South Bay homes moving fast and furious
Weather proofer Julio Solis and carpenter Francisco “Raton” Cortes are helping build a new home on First Street in Hermosa Beach, just months after completing work on a new home next door. The next door home is listed at $3.5 million. Photo
A red hot real estate market sparks bidding wars reminiscent of the last housing boom
For realtors like Vance Mizzi business has been booming lately. Triggered by low interest rates and an assumption the housing market struck bottom, median home prices in Los Angeles County rose 14 percent since last year.
In recent months, buyers looking for a new home faced the kind of bidding wars common during the housing boom, driving the sale prices of homes in many cases above their asking price. Homes are selling fast, sometimes before even being listed publicly. Institutional investors are grabbing deals with all-cash offers while contractors too are beginning to build again, a sign the economic momentum could be here to stay.
Last month a Palos Verdes home Mizzi listed at $985,000 sold for more than $1 million with 25 offers. Another condominium went on the market for $375,000 on a Friday and by Sunday when he arrived to the open house there were 30 people in the front yard. Mizzi said he had to cut bids off at $450,000 because he knew the house would not appraise that high and so the bank probably wouldn’t approve the loan.
“It’s discouraging for a lot of home buyers,” he said. “When you are making an offer on a home and you hear there are 18 other offers, you just kind of throw your hands up in the air.”
Mizzi, who left Wall Street five years ago to begin a career in real estate as the market was at its worst, said nothing’s really changed since last year to fuel the recovery other than a series of news stories that said the housing crisis was over.
“Perception is everything,” he said. “Home prices were lower last year with the same interest rates. Why are people all of a sudden jumping on the bandwagon to buy a home this year? When the media reports it, people listen.”
ReMax owner and broker James Sanders said that a key component driving the current market is a decrease in foreclosures, resulting in fewer homes on the market and a rise in prices. In one recent case, Sanders listed a Manhattan Beach home for just over $2 million and got 16 offers on it. In a matter of days the home ended up selling for almost $2.5 million.
“Definitely we saw the bottom and we’re coming out faster than we would have ever imagined,” Sanders said.
Median home prices throughout the county rose to $450,000, up 14 percent from a year ago, most of which took place in the past five months, according to RealtyTrac, which compiles data nationwide. Compared to the rest of the country, the LA area experienced some of the largest rises in home values, higher than both New York and Chicago with -1 percent and 8 percent respectively. The Phoenix area, meanwhile, saw 21 percent increases.
Among the beach cities, in all but Hermosa Beach, median home values rose from a year ago, according to the RealtyTrac data. In El Segundo prices rose 11 percent to $749,000, Manhattan Beach 3 percent to $1.4 million, Redondo Beach 9 percent to $704,500 and Rancho Palos Verdes 6 percent to $904,500. In Hermosa Beach, median prices dropped by 9 percent to $960,000.
“A lack of foreclosure supply is mostly driving this,” said Daren Blomquist, RealtyTrac vice president. “It’s a good thing for the economy, but there’s nothing that’s immediately filling that gap right now.”
Annette Lombardi and her husband have undertaken an extensive exterior and interior remodel of their 25-year-old Manhattan Beach hill section home. Photo
California’s Homeowner Bill of Rights, which took effect in January, dramatically decreased the number of foreclosures, he said. In just the first month of the law, foreclosure filings dropped 62 percent in California.
In April a reported 4,400 properties in LA County filed for foreclosure, nearly returning to pre-bubble levels in 2006 when 3,300 foreclosures took place on average per month. To put that in perspective, at the absolute peak of the housing crisis in March 2009, 31,000 properties made foreclosure filings.
“That took away one of the big sources of supply in California,” Blomquist said. “Nothing at least in the short term is filling that gap. Home builders are starting to ramp up but that hasn’t been enough to fill the supply.”
In Rancho Palos Verdes, building permits are up 15 percent from last year, said Planning Director Joel Rojas. From July 2011 to June 2012, 410 planning approvals were awarded. With another month yet before the end of the current fiscal year the city has already received 471 permits for anything from new home construction to the installation of a skylight. In the 2007 fiscal year the city of RPV approved 643 permits.
