October 2011: West Hollywood Condo Prices Down 40% From Market Highs; Foreclosures and Short Sales Make Up 31% of Closed Sales; Yet Median Price Unchanged at Lofty $500,000

Our assessment of the West Hollywood condo market is that:

1. Prices are off 40% since the top of the market; 
2. Short sales and foreclosures are making their mark on the market -- a whopping 31% of the 85 condo sales in the past three months have been distressed properties.
3. Condos in premium, new construction projects are retaining their value more than resales in older buildings (60's -- 90's);
4. Yet ... the median price of $500,000 has not changed since 2009.

Let's take a look at what's been selling.

1200 N Sweetzer Ave #8 - 2 br, 2.5 bath, 1,378 sq ft - $800,000 

The ten units at 1200 N Sweetzer Avenue, which has been marketed for nearly two years, have now all sold, ranging in price from $520,000 - $1,100,000.  Final selling price on average was $523/sq ft, well above the $399/sq ft that the 32-unit Harper West Hollywood, one block away, sold for.  Unit #8, a mid-priced unit, closed at $800,000, $580/sq ft.

825 N Kings Road -- Habitat 825

#15 -- 2 br, 2.5 bath, 1,580 sq ft - $734,900
#11 -- 2 br, 2.0 bath, 1,270 sq ft -- $725,000

Habitat 825 is an award-winning project by Lorcan O'herlihy Architects next to the Schindler House on Kings Road between Melrose and Santa Monica Boulevard. This building was launched in 2007, and units are now selling well below their original sale prices.   Consider that #15 sold as a foreclosure for $734,900, off 40% from its original $1,222,000 sale price.

 

751 N Fairfax Avenue -- Lofts @ Cherokee Studios

#5 - 2 br, 2.0 bath, 1,506 sq ft - $591,000
#12 - 2 br, 2.5 bath, 1,377 sq ft - $531,000
#2 - 1 br, 1. bath, 1,197 sq ft - $468,000

Previously listed at stratospheric prices and then foreclosed upon, the ultra-"green" Lofts @ Cherokee Studios on Fairfax between Santa Monica Boulevard and Melrose is now selling at about $390/sq ft.  Given the numerous expensive features and fixtures, this project is likely selling below replacement cost.  The developer's loss is the buyer's gain.

 7917 Willoughby Avenue #1 -- 2 br, 2.5 b, 1,580 sq ft -- $722,500

This project near Fairfax and Santa Monica Boulevard has eight excellent sleek, modern, loft-style units and sold out in late 2008 and early 2009.  Unit #1 sold for $830,000 in November 2008, and thus lost 13% of its value in approximately three years.  In spite of the price drop, this high-quality new construction has retained its value better than older stock.

1134 Alta Loma Road #104 -- 2 br, 2.0 bath, 1,038 sq ft -- $375,000

This foreclosure in a 48-unit building near Sunset Plaza sold at discount of 40% from its 2005 sale price of $625,000.   Like its period brethren, this 1972 vintage building did not fare as well as its contemporary counterparts, as many upside-down and distressed owners have been forced to sell or are alienated from their condos, creating a downward cascade in pricing.

839 Larabee Street #1 - 2 br, 2.0 bath, 1,500 sq ft - $420,000

This is a foreclosure in a 1980's building in the center of West Hollywood that sold for $280/sq ft.  Consider that this unit sold for $320,000 in 2001.

 

1250 N Kings Road #404 - 2 br, 2.0 bath, 1,121 sq ft - $390,000

A upgraded 2.0 br, 2.0 bath unit on a great street for less than $390,000.  A very good price throwing the rent vs. own proposition back into balance.

Three Hot Zip Codes, Three Multifamily Picks: Adner Realty Group Rounds Up the Best Apartment Buying Opportunities in Hollywood, Silver Lake and Inglewood

We analyze the multifamily inventory for sale across Los Angeles and over the years have developed our "favored" neighborhood for apartment buyers.

What makes a favored neighborhood?  Those that offer a combination of good returns and opportunity for future rent appreciation; that are centrally-located, close to jobs, shopping and entertainment.  They are not the "platinum" neighborhoods of Beverly Hills or Santa Monica, but the "infill" parts of the city.

Here we focus on three of our preferred zip codes: 90046 (Hollywood), 90026 (Silver Lake/Echo Park) and 90302 (Inglewood).  Let's see what's for sale.

1.  1600 North Martel Avenue, Los Angeles, CA 90046 - Hollywood

$1,800,000 - 8 units - 5.92% cap rate

90046 (click to enlarge)

Located in the heart of Hollywood, near Runyon Canyon and "Rock and Roll Ralphs", this building comprises 8 classic, character units that appeal perenially to renters.  Furthermore, a new owner can apply for Mills Tax Act status, whereby they will receive 50 - 80% tax abatement if they do not modify the property. This "historical" status will limit further improvements, but with the tax-advantaged cost savings, why mess with a good thing?

2.  950 Edgecliffe Ave, Los Angeles, CA 90026 - Silver Lake

$3,388,000 - 12 units - 5.65% cap rate 

90026 (click to enlarge)

This 12-unit asset benefits from (1) the high-quality rental pool in the Silver Lake market; and (2) the fact that units are not subject to rent-control.  There is little new rental construction in Silver Lake, a much sought-after, collegiate / post collegiate / young professional neighborhood close to Downtown, and a new owner can capitalize on the limited rental supply and appreciating rents. Well-located in a "South of Sunset" neighborhood, close to Hollywood and Santa Monica Boulevard, a major corridor to Westside neighborhoods.

3.  815 Victor Avenue, Inglewood, CA 90302 - Inglewood

$3,175,000 - 27 units - 6.13% cap rate

90302 (click to enlarge)

This 27-unit building is located in the non-rent controlled City of Inglewood across La Cienega Boulevard from the LAX / Westchester neighborhoods. As salaries have declined, renters have migrated from high-cost beachside neighborhoods such as Marina del Rey to more affordable, more central neighborhoods such as Inglewood. The result is low vacancy (2%) and high returns (over 6% cap rate) for this "bread and butter" asset.
 
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