The heat in L.A.'s housing market is migrating to some unlikely places. A study of median home values conducted for the Business Journal by DataQuick Information Systems found that several areas long considered too gritty or crime-infested to entice many homebuyers are now on fire.
Echo Park, North Hollywood, Van Nuys, Eagle Rock and Tujunga have all pushed their way into the top 10 zip codes in Los Angeles County, in terms of median per-square-foot home price appreciation over the past three years.
"There aren't many areas in Los Angeles where you can buy a home for less than $150,000," said John Karevoll, an analyst at DataQuick. "These areas are doing well now because they're affordable. In terms of the 2000 numbers, these areas saw the steepest increases because they had the steepest bottom to come up from."
Meanwhile, major run-ups in premium housing markets that took place early the three-year period (fourth quarter 1997 to fourth quarter 2000) in places like Beverly Hills, Manhattan Beach and Pasadena are now flattening, industry observers reported.
Higher-priced homes, Karevoll said, led the market out of the slump of the early 1990s and have reached their price plateau sooner than homes in more moderately priced neighborhoods.
Driving the emergence of once-spurned neighborhoods are several factors. First, the proportion of Angelenos able to afford homes in higher-priced areas is relatively small, and has gotten smaller in recent years.
Second, many of those able to afford higher-priced homes have already bought those homes, and are more likely to stay put.
As a result, the primary force now driving the L.A. housing market is the first-time homebuyer, people in their 30s and 40s who are buying undervalued homes on decent-sized lots.
"A lot of younger people have discovered that home is important to them, and they want a nice home," said Realtor Jerry Primack of Prudential/John Aaroe & Associates. "A lot of these areas were dormant areas where no one wanted to live before."
Beyond the fixer-upper, Primack said, some San Fernando Valley property values are increasing at high rates because the stigma of "the Valley" is fading.
As a result, buyers are flocking to relatively affordable suburban communities such as Van Nuys and other areas such as Eagle Rock and Tujunga. All saw median home price increases of about 50 percent over the past three years.
"It shows a lack of supply everywhere else, and it shows people are getting priced out of the employment centers (on the Westside and in other high-priced areas)," said Leslie Appleton-Young, chief economist at California Association of Realtors.Easy financing
Another factor enticing first-time buyers into the market: Mortgage rates have, on the whole, been on a downward slide for 18 months, said Doug Perry, first vice president of the consumer markets division at Countrywide Home Loans Inc., a wholly owned subsidiary of Calabasas-based Countrywide Credit Industries Inc.
On top of that, lenders such as Countrywide are now willing to give loans to first-time homebuyers who would never have qualified even three years ago, he said.
"It's a good time to be a homeowner, but it's great time to be a home buyer," Karevoll said.
The competitive financing world has changed drastically in recent years, thanks in large part to the Internet and to greater access to information for both lenders and consumers. Lenders and investors who buy mortgages on the secondary markets have leveraged their surer footing to increase loan limits and are willing to bet heavily on mortgages that go to consumers with good credit, even without down payments.
That means the ability to cross the threshold into home ownership has increased sharply since a decade ago, Karevoll said.
And, even if the L.A. economy is hurt by the energy crisis and slips into a recession, the housing market is unlikely to suffer the way it did in the early 1990s. Strong demand and minimal speculative construction by builders have kept the local housing inventory tight.
And that is prompting buyers to move into neighborhoods they may not have considered even a few years ago. One such area is Echo Park.Bohemian haven
"Echo Park is one of those little hip areas," said Dean Wehrli, managing director of The Meyers Group, a real estate consulting firm. "Not everybody knows about it, but people in the know, know about it and it's a cool place to be."
Tree-lined streets, nice homes, good accessibility, hills and views add up to an attractive place to settle down.
"More than that, the people who live there are very concerned with making sure it stays a good place to live," Wehrli added.
To a large degree Echo Park remains a working-class area, said Peter Reyes, a realty associate with Fred Sands Realtors, recently acquired by Cendant Corp.'s Coldwell Banker Residential Brokerage Co. But that is changing as artsy, Bohemian types and young professionals move in.
"People are being displaced and more wealth is coming into the community," Reyes said. "You can be on one street and think it's very Asian. You can be on another and think it's very Hispanic. But if you go in the hills, it's a mix and I see it predominantly Anglo."
The area, which includes Elysian Heights, is near Silver Lake and downtown L.A., but cheaper, said Reyes.
Reyes never refers to Elysian Heights, where he has lived for 28 years, by its familiar name. As far as buyers are concerned, it's "Baja Silverlake."
"Echo Park has had a barrio stigma," Reyes said.
Nevertheless, the area's median per-square-foot home price appreciation rate of 53.4 percent over the past three years outpaces such tony neighborhoods as Beverly Hills, Pasadena, Sherman Oaks and Los Feliz. Still, some are unimpressed.
Murray Weisberg of Coldwell Banker's Brentwood office, said his clientele would never consider homes outside Brentwood, Beverly Hills and other swanky Westside neighborhoods, even if the lower-prestige areas are posting greater appreciation rates.
"Those figures are meaningless," Weisberg sniffed. "It makes them sound so great, but to this side of town, who cares?"
Weisberg said he has witnessed 10 percent annual appreciation on average in communities where homes range from $500,000 to well north of $1 million.
Indeed, several high-priced areas have been among L.A.'s best-performing zip codes over the past three years, including the famed Beverly Hills 90210, where the median home price jumped from $722,500 to $1.2 million.
But industry observers report that rapid price appreciation in those high-priced areas is now flattening.
Not to fret, said Karevoll. L.A.'s housing market across all price ranges remains generally strong.
"If the market's going to turn, you don't really know it's turning when you're in the middle of it," he said. "But you do know something's going on. Right now, we don't even know that. There are no flashing yellow lights. It's just all green."
Christopher Keough is a staff reporter for the Los Angeles Business Journal. Milo Peinemann is a contributing reporter.
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