“Yes we’re busy right now but not overwhelmed,” Rojas said. “In building and safety we are starting to get overwhelmed because they are getting inspections now in numbers that are hard to keep up with per day. But this is what was expected. Everything goes through cycles. We know we can deal with it because we’ve seen how busy it can be.”
In Rolling Hills Estates, Anastasi Development will start construction later this year on a 69-unit mixed use complex on Deep Valley Drive across from the PeninsulaShopping Center with 2,000 square feet of retail on the ground floor. Another 75-unit complex by Anastasi is slated soon after near the same location.
Long-time developer Scott Anastasi runs the Redondo Beach-based business began by his father, who started it 50 years ago. He said the company never stopped building during the economic downturn but certainly slowed.
“The byproduct of the downturn in the market is that the majority of builders couldn’t get construction loans,” Anastasi said. “There really has been no new construction development of any significance for years now.”
The latest projects on the Hill represent an attempt to help revitalize the struggling commercial district among the Promenade on the Peninsula Mall and the PeninsulaShopping Center, both of which faced mounting vacancies in recent years.
“I’ve always been a big proponent of the idea of allowing housing in the PeninsulaCenter area,” Anastasi said. “I think it’s a great idea and with the right projects they can activate the streets up there.”
The city is also awaiting the results of a boundary dispute involving a proposed 100-home development near the Rolling Hills Country Club, as well as additional seismic studies on a site that formerly had slide issues.
The Rolling Hills Estates City Council is expected to take up approval of a 148-unit proposed project that would surround the Brick Walk retail center on Deep Valley Drive. The 8-acre site currently remains covered in black plastic since a 1997 landslide. Mayor Frank Zerunyan said the city is being cautious but would love to see the site developed safely.
“We will take our time and do our homework for our residents and find a way to see a project through with the least amount of burden to the community,” Zerunyan said.
In Rancho Palos Verdes, the city council recently approved a 60-unit senior living center called the Crestridge Housing Project across from the PV Arts Center. Construction requires 147,000 cubic yards of grading, which means a lot of truck loads through the neighborhood. Mayor Susan Brooks said the Peninsula has pretty much reached its capacity for development. Projects like Crestridge help to keep people in the community while freeing up housing, she said.
“There’s the graying of the peninsula and people don’t want to leave,” she said. “People who came over in the 1950s on the GI Bill and got inexpensive homes are leaving those homes now but still want to stay in Palos Verdes. It also affords others the chance to move into those homes.”
In Manhattan Beach, city planners processed over 1,200 building permits over the past year worth more than $86 million. Lately, more than 65 permit filers are visiting city hall each day, said Richard Thompson, planning director.
“Development activity in Manhattan Beach has recovered and continues to increase over the past two years and is expected to continue to grow,” he said.
Many in the real estate industry say housing prices will continue to rise about 25 to 30 percent.
“Homeowners are not listing for sale in great numbers because many of them are underwater still and owe more than their property is worth,” said Blomquist of RealtyTrac. “So they are waiting for prices to rise even higher before they list it for sale.”
ReMax realtor Robert Freedman believes it could take two to five years before the market reaches another peak. Freedman is currently selling a home built by One World Development on 1st Street off Sepulveda in Manhattan Beach for $3.5 million. The company, which bought the lot last year and completely tore down the existing home, is emblematic of an institutional investor driving much of the recovery.
“I’ve been able to understand the market through every single cycle,” Freedman said. “I’ve been through five different cycles. I’ve seen it go up and go down. I know what it feels like when the market is about to change. Right now this month it feels like prices are pausing.”
Jason Buck, a realtor in Palos Verdes Estates, said many homes are selling before they reach the Multiple Listing Service through in-house deals known as “pocket listings.”
“Right now there are agents able to list a property and never even put it on the MLS and they can sell it and double pop both sides. In my mind I think that’s wrong because it takes away representation,” Buck said. “I’m thinking it’s not right to the seller if you don’t give enough time for the public to see the property.”
But all signs point to a hot market that’s improving faster than most people expected.
“I don’t think anyone in the industry knew we would come out of it this quickly,” said Sanders. “But the market is absolutely on fire.” ER