Beverly Hills Development Watch: Beverly Hilton Up for Sale, 1953 Hotel Preserved, But Make Way For Luxury Hotel and Residential, and "Last Straw" for Trader Vic's

When a neighbor is able to command a pretty penny for their real estate, an owner thinks it may be the right time to tiptoe into the market.

This is precisely what's happening with the Beverly Hilton, the 1953 hotel sited at the corner of Wilshire Boulevard and Santa Monica Boulevard in Beverly Hills.

Last month we reported that 9900 Wilshire, the adjacent parcel and home to the former Robinson May department store, sold for $148 million.  Prompted by unsolicited offers for his property, Beny Alagem, the current owner of the Beverly Hilton, has retained Cushman & Wakefield to market this prime wedge of real estate.

The idea is that either a new owner or the current owner will go ahead with a plan that was approved by Beverly Hills voters in 2008 to renovate the original 352 room hotel, and build 110 residential units and a 170 room luxury hotel.

How much will the site command?  The current owner paid $130 million in 2003 and then completed $80 million in renovations in 2006.  Is it possible that the hotel site will pierce the $200 million mark?  There are many hungry players with vaults of cash seeking the best global assets, and the Beverly Hilton is that sort of sweet plum, ripe for the picking.  Our hunch is that interest in this unique opportunity will be as strong as a Trader Vic's double Long Island Ice Tea.

The Beverly Hilton is a Los Angeles institution, not so much for its accommodations (its rooms are 4-star), but because of its size (an 8.9 acre parcel in the middle of Beverly Hills!), its prominent frontage at one of the most prominent intersections in the city, and because of its showbiz legacy.  Merv Griffin was the previous owner (interesting to note that he paid $100 million for the property in 1987), and the hotel's International Ballroom has been home to the Golden Globes since 1961 and is the site of the Academy Award's Governor's Ball.

Beverly Hilton hotel may get new owner [Los Angeles Times]

Hilton on the Market [Los Angeles Business Journal]

On The Money: $4 - 12 million Los Angeles Multifamily Sells in Narrow Band of 9.65 - 9.85 GRM in mid 2010

What's happening in the mid-size apartment category in Los Angeles, those with 40 units or more, and priced in the $6 - 12 million range?

A few very apparent trends: 1) Opportunities are few, with thin inventory reaching market; 2) Demand is strong and buyers are willing to pay a remarkable 97.1% of asking price; 3) Returns for these assets are remarkably consistent with GRMs in the 9.65 to 9.85 GRM range; and, 4) The trend (excluding Beverly Hills, natch) was consistent from Palms, Sherman Oaks, Koreatown/Mid-Wilshire to Hollywood. 

Given the attractiveness of the returns on these buildings (cap rates above 6.0%) when compared to other "low risk" investments (like T-bills near 0%), the market dynamics are characterized by a moderate number of well-capitalized investors pursuing a small number of worthy investment properties.  The result: quick sales and finely-calibrated returns.

Buyers seeking distressed options in this market should turn their sights elsewhere.  Financially robust owners of these assets sell them to other sound buyers -- with an absence of short sales, loan work-outs, bankruptcies, etc.  This market segment is stable.

Palms is a perennial favorite for investors who love the Westside location, the proximity to the 405 and 10 freeways, and the below-average 3.8% vacancy rate.  10705 Rose Avenue with 60 units sold for $11,650,000 or $194,000/unit.  The building has 62,116 sq ft of living area and was constructed in 1962.  This complex has two buildings, is freeway adjacent, and is one of the few multifamily properties of this size to come to this desirable Westside market.  GRM was 9.71

Over the hill in Sherman Oaks, 14355 Huston Street, with 74 units sold for $9,400,000.  This amounts to $127,000/unit.  This 1969 complex is set on 1.38 acres, has a fitness center, swimming pool, and "park like" amenities, and was recently upgraded with $850,000 in improvements.  50 of the 74 units are renovated.  The complex has 48,186 sq ft of living area.  Unit mix is 72 (1) bedrooms plus (2) singles.  GRM was 9.85

