With home prices in Los Angeles nearly as high as they’ve ever been and rents hovering at levels many residents can’t afford, Angelenos wondering whether to rent or buy aren’t faced with an easy choice.

Each option comes with its own advantages and disadvantages, and one—buying—requires a financial commitment quite a few people are simply unable to make.

Assuming you’ve got some savings lying around, which option makes the most sense from a financial perspective?

“There’s no right or wrong answer,” says Eric Sussman, adjunct professor of real estate and accounting at UCLA. “But you’d better be thoughtful about it.”

Tools from Zillow and the New York Times offer some guidance on this question. The Zillow calculator determines the break-even point, when buying a house becomes cheaper than renting due to equity gained by the homeowner since the purchase.

More simply put, as you pay off more of your home, you have access to more of its total value when you decide to sell. Assuming rent and mortgage payments are equal, then buying will save you money if the amount you end up with when selling is more than you would have been able to make by putting your down payment into an investment fund and continuing to write checks to your landlord each month.

If you were to buy a median-priced home in Los Angeles County (around $605,000), rather than pay for a $2,000-per-month apartment, it would take five years and three months to hit the break-even point when buying pays off over renting. But buying a pricier residence or signing a cheaper lease can change the calculation dramatically.

Under the same scenario, it only takes just two years and seven months to break even if your monthly rental payments are $3,000. On the other hand, if your choice is a $605,000 home or a $1,500-per-month apartment, buying will never be cheaper than renting.

Of course, these examples assume buyers are ready to make a 20 percent down payment. For a $605,000 home, that’s more than $120,000.

“How many people have $120,000 lying around?” Sussman asks. That’s one reason why he says the question of whether it’s better to buy or rent depends on a host of other factors, including how much buyers have saved up and whether they are willing to make such a large financial commitment.

It is possible to get a mortgage without putting 20 percent down, but a lower down payment generally means higher monthly costs. That’s because most banks will require you to pay for private mortgage insurance until you build up to 20 percent equity in your home. Like rental payments, those costs also do not add to the equity you have in your home.

A low down payment can also impact the financial viability of a purchase, since buyers have less equity from the get-go. With a 5 or 10 percent down payment, a drop in home prices is more likely to leave homeowners stuck owing as much or more than their house is worth.

“It doesn’t take a lot to put a hole in your balloon,” Sussman says.

For some people, the chance to buy with lower up-front costs might be worth the risk, especially if they’re already stuck with high rental payments. The New York Timescalculator helps to assess whether your rent is high enough that it makes more sense to buy.

Assuming that you plan to stay for at least five years, the calculator finds that buying a median-priced home in Los Angeles is the way to go if you’d be paying more than $2,425 in rent for something similar.

That calculation would look much different if mortgage interest rates were higher. According to Freddie Mac, interest rates for a conventional home loan now stand at 3.84 percent, well shy of the 4.5 percent or higher many analysts were predicting at the start of the year. Using the higher rate, the New York Times calculator finds renting makes more sense up to $2,617 per month.

Interest rates are one of the key variables that can affect the overall cost of buying at a given time. A high interest rate means costlier mortgage payments, which add up over time.

Right now, interest rates are low, and homes are taking a bit longer to sell than they did this time last year, according to data published by the California Association of Realtors. Prices are also climbing at a more modest pace; LA’s median sale price rose 3 percent between May 2018 and May 2019, according to CoreLogic. That’s significantly lower than the 8.4 percent increase seen a year earlier.

Those factors point to a market that’s shifting toward buyers—though prices are still high enough that the number of people capable of buying is discouragingly small.

Sussman stresses that the decision to rent or buy depends entirely on what people are looking for in a home and how long they’d like to stay there.

“For the right person, if your financial wherewithal is solid, and if you’re going to be in the house for more than five years, go ahead and buy,” he says. “Prices will be higher 10 years from now than they are today.”

