Million dollar madness in hot L.A. house market

By Jill Serjeant

LOS ANGELES (Reuters) – House-hunting in Los Angeles County
is no place for the faint hearted.

In a market where a software billionaire dubbed “Pacman”
has gobbled up a dozen Malibu properties for $180 million and
an ocean-view trailer with an asking price of $1.4 million
barely raises an eyebrow, buyers need nerves of steel and
mountains of cash.

Sticker shock sets in well before buyer’s remorse when a $2
million tear-down attracts multiple offers and open houses draw
crowds worthy of a rummage sale on Beverly Hills’ ritzy Rodeo
Drive.

“It’s like another planet, and it really is. It’s the real
estate planet,” said Joyce Gottlieb, a realtor with 25 years
experience in the desirable beach cities of Santa Monica and
Malibu.

Home prices in California have doubled since late 2001,
making it one of the hottest in what some economists believe is
an already overheated U.S. market.

Only 15 percent of households in Los Angeles County can
afford to buy the region’s $503,450 median priced home,
according to latest figures from the California Association of
Realtors.

A literally shifting landscape prone to earthquakes,
mudslides and wildfires has failed to dim the enthusiasm.

“Even natural disasters are not keeping people away,” said
Los Angeles writer Sandra Tsing-Loh, who has humorously
chronicled her own, failed, house hunting travails on KPCC
public radio.

“In Los Angeles, houses can actually be dropping off into
the ocean and a week later people will be spending a million
dollars buying them up. That’s a metaphor for insanity,” she
said.

A landslide in June that destroyed or damaged 18
million-dollar or more homes in picturesque Laguna Beach has
had no noticeable effect on prices there, realtors say.

“I think people are willing to take risks to live in an
environment they truly want to be in,” said CAR president Jim
Hamilton. “It’s California — in Florida they get hurricanes,
in the Midwest they get tornadoes.”

Hamilton recently met a new arrival to California suffering
a severe case of sticker shock. “She asked me what you do when
houses are a quarter of a million dollars. And I said ‘I’d buy
10 of them,”‘ he joked.

STAR POWER

Rising home prices have been propelled throughout the
United States by low long-term mortgage rates and borrowing
through adjustable-rate and interest-only mortgage loans.

In the Los Angeles area, star power has also played a role.
“Celebrities generally buy their first home and then they want
to buy those around them. That’s what happened with Arnold
Schwarzenegger and Sylvester Stallone,” said Gottlieb.

That leaves ordinary, middle class Angelenos who need to
buy or move in a quandary.

Tsing-Loh, who lives in distinctly unfashionable Van Nuys
in Los Angeles’ sprawling San Fernando Valley, noted that some
homes in her neighborhood are now worth almost $1 million but
statistics show that 90 percent of residents are economically
disadvantaged.

“How can it be that a neighborhood is so vastly expensive
when most of the kids are poor? The whole thing feels surreal
and out of control,” she said.

The boom in house prices has also almost doubled the
numbers of realtors in California to around 170,000 currently
from around 100,000 in the late 1990s.

The bottom line is still location, location, location and
there is no longer any stigma attached to mobile homes — at
least those with a community pool, tennis court and sunsets
over the ocean.

“There is only so much land. There is only one Malibu. It
will always be an attractive market,” said Gottlieb. “That $1.4
million mobile home doesn’t really surprise me.”

Stunning mountains, bewitching deserts and sunny January
mornings on the beach help to compensate for earthquakes and
the notorious Los Angeles traffic.

“There is a certain celebrity lure about Southern
California. It is part of the mystique of why people come and
visit. And a lot of times people come and realize how beautiful
it is, and wind up staying,” said Hamilton.