530 S Catalina Street in the Koreatown/Mid-Wilshire neighborhood with 45 units sold for $6,200,000.  This amounts to $138,000/door.  The building has 36,929 sq ft, was built in 1971, and just had $1.1 million in renovations completed in 2007 - 2008.  This is on the high-end in terms of quality of upgrades in the Koreatown/Mid-Wilshire neighborhood.  GRM was 9.63

At the border of Hollywood and Los Feliz, 1616-1620 Normandie, a two building complex with 46 units, sold for $4,425,000.  The larger building is a 1920's "bricker" and the smaller one of mid-century vintage.  The sale is at $96,000/sq ft, although the average unit only amounts to 544 sq ft (total is 25,032 sq ft).  This multifamily property is adjacent to the high-end homes of Los Feliz as well as Griffith Park.  GRM was 9.65

There are exceptions to every rule, and in the Los Angeles market Beverly Hills is that case that breaks the mold.  133 N Almont Drive, near Wilshire and Doheny,  sold for $5,775,000 or $304,000/unit.  This was a court-ordered sale, the majority of the 19 units are unrenovated (and with below market rents), and average between 1,100 - 1,400 sq ft.  In total, the 1961 building has 26,291 sq ft.  This Beverly Hills property "tips the scales" in terms of cost per door.  The reality is, few assets of this sort are for sale, and like in all other property types, the "Beverly Hills premium" is very much alive and well today.

Beverly Hills Development Watch: 9900 Wilshire, Coveted Robinsons-May Site in Beverly Hills Sells for $148 Million - 65% off Previous Sale Price

Many developments follow a simple course, going from raw land to finished final entity with nary a speedbump along the way.  That's not quite the case for 9900 Wilshire Boulevard, one of the most valuable real estate sites in the nation, which just sold for $148.3 million, after a rocky couple of years.

To recap, this site, home to the former Robinsons-May Department store, sold in 2004 for $33.5 million.  In 2007, jet-setting British developers Candy & Candy purchased the site for $500 million,  with ambitious plans to create a 235-unit condo/townhouse complex designed by Richard Meier, fabled architect of the Getty Center.

Needless to say, a global recession later, Candy & Candy were out, and Carlos Slim, Mexican billionaire and co-financier of the purchase, foreclosed on the $365 million loan.  The land was auctioned privately, and just closed this week.

The buyer is Joint Treasure International, a Hong-Kong-based private equity firm, with plenty of experience in this property type.  Since 1995, the group has owned the Beverly Wilshire Hotel, just down the road.  Joint Treasure intends to develop luxury condos and has had preliminary meetings with Richard Meier, but it's unclear, ultimately, what will emerge on the site.

We think now is an excellent time for the group to hit the drawing board with the intention of creating some of the best luxury housing ever to emerge in Los Angeles.  Perhaps five years from now, when the units open for sale, the global doldrums will have receded, and a cadre of world-class buyers will be lining up to get in on the excitement.

Beverly Hills Development Watch: Developers of 9900 Wilshire Surrender 8-Acre, $500 Million Site to Bank

Los Angeles Times: Coveted Beverly Hills property sold for $148.3 million

Beverly Hills Homes Mount Stunning Comeback and Rebound 6.7% from 2009 Lows; Auguring Better Times for High-End Los Angeles Real Estate?

If Beverly Hills real estate is any indicator, recent reports that 'The Great Recession' ended in 2009 hold true.

The median sale price of Beverly Hills single family homes has made a stunning turnaround from its low of $2,870,000 in 2009, and is now averaging $3,063,000 year-to-date in 2010, up 6.7% from last year.  In spite of the rocky economy, buyers (essentially investors) are looking at Beverly Hills as a safe place to sock away cash that may not be subject to outlier events like the "flash crash" or the likes of Bernie Madoff.

