L.A. real estate in the post-pandemic era is about to undergo massive changes as millions work from home, hipster hoods falter amid retail meltdown, and the city’s newest hot spot might be monopolized by the richest man on Earth. Will massive home equity growth come to a crashing halt? Or will the residential market reset to its pre-pandemic self this summer? With millions sheltering in place, here’s what’s hitting home.
While Palos Verdes might have the peacocks, horse trails, and ocean vistas, the commute to downtown or Century City is a deal killer for most, a fact that has suppressed prices relative to otherwise comparable communities. But the sudden uptick in remote working could have post-lockdown implications for the peninsula. “The area has the schools, the views, and amazing prices for what you get,” says real estate agent Tami Pardee, adding that clients were already decamping from Venice and Mar Vista before the pandemic. Anthony Poon migrated to Palos Verdes last year after owning homes on the Bird Streets in the Hollywood Hills and Bel Air. “I sought out a tranquil neighborhood of nature and birds, wide streets, and rejuvenating calm,” says the architect, who purchased a 2,800-square-foot midcentury with exposed beams, tongue-and-groove ceiling planks, and a split-level open plan. “If this house was in my past neighborhoods, it would be literally three or even four times the price to obtain the same square footage, size of lot, canyon views, and architectural character.” And while Palos Verdes’ Valmonte district doesn’t boast ocean views, it could hold the biggest potential for appreciation. “This is a neighborhood where people are walking up and down the streets. You see old people, young people, strollers, and dogs. In the evenings adults are on lawn chairs, and in general there are a lot of red Solo cups,” says real estate agent Cari Corbalis. “There’s a Little League field here with a snack shack that’s the social hub, even for people who don’t have kids.” That bygone charm has lured buyers from Manhattan Beach who don’t want to spend $6 million for a house with no yard, says Corbalis. “Here, they pay a fraction of that,” she notes of the approximately 400 homes that start in the mid-$1 millions. “If people are going to start working from home, even part-time, suddenly Palos Verdes becomes one of Los Angeles’s most desirable places to live.”
A Shifting Center
Amazon’s impending occupation of Culver City—Jeff Bezos’s behemoth will soon expand beyond 700,000 square feet of office space there—is just one of many tech giants moving into the area. Together with Apple, TikTok, and HBO, more than 7,000 new employees are scheduled to work in the incorporated city of 39,000 in the next two years. “That’s a remarkable amount of new jobs with remarkable companies,” says Eric Willett, a research director at CBRE. “[Neighboring] West Adams has a unique confluence of factors: a combination of cultural attractions, access to tech and creative talent as well as infrastructure. We don’t see underlying risk factors there, only huge potential for growth,” he says. Massive developments like Cumulus, which features a 31-floor high-rise and a seven-story building, will add 1,210 rental units this fall, while an additional 400 from a variety of projects are in the pipeline, says Willett. Many of the people moving into these new properties will be coming from Culver City, says Lina Lee, associate vice president of development at CIM. “These are people whose apartment has changed hands or whose rent has gone up dramatically.” But they won’t be heading to just West Adams. Leimert Park, View Park, Ladera Heights, Baldwin Hills, and Windsor Hills have all seen double-digit annual price jumps in the past three years. “There is nowhere else to go to the west, and there are hills to the north. The migration we’re going to see is to the southeast of Culver City,” says Lee. “Four years ago you could get a small three-bedroom home in West Adams for half a million dollars. Now it’s more like $850,000 or higher. That’s a year-over-year increase that far exceeds the rest of Los Angeles during the same time period.”