Source: Curbed La

Author: Elijah Chiland

The first time Thu Lesher toured her future home, she couldn’t see past its dated look, with heavy furniture and draperies. She changed her mind two years later, when the antebellum home became the Charleston Symphony Orchestra League’s 2014 Designer Show House and received a sweeping face-lift, with fresh wall paint, custom-made curtains and new light fixtures.

In June of that year, Dr. Lesher, a professor at the College of Charleston, and her husband, Aaron Lesher, a pediatric surgeon, bought the six-bedroom property for $1.3 million.

“It was absolutely transformed,” she says. “I needed someone to show me the potential of the house.”

At show houses across the country each year, interior designers work their magic on a lucky home (often a different designer for each room). Designers shoulder the cost, with no charge to the homeowner, to get exposure for their work. Visitors pay an admission fee to tour the show house, with the proceeds usually benefiting a local charity. Removable items and decor used in the renovation are often removed after the show, although fixed items (wallpaper, paint) usually remain. Some homes are for sale. If the property is listed, sellers wager that foot traffic, media buzz and visual upgrades can expedite and improve a sale.

“This is staging on steroids,” says Margaret von Werssowetz, an agent with Handsome Properties in Charleston who is selling this year’s Charleston Show House, a 1903 Victorian listed for $1.65 million.

At least 25% of the show houses in the 47-year history of the Kips Bay Decorator Show House event in New York City have sold within 12 months of the exhibit, says Daniel Quintero, executive director of the Kips Bay Boys & Girls Club, the event’s beneficiary. This year’s show house, a stately, 12-bedroom, eight-bathroom Upper East Side townhouse currently listed for $29 million, has been decked out with crown molding and fireplaces, hand-painted murals and crystal-encrusted chandeliers.

The annual Decorator Show House in Wichita Falls, Texas, benefiting the Wichita Falls Faith Mission, which operates two local homeless shelters, has sold during or soon after the event nine times in its 11-year-history, according to Frances Anne Manning, director of development at the charitable organization. “Attracting buyers through this prestigious event and showing them a house decorated in this way can help them feel that it’s a high-end home worth the price,” says Allison Gray, a real-estate agent in Wichita Falls, located between Dallas and Oklahoma City.

In 2014, a five-bedroom near Midwestern State University had been for sale for two years before becoming that year’s show house. Wichita Falls locals Britt and Kristi Milstead, who have three children, bought the 3,800-square-foot-property for $240,000 four months after the event. Real estate website Zillow now values it at $306,000.

The show house improvements had made it attractive enough to buy, says Mr. Milstead, 47, but it needed more work. Floors had to be refinished, and kitchen and bathrooms required updating.

But the Milsteads liked the living room, which show house designers had painted a light mint green with a darker green trim that was continued in the formal dining room. There, it was paired with wallpaper that had a medallion pattern.

“Being a show house helped sell that house,” says Mr. Milstead, director of sales at a television station. ”It provided touches that needed to be done and that the seller wasn’t willing to make.”

In Topeka, Kansas, a 7,300-square-foot home was listed but not attracting any buyers when, in the spring of 2014, it became the Designers’ Show House for Child Care Aware of Eastern Kansas, a nonprofit helping parents with child care and education.

Local designers installed new kitchen cabinets, removed dated foliage-inspired wallpaper and repainted walls in a neutral palette. The house’s listing touted its fresh renovation and prominence as a show house.

Kristina and John Dietrick bought the five-bedroom property four months after the show house event for $514,000. Today, Zillow estimates it is worth around $581,000. Without the upgrades, they would have balked.

Ms. Dietrick, 50, recalls liking 80% of the show house designs. She removed all of the window treatments, painted over stencil art on the dining room ceiling, and changed the kitchen cabinets from brown to a black that she felt would look better with the appliances and quartz countertops.

“The kitchen cabinetry had a rustic look, while the rest of the house had more of a sleek, modern look,” she remembers.

In the 2014 Charleston Show House, the Leshers kept only burgundy-colored drapes in the study and bright pink valences with a matching pale pink bamboo wallpaper in the master bedroom. First to go after the show house ended: purple walls and ceilings.

“The color of the year was purple—it was everywhere,” recalls Dr. Lesher, 42.