The top sale of the past three months was 1728 Chevy Chase Drive, a 5 bedroom, 7 bath, 7,200 sq ft house on a 20,689 sq ft lot.  This Mediterranean tennis court estate sold for $8,300,000.  It had been listed in January 2009 for $10,995,000. 

630 Mountain Drive, a grand Mediterranean estate on the one of the most exclusive streets in Beverly Hills (just off Sunset, close to Greystone Park), sold for $7,935,110.  This 1964 home is a fixer and has 4 bedrooms, 8 baths, 8,287 sq ft of living area on a full acre lot. 

Distress is not absent from the Beverly Hills market.  907 N Roxbury Drive was sold in Bankruptcy Court for $7,580,000.  This 5 bedroom, 7 bath, 8,394 sq house on a 23,900 sq ft lot is north of Sunset and was built in 1985.

Trousdale Estates was home to 0 Carla Ridge, set on a promontory with views to the Getty, Catalina Island and Downtown.  This 4 bedroom, 7 bath house has 6,200 sq ft of living area and is set on a 20,380 sq ft lot.  It sold for $7,500,000.

An excellent Beverly Hills rehab opportunity came on the market by Greystone Park, close to the Sunset Strip border.  424 Robert Lane, a 1960's period gem with 6 bedrooms, 9 baths, 6,834 sq ft of living area on a full one acre lot sold for $7,500,000 (somewhat off its list price of $10 million).
 

Finally, 8643 Clifton Way, a little cottage in the flats of Beverly Hills, almost seemed like a deal, selling in a short sale for $900,000.  This 3 bedroom, 2 bath home has 1,286 sq ft of living area on a 5,160 sq ft lot.  Just goes to show it doesn't cost a cool million to live the 90210 lifestyle.

Beverly Hills Development Watch: Developers of 9900 Wilshire Surrender 8-Acre, $500 Million Site to Bank

We hear so much about foreclosures, short sales and "cash for keys" that it almost seems common course that banks repo real estate for which owners are in default. But we forget that sometimes these distressed properties have some very big price tags.

Like $500 million, for example.

Today, the posh British development team Candy & Candy and Iceland’s Kaupthing Bank will hand back ownership of 9900 Wilshire Blvd in Beverly Hills to a bank controlled by Mexican billionaire Carlos Slim. The developers had defaulted on their $365.5 million loan, which had been one of the largest transactions in Los Angeles County.

This 8-acre site, formerly home to the Robinsons-May Department store, was to be home to 235 super-luxury condominums designed by Richard Meier. Candy & Candy had successfully promoted similar developments, such as One Hyde Park in Central London.

But times change, and the project never got past the drawing board. We believe even more money could have been lost if the project saw the light of day and its multi-million dollar condos were languishing on the market. And whoever the new owner is will have a lower cost-basis and the ability to set prices at realistic levels.

There were signs that the $500 million price tag was perhaps a tad inflated: the property sold for $33.5 million only three years earlier.

[Beverly Hills Gets Waldorf Astoria, Luxury Condos, and Bump in Traffic]

Beverly Hills Market 2009: $2,870,000 Median Sale Price Down 20% From 2007, But Prized Land in Flats Sells for $13.4 Million Per Acre

Beverly Hills is perhaps the best branded neighborhood in Los Angeles, known far and wide as the oasis of palm trees and luxury living.

Beverly Hills, however, is not immune to the ills of the real estate market, and has been subject to the same boom and bust cycle of the recent years.

The median home sale price in Beverly Hills in 2009 was of $2,870,000, down 20% from the high of $3,600,000 reached in 2007.

This drop in prices is less dramatic than in neighboring areas such as the Hollywood Hills, which saw a decline in median price of 25% since 2007.

The median condo sale price in Beverly Hills last year was $800,000, down 12% from the high achieved in 2006.

The number of home sales in Beverly Hills have been declining steadily since 2004. Last year sales volume was only 45% of what it was during 2004.
What sold in 2009? Most properties that change hands are not rehabbed, gleaming gems, but out-of-date teardowns or fixer-uppers that will be upgraded by their new owners.

