Dear Friends and Neighbors,
Happy New Years! May the New Year bring Blessings of health and happiness to you and your loved ones. As my grandfather said, “Your Health is Your Wealth”
This past year is behind us and the numbers are in. I can’t imagine a more fascinating year with this new president, the faceoff with North Korea, the ramifications of the largest tax reform legislation in over 30 years and a very weird year in real estate. Let’s look at the sale of single family residence homes (SFRs) as reported in the MLS.
In the past, we have taken the city of Beverly Hills and compared it to the Los Angeles community of Westwood. I’m going to do the same, but I’m adding in a third community of Los Angeles; Brentwood. The area of Brentwood is immediately west of the San Diego freeway, from the Mulholland Highway south to about Olympic Blvd and west to the city of Santa Monica. It’s a gorgeous community, with large homes between Sunset and Wilshire, the Getty Museum, O.J.’s old home, numerous luminaries living there such as Steven Spielberg and Tom Hanks and a host of others, and great shopping.
There’s a reason for this. The community of Brentwood is highly weighted with large gorgeous homes on huge lots, a bountiful amount of money to constantly update them and build new ones and some of the most stunning architectural designs in the city. Because of the placement in the foothills, it really lends itself to be one of the most desirable areas to live in the greater Los Angeles area.
You think I’m kidding? Check this out; in the whole city of Beverly Hills a total value of $1,032,833,692 in single family residences were sold in 2017. Yep that’s more than a billion dollars! My commission on that would be over $20,000,000 and finally, I could afford my wife! But in little ‘ole Brentwood, that total was eclipsed with $1,123,054,062 in total sales. The truth comes out when you dig deeper and look at units; 144 homes sold in Beverly Hill but 249 homes sold in Brentwood, bringing down the average price of a home from $7,692,187 to $4,454,341 in Brentwood.
Where does Westwood stand as the poor step sister of Beverly Hills and Brentwood? How about a meager $394,496,331 in property SFRs sold in 2017 with an average of $2,231,652 based on 168 units sold. I’m sorry to confess that Lynn and I, as longtime residents of Westwood, live on the wrong side of the tracks!
Let’s dig a little deeper and see who the better negotiator was? Well, it seems like the homeowners of Beverly Hills thought they could play hard ball…and lost. They spent an average of 78.08 days on the market (DOM), while Westwood got away with 41.40 and Brentwood with 59.13. It showed up in their comparison of listed price to final selling price. Beverly Hills settled for 93.24% when the dust settled, while Westwood got 100.28% of the listed price and Brentwood almost the same at 101.26%.
Remember I mentioned to you about average lot size in Brentwood? How about 25,179 sq ft in Brentwood compared to 15,720 sq ft in Beverly Hills and 7,502 in Westwood.
What the hell. Let’s go for the gold. Let’s go see how those mega mansions in Bel Air are doing. That’s where the REAL mega bucks can be found. Bel Air is also part of the city of Los Angeles, located just north of Sunset Blvd above Westwood. There you will find (in lower Bel Air) truly the mega mansions of Los Angeles, including the locations for those famous $500M and $250M spec homes being built. What does Bel Air tell us?
Surprisingly, not much. I guess the sale of any mega mansions was offset by the sale of homes in the rest of Bel Air, which brought down the averages. But still impressive, with $819,323,098 in sale values covering 179 properties in 2017, averaging $4,900,895 each, taking an average of 74.13 days on the market! That’s a lot of carrying costs if you’ve already bought another home or moved already. And they also shot themselves in the foot by negotiating too hard; 93.40% was the average final selling price when compared to the listed price. Ouch. But here’s the big number that sticks out. Average home sold was 4,209 sq ft and average lot was 60,001 sq ft. Wow! Even with the smaller homes of Bel Air factored into it, the numbers on lot size still blitzed anything else in the area. Do you know why? (Hint – All of Bel Air is built in, on or at the bottom of canyons so much of that lot size is dedicated to unusable square footage!)
How about comparing 2016 to 2017? Not so interesting either. It’s amazing how steady and calm this real estate ship is sailing. In Brentwood, 249 units sold in 2017 and 247 in 2016, but don’t let that fool you. Average prices went up 22%, beating out the other areas. Up 12% in Beverly Hills, down 5% in Bel Air, and up 3% in Westwood.
One thing that did surprise me was that in each of the four areas, the final selling prices in 2016 were less than the listed prices. I don’t know how much the election campaign contributed to it, or the pushback we saw from the buyers near the end of the year. But year-end figures released this time last year showed a drop to 97% in Beverly Hills, 87% in Bel Air, 99% in Westwood and 97.4% in Brentwood.
Real estate remains the single best bet for building wealth, particularly on the west side of Los Angeles. Astute decisions that are supported by analysis result in steady and strong growth. We’ve talked about income properties in this blog, analyzed prices from numerous vantage points, examined different strategies to minimize the tax liability and explored property as a form of investment. In all of these discussions there was one consistent theme; it just seems to continue to go up on a long term basis.
Welcome to 2018!