Monday Morning Quarterback

Monday Morning Quarterback

(Monday, September 8, 2025)

Frustrated with exorbitant home prices, this couple built a L.A. hillside retreat themselves. Lindsay and Daniel Sheron dreamed of buying a home of their own. But in Los Angeles, where housing is expensive and in short supply (the median home price is roughly $1 million, according to Zillow) purchasing a home can be difficult for first-time homebuyers with limited equity. So after many years of renting various homes, the Sherons, who are both 36, reached a tipping point while searching for a house in northeast Los Angeles. They quickly realized that they couldn’t afford to live in their neighborhood. “We weathered the pandemic in a 900-square-foot bungalow in Eagle Rock,” Lindsay, who is an architect, recalls of the house, which their landlord had listed for $900,000 before they decided to rent it out. “I thought, ‘If that’s what $900,000 gets you in Los Angeles, why don’t we look at land and see about designing and building our own house?” she adds. “Maybe we can gain more value that way.” (The bungalow sold for $1.3 million after they moved out.) Using Zillow, the couple scouted several hillside lots and eventually purchased a 4,300-square-foot hillside property in 2021 for $212,000. Located at the top of a small ridge at the end of a cul-de-sac in Mount Washington, the north-facing lot was on a buildable slope with lovely views of the San Gabriel Mountains. More important, the vacant lot had access to utilities such as electricity, gas and water, including a sewer manhole at the bottom of the property. There are many lots for sale, Lindsay notes, but many of them don’t have access or utilities. With their entire savings invested in the land, the Sherons took a cost-saving, hands-on approach to the next step: construction. In addition to Lindsay’s design services as an architect, they decided to serve as general contractors and subcontract the major trades, including the concrete foundation, tile, framing, exterior siding and hardwood floors. The exterior of the house, which is clad in shou sugi ban (charred wood siding) from Nakamoto Forestry, was a priority for the architect but a mystery for the subcontractors. “Everyone presumed we were going to add stucco,” she says, “because that’s what everyone else does.” Though their goal was to build the home for under $1 million, in the end, they borrowed a little over that amount. Even so, they estimate they built their house for about 45% less than what a similar home would cost. They have seen three-bedroom, two-and-a-half-bathroom homes on comparable lots in their neighborhood sell for over $2 million. Now that’s a smart investment! In other investor news, let’s run it up the flagpole…

Smart Solution For Downtown L.A.’S Empty Skyscrapers. Los Angeles faces two land use crises! On one hand, L.A. is beset by a desperate housing shortage in the hundreds of thousands of units, born mostly by beleaguered low-income and moderate-income Angelenos, for whom renting and homeownership is increasingly out of reach. Meanwhile, our downtown is afflicted by increasing emptiness, with 28% of office space sitting vacant due to pandemic-era changes in the structure of work, and flight to Culver City and Century City. Angelenos may want to come home to downtown, but too few want to work there. These twin challenges may dovetail, conveniently, into one solution: convert those empty towers into housing. Indeed, a recent report from BAE Urban Economics makes the case that vacant offices should be redeveloped to create a new generation of apartments and condos. The conditions are particularly ripe for these in conversions in L.A. The city already has a nation-leading “adaptive reuse” ordinance that smooths the path for conversions like these, state and local leaders are eagerly reviewing other regulatory changes to further support these conversions, and a growing fiscal crisis could be ameliorated by breathing life into downtown. But wait, not so fast. While authors from Downtown Works LA (a nonprofit that aims to expand the city’s economic opportunities and “uplift its reputation as a dynamic, inclusive and welcoming urban center”) correctly point out the considerable fiscal benefits of stabilizing property values and bringing new foot traffic to the area, they don’t fully understand the cost. Without public subsidy, “conversion projects are largely financially infeasible,” the group concedes, calling for additional research into the size of subsidy needed. But there’s a better way, one that offers significantly greater bang for the city’s buck. According to a February report by the architecture firm Gensler and Pew Charitable Trusts, “co-living” conversions can outcompete with apartments and condos by about a third of the cost per square foot while producing about three times as many units. These co-living spaces, sometimes referred to as “dorms for adults,” are made up of small studio apartments featuring single beds, desks and closets, with tenants sharing communal kitchens and bathrooms. That means they’re significantly more affordable to the renter. Under Pew’s design, dwellings would clock in at just $1,000 per month, putting them within reach for any Angeleno making at least $40,000 annually.

Macy’s Parking Structure is L.A. Newest Luxury Apartment Complex. Remember the Westside Pavilion? The Pavilion was one of the city’s premier shopping venues and a cultural touchstone for generations of Angelenos, appearing in movies, television shows and music videos. Built on the site of California’s first drive-in movie theater, the Pavilion played prominent roles in the 1995 film “Clueless” and the video for musician Tom Petty’s 1989 hit “Free Fallin’.” But like many other indoor malls, the Westside Pavilion fell out of favor in the 21st century before closing in 2019 to be converted to offices for rent. Now the former mall also has housing, which is even more in demand than offices these days. On a spot once occupied by what the developer called an “absolutely horrible, obsolete” parking structure, there are now 201 luxury apartments — a six-story complex that includes townhouses with front doors that open onto a residential street. GPI Cos., the Los Angeles real estate company, built the Overland & Ayres apartments and converted the mall’s former Macy’s building into the West End office complex. The combined cost of both builds was $350 million. The rest of the former mall was in the process of being converted to offices for rent to Google when it was purchased last year by UCLA. The university is turning the old shopping center into a nearly 700,000-square-foot research center that will focus on immunology, quantum science and engineering. The biomedical research center, which is set to open next year, will be trying to tackle towering challenges such as curing cancer and preventing global pandemics. Meanwhile, the new apartments will be convenient for people working at the research center or other nearby job centers, such as UCLA in Westwood, Century City or Culver City. As has grown more common for buildings competing at the top of the apartment market, Overland & Ayres has amenities such as a gym with a resort-style pool deck and spa, an outdoor lawn for working out, a sauna and a cold plunge tub. Rents range from $3,800 per month for a studio apartment to $8,500 per month for a townhouse.