And there is plenty of interest in the Flats. 808 N Camden Drive, a 5 bedroom, 4.5 bath, 3,334 sq ft house on a 12,800 sq ft lot (with two guest houses) sold for $3,471,000, $276,000 above its asking price, in 15 days.

A teardown at 825 N Roxbury Drive on a 22,310 sq ft lot, sold for $3,825,000, slightly below its $4 million asking price, in 13 days.

623 N Maple Drive, a 5 bedroom, 6.5 bath, 5,549 sq ft 1925 Spanish estate on a 16,150 sq ft lot sold for its $6,495,000 asking price in 13 days.
Beverly Hills, with its lofty prices and the grand ambitions its landowners, has also experienced pockets of distress. This development opportunity at 631 N Crescent Drive sold for $6,500,000 as a short sale in October 2009. The site is 34,580 sq ft, pricing the land in this neighborhood at $8.2 million per acre. The property previously sold in March 2008 for $7,900,000.

Another teardown on a one acre lot, 424 Robert Lane, just south of Trousdale Estates, sold for $7,350,000, below its $7,900,000 asking price.

Want to live on Rodeo Drive? It's going to cost you. This Colonial teardown on a 31,000 sq ft lot near the Beverly Hills Hotel sold for $9,500,000 -- or $13.35 million an acre.

11 Chic Condos @ 140 S. Oakhurst Drive Beverly Hills

Tucked just south of Wilshire in the center of Beverly Hills is a new 11-unit condo development, 140 S Oakhurst Drive. Located on a quiet residential block, the project includes one studio (reserved), two one-bedroom units (one reserved), seven two-bedroom units, and one grand three bedroom penthouse.

One bedroom units are $925,000, two bedroom units range from $1,045,000 to $1,425,000, and the penthouse is priced at $2,595,000. HOA are surprisingly low, ranging from $518 - $793/month.

We like what we see. Construction is top-rate. The floors are an attractive light-color wood. Living rooms are large. All units (save the studio) have a half-bath conveniently located next to the public areas.

The kitchens are done in a country French style and include a Wolf range, Sub-Zero refrigerator and Miele dishwasher.

Bedrooms are large and have a sizable walk-in closet adjacent to them.

Bathrooms include precision tile work and plenty of stone.

This first floor model unit (1 br, 1.5 ba, 1,678 sq ft) also includes a 300 sq ft patio area.

The 3,314 sq ft penthouse boasts one of the largest living spaces in a new building in Beverly Hills.

The mega-kitchen is a chef's or entertainer's dream.

The penthouse also has lots of outdoor patio space from which you can enjoy views of the tree-lined street.

Units are priced at $550 - $650/sq ft, offering excellent value for buyers seeking to live in this desirable Beverly Hills neighborhood. Bring your toothbrush, move right in -- these units are "done done done" and ready for your personal touches.

Sold by Coldwell Banker

What's the Worry about Westside Los Angeles Real Estate?

Last week we took a look at market trends on the corridor between West Hollywood and Downtown Los Angeles. This week we're taking a look at market trends in the chunk of Los Angeles Westside, the highest priced markets in the city between Beverly Hills and the Beach.

The selected neighborhoods included Beverly Hills, Beverly Hills Post Office, Brentwood, Pacific Palisades, Santa Monica, Venice and Westwood - Century City.

There is currently a 3.2 months supply of inventory of homes priced under $1 million, the lowest level in more than two years. Under these conditions, buyers are forced to view properties and write contracts as they compete with other buyers who are also trying to get into these high-barrier-to-entry neighborhoods.

What is driving this decline in inventory? Record low interests rates, reduced prices, a higher supply of distressed properties, and a sentiment that the market is in the process of bottoming-out.

But the sales in these neighborhoods under $1 million account for only 17% of the market. What's happening in the market for houses selling for more than $1 million?

Current inventory is about 7 months, slightly below what it was two years ago. After a gut-wrenching decline in activity during the worst part of the financial crisis when inventory exploded to two or three years worth, we're now returning to normal levels of selling.

