Compass agent John Hathorn has an eye on Santa Monica’s past and present.
His office sits on trendy Montana Avenue, across from the Aero Theatre that originally opened for aircraft workers in 1940. Today, the street is home to trendy cafés, booked out restaurants and boutiques.
“It has come a long way, but I think that’s true of most beach towns. They were not considered high-end,” Hathorn, who makes up the trio of partners leading the Pence Hathorn Silver team, said of Santa Monica. “The big sea change was the town grew because of its close proximity to the beach and an easy commute to get downtown.”
While doctors and lawyers at one time dominated residential ownership, that has given way to more tech money. Single-family homes in the city had a median price of $1.7 million in June, up 4.2 percent from the prior year, according to Redfin data.
The rally Hudson noted in the second quarter includes the city’s priciest and second-priciest deals of the year.
Former Golden State Warriors general manager Bob Myers paid $19.2 million for 512 and 518 Georgina Avenue, marking the city’s most expensive trade this year. The next highest deal was the $17.5 million sale of 835 San Vicente Boulevard, bought by former Warner Bros. CEO Cameron Strang.
The city is not immune from some of the broader market challenges.
“Sales were really off in the first quarter of the year, but then completely rallied in the second quarter,” explained Compass broker Nili Hudson.
She attributed some of that slow start to interest rates and Santa Monica’s new “mansion tax” on homes. Voters approved Measure GS, which added a third tier to its existing transfer tax structure beginning in March 2023, with a 5.71 percent tax on homes that sold for $8 million or more.
But bidding wars are emerging at lower price points, providing sellers with an upside.
Sotheby’s International Realty agents Don Greene and Michelle Greene marketed a three-bed, three-bath home at 2343 Hill Street in late June for just under $1.7 million. Less than a month later, it sold for $2.4 million, after 22 offers came in.
Multifamily forces
Hudson has had a front row seat to Santa Monica’s evolution. She has lived on L.A.’s Westside all her life, from attending Brentwood Elementary School all the way to graduating high school in Pacific Palisades.
She has seen both home and condo prices, particularly on Ocean Avenue, rise over the years.
But multifamily seems to be moving in the opposite direction, according to agents familiar with the market.
At the start of July, there were 56 active listings for multifamily buildings in Santa Monica, ranging from 20 units for $8 million to a duplex priced at $1.9 million.
“It seems like the people that own apartment buildings are running for the exits,” Hathorn said. “It remains to be seen what that’s going to mean for single-family. A lot of the people that own these multifamily buildings live in single-family homes not far from these investment properties.”
The average asking monthly rent across Santa Monica and Marina del Rey submarket ticked down 2.8 percent in the second quarter, compared with a year ago, to an average of $3,800, according to CBRE data.
Meanwhile, vacancy ticked up to 5.9 percent in the second quarter, a marginal increase compared to a year ago, according to CBRE.
Regulations — including the requirements placed on owners to retrofit buildings, money lost during the rent freezes of the pandemic and a ballot measure that would overturn the Costa Hawkins Rental Housing Act — have led to a flight away from the asset class.
The Costa Hawkins Act lets landlords bring units in their buildings to market rates once a tenant moves out. A reversal of that public policy, landlords argue, would strangle their ability to make property improvements and generate a return on their investments.
Hudson can speak from experience as an owner of a six-unit building in Koreatown. She also sold a four-unit property there in December.
“It’s all because investors can get so much more money either investing in single-family homes or in the stock market or in a bank account where you can get 5 percent,” she said.
Family style
While each segment of the housing market has its own dynamics and headwinds at play, one constant for the city over the decades has been many families’ refusal to leave Santa Monica.
Agents say it’s not uncommon to see parents, with the means to do so, shopping for property within the city for their adult children.
Shelton Wilder, an agent at Christie’s International Real Estate Southern California, noted how many Santa Monica homeowners she represents upgrade or downsize within the city, but also have a strong desire to keep their adult children close.
Wilder, who represented the buyer in the city’s second-priciest sale so far this year on San Vicente Boulevard, recalls a recent conversation with a client who had their elementary-age children in mind as they considered potential investments.
“I had a client I met at my club, and they were like, ‘north of Montana [Avenue] if you see anything that’s $3 million to $3.5 million, even if it’s a total fixer, we just want to get it and hang on to it.’,” Wilder said.
Some parents have a sense of humor about it. Hathorn said he came across one LLC named My Kids Got Lucky Trust.
“It’s comical,” Hathorn said.
The desire to stay within the city comes down to amenities, agents said. Residents have easy access to services, such as doctors, dentists and hairdressers. That’s mixed with entertainment in the restaurants, nearby beach and other outdoor recreation.
“You don’t need to go east of the [Interstate] 405 anymore unless it’s purely for entertainment and for visiting friends,” Hudson said. “It’s just an incredible enclave now.”
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