“They walked me through this empty tower, down this hallway — they had drawn chalk lines to show where the condos would be. Chalk lines! They wanted something like $900 per square foot! Maybe less, but close to it. Now, you’re right next to the freeway in this nothing building with no green space. It was just crazy! Chalk lines — honest to God! An empty hall, and a few pipes above!”
Something about the emotionalism shown by both the developers and the prospective buyers struck the downtown denizen as unsettling and frightening. He went on to live in two different and beautiful downtown condos. He insisted on leases.
Wittasek, the consultant, also was tempted to buy a loft downtown during that period. In fact, he had an agreement in hand one day. But then, he recalls, “I heard a rumor that Countrywide was going under. I pulled out, right before.”
Then the housing market crashed. It started slowly in 2006. By late 2007 federal officials were warning that the bursting bubble could ruin the U.S. economy. By the fall of 2008, the globe was in financial crisis.
"Supply was artificially high" — particularly downtown, Wittasek says. "There were buildings that weren't even finished. Housing was sitting there unused, piling on top of itself, creating a steep decline in prices."
Downtown is having a harder time bouncing back than most areas because of the people who want to buy: mostly young, urban pioneers. They tend to have too-small down payments, making them high-risk. Combined with the fact that interest rates of late have sunk to record lows, lenders aren't interested.
Now, downtown is filled with underwater owners who can't sell, and renters in former condos that didn't sell.
The surprise result is a tight housing supply. Downtown is in "a very strange 'rebound,' " says Tiffany Gatto of L.A. Loft Realty. "Of probably 88 units" her firm has available for sale, "29 are in undesirable areas, 25 are above $700,000 [and] two are under $250,000."
She's seen bidding wars, but those deals can be quashed when appraisers won't approve the jacked-up bids. Real estate agents claim that appraisers are misjudging downtown because home values are a hodgepodge, often shifting block by block. Spring Street is 250 feet from Broadway, yet they're like distant planets. The Toy District, Jewelry District, Gallery Row, Financial District, Old Bank District, Historic Core and South Park rub against each other but don't quite blend.
While agreeing that appraisers can be wrong, and downtown "can change within a block," Tupper Lienke of Hampstead Appraisal Co. says, "If they have a bidding war between buyers, do we really have market evidence that that's the value? Or do we have people who, in a contest to see who can get the property, have left the realm of reality?"
The Los Angeles housing market is improving, says Richard K. Green, director of USC's Lusk Center for Real Estate. But it's "nothing like what it was. You're still way far away from where prices were in 2005."
That's not likely to change anytime soon. Downtown L.A. never became the huge jobs-housing center the boosters promised. Today, analysts say downtown accounts for perhaps 2.5 percent of L.A.'s jobs — like a suburb. (Downtown Chicago and San Francisco account for 15 percent of the jobs.)
Yet there are people who want downtown life, like Ramon Garcia. "I grew up in suburbs ... baseball and family and church," he says. "So this is refreshing."
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The worst part in the article is this agent claiming that she has 88 places for sale. I am a broker and there are only 85 places listed now. I wish we could stop bad agents for saying whatever they want and misleading the public. So called journalists should verify their sources before publishing.
Typical blah, blah, blah anti-development L.A. Weekly article. Full of propaganda, weakly researched and commented on by the same 20 antidevelopment posters. I love Downtown and am so happy I bought here. My property is more than holding its own in the same neighborhood that this reporter is referencing. Lazy, lazy journalism, at best.
Too many down payments, and the ability to generate revenue from those down payments, have been lost forever because buyers did not understand market fundamentals. New construction sold by a developer is always overpriced on a per square foot basis. It's what developers do. Downtown buyers could have bought 1930's to 1960's construction from a resident buyer in many westside areas during the bubble and paid less, than buying a downtown loft newly renovated by a developer. The buyer's wrong choice is the root of the problem.
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Although these may be very personal stories of people who bought at the wrong time, the evidence and my experience just does not fit this story as the current state of things. I agree with the other comment--it's more 2009.