Six- and Seven-Figure Views
Since the last recession the L.A. real estate market has become vista-obsessed, with promises of jetliner views commanding eight- and even nine-figure prices in places like Trousdale Estates and Sunset Plaza. Can’t afford those downtown-to-ocean panoramas? Second-tier alternatives are gaining status. “What you don’t get on the city side are the mountains. People are starting to appreciate the beauty of valley views,” says Compass real estate agent Tori Horowitz, who reports a surge of interest in Laurel Hills, a small section of Laurel Canyon off Mulholland Drive, which provides “wide views with layers of mountains. When the San Gabriels are snowcapped, it’s stunning.” Horowitz says home buyers are also attracted to the Laurel Canyon lore without the logistical hassles. “Laurel Hills has nicely paved streets and sidewalks as well as a proper sewer system,” she says of the area, where vista properties start in the mid-$2 millions, a “fraction of what it would cost in the Bird Streets.” Agent Tami Pardee says landlocked Westsiders in Venice and Marina del Rey are seeking higher ground in Baldwin Hills. “You can get space and land for a lot less money there,” she says. “There are homes from $700,000 to $1.5 million, some of which have amazing city views.” Edel Legaspi and her husband, Christopher Courts, paid less than a million for their 1,600-square-foot midcentury ranch in Baldwin Hills three years ago. “At that point we were priced out of Culver City,” says Legaspi. “It was this great surprise to discover this neighborhood. It’s quiet, with great walks, and our house has great city views. We can see the Hollywood Sign and sometimes the Griffith Observatory.” The higher streets, known as the Dons, have become a hotbed of activity: “Since we moved in, two houses next door and one across the street have been purchased by developers and flipped.”
A Faltering Frontier?
“Last recession the frontiers of new real estate development included East Hollywood and the Arts District. As they were not fully stabilized when the recession hit, they experienced higher levels of distress than certain mature submarkets,” says Paul Habibi, professor of finance and real estate at the UCLA Anderson Graduate School of Management. “Now it has moved outward to places such as Northeast L.A. The frontiers are often the most vulnerable during a recession. The last to deliver is typically the first to suffer,” says Habibi of areas that include Highland Park, Mount Washington, Glassell Park, and Eagle Rock. “These are all tied together and have been appreciating for the last few years. But as they’ve gentrified, other undervalued neighborhoods are going to take over in terms of appreciation,” says CIM’s Lina Lee. “If you bought a house in Mount Washington in 2014, for example, its appreciation would have been about half as much had you purchased that same home in West Adams.” Non-chain restaurants, shops, and studios have led the evolution in many of these areas, but the full impact of the pandemic shutdown on real estate will take a while to materialize. “If you think of retail as providing the kindling to ignite real estate developments, that’s in trouble right now outside of daily-needs retail such as grocery and drugstores,” says Habibi. Deasy Penner & Podley agent Scott King says Mount Washington might be more recession-resistant than its neighbors. “Mount Washington Elementary is one of the highest rated on the Eastside,” he says. “That’s a huge difference during times of decline, when families may choose to go from a private to public school.” Add in greater architectural diversity and far fewer retail outposts than other northeast areas, and, King says, those factors translate into less downturn vulnerability.
Cape Cod Apocalypse
According to real estate agent Bret Parsons, an architectural correction is on the horizon for the supersize East Coast-style piles that have proliferated in Westside areas like Santa Monica, Brentwood, and Cheviot Hills. “These Cape Cods sell well the first time because they are new,” says Parsons, who has written many books about L.A.’s architectural history. “After that, the cavernous, wall-less rooms with the just-cooked-dinner odors permeating every room just won’t sell as well.” The kicker? “They cost a fortune to cool and heat,” he notes. Furthermore, historical neighborhoods bring a better real estate investment, according to Parsons. “I recommend Hancock Park-adjacent neighborhoods including Lafayette Square, Wilshire Park, and Country Club Manor, all [historical protection overlay zones]. These areas are desirable as tear-downs are scant, and residents love knowing their communities will look the same tomorrow.” The rampant Hamptons-ization of Pacific Palisades has helped drive real estate values up in Sunset Mesa, an enclave above the Getty Villa that has escaped much (but not all) of the East Coast mania. “In the ’80s the neighborhood was known for its rowdy skateboarders, but now it’s a well-kept gem, almost a time capsule with its 1960s homes,” says resident Margot Jones. “Three years ago the average price was $1.6 million. Now it’s around $2.5 million and more.”