The couple painted over the shade in every room but their daughter’s bedroom. They spent “at least half a million” dollars on additional, structural renovations, says her husband, 42. The cosmetic changes for the show house, donated by participating designers, saved them as much as $30,000, he estimates.

Zillow now values the 5,100-square-foot six-bedroom, 3 1/2-bathroom home at $1.99 million. But the Leshers have no plans of selling. “If we sold it today, we would be in good shape, but we’re not selling it,” says Dr. Lesher.

Not all show house redesigns have the desired marketing impact. If designs vary too much between rooms, real-estate agents say, they can hinder a sale.

“The problem with designer showcase homes is they don’t flow,” says Topeka agent John Valley who sold the Dietricks their home. “One room looks this way, one room looks that way. It doesn’t have any continuity.”

In Palm Springs, James Lee and Dominick Spatafora bought the midcentury modern show house that was part of the town’s 2014 Modernism Week shortly after the festival ended that year. Its look was coordinated by Christopher Kennedy, a local interior designer and prior owner of the home.

“I serve as the creative director,” says Mr. Kennedy, who has put together four show houses and describes his style as “combining Jet-Set nostalgia with California modernism.”

For the 2014 show house, he set a neutral color palette and ensured that permanent features, such as floors, tiles and bathroom fixtures would work together. Messrs. Lee and Spatafora say some of the whimsical designs took them out of their comfort zone, which they liked because it exposed them to cutting-edge décor they had not seen before. It included a gold ceiling in the TV room, a sink that lights up in a fluorescent blue in one bathroom and turquoise and black wallpaper with fish, paired with a black ceiling, in the powder room. One stretch too far: hand-painted zebra-patterned wallpaper in the master bedroom that they removed.

The couple, whose primary residence is in the Marina del Rey area of Los Angeles, bought the 3,000-square-foot, four-bedroom property for $1 million, slightly below the asking price of $1.1 million, which had been lowered from the initial price of $1.4 million. They still paid a premium to the average square-foot price in Palm Springs’ Indian Canyon neighborhood in 2014, says Ronald Scott Parks, a broker with Pacific Sotheby’s International Realty in Palm Springs. Mr. Parks estimates the home’s current value between $1.25 million and $1.3 million.

Back in 2014, the couple spent less than $10,000 on additional improvements. After their purchase, they were taken aback when locals mentioned that they had been in their house, but they now enjoy its prominence.

“Initially, you feel so exposed,” says Mr. Spatafora. “But it’s actually fun to talk about it.”

Source: https://www.wsj.com/articles/decorator-show-houses-are-designed-to-sell-11562162857

Author: Cecilie Rohwedder

The most expensive home on the market in the U.S. just got significantly less expensive. 

The Los Angeles property dubbed Chartwell had a cool $50 million chopped from its asking price on Monday, taking its price tag down to $195 million from the whopping $245 million it was asking when it officially hit the market in October, according to listing records.  

The tech scene is alive and well in Los Angeles, specifically in the westside beach communities between Malibu and LAX airport—namely Santa Monica, Venice, Marina del Rey and Playa del Rey—and the adjacent inland neighborhoods, including Playa Vista, Culver City, El Segundo and Mar Vista. Collectively, these neighborhoods where tech is prevalent, are known as Silicon Beach.

In the last 18 months, major technology companies with an entertainment bent either moved into new Silicon Beach office space or are set to do so. Snap Inc., the parent company of social media platform Snapchat, moved from Venice beach to Santa Monica; Google employees moved from Santa Monica into a remodeled 500,000-square-foot airplane hangar known as the “Spruce Goose” in Playa Vista; and HBO, Apple and Amazon Studios are slated to move creative segments of their businesses into new office space in downtown Culver City later this year.

As these newsworthy tech moves are taking place, real estate prices have finally leveled off in greater Los Angeles after a seven-year run-up that started in 2012, and led to many years of double-digit price growth. Median sales prices are down 4.5% to $1.455 million, according to Douglas Elliman’s Q1 2019 market report; and the number of sales declined, as inventory increased.

