close proximity to major studios, like Warner Brothers and Universal. And then there are the views.

“The sunsets are absolutely spectacular,” said David Spancer, who with his wife, Apryl Lundsten, fell in love with a midcentury modern home that sits high in the hills of Eagle Rock. Their 2,100-square-foot house with three bedrooms and two and a half baths cost $495,000 in 2003. Built in 1966, the house still has much of its original detailing, as well as a built-in bar and stools, a barbecue and rotisserie, and a large old-fashioned Chambers refrigerator that still hums along. There’s also a built-in can-opener and coffee maker.

But the real treat is a 1,500-square-foot west-facing balcony that runs the length of the house, offering views from the Pacific Ocean to the Hollywood Hills on a clear day. “And most of my work is at Universal Studios, which is only a 20-minute drive,” Mr. Spancer said, standing on the balcony on a 75-degree February day.

Mr. Spancer is a script coordinator, while Ms. Lundsten is a longtime radio journalist who recently started a podcasting business, L.A. PodSquad. Along with commercial work, she and a business partner produce a regular podcast called Eagle Rock Talk, featuring many of the neighborhood’s new business owners.

“It’s nice to be part of a community that’s coming alive,” she said while giving a tour of the commercial district, where a smattering of cafes, restaurants and boutiques have opened to meet the demand of new homeowners in the area.

Blue Heeler Imports is one such boutique, opened by Shannon Bedell, who lives in Mount Washington. Ms. Bedell did well during the Internet boom, and she was able to buy her Mount Washington home in 1999 for $375,000, along with two lots next door for an additional $80,000. Having lived in Australia for a bit, Ms. Bedell decided to open a boutique featuring Australian products.

“I looked for eight months all over West Los Angeles for a retail space, but I finally decided that Eagle Rock was an up-and-coming commercial district,” Ms. Bedell said. “I’ve definitely noticed an influx of industry people shopping at my store, and it feels good to invest in my own community.”

Not to mention that it is a much easier commute from Ms. Bedell’s 1,500-square-foot two-bedroom Spanish Mission-style home, built in the 1930s, which she shares with Shawn Bishop, a photographer with an even easier commute — to the second bedroom, where he keeps his photo lab and office.

But once again, it is the outdoor space that steals the show. Ms. Bedell’s 1,200-square-foot split-level balcony — reached from different parts of the house by five sets of French doors and shaded by old-growth trees — overlooks the hills of Mount Washington, which could be mistaken for Tuscany.

Community activists credit a strong historic preservation movement for stabilizing NELA, especially in the 1970s, when Highland Park — which sits in a valley between Mount Washington and Eagle Rock — began to experience gang problems and disinvestment.

Charles J. Fisher, a historian who grew up in Mount Washington, married in the early 1980s and moved into a Craftsman home built in 1908 in Highland Park. He immediately noticed that because the area had high-density zoning, developers were buying historical Craftsman and Mission Revival homes, tearing them down and building cheap apartment buildings.

With some other concerned residents, Mr. Fisher founded the Highland Park Heritage Trust, which succeeded in getting a historic-preservation overlay zone for much of Highland Park in 1994. The city planning department has instituted an approval process for modifying historic homes within the zone.

But it wasn’t until the more recent real estate boom that people from outside the area began to discover the housing stock.

“The overlay literally ground the crazy development to a halt,” Mr. Fisher said. “But what’s been happening now, people are moving into the homes and fixing them up. At the time we were fighting for the historic overlay, the real estate market was in a slump. Our biggest ally was the poor economy, when there wasn’t a building boom going on. Otherwise, there would have been a lot more opposition from developers. So when the real estate values skyrocketed more recently, developers went looking elsewhere. We got lucky.”

That is not to say that prices have not gone up. For the ZIP code 90041 (Eagle Rock), the highest and lowest prices paid this year were $1.2 million and $400,000, with a median of $579,500, according to Multiple Listing Service figures provided by Mr. Taylor. In 2001, that ZIP code’s median was $246,000.

Even in Highland Park, which is thought of more as an entry-level home buyer’s market, prices have gone up considerably. For its ZIP code, 90042, the highest price paid this year was $655,000 and the lowest $366,000, with a median price of $487,500. In 2001 the median price was $182,000.

But housing costs still seem reasonable, compared with West Los Angeles. And some west-Angeleno types are moving in. Mr. Taylor said he had recently sold a 3,000-square-foot Craftsman home on a hill and surrounded by 18,000 square feet of land, with a guest apartment over a three-car garage, for $849,000 to an actress whom he asked, for privacy reasons, not to identify.

“You still don’t see too many recognizable actresses looking in Highland Park,” Mr. Taylor said. “But that house on that much land would be a couple million in West Los Angeles. And you probably wouldn’t get the views.”