The monthly MMRA Newsletter publishes the previous month’s Miracle Mile real estate sales. To see past issues of the MMRA Newsletter click HERE.
Miracle Mile Real Estate Report: Which Way is Up?
[from the April 2013 Edition of the Miracle Mile Residential Association Newsletter:]
After years of foreclosures, falling prices, and economic chaos, it’s hard to tell which way is up in the real estate market. Most experts speak in broad terms and their forecasts are all over the place. As Dorothy Parker once famously remarked: “Los Angeles is 72 suburbs in search of a city.” When the experts talk about the Los Angeles real estate market it is natural to wonder: “What about my neighborhood?” We decided to get specific information on the Miracle Mile (map) from three real estate professionals who not only specialize in the Miracle Mile properties, they live here, too: Jay Evan Schoenfeldt, Mary Woodward, and Mark Zecca are members of the MMRA with many years of experience in the real estate business. Below we sum up their take and get a quick fix on the Miracle Mile real estate market:
Overall, things are definitely getting better with strong demand from investors lifting prices.
While the number of properties that changed hands between January 1 and March 15 were about the same this year as they were last year, investors are buying properties at higher price points than in 2012. Home prices have increased in the Miracle Mile an average of 17% in the last year. Eleven single-family homes were sold in the Miracle Mile in 2012.
Big money investors, including hedge funds and private equity firms, have become very aggressive and have forced most individual “fix & flip” practitioners to the sidelines. Cash is king with these investor groups, who are optimistic that prices for their renovated properties will return an ample profit on their investments. Several properties recently purchased by investors within the MMRA boundaries have or will be placed onto the market in the near future.
What’s fueling the price increases?
Very little inventory and historically low interest rates. Right now there are two single-family homes on the market in the Miracle Mile, four scheduled to close, and six that have closed this year. Sellers of single-family homes are definitely in the driver’s seat, but they still have to price their homes realistically.
There is huge pent up demand from buyers who want to pull the trigger before interest rates rise. Buyers are also concerned that prices are steadily creeping upward as a market price listing will often find multiple offers and a final sales price well over the asking price – and, often, the winning bid is all cash.
As property prices rise inventory should modestly improve as “underwater” homeowners finally surface for air and put their homes on the market – but given the historic stability of the Miracle Mile and that homeowners here tend to stay put it remains to be known what impact, if any, slightly enhanced inventory will have on prices.
Are the bargains gone?
In short: yes. There were four REO short sales in the Miracle Mile last year. So far this year: zero.
What about the regular homebuyer?
It is the best of times and the worst of times. With good credit scores a 30-year fixed mortgage can be had at 3.25% interest. And FHA loans are getting easier to secure even with a prior foreclosure. But everyday buyers with conventional loans and a 20-25% down payment are at a serious disadvantage when competing against so many all cash buyers in such a low inventory market.
Refinancing is still an exercise in frustration…
Banks continue to play hardball on re-fi. Despite steadily rising prices, homeowners are frustrated by “low ball” appraisals and reams of paperwork.
As of the time this newsletter went to press, one Miracle Mile condominium has sold in 2013. Two are scheduled to close in the near future and there are only two on the market. Condo prices are on the upswing, but slightly lag behind the 17% increase enjoyed by single-family homes in the last year.
According to the 2010 Federal Census 63% of the residents in the 90036 zip code are renters. Inventory is driving the rental market, too. Overall, apartment supply is low and demand is high. The recession has forced many young professionals to put home-ownership on the back burner. Cashing in on this market of “home-less” young professionals has inspired the building boom of new apartment complexes along Wilshire Boulevard as well as in the surrounding area. Hundreds of new units have been built in the last few years with hundreds more under construction and even more on the drawing boards.
Although, the average monthly rent for all one-bedroom apartments in the Miracle Mile area is $1600, the rents for these newer complexes are much higher – ranging from around $2o00-plus per month for one-bedroom units up to $6000-plus for a three-bedroom apartment.
Income properties prices heat up…
Banks aren’t making it attractive for cash-heavy investors to deposit their money, hence multi-unit income properties are selling at higher gross rent multipliers than before as more investors seek to invest their capital into hard assets with a steady income stream. Two of the four income properties that sold in the past year were either all cash or nearly all cash deals with the purchase prices being $1,371,000 and $1,725,000. The predominance of all cash investors has squeezed out most traditional “owner-occupant” purchasers in the income property market. Sellers of duplexes and multi-unit properties are at a disadvantage if their rents are below market. Prospective buyers prefer vacant units to occupied units paying under market rents.
What’s going on in neighborhoods around the Miracle Mile?
Homes in Sycamore Square and Brookside tend to be larger and command higher prices but, like the Miracle Mile, inventory is extremely low. Wilshire Vista to the south of the Miracle Mile has seen greater increases in both sales and prices because properties there are more “affordable” than those north of San Vicente. The gentrification along Pico Boulevard has been a factor in the considerable rise in transactions.
What is the average Miracle Mile house?
Miracle Mile homes tend to be between 1,700 square feet and 2,500 square feet with an average lot size of 6,500 square feet. The majority of the properties were constructed in the late 1920s and early 1930s. Spanish Colonial Revival is the predominate architectural style with tile roofs and stucco over wood frame construction.
What’s the future of real estate in the Miracle Mile?
Although it will take a few more years for the real estate market to stabilize in Los Angeles, in the long term the Miracle Mile is looking good. Its classic older homes with large lots are very attractive to prospective buyers. The Miracle Mile is a very stable community with a strong residential association. The Miracle Mile scores well as a very “walkable” community with lots of restaurants, stores, and world-class museums as popular destinations. Wilshire Boulevard is a major transportation corridor and the planned extension of the subway with two stops in the Miracle Mile promises to further enhance our mobility. As gentrification continues to roll south along La Brea and new attractions are added along Wilshire – such as the Academy of Motion Picture Arts and Sciences Museum in the old May Company location – the demand for housing in the Miracle Mile will stay strong. In short, the Miracle Mile has three things that matter most in real estate: location, location, and location.
For additional information on Miracle Mile real estate, contact:
Jay Evan Schoenfeldt, Brick & Mortar Real Estate, 310-497-8100
Mary C. Woodward, Keller Williams Realty, 323-762-2571
Mark Zecca, Keller Williams Realty, Larchmont Office, 323-842-2962