But that market data doesn’t tell the whole story, said Erin Kennelly, the executive director of research at the L.A.-based luxury brokerage, The Agency, who noted that when you dig into the numbers, what’s happening in real estate differs greatly depending on the neighborhood.

For now, Silicon Beach communities are holding strong, and performing among the best in the region.

“What we see is that Silicon Beach neighborhoods have among the lowest inventory and the best performance over the past year,” Mr. Kennelly said.

In addition to the impact on price, tech influence has also changed the type of homes that are desired and built in Silicon Beach; communities like Venice and Playa Vista look totally different than they did a decade ago, with more multi-million dollar modern homes in Venice, and more multi-family dwellings, including condos and townhouses, in Playa Vista. And as people get priced out of Silicon Beach, Mr. Kennelly said, the tech influence on price and design is spreading further east to neighborhoods including Echo Park and Silver Lake, where young buyers who often work in tech or tech-adjacent fields are putting down roots and either working remotely or commuting in.

When it comes to the question of why tech companies opened offices in L.A., the answer is simple, Mr. Kennelly said: They followed a pool of well-educated potential employees south from Silicon Valley down to the beachfront communities where those people wanted to live, which at the time, was much more affordable than the traditional tech hubs up north, such as San Francisco and Palo Alto. “This is what always happens,” he said. “Tech employers chase top talent, who have relocated for a better quality of life.”

As this tech workforce moved near the beach and the tech companies followed, the growth of the tech industry in L.A. “put legs under the city’s housing market,” said Paul Habibi, a professor in the Ziman Center for Real Estate at UCLA. “If real estate was strong before the tech sector, I think it’s made it increasingly so.”

Specifically, he continued, tech has helped the $1 million-to-$3 million segment of the market. “All the communities around Silicon Beach have undoubtedly succeeded due to the success of the tech sector,” he said.

Returning to the latest market data, Mr. Kennelly said the influence of tech is clear. In March, inventory in the greater L.A. region was 5.2 months, which means it will take active units an average of just over five months to sell. Anything under six months is considered tight inventory.

In Venice, inventory remains tight at 3.8 months. The same is true in Santa Monica, where inventory is at 3 months, and in the nearby communities of Palms and Mar Vista, where inventory is extremely low, at 1.4 months for single-family homes.

Another important metric is median sales price. While March data shows that prices in greater Los Angeles are up 1% compared to one year ago for single-family homes, Venice prices are up 8% compared to a year ago, to $2.481 million, Mr. Kennelly said, and Santa Monica prices are up 9% to $2.529 million.

Finally, homes in Santa Monica are still selling for 1% over list price, and 2% over list price in Culver City.  

This upward price trend has also continued in Playa Vista, a mixed-use urban community that houses a slew of tech companies, including Facebook, YouTube, Electronic Arts and IMAX, alongside parks, restaurants and residential units, from one-bedroom rentals to multi-million dollar detached homes.

In February 2017, Playa Vista’s developer, Brookfield Residential, unveiled the most expensive residential units in the community—three-story, 4,500-square-foot detached villas with expansive indoor/outdoor entertainment space, in a development known collectively as Jewel. Priced starting in the high-$3 millions—well above other homes in the area—“people weren’t sure this would be a slam dunk,” said Kris Zacuto, an associate broker with Hilton & Hyland, who represents these properties.

But today, there are 11 closed sales, one unit in escrow, and only two Jewel units remaining, with a sales price for the project averaging above $4 million, Mr. Zacuto said.

“The success of Jewel is a testament to the overall impact and growth of the tech sector on the Westside of L.A., and the Silicon Beach vibe,” he said, noting that they just closed on a Jewel unit in the beginning of the second quarter at asking price, for $4.058 million.

“At this price point, these buyers could purchase a home anywhere in L.A.,” Mr. Zacuto said, “but they really value that sort of low-maintenance, lock-and-leave, amenities  outside your door lifestyle that Playa Vista offers.”

