Where to Find a Deal in L.A. as the Market Stays Hot

Los Angeles prices for luxury real estate have generally softened in recent months, with the median sales price down in the first quarter compared to the same time last year by 4.5% to $1.455 million, according to Douglas Elliman market data. At the same time, the number of sales are down 26.4% and the amount of inventory currently listed is up 27.7%. Still, in-demand Westside communities near the tech sector, known as Silicon Beach, are still showing steady price increases and low supply.

Given current market factors and other dynamics, there are now some neighborhoods—generally outside of Silicon Beach—where buyers can find a deal on a property priced above $5 million, or score a less expensive home that costs about $1 million, with significant price increases expected in the coming years.

In the $5 million-plus range, there are two stories playing out right now when it comes to potential “deals.” The first is in the luxury spec build market, in which there is currently an oversupply of inventory, with more properties slated to hit the market soon.

“There will be about five years of new luxury inventory hitting the market in affluent areas such as Bel-Air, Beverly Hills and Brentwood the next 18 months,” said Eli Karon, a broker associate at Douglas Elliman, who noted that every third house in certain pockets of these neighborhoods seems to be under construction. “This means that buyers who are qualified in this $5 million to $10 million price range, or higher, will have a lot to choose from.”

With this oversupply, buyers can get picky, take their time to find the home they truly desire and then negotiate hard, Mr. Karon said. For instance, he noted, a home in the tony Bird Streets, where there are large, flat lots and great views, sold in April for $15.75 million from a list price of $22.995 million, which was first listed just under $26 million. That’s a 40% discount from the original list price, with 255 days on market. “There’s just not the demand there to move these properties,” Mr. Karon said, “and that trend will continue.” 

For the handful of homes currently listed in the $100 million price range, he said he wouldn’t be surprised to see them sell for closer to $40 million.

But while these are big price decreases, he cautioned that potential buyers shouldn’t necessarily consider them “deals,” because in real estate, that doesn’t really exist. “The market is the market,” he said. “But if you look at a neighborhood flooded with new inventory, there’s certainly an opportunity there.”

Malibu Presents Another Opportunity as Community Recovers

In November, the Woolsey fire ravaged the beachside community of Malibu, burning down about 700 properties—many of them considered multi-million dollar homes. In the fire’s aftermath, the neighborhoods most impacted by the fire, including Malibu Park and Point Dume, were largely shut down. But now, seven months later, life has resumed.

“There is only one Malibu,” said Eric Haskell, an agent and Malibu expert who works for L.A.’s high-end brokerage, The Agency. “And it’s unfortunate to say this, because the fire was such a bad thing for so many people, but it’s presented buyers with a real estate opportunity.”

Or rather, two opportunities. 

The first is for homes that were not impacted by the fires and are listed now, Mr. Haskell said. “They are currently being traded at a bit lower price point than what we would have seen in the past,” he said, “although there will likely be a tipping point soon where people jump back in the market.” 

Current listings The Agency has in Malibu include a $9.495 million home in the Point Dume area; a $16.9 million home overlooking the coast; and a $75 million manse on Malibu Crest Drive. 

And according to Douglas Elliman market data for the first quarter, the average sales price was down 27.9% in Malibu year over year, and there were only 33 sales in the quarter, compared to 73 last year.

In terms of when that tipping point will happen, Mr. Haskell can’t be sure, but in another community he represents on the coast 90 minutes north, called Montecito, it took about a year to a year-and-a-half for buyers to feel comfortable again after a massive debris flow impacted much of the luxury community following a massive fire and subsequent flood.

“That turnaround is going to take less time in Malibu because it’s closer to L.A., and didn’t have as much damage,” Mr. Haskell said, noting that in Montecito, the debris flow wiped out roads and utilities. “Plus now that it’s summer, people will want to come out and have that Malibu experience.”

The second opportunity in Malibu, Mr. Haskell said, is for developers and buyers to pick up land where homes burnt down, with an opportunity to build and add their own touch that they wouldn’t normally get. 

Some of the previous owners are leaving because they were under-insured, he said, while others don’t want to oversee a rebuild and would rather move elsewhere. Either way, because there is vacant land, and a push by the local government and the California Coastal Commission to make building easier and the permitting process less time consuming, it means there is a once-in-a-lifetime opportunity to get in now with an expedited build process.

For Up-and-Coming Luxury L.A. Neighborhoods, Look East

When it comes to trying to predict where the market is going, and anticipate the next L.A. hot spot, all signs point in the same direction: East, said agent Daniel Stevenson, a director of The Agency’s New Development Group. 

“We saw development and price appreciation on the west side near the ocean, and far east in Pasadena and the surrounding communities, and now we’re seeing a compression back toward the center,” Mr. Stevenson said. “Right now, most of east L.A. is really solid.”

Topping that “solid” list is the community of Silver Lake, where according to The Agency data, the median sales price in May 2019 was $1.16 million, up 18% over the same month last year. The neighborhood also currently has less than three months of inventory.

Single-family homes are a good bet, Mr. Stevenson said, who also believes that The Agency’s forthcoming luxury condo project, Vica—the first in Silver Lake in 10 years—which will have 31 units priced between $505,000 for a studio up to $2.4 million for a three-bed, three-bath penthouse with a private roof deck, will be a hit.

“There’s a huge opportunity for price appreciation and growth in L.A. where walkability is a key feature of life,” he said, noting that Silver Lake offers just that, plus restaurants and nightlife to boot.

Nearby eastside neighborhoods including Glendale, Mount Washington, Eagle Rock and Atwater Village, where there are mostly single-family homes that cost just over $1 million, are also really interesting, Mr. Stevenson said. As is the eastern part of West Hollywood, where there are similarly hip restaurants and some tech companies (namely Netflix) developing space. 

In the under-$1 million range, Mr. Stevenson said he’s bullish on the neighborhood of West Adams, where hipster healthy eating chain Sweetgreen, and luxury consignment shop, The RealReal, both recently announced they were moving their headquarters. 

Mr. Karon agreed. “Gentrification is still in full swing in neighborhoods including West Adams, Leimert Park and Jefferson Park,” he said, “but the architecture is really good, the Metro Line offers convenience, and home values are definitely going up.”

And not so far away in the Culver City-adjacent neighborhoods of View Park and Baldwin Hills, it all comes back to those views. 

“The view from these neighborhoods may be better than in the Bird Streets,” Mr. Karon said, noting that you can see the Hollywood sign, downtown and the ocean, “but you save 10 times on the purchase price. That offers one of the best values in L.A.”

Source: ANNE MACHALINKSKI, Mansion Global