The Next Arts District
Outdoor space beyond the balcony might be the ultimate pandemic selling point for apartment dwellers. At the Linden in Long Beach, top-floor units come with private “sky gardens,” while residents of all 49 apartments have access to communal outdoor lounge areas. “Outdoor space is at a premium in high-density areas,” says architect Michael Bohn of Studio One Eleven, which designed the East Village Arts District building. “During the last recession this was an area that you wanted to walk through as fast as you could,” says Bohn. “But we wanted to avoid the typical model of ‘Tear it all down and sell it to a developer who has nothing to do with our city.’” So Bohn and his partners decided to invest in the area as well as reimagine it, starting with a trio of warehouses owned by Black Flag guitarist and SST Records founder Greg Ginn. Today those properties are home to restaurants, shops, and offices, while a parking lot on the same block is now a low-density 49-unit residential building. “In an age when developers consolidate parcels and maximize profits by scaling up, we were able to scale down,” says Bohn. Similar village-scale projects are planned throughout the area, where the city has planted trees and created parklets. “In downtown Long Beach we have 10 sites with either market-rate or affordable-housing developments comprising just over 2,000 units, many with ground-floor retail. None of these sites displaced any residents, though we did displace almost 280 vehicles.”
“Relax. This Isn’t 2007.”
“The hysteria over what’s happening right now is simply out of line with reason and reality. The Great Recession was driven by the collapse of a $15 trillion subprime bubble. Back then the housing market was vastly overinflated, we had a massive oversupply of housing and record consumer debt and a record low savings rate. None of that is happening now. Instead, we’re coming into this mess with one of the fundamentally strongest economies in 30 years. But when it comes to conversations about the economy, hysteria has become the new normal. And while this is surely a shock to the system, it’s important to remember that this is a sharp bump, not a protracted hole. Depending on how quickly we get in front of this pandemic, real estate is going to pick up where we left off.”
— Christopher Thornberg, Ph.D, Founding partner, Beacon Economics, and director of UC Riverside School of Business Center for Economic Forecasting and Development
First-Time Buyer’s Market at Last?
L.A.’s fastest-rising real estate stars could correct toward affordability
“The [SoFi] stadium is supposed to open this year. The Super Bowl is scheduled for 2022 and the Olympics in 2028. There’s also the coming Crenshaw Line as well as the central location, all of which means this is one of the fastest-rising areas in Los Angeles. Last year you could get a tear-down for $500,000. Now it’s more like $700,000 or $800,000.” —Yana Beranek, Berkshire Hathaway
“With a huge range in prices, from bungalows starting in the $600,000s up to country-club-adjacent compounds in the $3 millions, Altadena is attracting young buyers who want to be close to nature. It’s got the cafés and the walkability, but it also has the San Gabriel Mountains right there. From a starter bungalow you can walk to trails. Not baby trails—world-class, amazing hiking and biking trails.” —Scott King, Deasy Penner & Podley
“Five years ago you could get a house in Frogtown for $400,000 all day long. It was a place where younger couples who couldn’t afford Silver Lake or Atwater Village came as well as older investors who were buying duplexes and triplexes because they knew the rents were going to jump. Now you’re seeing homes for $1.4 million and rents for $3,500 to $4,500. If you had said ‘Frogtown’ five years ago, people would say, ‘Where is that?’” —Juan Longfellow, Deasy Penner & Podley
“For most of 2019 DTLA has been flat in terms of appreciation. While areas like Highland Park and Playa Vista have seen 10 percent increases year over year, that hasn’t happened in downtown, primarily because of the large inventory of condos on the market. In terms of the overall outlook for the L.A. real estate market, I’m preparing for the worst and hoping for the best. If prices stayed flat, or even if we took a modest 15 to 20 percent dip, I’d be relieved.” —Tony Mariotti, RubyHome
“Since it’s at the lower end of Silver Lake, first-time buyers can feel like they’re in the mix without having to go to Eagle Rock or Highland Park. And in three years houses here have gone from supercheap to expensive—from $500,000 to upward of $1.4 million. Someone just flipped a house for $1.4 million that they bought for $700,000 just over a year earlier.” —Juan Longfellow, Deasy Penner & Podley