The big picture is that the home market collapsed and is recovering and now looks a lot like it did two years ago. The median selling price in these neighborhoods last month was $1,645,000 -- a scant $3,000 above the median selling price in September 2007.

With so much negative sentiment about residential real estate, the California economy, etc., it's surprising to see that the real estate fundamentals in high-end neighborhoods of Los Angeles remain strong.

443 N Palm Drive, Beverly Hills: Luxury, Comfort on a Grand Scale

For those desiring a 2,500+ sq ft pied-a-terre in Beverly Hills, look no further than 443 N Palm Drive. These spacious, well-designed units offer luxury, comfort, a doorman, 24-hour security and a Beverly Hills address. Updated October 9, 2009: Prices have been cut -- a lot. List prices are: PH3: $2.6 million; PH2: $2.5 million; #303: $2.1 million.

This five-story building has thirteen units, seven of which have sold. All remaining units are 3 bedroom - 3.5 bath or 3 bedroom - 2.5 bath. Prices range from $1,649,000 for a 2,562 sq ft ground floor unit to $2,600,000 for PH3 (seen here) with 3,034 sq ft of living area on two floors and a 508 sq ft rooftop deck with jacuzzi, gazebo and barbecue. Enter into the fifth floor where there's the living area.

You'll also find an immense kitchen with Miele and Gaggenau appliances. And plenty of room to entertain. Take the stairs up …

To this private enclave on the roof with hot tub, BBQ and excellent views. You might want to stay a while.

From the living room, take the stairs down to the 4th floor where you’ll find the bedrooms, including a very large master ...

... And a very large master bath ....

Homeowners dues are $1,262.00 for all units. Units come with three parking spaces. Beverly Hills is a world apart, with mad bidding wars for houses in the Flats even today. Those looking to get into the neighborhood without the maintenance of owning a single family home should check out 443 N Palm Drive.

Sold by Platinum Realtors

LA Times: "Southland Home Prices Looking Up"

Evidence that the local residential real estate market is stabilizing was front page news in yesterday’s Los Angeles Times. A bold-faced headline read: “Southland home prices looking up”.

Finally, the sunshine seems to be breaking through the gloomy clouds of news about REOs, short sales and delinquent, underwater homeowners. For a moment, it seemed like real estate was getting back its sheen.

The median sales price in the five county Southern California rose from $249,000 in May to $265,000 in June, an increase of 6.4%.

Southern California home prices may have finally hit bottom, with median values rising last month for the first significant increase in two years, new data show.

After drastic drops in equity, homeowners have reason to cheer the rise in prices.

There’s also a glimmer of hope in the local labor market -- the unemployment rate in Los Angeles County in June was 11.3%, a drop from 11.6% in May. The “green shoots” of recovery may indeed be on their way.

But there's still a big gap between sales activity in the low end of the market and the high end of the market.

Although prices have firmed at the low end of the market, they are still falling in affluent communities. [Los Angeles Times]

What does this mean in our local market? Lots of sales under $1 million and an anemic market over $1 million.

These two charts look at the single family market over $1 Million and under $1 million in Beverly Center - Miracle Mile, Hancock Park - Wilshire, Hollywood Hills East, Los Feliz, Silver Lake / Echo Park, Sunset Strip - Hollywood Hills West, West Hollywood.

In June, 7% of properties over $1 million (above) were under contract -- an increase from 3% in the worst part of the financial crisis -- but still half the sales level recorded in June 2007.

On the other hand, there's been a boom in sales under $1 million. In June, 18% of homes in these areas were under contract, a 50% increase from the levels recorded six months ago and in June 2007.

The increase in activity on the lower end can be attributed to record affordability and low interest rates, and a continuous supply of well priced REOs and short sales. On the high end, the unavailability of financing coupled with buyers' diminished assets and income has made for a slow market.

The "Burton Corridor" in Beverly Hills?