What I see is rising rents, and very high demand for workforce and market rate housing. I also see extreme demand for units above 1000 square feet, presumably for couples or families--of which we have a serious dearth in downtown. The minute a unit goes on the market, the price is driving up by the demand, so for an appraiser to say it's not "reality" is just silly, phobic thinking. The prices already bottomed out, if people are willing to pay and pay the difference in cash enough times, what does that say about values?
For some reason it seems people love to be snarky about downtown--it sucks, it's gentrifying, it's gross...whatever the negative spin. Look, it was a wasteland for decades, and it was built up in warp speed so let's give it a little credit. And the facts are, we had under 20,000 units and it's more than doubled in the past decade. When stores like Target, Ross, and Walmart want to develop--not to mention tons of high-end, small chain restaurants and bars, what does that say about the growth? And something this article doesn't consider...we have a growing volume of self owned and operated businesses moving in, along with creative and start up companies. Many rent creative office space, many work from home. These are the folks that don't listen to the negative hype, and are partly responsible for the success of downtown.
There are still issues, but change is difficult and long to establish. Face it, we are on track for a permanent urban marketcenter. Get used to it!
This is relevant as many homeowners think that values will come back soon. If this helps anyone who is still paying an underwater motgage, then it is good. It is refreshing to see an honest valuation article come from a liberal learning news source. Politics is keeping more articles like this from being published. There is a major valuation problem in many areas of SoCal, and people should not be swayed by national news. WHO Cares about your local political issues, this is about home values. Those with those underwater motgages need to walk of their payment is more than comparable rent. I don't care if they squat, short sell or whatever, but be informed about reality and where values will be 5 to 20 years now. (Not much higher) If more people quit paying, we could actually hit the bottom, as we are not there yet in most of SoCal.
Yawn. This article would have been relevant in 2009.
This article fails to note that many of the above $700,000 properties are being sold in South Park, which is home to the higher priced condos in the downtown area. Furthermore, the article also fails to note that because of the developer bankruptcies several formerly expensive buildings in the marginal part of downtown are now available for sub- $200,000 (see the Santee Village Lofts and the Little Tokyo Lofts).
The market crash ruined the equity of many people who purchased at the height of the market. It also created opportunities for people to purchase formerly expensive properties at bargain prices. I’m not sure if this article adds anything new to the on-going discussion about the gentrification of downtown. Maybe, you should focus on Skid Row clean up or the redevelopment of transient hotels
Yawn. This article would have been relevant in 2009.
This article fails to note that many of the above $700,000 properties are being sold in South Park, which is home to the higher priced condos in the downtown area. Furthermore, the article also fails to note that because of the developer bankruptcies several formerly expensive buildings in the marginal part of downtown are now available for sub- $200,000 (see the Santee Village Lofts and the Little Tokyo Lofts).
The market crash ruined the equity of many people who purchased at the height of the market. It also created opportunities for people to purchase formerly expensive properties at bargain prices. I’m not sure if this article adds anything new to the on-going discussion about the gentrification of downtown. Maybe, you should focus on Skid Row clean up or the redevelopment of transient hotels
"Power tends to corrupt and absolute power corrupts absolutely" Lord Acton
When you're the City Council you can build any piece of dreck anywhere you want and declare that you have revitalized the neighborhood. As we ar learning, the only thing that was revitalized was the developer's pocketbook. No wonder Garcetti raised $2.2 Million -- he's given away about $1.5 Billion in CRA funds. $2.2 M is only 0.00146 of $1.5 Billion. The developers can do better than that!
On the other hand, look what Garcetti has brought the developers:
Veto of AB 2531 because his hubris made Hollywoodians so mad;
Abolition of the CRA due again to his hubris which galvanized people to oppose the CRA;
Three lawsuits against the Hollywood Community Plan;
400% increase in the flight of people out of Hollywood and a terrible real estate bubble in central Hollywood;
Destruction of the infrastructure which lowers everyone's property values
Before Garcetti Hollywood was still improving, but with Garcetti, its reverting to a slum.
Lord Acton should have added that with power comes incompetence. The powerful push others aside under the delusion that they masters of the universe -- until we have financial melt down.
Garcetti has the King Midas touch in reverse.
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