The 15-Year Mortgage Is The Most Underrated Offering In Loans Right Now. In an era of higher-than-normal inflation and 7% mortgage rates, a small group of homeowners are finding relief in 15-year mortgages, which most often come with lower interest rates. Their goal isn’t to lower mortgage payments. Instead, fans of the 15-year mortgage say it offers two key benefits: (1) a quicker path to paying off their mortgage, as well as (2) hundreds of thousands of dollars saved on interest payments. But it’s not a product for everyone. Skeptics of the 15-year mortgage argue that it is less affordable on a monthly basis and puts people in a position of prioritizing the repayment of their mortgage over the other conveniences a lower monthly payment can bring. They also contend that a homeowner can pay off their mortgage sooner simply by making extra payments on a 30-year mortgage. The 30-year mortgage is by far the most popular loan among home buyers in the U.S. In the fourth quarter of 2024, about 88% of mortgages originated were 30-year loans, while only 4.2% were 15-year loans, according to a report by TransUnion. Alongside the 30-year loan’s dominance over the last decade, the popularity of the 15-year has notably waned. About 13.3% of outstanding loans at the end of 2015 were 15-year mortgages, compared with just over 4% today. As home prices and interest rates surged over the course of 2022, home buyers sought refuge in the more affordable 30-year loan product, which came with lower monthly payments. Consider a buyer looking at the 30-year mortgage and the 15-year mortgage for a $450,000 home. After putting 20% down, the buyer has to take on a mortgage for about $360,000. The home buyer’s initial monthly payment looks shockingly different depending on the loan term: If they were to take out a 30-year mortgage, their principal and interest payments would be about $2,300 a month. If they were to take a 15-year mortgage, that payment would be nearly $3,000. For many home buyers, a difference of $700 per month is huge (it’s about how much people pay monthly for a new car, according to LendingTree). “If you ever pull back the curtain on the 30-year … it’s an ugly-looking loan,” economists argue. Instead of dealing with a high monthly payment on a 15-year mortgage, homeowners could make extra payments on a 30-year, economists suggest. For instance, if the monthly mortgage payment was $2,000 a month, paying $1,000 every two weeks would put a homeowner on track to pay off the loan seven years sooner.

6th Annual Los Angeles Real Estate Grand Expo. Join the finest builders, contractors, property managers, landlords, investors, and related real estate professionals, at the largest real estate event in Southern California, featuring 12 national speakers, 70 real estate vendors, food trucks, free workshops, and the ultimate networking. Saturday, November 8, 2025, at the Iman Cultural Center, 3376 Motor Avenue, Culver City, CA. RSVP: www.LAGrandExpo.com.

Vendors Expo Returns! Our world-famous "Vendors Expo" returns in 2025, on Thursday night, September 11, 2025. The Vendor Expo opens starting at 6:30 pm. We'll have 30+ of the finest vendors featuring real estate products and services you will want to utilize as a successful investor. Our Vendor Expo will be held at the Iman Cultural Center, 3376 Motor Avenue (between National and Palms), Culver City CA. FREE Admission. Please RSVP at our website, LARealEstateInvestors.com.

"You Go Girl." Both men and women invest in real estate. But honesty, women have certain “challenges” that men just don’t have to think about. (Men, you may have no clue what we’re referring to, but women know exactly.) So please join us at the Los Angeles County Real Estate Investors Association September meeting, Thursday night, September 11, 2025, 6:30 to 9:30 pm, where you will learn how to confront these challenges and become a successful real estate investor. This month we have a unique panel of four women who are kicking butt in Real Estate? These women have been in the trenches, confronted and conquered challenges, and know how to swing a hammer (though they’ve learned they don’t have to). And that’s what they will share with you. Their stories are as different as their personalities, but they all share two things in common: They are successful at what they do and they earn a good living doing it! Attend and learn what advantages women have when investing in real estate. (Men; you can attend too, but at your own risk.) This joint event with the Women's Real Estate Network ("WREN") is always our largest attended event of the year! Don't miss it!

This Week. Looking ahead, investors will continue watching for additional information about tariffs and monitor comments from Fed officials for hints about monetary policy later in the year. For economic reports, the focus will be on the inflation reports. the Producer Price Index (“PPI”), the monthly inflation indicator, will be released on Wednesday from the Bureau of Labor Statistics. The Consumer Price Index (“CPI”), a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services, will come out on Thursday, also from the Bureau of Labor Statistics.

Weekly Changes:

10-Year Treasuries: Fell 015 bps

Dow Jones Average: Rose 100 points

NASDAQ: Rose 400 points

Calendar:

Wednesday (9/10): Producers Price Index

Thursday (9/11): Consumers Price Index

Thursday (9/11): Jobless Claims

For further information, comments, and questions:

Lloyd Segal

President

Los Angeles County Real Estate Investors Association

Lloyd@LARealEstateInvestors.com

www.LARealEstateInvestors.com

310-792-6404