Change is in the air. Can’t you feel it? I sure can. More than a mystical sense of unseen forces, what I have is rock-solid trend analysis based on tangible physical evidence. Something is about to happen in the Southern California real estate market.
I noticed the first signs at the beginning of summer. I currently live in a beach resort community, close enough to downtown Los Angeles that quite a few people have homes here and commute there. Most days of the week, I ride my bike along a row of million-dollar-and-up beachfront homes. Much to my surprise, I spotted a For Sale sign. Gossip has it that most sales and rentals in our community go through a subscription-only property listing service, and since I’d never seen a For Sale sign anywhere in town before, this caught my attention.
Over the summer, I started noticing more For Sale signs. A couple of these high-end homes are starkly empty, and one is being gutted and remodeled. (That might mean something else entirely).
About a year ago, my husband and I priced out a few of these beachfront homes, just to be funny. The first three in a row went: one million, four million, eight million. These are not special or extravagant homes. They’re... small, for one thing. Anywhere other than on the beach in a destination city, they would look quite ordinary. They also have zero in the way of a back, front, or side yard. Just yellow sand and the Pacific Ocean. Along the same row, though, there are a few large houses that could charitably be described as “mansion-like.”
I have really strong opinions about architecture and interior design, which is part of why I can’t bring myself to take out a mortgage. I can’t commit to a house and I’m just not ready to put the key-ring on it.
Okay, a few empty upscale beachfront properties during a particularly beautiful summer? When unemployment is low and the stock market is high? The economy is booming! What gives?
Eh, what do I know, right? I’m not an economist, nor a financier, nor a Realtor, nor any other profession that starts with a capital letter. I’m just an historian.
Our home is a wee little studio apartment on the other side of the marina from all this splendor. We noticed back in January that the unit next to ours stood empty. We noticed because we wanted that one, and they told us the cabinets weren’t ready or some such nonsense. Now it’s October and still, nobody has rented that unit. Maybe it’s haunted? As each studio gradually emptied of near neighbors, we noticed more and more. We’d been counting: “They must have lost ten thousand dollars on that unit alone this year.” Obviously the rent is too dang high.
We got a survey from a third party contracted by the property management company. How did we feel about our apartment, the management, the maintenance; would we be renewing our lease? I wrote a very detailed series of notes about the design issues that could be fixed, such as our distinct lack of air conditioning, washer, dryer, and dishwasher. I gave the maintenance guys five stars.
Two months later, a crew came in and started gutting the empty studio units. It’s hard not to notice, because they keep running an air compressor outside our apartment, and because the blinds are left open, so we can spy inside. They tore out all the carpet and put down either Pergo or, possibly but doubtfully, actual wood floors. They redid the countertops and the cabinets. They put in new appliances. Earlier this year, they repainted the entire complex, and despite this, went back and began replacing all the wooden balconies. Now they’re completely remodeling the gym. Interesting, we thought, they must be upgrading so they can attract tenants at their desired rent.
Then the real dirt came in. We always make a point of befriending the staff and crew of any place we hang out, not because we are pretentious but because they tend to be nicer than our neighbors. My husband was chatting with the night security guard, who says there are at least fifty empty units in our complex right now!
There are 332 units total.
When we moved to this place, a year and a half ago, rental listings were skimpy and scant. There were only three houses for rent anywhere within our price range, and two were not available for a full twelve-month contract. As far as we could tell, there were about four empty apartments for rent in the entire city. That seemed weird, since it was wintertime and the summer-only rental market wasn’t in play. Today, well, it looks like we can pretty much have our pick.
We also noticed an empty house for rent up the street from our place. A house! A house with a yard! It’s a 2/1 and it has a detached garage. It’s going for a few hundred a month less than the two-bedroom townhouse units in our complex. Hmm. If it weren’t for the $7300 fee for breaking our lease, we might consider it... which makes us wonder how many of our neighbors are also simply counting the months until they can escape and get either lower rent or a nicer place somewhere else. In town, in Nevada, in...?
We’ve been planning to move when our lease is up. We’ve been planning that since before we actually moved in to this studio; it’s just a temporary part of our long-term financial strategy. Now we’re starting to wonder if we can negotiate a significantly lower rent on one of the two-bedroom units with a sea view. We’re even starting to wonder if the real estate market crash is on its way, in which case maybe we’ll hover like vultures and wait to buy our own place.
Real estate is like any other market. Sometimes values drop and never return, because the neighborhood declines. A house is not a smart investment for everyone, and it can in fact cause financial ruin and devastation (like marriage) if made at the wrong time for the wrong reasons. If I owned a house right now, I’d operate under the assumption that we are just over market peak, and if I weren’t selling it like, this week, I wouldn’t plan to sell for the next three-four years. If I planned to buy a house (which, maybe) then I would also hang out and watch for an opportunity sometime within the next year or two.
I've been working with chronic disorganization, squalor, and hoarding for over 20 years. I'm also a marathon runner who was diagnosed with fibromyalgia and thyroid disease 17 years ago.