Real estate is local. That’s what they say anyway… usually it’s the final tag line in an article or interview discussing real estate values and market conditions. Kind of an afterthought really, yet factually just relevant enough that it needs mention. The funny thing is, real estate is so local that any broad analysis can easily be useless. Let me explain.
In our area along and near the Los Angeles/Ventura County line, we have half a dozen towns and a population under 200,000. To our east lies the San Fernando Valley which if a city unto itself would be a top 10 largest city in the country; to the south, Malibu. We’re in the weird part of California where the Pacific Ocean is both south and west of us. We’re just a mere 35 minutes to downtown Los Angeles… at 4 am, same for Beverly Hills. Yet those are markets included when analysts speak about L.A. The statistics include real estate in and around the greater Los Angeles metropolis. If you live here, you know just how stupid that sounds but that’s how analysts look at trends in the L.A. market. Fact is, Beverly Hills real estate has almost nothing to do with Westlake Village. The only connection is that they’re both real estate an located in Southern California. If you were looking to buy smaller in Beverly Hills and for the same money you can buy bigger in Westlake or Calabasas, then there might be a distant relationship, but it’s just not close enough geographically nor in lifestyle to really be a consideration.
Is there a connection between the value of property in one place and to another close but still far away? Sometimes. I remember back in 1994 when the market was at or near the bottom of that early ‘90’s collapse. There was a total fixer in the flats of Beverly Hills listed in the mid $900,000’s. I said to an associate, “If you can buy in Beverly Hills for the $900’s, then you better be able to buy in Studio City/Sherman Oaks in the $800’s; and if you can buy there in the $800’s, Tarzana best be in the $700’s, Woodland Hills in the $600’s etc.” So there is a relative connection in their pricing, but it’s pretty thin.
My brother in law, David Bader, sells with the John Aaroe Group in Beverly Hills. He has a client who builds spec homes. Sometimes those homes are in L.A., maybe the Hollywood Hills and sometimes in the south east Valley, like Studio City. David tells me people are paying $1.3M for a teardown in Studio City and building a $3M home on it. He says that there’ll be multiple offers on both the teardown buy and the estate home sale. Same is true in West Hollywood, Bel Air, Brentwood, Santa Monica, Venice, all over the Westside. The market is so hot it can burn you to touch it. Is there a correlation with what is happening in Santa Monica or even Studio City to what is happening in Westlake? Not really. They are on fire while we are just smoldering. It’s a different buyer with different priorities and very different money. And with very few exceptions the person that wants the Westside is probably not even considering the Valley and almost certainly not Calabasas and definitely not Westlake or Thousand Oaks. But that’s OK, because the person looking to buy in Thousand Oaks is not considering to buy in West LA either. Here they would be buying fabulous public schools and an easy suburban family lifestyle, whereas the Westside is the City, celebrity glamour, nightlife and private school.
It’s interesting, just 15 years ago there used to be subdivisions and model homes sprinkled all over the Conejo. Today, barely a one. Yet just 10 miles away in nearby Moorpark, another small Ventura County hamlet, there are some new homes being built. That’s not very far away, 18 miles, but the impact of those homes on our affordability and housing market is nil. So 18 miles isn’t local enough. How about comparing the east part of our Valley in Agoura Hills, a small city next to Calabasas to Thousand Oaks just 7 miles away. Is there a relationship between Agoura and T.O.? Yes, but someone who’s looking Agoura is probably not willing to drive the extra 10 minutes to buy in Thousand Oaks or Newbury Park. Sure, there’s some exceptions, after all it’s just 7 miles, but sometimes your buyers would have you think it were a thousand.
Amgen, Thousand Oaks’ largest employer, recently announced a sizable layoff. This has cast a bit of a pall, over the west end of our valley. It’s felt strongest in Newbury Park and Thousand Oaks where many employees live. So now we are talking about 5-7 miles, that’s pretty local. Break that down even further and look to certain newer subdivisions where the concentration of Amgen employees is greatest and there’s an even stronger effect of the Amgen Pall. We are now talking about a square mile here and a square mile there. We are talking really local, Hyper Local. But that’s the nature of real estate. You’ve heard the old adage that the three most important words in real estate are location, location, location. I like to think of this as: the town, the neighborhood, the street and lot. Does one sale in a neighboring subdivision have an impact on another similar home in a different subdivision? Maybe, maybe not – not if the buyer only wants the one subdivision, then the value of a sale just a couple streets over is of little consequence. You can’t get much more local than the street and lot. So if you ask me, is real estate local? I say, you better believe it.
Tim understands real estate better than anybody I know,
This post should be required reading for everyone in the business.
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