To all the agents in the house,
Like Val Kilmer in "Heat," I am going through dizzying logistics to slink my way out of Los Angeles this week. I'm driving to Chicago, where I will be for at least several months, learning and reporting on real estate from there.
If you are reading this and in Chicagoland, let me know. It would be great to meet in person. Also, if you are attending the RealTrends "Gathering of Eagles" event next week in Colorado Springs, send me a line. I'll be there.
I started covering real estate with a focus on Los Angeles County, and it wasn't until HousingWire that my outlook was national.
With that in mind, here's a commemoration on what is distinct about the L.A. market, what is beyond the "low inventory, high demand" national story. Hope this helps you think about what is distinct where you work and live.
* L.A. has a lot of rich people, and those people often buy with cash.
The median home value in Beverly Hills is $3.8 million, according to Zillow. Beverly Hills, though, doesn't exist on some wealthy island, but instead is surrounded by other areas with multi-million dollar home values including Bel Air and Brentwood.
Consequently, west Los Angeles has an entire ecosystem of brokerages like Hilton & Hyland, The Oppenheim Group, Nourmand & Associates, and Westend Estate Agency that facilitate mostly cash buys.
The mortgage joint ventures and other ancillary services, the very products that seem to actually make brokerages money, are not part of the equation.
It bears watching if brokerages like The Agency, which started in Beverly Hills but is now national, and brokerages like Compass that have a national presence but focus on luxury, can thread the needle. What makes money in west L.A. may not in Knoxville, Tennessee.
* Compass has made its presence felt.
I've taken the proverbial gloves off in examining New York-based Compass's money-losing brokerage and indiscernible formula to ever be profitable.
But, for what it's worth, Compass is everywhere in L.A., as the brokerage vies with Coldwell Banker for the biggest in county sales volume.
Compass has done an excellent job infiltrating places like Pasadena and Silver Lake that are rich for the rest of the country but merely upper-middle class for L.A.
In Pasadena, there are stately and sleek Compass yard signs on almost every block. In hip Echo Park, there are signs by Compass agents drolly calling themselves "Used home salesmen." And in Santa Monica, there are people walking on the beach in Compass t-shirts.
Again, it's not clear if this translates into a good business strategy. WeWork also was (and still kind of is) everywhere in L.A. But I can see why agents and some investors may feel drawn to the brokerage.
* There are a lot of poor people in L.A.
There are roughly 66,000 homeless people in Los Angeles County as of January. At Echo Park Lake, one block away from where I live, hundreds of homeless were forcibly evacuated in March, with the apparent promise of city-subsidized short-term hotel stays.
It's a policy debate whether L.A.'s homeless and the lack of affordable housing is purely a government matter, or if the private sector can help. But what the evidence shows is few home builders see the crisis as an opportunity to make money and also help people.
L.A. is spot-zoned, so it is not easy to build housing without resistance from not in my backyard types. Some homebuilding rules have loosened up in the last five years. But no company has, for example, developed a large-scale business model around building accessory dwelling units.
The biggest home building projects continue to play to the country's abundant wealth. Toll Brothers and Lennar, for example, hope people will shell out almost $1 million per home on an oilfield in Montebello Park.
...Those are probably my chief observations about L.A. real estate. What stands out where you are? Email me anonymously at mblake@housingwire.com.
Sincerely,
Matthew Blake
Senior Real Estate Reporter
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