It happens all the time. I meet with a young couple who makes a good income and has saved a nice downpayment. They are excited about the prospect of buying their first home in Beverlywood - until they realize what it will actually cost. Then I hear, “How can anyone afford to buy a house here?"
As a Realtor who lives in and specializes in selling homes in the Beverlywood neighborhood of Los Angeles, that’s a question I get a lot. The greater Beverlywood area, which includes Crestview to the east of Robertson Boulevard, and Pico/Robertson to the north and east, is one of the most expensive neighborhoods in the whole country. According to MLS data, the median single family home price has risen 44% over the last five years. Why? The bottom line is because so many people want to live here.
Beverlywood is adjacent to Beverly Hills, world-renowned for expensive real estate. It’s on the west side of Los Angeles, just a few miles from the beach. It’s next to Century City, a hub for high-end professional offices, and is very close to both the 10 and the 405 freeways, making it convenient for all types of commuters. It’s an oasis of suburbia in the middle of a big city, and has top-rated public elementary schools.
And then there are the synagogues. Because Orthodox Jews don’t drive on the Sabbath, the ability to walk to synagogue from one’s home is a requirement, and Pico/Robertson is a major hub of Orthodox synagogues as well as kosher restaurants, markets, daycares, and schools. Being in close proximity to all the amenities of an Orthodox lifestyle is convenient, but it also comes at a high cost. So how do people afford it? Let me count the ways...
Some Have Family Help
Yup - secret’s out. Certainly not all, but many first time homebuyers whom I have worked with in this neighborhood have had financial help from family - ranging from parents or grandparents lending part of a downpayment to simply buying them a home with cash. Many are not this fortunate, but for those who are, it can make home ownership a reality.
Some Bought a Long Time Ago
This is the category my family fits in. We bought our first house back in 1997 when prices were substantially lower (but it sure seemed like a lot at the time!). Since then we have reaped the benefits of the equity gained as the market has risen, which has allowed us to buy the house we have now. This is why I advise anyone who will listen to buy whatever they can afford whenever they can afford it. Just getting into the market will make all the difference to your future.
Some Make a TON of Money
I’m not just talking regular doctor/lawyer money, which almost anywhere else in the country is considered a lot. I mean entrepreneurs who just sold a start-up, top hedge fund managers, tv writers with a hit show - these people usually have to live frugally for a few years even though they are making insane money, but they make enough to be able to save a downpayment and quality for a big mortgage.
Some Buy a Condo
Many first time homebuyers who make good money and have saved a downpayment find that a single family home is still out of their reach. They recalibrate their expectations and buy a condo instead. From a long-term strategic standpoint, this makes a lot of sense, as condo buyers will accumulate equity as time goes by and may eventually trade up to a house. The way I look at it is that Los Angeles is quickly becoming a world class city. Most people wouldn’t expect to be able to buy a single family home in Manhattan or Tokyo, and as Los Angeles becomes more “vertical” - ie, more people are living in condos, the idea of a house with a yard will become less of an expectation.
Some Buy in “Transitional” Neighborhoods and/or Buy a “Fixer"
I fit in this category too. My first house was in an area that was not fashionable at the time, and it probably should have been condemned. It smelled really bad and the foundation was so damaged you could feel yourself tilting as you walked through it. I had to take out a loan at a sky-high interest rate to be able to finance the renovations, but a few years later when the neighborhood gentrified, I was able to sell for a handsome profit and upgrade to my next house. For buyers who want to be able to walk to synagogues in Pico/Robertson, this means heading south and east. Usually the farther you are willing to walk, the less expensive the house will be.
And if none of those options work:
Some move to more affordable communities in the Valley, or even out of state. I have referred several clients to Realtors who specialize in those areas and they are very happy in their new communities. Or some decide it’s ok to be a renter and give up on the dream of owning a home. That one kind of breaks my heart because I’m such a proponent of homeownership as a tool for wealth-building, but it’s a choice many have made because they love this neighborhood and want to stay. It’s easy to love Beverlywood - it’s just tough to afford it. But often times with some out of the box thinking, adjusting expectations, and good advice, anything is possible.