A History of the Northeast LA Real Estate Market

When it comes to the housing market, it’s been a wild ride for Northeast Los Angeles real estate and nearby communities like Mt. Washington, Eagle Rock, Highland Park and Pasadena. Real estate prices in NELA peaked in 2005-2007, dropped into the valley in 2008-2012, and recovered in 2013-2015. This was fueled by the "irrational exuberance" of the market back in the mid-2000s: flexible lending practices that included lots of 95-100% financing, super-low introductory adjustable rate mortgages, and lots of "stated income" loans (Liar Loans). People bought million-dollar homes based on what their lender made up on their loan application. Prices were going up so fast, you could buy a home with practically no money down and refinance within 6 months to finance your way out of the hefty interest rate increase. 

 

Beginning in spring 2008, the bubble burst and prices dropped as much as 30-40% in 15 months. Experts said we'd never see such high home sale prices again--ever! We met many people at open houses for years that said, "I think prices are going to go down more, I'll wait a little longer to buy." 

 

If you wanted to sell your home in a declining market but you didn't have to, what would you do? You would keep your home off the market and wait it out. What goes down eventually goes up, right? So, unnoticed by most people, inventory started to disappear and prices began to rise a little in 2012.

 

In 2013, the inventory of homes available for sale had dropped to just about nothing. Buyers suddenly realized that they had missed the bottom and prices were going up! Dang! They were angry, hostile, and resentful. But everybody has to live somewhere, and if you could afford to buy, waiting would just mean your home would cost more. And interest rates were so low, it wasn't worth waiting any longer. In fact, with interest rates at historic lows, it was cheaper to own the same priced house as in 2007, and at a fixed rate that would never change!

 

Still, most people believed that we would never see the peak prices again. But guess what? In 2014, most areas matched their historic highs, some exceeded them, and really good houses far exceeded them.

 

Now, at the end of 2015, the 3 zip codes of Northeast Los Angeles, 90041, 90042 and 90065 – Eagle Rock, Highland Park and Mount Washington real estate respectively – average 7% above the peak average sale price, and in Eagle Rock, 90041, alone, the peak has been exceeded by 16%! People are now calling this a bubble. This particular bubble has been going on for 3 years, though most people just noticed it a few months ago. But it's not like the days of 2005-2007 with crazy loans. Today, most loans are 20% or more down, 30-year fixed, full documentation (down practically to listing what you ate for breakfast every morning for the last 2 years). And 15% of home sales in our area sell for cash--and not from foreign investors, but from the entertainment industry and families sharing the equity in their portfolios to help their kids buy a home.

 

Will there be a correction? The real estate market is cyclical, and influenced by interest rates, the general economy, unemployment, even natural disasters. As to when this will result in a flattening or decline of the market? That’s a question for your fortuneteller.