Timely Real Estate News…………………………15 May 2015
Sales activity makes up for lost ground….good news
Real estate sales are up for the seven communities I report on which is another reflection of the growing strength of our residential market, and of course, it couldn’t come at a better time as we begin our Spring selling season. For April 2015, sales activity for the combined communities (Beverly Hills, Beverly Hills Post Office, Bel-Air, Westwood/Century City, and Brentwood) was essentially even through the first four months of 2015 — $956 million compared to $958 million for 2014. This shows that sales have made up a lot of ground when sales volume as of the end of March 2015, sales were down by as much as 17% when measuring March sales between 2015 and 2014. “This is another indication that buyers are returning after a slow start since the year began,” stated Carole Schiffer.
Median sales prices for the first four months of 2015 were a mixed bag, though. Beverly Hills, down for the previous three months for the year, is now up 6% at $5.250 million. Bel-Air is up 12% at $2.500 million, Brentwood MSP is even for the year to date at $2.975 million. However, Beverly Hills PO had an out-of-the ordinary month when compared to last April 2014. Median sales prices for BHPO was down 38% at $1.950 million. And Westwood/Century City was down just 2% at $1.690 million.
What we are seeing for the first four months of 2015 is that prices are holding and moving up slightly. This is not unusual for the first part of any year — we have seen this happening before during our ‘recovery’ since the recession began in 2007.
Looking at April’s median sales price performance for these five communities shows that Beverly Hills was up 48% for 2015 compared to April 2014. BHPO was down 16%, Westwood/Century City was up 3%, and Brentwood was up 27%. However, BHPO was down 170% from the previous April 2014, which was an anomaly for the period (this is reflective of some big sales in the past which always skews the numbers).
Tech wars heating up between Los Angeles and San Francisco. LA is winning
This is not a fad. It’s not a temporary, new thing among techies. It’s a solid trend that has been building for years amongst the world’s top tech companies who have started a virtual stampede toward Los Angeles. Over the past several years, big names ranging from Google to Facebook to Snapchat to Vice have set up shop in and around Venice and Santa Monica. As the neighborhoods have changed apace, tech industry movers and shakers have begun spreading out into the rest of the city — buying up big-ticket homes and putting down roots far afield from so-called Silicon Beach.
Snapchat, L.A.’s highest-valued startup, has typified the transformation. Undergoing another round of expansion, the social video company has Venice residents concerned there just isn’t enough room for all comers — or the neighborhood’s longtime population of more downbeat creatives. “Snapchat Chief Executive Evan Spiegel, who grew up in Los Angeles and attended Stanford University, said he chose Southern California to escape both corporate and Silicon Valley culture,” the Los Angeles Times reported.
But with Snapchat and other big companies snapping up real estate along Silicon Beach’s coastline cities, some of the largest tech companies have already planted flags in relatively new areas in the Westside.
“Google recently announced that it would expand its Southern California operations beyond Venice,” the Times noted, “to a massive new office park in Playa Vista with nine times more space.” Playa Vista, a planned community once dominated by the Hughes Aircraft company, has welcomed the move. According to the Daily Breeze, “Google purchased a 12-acre plot of land in December for $120 million, and is rumored to have its eye on the 300,000-square-foot hangar that used to house the Spruce Goose, Howard Hughes’ infamous plane. ” This summer, Yahoo’s 400 employees based out of Santa Monica will be shifted into new Playa Vista office space as well.
The Westside’s “beachy” coastline hasn’t been the only part of Los Angeles to attract top-rank tech attention. Firms have begun moving downtown, lured by lower rents and a new air of exclusivity. (Soho House reportedly signed paperwork to set up its second L.A. location in an Arts District building.) The growing list of tech-centric companies downtown now includes Hyperloop Technologies, the startup created to realize Elon Musk’s vision of an ultra-fast transportation system that would far exceed the capabilities of the high-speed rail embraced by Gov. Jerry Brown.
Local officials have warmed to the prospect of tech money and prestige anchoring downtown’s rapid development, even if it has meant giving a fair shake to projects that strike a sharp contrast with some of Gov. Brown’s favored policies. “Any idea that can get you from San Francisco to Los Angeles faster than it takes to get from downtown to Hollywood during rush hour is worth pursuing,”
Growth with limits –– Despite the sky’s-the-limit attitude and booming real estate prices, however, some critics caution that the original Silicon Valley still maintains unmatched structural advantages.
As futurist and urban theorist Joel Kotkin argued recently, Silicon Valley’s appeal “to young companies was painfully evident in the decision this year by Oculus, a promising virtual reality firm, to move from Irvine to be close to its corporate buyer, Facebook, taking its top designers and executives to Menlo Park. It takes stubborn executives, like Snapchat’s co-founders Evan Spiegel and Bobby Murphy, to say no to the moguls of Menlo Park and stay here in the Southland.”
