What do you want to know about today’s real estate market? Just ask Cindy Crawford. According to Ruth Ryon’s March 16 Hot Property column in the Los Angeles Times real estate section, the model-actress, who has been leasing on the Westside, paid more than the $1.8 million asking price for an “old and dated but charming” Brentwood house, which had multiple offers its first day on the market.
To those operating under the assumption that the market is still soft, that’s a wakeup call.
Making the move from lessee to buyer, purchasing a fixer that drew multiple offers on day one and sold above list price — Crawford’s home-buying experience may sound reminiscent of the late 1980s, but in fact is typical of today’s new and improved real estate market. According to the panel brought together for this article, the market is back in a big way. From the San Fernando Valley to Malibu to Bel Air to Silver Lake, property is hot right now. And not just in Ruth Ryon’s column.
Across the Southland, real estate agents report a low inventory of quality listings, resulting in multiple offers on the better properties, with many selling above their list prices. The California Assn. of Realtors’ most recent figures indicate that as of January, home prices were up an average of 4%, with the number of sales up 7.6% from December. In another solid market indicator, pending sales also are on the rise. At the end of January there were 783 pending sales in Los Angeles County, the highest number since 1989.
“1997, compared to 1996, is like a whole different world,” says Joe Babajian, chairman of Fred Sands Estates. “The market has taken a major turn in the last three months.” Home prices, which are still comparatively low, coupled with favorable interest rates, get the credit for this upturn.
Everyone, it seems, is trading their temporary tenant status for the satisfaction that comes with being a homeowner. Melanie Griffith and Antonio Banderas made the leap recently, according to Ryon’s column, paying about $3 million for the home they had been leasing from Michelle Pfeiffer for $15,000 a month.
Just one year ago, business managers advised clients to lease homes rather than buy. The advantages of home ownership, such as tax benefits and life without a landlord, were outweighed by the threat of declining values. Today, that sentiment has changed so drastically that leases are hard to come by. “A lot of people who rented their house out, because they couldn’t get the kind of money they wanted, are now able to sell the house. So the inventory (for leases) is diminishing very quickly,” says Don Richstone, manager of Rodeo Realty in Malibu. This is a problem, because leases do serve a purpose. Leases appeal to people in town for a short time, those wanting to test the commute or the neighborhood, or folks who just want to spend a few months on the beach.
If renters are feeling the pinch, buyers should consider themselves forewarned. “At least you can choose your house now,” Richstone says. “In maybe a year or two you’re not going to be able to.”
The reason is the limited supply of property. And demand is beginning to exceed supply.
“Everything that I’ve put on the market recently has sold pretty much in multiple offers, first week on the market, and over asking price,” says Gillian Swanson, the top producing agent in Silver Lake for Prudential Jon Douglas. “Under these circumstances, you have to be willing to make a decision quickly, which is what I see with entertainment industry people. They are capable of doing that.”
With Hollywood leading the shopping spree, a handful of areas are emerging as industry favorites. The Westside — Malibu, Santa Monica, Pacific Palisades, Brentwood and Bel Air — continues to draw the big money, while the Eastside — Los Feliz, Silver Lake’s Moreno Highlands — is in vogue with younger buyers. Brad Pitt, Sandra Bullock, Johnny Depp and Grammy winner Beck are just a few who have settled in the east, some say out of rebellion. “The establishment is now more west,” Babajian says. “Those who want to make a statement move east.”
Homes on the Eastside tend to be more affordable, starting at $350,000, and have maintained much of their Old World charm. “Most of the homes were built in the 1920s and have lots of character,” says Swanson, a Silver Lake resident. “And there’s the lake. It’s very pretty. The area has sort of a Tuscan feel.”
In the San Fernando Valley, Hidden Hills is the hot neighborhood among family-oriented industry buyers. Located in the far West Valley, with prices starting at $750,000, it is a city unto itself. “There’s nothing lovelier than a gated community where there’s horses, a clubhouse and wonderful schools,” says Connie Nelson, estates director for Prudential Jon Douglas. “If they can afford it, it’s got everything the young industry family is looking for. It’s a great place to raise the kids.”
Two old favorites are Malibu and Studio City. With its strong sense of community and easygoing atmosphere, Malibu appeals to full-time residents and part-timers alike. Point Dume, where Richstone says, “You can still buy a nice house for $750,000,” is also popular with first-time buyers. Studio City continues to pull in showbiz dollars with its convenient location, abundance of retail shopping and homes starting at $350,000.
And just what is the “industry buyer” looking for? High-profile celebrities may place the emphasis on privacy and security, but everyone, from the grip to the superstar, wants a home with charm and atmosphere. Recall Cindy Crawford’s purchase of an “old and dated but charming” Brentwood house? “If a buyer walks into a house and it’s very emotional, like a great old Spanish-style place, and the kitchen needs to be redone, they’ll buy it and redo the kitchen before they buy another place that has a new kitchen but which is very bland and boring and has no bones,” Babajian explains.
“In a market driven by the entertainment industry, this is a very important consideration — it’s a visual business,” says Swanson. “If you must remodel, set the stage. Create something that has strong visual appeal, emotion, atmosphere.”
Nelson advises, “People should never try to remodel if they don’t have a sense of style. You really have to know what you’re doing.”
Other considerations for would-be remodelers are the investment of time and money. “If you are in your peak earning years, you don’t want to stop and start planning a house. It’s not the best use of your time,” advises Richstone, whose own informal survey found that “normally, remodels cost 100% over budget. It’s something to think about.”
Financing is one thing those employed within the industry need not worry about. “There are lenders that favor the entertainment business,” Nelson says. “They know what to look for, they are accustomed to dealing with business managers, and they make it much more comfortable for the client.”
Even with money readily available, however, buyers still have to meet certain federally mandated lending criteria. “They take a lot of things into account: Your employment contract, income, expenses, how much money you have in the bank, other assets and the appraisal are all things they look at,” Babajian says.
True, but as Richstone points out, in a go-go market, lending policies tend to get tweaked. “Your short-term debt plus your mortgage payment, taxes and insurance shouldn’t be more than a third of your income. But of course, with enough down, they don’t care. You just have to be breathing.”
Years of experience catering to the entertainment industry client have given these Realtors a unique perspective on Southern California real estate. A problem they share is the difficulty in keeping a celebrity transaction hush-hush. “I’ve had gardeners tell me that so-and-so bought a house,” Richstone laments. As evidenced by the Crawford item in the Hot Property column, “You cannot keep a sale confidential. All you can do is keep it quiet for a period of time, if you’re lucky — long enough to where it stops being news.”
With a little luck, who is active in the market soon will become secondary to the market itself. In the unanimous opinion of this panel, today’s market is the stuff headlines are made of.