Two new residential developments are coming to Burton Way in Beverly Hills. One, an eight-story mixed use complex with apartments, is being greeted with open arms. The other, a 14-story condominium complex, is bringing dissent to the Hills of Beverly.

The mixed-use complex, to be constructed at the intersection of Burton Way and La Cienega / San Vicente Boulevards, is the brainchild of Rick Caruso, developer of the Grove and the Americana in Glendale.

Caruso's plans to build an eight-story mixed-use structure on his lot, with 88 apartments and a ground-floor Trader Joe's, have been widely praised by residents who welcome the project as a smart addition to the neighborhood.

The condo building, on the other hand, has been given a cool reception.

…A tiered, 14-story condominium project planned for just north of Burton Way, along 3rd Street between Wetherly and Almont drives, has met with opposition from neighbors, who criticize the building's height and say that it is out of character with its neighborhood.

The 95-unit Wetherly Drive condo project, as it is known, replaces 84 units in seven older apartment buildings.

Genton [developer] -- and others -- stressed that the height of the property was in keeping with other buildings in the area, including the nearby Four Seasons hotel.

What’s really being disputed is the future of Burton Way, a major artery of Beverly Hills. Should it be low-rise or high-rise? Beverly Hills isn’t Westwood or Century City. Is it really desirable to build up? But the city must grow denser, with residential living on major corridors of public transport. We can’t continue to fill the streets with more cars.

Look for more discussion when Councilman-elect Paul Koretz takes office. [Los Angeles Times]

Rents Down, Vacancies Up: LA Metro Apartments 1st Quarter 2009

The 1st Quarter 2009 report on Metro Los Angeles rental activity reveals that average asking rents edged down 1% on an annualized basis, a far cry from the 5 – 6% annual rent acceleration during the 2005 – 2007 period.

Current monthly asking rents in the Metro area are $1,016 for a studio, $1,314 for a one bedroom, $1,683 for a two bedroom, and $2,032 for a three bedroom.

It should be noted that Metro Los Angeles includes areas as far and wide as Palmdale/Lancaster, El Segundo, Whittier and Arcadia and should not be equated with Westside LA or Central LA City.

Vacancy rates for apartments in Metro Los Angeles experienced a sharp uptick from 4.5% in the 4th Quarter 2008 to 5.3% in the 1st Quarter 2009.

The decline in construction activity has had a dramatic effect on the rental market. In the 1st Quarter 2009, only 647 rental units were built – and 5,557 were absorbed.

The severe downturn in construction has curtailed the supply and development of new rental units, and the rental market is forecasted to tighten in the coming years.

Below are asking rents and vacancy rates in a few key neighborhoods:

Santa Monica – $2,431 – 3.4%
West LA/Westwood – $2,300 – 5.8%
Downtown – $1,978 – 9.7%
Beverly Hills – $1,856 – 5.4%
Pasadena – $1,704 – 6.3%
Sherman Oaks - $1,578 – 6.3%
Mar Vista/Palms – $1,516 – 3.7%
Burbank Glendale – $1,497 – 3.6%
Hollywood – $1,436 – 3.3%
Van Nuys/North Hollywood – $1,112 – 3.9%
Palmdale / Lancaster – $859 – 9.5%

Note the combination of high rent and low vacancy in Santa Monica, high rent and high vacancy Downtown, low rent and low vacancy in Hollywood, and low rent and high vacancy in Palmdale / Lancaster.

SoCal Housing Market Stabilizes

# of Sales, Los Angeles Southwest, Metropolitan Southwest Neighborhoods

(click chart for more detail)

Home prices in Southern California held steady in February for the first time in nearly a year, figures released Tuesday show, as low prices brought buyers back into the market.

Experts say it's not clear whether prices have hit bottom, but they are now low enough that thousands of buyers are emerging as the traditional spring home-buying season begins.