In addition to an amenity-rich, walkable neighborhood, wealthy tech employees also have specific demands when it comes to the aesthetics and comfort of their space, said Venice-based designer and custom homebuilder Kim Gordon of Kim Gordon Designs.

For Ms. Gordon, who has lived and worked in Venice for 28 years, the tech industry has brought in a new slew of buyers, for whom the old stock of homes—either “cute, but not great” houses, with inconvenient design features, like tiny kitchens and backyards only accessible through a master bedroom, or “severe modern boxes”—just don’t work anymore.

That’s why when she works on a new project for a tech industry client—of which 80% of her clients now are—she brings in a strong indoor-outdoor influence, with al fresco dining options, floor-to-ceiling windows and landscaped water features. There’s always an open floor plan and a big kitchen, with en-suite bathrooms with most bedrooms, not just the master, which makes it comfortable for guests to stay over.

The tech industry has brought in people who want flexible homes, where they can have friends and colleagues over to have creative meetings and collaborate, she said. “People want to come home to a quieter, more comfortable environment, where they can focus on their projects.” When she works on the home, they often sell for over $5 million.

As some younger tech employees have been priced out of Silicon Beach, they’ve been moving east, to hip neighborhoods like Echo Park and Silver Lake, Mr. Kennelly said.

“We’ve seen the steady march of development move from the beach to downtown L.A.,” said Justin Barth, the owner/operator of Barth Partners, an L.A.-based development firm with a residential focus, noting that Venice was a completely different place 20 years ago and Culver City, located five miles inland, is far removed from what it was 10 years ago. “Silver Lake in undergoing those changes today.”

Much of the reason is because it’s conveniently located about five miles from the hip downtown Arts District and less than four miles from Hollywood, where Netflix has recently signed several leases for additional office space, that will bring their real estate footprint to over 1 million square feet of space in the next year and a half.

It’s also walkable, urban, and home to plenty of hip and interesting restaurants and businesses, such as bedding and bath company Parachute Home and a soon-to-be-open Erewhon Market (think a smaller and higher-end L.A.-based Whole Foods). Notably, both of these businesses also have flagship locations in Venice.

Real estate data supports this trend.

“Silver Lake is the hottest neighborhood in L.A. right now,” Mr. Kennelly said, with inventory remaining low at 3.3 months, and prices up 21% in March 2019 to $1.28 million compared to a year ago.

Other market indicators are also strong. The median days on the market for a listing is only 16 days, Mr. Kennelly said, and homes are typically selling for 4% over their list price.

To accommodate this new population and take advantage of their interest in more compact, urban homes, located close to amenities, The Agency Development Group is representing a new Silver Lake residential project, called VICA, developed by Mr. Barth.

VICA, which recently topped out at five stories on Sunset Boulevard, will have 31 modern residences—many of them available for under $1 million—above a ground floor restaurant space, which Mr. Barth said is the first West Coast location of a popular cafe that’s located in Manhattan’s SoHo neighborhood. (He declined naming the cafe). It will be finished in late-2019, and according to Mr. Barth, represents the “first new condominiums built in Silver Lake in over a decade.”

Before this project, his company also developed 10 small lot homes called Ridge Silver Lake. Another small lot home project by a different developer, called 850 North Coronado, which will be located just south of Sunset Boulevard, is also in the works, as is an apartment project by CIM Group that will be located near Erewhon, and a Palisociety boutique hotel called Silver Lake Pool and Inn.

Despite the community’s typically challenging approval process when it comes to residential development, Mr. Barth said he thinks there will be more projects in Silver Lake in the years to come.

And Mr. Kennelly suspects there will also be more of a local tech influence as well. “Smart tech companies will continue to chase lifestyle perks,” he said, “and open offices in downtown L.A. or near Silver Lake—closer to the places their work force wants to live.”

Photo Credit: https://www.intercontinentallosangeles.com/things-to-do/venice-beach

Source: https://www.mansionglobal.com/articles/los-angeles-tech-scene-expands-beyond-silicon-beach-202795

Author: Anne Machalinski