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Looking for the Hot Spots

Where are home prices going to skyrocket? The savvy observer might try looking at cafes, not schools, for the clues.


Real estate in Los Angeles is a dynamic game, swayed by easily quantified factors that include the prime lending rate, the number of houses for sale and the number of buyers looking in any particular season. Less easy to understand, however, is the changing nature of neighborhoods. What makes one neighborhood's values skyrocket while another area languishes? What are the signs that a community is about to catapult from dump to destination?

As recently as the mid-'90s, now-popular areas of Los Angeles such as Venice, Carthay Circle and Silver Lake were considered "off the map" for home buyers contemplating a significant investment in residential real estate. They had reputations, deserved or not, for crime, graffiti and noise, and their low real estate prices reflected that reputation.

Properties in these neighborhoods today are from 60% to 75% higher than their prices five years ago. It's not unheard of for houses to sell within 24 hours, after receiving multiple offers. If buyers had known then where those neighborhoods were headed, and how quickly they were going to get there, their attitudes (and their addresses) might have changed.

The factors that make a neighborhood appreciate are not entirely different from the factors that all buyers look for, according to Keven McConnell with DBL Beverly Hills.

"Buyers are always looking for convenient access to major thoroughfares, jobs and shopping," he said.

But beyond these basics there are reasons both practical and intangible that attract buyers to certain communities.

"Buyers are returning to older neighborhoods instead of looking into areas farther away. They're tired of traffic, tired of long commutes," McConnell said. "But they're also looking into neighborhoods where the homes have interesting architectural details, the kind you can't find in newer houses. This trend is happening not just in Los Angeles but nationwide."

Architectural qualities such as colorful bathroom and kitchen tiles, stained-glass windows, decorative light fixtures, even telephone nooks, are attractive amenities to buyers who may not have grown up with these once-common features.

Ironically, many houses have been "preserved by neglect" because owners lacked the necessary funds to update them over the decades, so they still have the features that now make them more valuable.

One such neighborhood is Wilshire Vista, a historically middle-class African American neighborhood north of Pico Boulevard near La Brea Avenue. The demographic mix of the area has become more varied in recent years as young families and single professionals have moved into the neighborhood.

In September, McConnell client Todd Neuman purchased a 1935 Spanish-style fixer-upper for $295,000 in Wilshire Vista. Neuman, though exhausted by the rigors of fixing up his 1,800-square-foot, three-bedroom house, is encouraged by the sale of a slightly smaller one (1,500 square feet) just three doors up from his. The selling price was $430,000, $135,000 more than Neuman paid just two months earlier.

Though the quality of local schools has typically been a critical factor for home buyers, not all experts agree that good schools are an important component of neighborhood transition.

According to Marshall Reddick, real estate educator and former professor of business and economics at Cal State Los Angeles, "A good school system is ideal, but many of the people moving into marginal neighborhoods are yuppies or singles without children. It's a classic chicken-or-the-egg scenario. Do good schools turn an area around, or do the home buyers moving into an area push for better schools?"

Henni Bouwmeester, a Realtor with DBL Los Feliz, agreed: "The people moving into marginal neighborhoods are often singles, young professionals and gays. A good school system isn't their highest priority. And families with children who are considering these areas are likely to send their kids to private schools."

One of the most frequently cited qualities that areas in transition have in common is reduction in crime. According to Reddick, "If people are afraid of crime in their neighborhood, they'll put up walls or gates or they'll buy a home somewhere else. But through increased police enforcement or visibility, you'll see an increase in prices."

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