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Story: House Flipping Wave Transforms Northeast LA

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This story was published by Spot.Us with discussion at The East Sider LA blog.

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On a sunny day in Northeast Los Angeles, you could take a drive slowly around comfortably run-down streets that wend through gentle hills and see it through the eyes of Steve Jones.

“There’s another one,” Steve Jones said under his breath, as he spotted the work of a competitor. “Hilarious.”

When Jones started flipping homes here three years ago, as principal of his design company Better Shelter, he was one of few people in the area doing this work. Today, a flipped home can be found on nearly every block in the neighborhood, thanks to at least a dozen small developers or individual flippers getting in on the game.

The houses aren’t difficult to spot. They usually follow some variation of the following pattern: gray or greenish-gray paint, with white or brick red trim, and a colorful door – mint green, orange, red – and sometimes a colorful accent mailbox. Instantly recognizable horizontal wood-slat fencing tops it off.

Home in Northeast Los Angeles

Slowly, this neighborhood may be getting remade in a uniform, “Ikea-like” style. The wave of boutique developers says something about our current economic moment – and our cultural moment, too.

In a city where property values have plummeted, the business-minded are remaking neighborhoods. And that could have ramifications for their character well into the future.

Home in Northeast Los Angeles

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In many neighborhoods the recession has made real-estate buying most feasible for non-residents. According to San Diego-based DataQuick Information Systems, which tracks the real-estate market, absentee buyers -- investors mixed in with buyers of second homes -- bought a record 26.1 percent of homes sold in the Southland in February, paying a median price of $198,000. The Southland, as defined by Data Quick, runs from Ventura County south to San Diego County.

The median price paid for a Southland home in February was $275,000, a drop of nearly 50 percent from $505,000 in mid-2007.

Much of the business of house flippers deals with aging homes in disrepair. Distressed properties are the ones that make most sense as makeovers, since the money required to make changes brings up the cost. But banks refuse to finance sale of these properties to the average borrower.

“Banks won’t lend for redevelopment. They don’t want to do construction lending,” says Chris Redfearn, a professor of real estate at USC. “A house for 200K that you plan to put 70K in – I can’t get that loan and I don’t have the equity. So who’s left?”

People like Jones, who have the cash. He can spend about $190,000 in cash, put in $80,000 of work, and turn it around four months later for around $400,000.

“Right now, we’re working on about 10 homes,” Jones said. “We take these old homes. A lot of them are not financeable because they lack bathrooms or heating systems …so we take them and fix them up.”

Home in Northeast Los Angeles

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Those familiar with the pattern of gentrification in Los Angeles know the eastward push from Hollywood – Los Feliz, Silver Lake, Echo Park, Eagle Rock. The last pocket of affordable housing stock in that wave, before you hit long-upscale Pasadena and abutting Downtown to the south, includes the neighborhoods of Highland Park, Mount Washington and Glassell Park.

The area was one of the first to be subdivided as Los Angeles spread out beyond its downtown heart in the late 19th century. Like much of L.A., there’s no single architectural style here – the homes range from stucco boxes, to Craftsman bungalows, to Spanish colonial revival and others. There are a few streets with larger homes, but mainly, the houses are modestly sized, middle-class affairs. The size of the homes is perfect for picking up and turning around in a short period of time, and the location makes sense for developers looking to cash in on the gentrification push.

There are a few larger commercial drags in the neighborhoods, with small corner markets here and there. Many of the businesses have Latino names and sell Mexican or Central American food or products. Three years ago, Highland Park was two-thirds Latino. Many of the homes are surrounded by chain link or iron fences. There are also lots of dogs. Nearly everywhere, you can hear them barking.

But despite its roots, this is a neighborhood in transition. Some residents aren’t crazy about the similar-looking flipped homes. Matthew Schodorf, the owner of Café de Leche, a neighborhood coffee shop, has lived in Highland Park for 10 years. He’s noticed the homes and says, “A lot of our older homes are architecturally significant. So if you’re going to build something new, make it architecturally significant.”

But developers are notoriously risk averse: new design is expensive and entails an unnecessary gamble. A house flip is a bet to begin with, but doing something that developers have seen work before is simply a more cost-effective one in the grand scheme. Beyond that, though, today the entire system of home ownership is stacked against individual middle-class homeowners looking to do their own design because banks won’t lend to them.

The formula that’s working out in these L.A. neighborhoods, notes Dana Cuff, professor of architecture and urban planning at UCLA, “follows the pattern of nostalgic home desires – it’s sort of a pre-nuclear thing …The colors are pre-war – they hearken back to 1890 to 1940.”

With their little plot of land, bucolic fenced-in yards, fragrant citrus trees, and attractively simple staging furniture, these are homes that represent the world before the complications of contemporary life.

Cuff believes the foreclosure crisis may have something to do with the style: “Maybe the American Dream, which we’ve seen so heartily crushed in 2008, is coming back writ large in iconic form. No one really believes they’ll ever own their house, you’ll never get a loan, you won’t have the same spouse, and you’re certainly not going to get old in these houses. You need a more heavy symbolism in these houses to make them work.”

“A lot of what our homebuyers are craving, even if they don’t know it, are authenticity and integrity,” Jones says. “People can appreciate old things and they can appreciate old things that have been restored and fixed up. So that’s all we try to do here.” Given that so many of these homes look similar, Cuff notes that Jones is specializing in a sort of ready-to-wear, mass-produced authenticity

Home in Northeast Los Angeles

* * *

The average length of stay in a home is no longer a generation, Cuff says, so having an attractive lifestyle ready upon move-in makes sense. Andy Wu and his wife recently bought one of Steve Jones’ homes. He’s 38, and she is 35. Wu says they liked that everything was designed attractively and in move-in condition. He says they only plan to stay about 10 years, until they have a family and outgrow the house. Essentially, a whole different group of people -- apart from race or net worth -- is moving in to a neighborhood where many people have lived in their homes for several decades.

Jones contends the flavor of the neighborhood won’t be lost, citing cultural diversity with deep roots.

“You have this history, these cultures and generations of people that have lived here for so long. It’s so embedded in this community that I don’t think it’s going to be changing for a long, long time.”

This may be a different kind of neighborhood change than we’ve seen in the past: it’s not just that higher-income folks are moving in, but that folks are moving in to homes that they can get in and out of quickly – they don’t plan to stay.

Many residents don’t yet note a change. Gerardo Borja has lived in his home in Highland Park for 46 years. It’s a nondescript off-white box with a brown roof and green artificial turf in front. A flip is going up right next door, but he says he hasn’t noticed any other changes in the area.  “But I’m just talking about this one street and immediate area,” he says. “We don’t really have time to look around.”

But Jerome Krase, a professor of sociology at Brooklyn College, says that “local residents are often oblivious to a single store or home that looks different, or a few young people who move in.”

Neighborhood change is incremental until it isn’t, he points out. And in a city as diffuse as Los Angeles, it can be hard to spot – until, that is, it’s completely different, or unless you know the signs to look for.

Northeast Los Angeles

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