Prices fell so far that median-priced houses in Southern California are selling for half of what buyers were paying at the market's peak in 2007. Those low prices, along with low interest rates, have boosted sales. [Source]

Droves of buyers are celebrating the low-price, low-interest rate environment by purchasing homes on the best terms in years. Finally, affordability has returned (in some areas), and the rent vs. own equation falls into balance.

The example above is the aggregated Los Angeles Southwest and Metropolitan South areas, where median sale price has fallen (an unfathomable) 62% in the past two years, from $430,000 to $167,000. Not surprisingly, sales activity is way up as these foreclosed homes change hands.

A note of caution should be given -- the high-end Westside market is still slow.

Home sales are still frozen in high-priced areas. Beverly Hills, Santa Monica, Brentwood, La Cañada Flintridge, Rancho Palos Verdes and Redondo Beach were among the areas posting far-below-average home sales totals in February. [Source]

# of Sales, Westside Neighborhoods

(click chart for more detail)

The vaporization of salaries of some high-end earners and the lack of availability of jumbo loans have put tremendous downward pricing pressure on high-end Los Angeles markets.

This chart illustrates how the combined sales in seven high-end markets (Beverly Hills, Beverly Hills Post Office, Brentwood, West Hollywood, Santa Monica, Beverly Center Area, Sunset Strip/Hollywood Hills West and Pacific Palisades) have trended down for two years.

It is noteworthy that in these markets there was a 17% uptick in sales in February 2009 vs. Janaury 2009. Perhaps the "capitulation" that is taking place on the low end will also spill over to Los Angeles' Westside.

Who Wants to Be a Millionaire? - Part 1

Investors of all stripes have been whipsawed by two bubbles that emerged this decade: the Tech Stock bubble that peaked in 2000 and the housing bubble that burst in 2006 - 8. Stocks, bonds, homes and commercial property, seemingly in lock step, all declined in value.

After the current rout, investors are left scratching their heads wondering how to move forward in this uncertain environment. Should they dollar-cost-average into mutual funds? Buy stock indexes? Buy a home? Invest in a multi-unit property?

The daily news reminds us of the bleak stock market. The Dow Jones Industrial Average and the S & P 500 have fallen more than 50% in less than two years and are now at levels not seen since 1997.

But how has a home in Los Angeles performed as an asset? What types of yearly returns are homeowners getting on their investment?

This analysis looks at five neighborhoods – Venice, Pacific Palisades, Beverly Hills, West Hollywood and Los Feliz – a little bit of the Westside, a little bit of the East Side. The trend is uniform across these neighborhoods – outsized price increases over time.

Here we see the median sale price of homes in Venice, Los Feliz and West Hollywood from 1996 to 2008. In 1996 in these neighborhoods, the average home was $250,000 – 325,000. Twelve years later, the median sale price in these neighborhoods had risen to $900,000 - $1,150,000.

Home values began a slow, steady climb in the late 1990s and then began to accelerate, rising rapidly in 2003 and finally cresting in 2006, and then ebbing and declining in 2007 to 2008 (although the Venice median sale price was unchanged from 2007 to 2008.)

The net returns are remarkable. In this twelve-year period, Venice prices increased 365%, Los Feliz values increased 175%, and West Hollywood prices increased 311%.


Two Westside neighborhoods show similar trends. The Beverly Hills median home price nearly quadrupled from $909,000 to $3,495,000 from 1996 to 2008. The median Pacific Palisades home price rose from $640,000 in 1996 to $2,225,000 in 2008, a 247% increase.

In spite of the recent market gyrations, long-term returns are impressive by any measure.


Over a twelve-year period from 1996 - 2008, while the S & P 500 sputtered along recording 2.7% appreciation per year, an investment in a Los Angeles home in these neighborhoods (without even considering leverage), was providing returns three and four times greater.

There has been much ballyhooing about the woes of owning real estate. What gets lost in the argument is that for those who “buy and hold” in Los Angeles – and who ride out the inevitable real estate cycles – returns can be impressive. Those renting should view the current downturn as an opportunity to buy what has proven in recent times to be a solid investment: a little piece of LA.