Ultimately, however, tech’s future in and around Los Angeles may well be assured by the Southland’s ace in the hole — its climate and style of living. As the Associated Press reported, not only moguls have gravitated toward L.A.’s priciest mansions; mere millionaires looking to shell out comparatively less than the Bay Area’s tech titans have discovered their dollar can go much further in Silicon Beach than in Silicon Valley.
March’s new home sales nationwide didn’t perform well, but…..
First of all, let me point out that while you’re reading this and other “national stories” about how new homes sales fell in March and how that might affect our residential real estate market, I want to pass on a sobering thought: A month does not a year make and new home sales — by and large — usually do not greatly influence our re-sale market.
And secondly, while new home sales did fall by 11.4 percent compared to a year ago, on a brighter note, existing home sales in March 2015 surged just over 6 percent from February—the largest monthly increase since December 2010.
Sales are also up over 10 percent from a year ago. Lawrence Yun, the National Association of REALTORS® chief economist, noted, “After a quiet start to the year, sales activity picked up greatly throughout the country in March.”
Also of note, Fannie Mae released its April 2015 Economic and Housing Outlook, revealing that economic activity slowed in the first quarter, largely due to West Coast port disruptions and difficult weather patterns gripping much of the Northeast. This was also reflected in the first reading for first quarter 2015 Gross Domestic Product (GDP), which fell to an anemic 0.2 percent. Now that spring has arrived, it will be important to see if economic activity blooms along with the weather.
Los Angeles art scene explodes….new wave escaping NY
Who would have thought: The Los Angeles art scene is exploding thanks to a wave of artists and galleries escaping New York, which has become over-crowded and too expensive for young creative types. And that just means it’s going to be better for art-hungry Angelinos and attracting some of the world’s most famous artists. And why not?
“An enormous number of artists are coming to set up in LA,” said Philippe Vergne, Director of Museum of Contemporary Art (MOCA), citing exorbitant real estate costs in the Big Apple in particular. “In art, it is like in real estate: you have to follow the artists, that’s where it’s going to develop,” he said, asserting that LA is “the city with the highest density of artists in the world.”
Martha Kirszenbaum, director and curator of the Fahrenheit arts center, which opened just over a year ago in a booming area of downtown LA, added: “LA’s strength is the artists, and the schools which have trained generations of artists.” The City of Angels is known for some of the most prestigious art schools in the country, including Cal Arts, the University of California Los Angeles (UCLA) and the University of Southern California (USC).
It is/was also already home to leading contemporary artists, including John Baldessari, Catherine Opie, James Turrell, the late Chris Burden, Barbara Kruger, Paul McCarthy, Ed Ruscha and the late Mike Kelley. Galleries, even if their number remains tiny compared to the hundreds which crowd New York, are popping up in increasing numbers.“New York is so saturated, we’d be the 700th little gallery, versus in LA it is in a very interesting state of flux,” said Karolina Dankow, director of Zurich-based Karma, which has just opened a gallery in Los Angeles.
“Everybody knows the very big galleries are moving here,” she added, pointing to figures such as Larry Gagosian, one of the world’s biggest art dealers, or Michele Maccarone, Gavin Brown and Matthew Marks, who have moved from New York.
“We are sometimes 100 years late compared to some institutions on the East Coast,” said Michael Govan, director of the LA County Museum of Art (LACMA), which is celebrating its 50th anniversary. “We have a wonderful collection, but in many ways we’re still catching up,” he said “I’ve made it a high priority that our shows travel because I think Los Angeles, California, has a lot to say,” he said.
Meanwhile Los Angeles’ artist expansion continues apace: philanthropists Eli and Edythe Broad will open a museum in September to house their collection of 2,000 art works including pieces by Warhol, Jean-Michel Basquiat, Roy Lichtenstein and Cindy Sherman.
Economic Thoughts from a noted Economist
Family formation — While the homeownership rate slipped to a 26-year low of 63.8% in Q1/15, it’s now falling for the right reasons. Rather than dropping as homeowners become renters, it’s falling because hordes of new, primarily renter households are being formed. Between Q1/14 and Q1/15, 1.5 million households were formed, and between Q4/14 and Q4/13 1.7 million were formed, a far cry from the lackluster household formation rate of 500,000/year since 2007.
What am I seeing?
Every day I run what is called an “hot sheet” from the multiple listing service which lists all of the properties in the various categories i.e., location (Beverly Hills to Palms Mar Vista, houses, condos and leases), new listings, properties in escrow and sold/closed escrows. I must tell you that in the single family home category, in West Los Angeles, Beverlywood, Palms/Mar Vista, Venice and Santa Monica communities some homes are selling in as short a time period as 2 weeks, with prices as much as $200,000 over asking! What does this mean? In some cases, sellers and their agents are purposely pricing the homes lower in order to drive up the price with multiple offers, which obviously is one way to sell and market your home, and in other cases. It is just a great property that has what everyone wants! At the end of the day, it all basically comes down to price.. if the home is well priced, it is selling immediately, if not it sits.
Please don’t forget to let me make a donation in your name to a local charity for every closed escrow we close. I love giving back to the community. That is one of my core values!