UPDATED, July 28, 2:24 p.m.:
In 2012, as brokers were preparing to debut a sprawling new spec home in the Bird Streets by developer Nile Niami, Malaysian billionaire Jho Low got word to listing agents that the planned broker open house would be a waste of time.
He told them, “You can have your open house for agents, but I am buying the house,” recalled Jeff Hyland, president of Hilton & Hyland. Drew Fenton, one of Hyland’s agents, had the listing.
Low paid $39 million — a record price for the Bird Streets — for the home at 1423 Oriole Drive. Actor Ricardo Montalban once had a mansion at that address. In the end, Low allowed the open house for the six-bedroom, seven-bath property with guard house and infinity pool. The event drew some 400 people, but it was really just a courtesy. The high-end spec home market in the tightly clustered Hollywood Hills community of some 25 streets was hot, so hot that the properties often sold themselves.
So it was in the heyday of the spec home building craze in the Bird Streets, the famed celebrity enclave above the Sunset Strip that is known for its spectacular views. Homes listed at $15 million or more were getting scooped up fast. The Low sale encouraged a slew of doctors, dentists and lawyers with little or no development experience to try their hand at building the latest “white glass box,” as agents describe the prevailing high-end design style.
Lately though, the decade-long run of soaring prices has fallen back to earth.
Agents are struggling to sell an increasing number of lavish spec homes, forcing sellers to slash their prices. An oversupply is growing, they say, and yet construction continues. As of Friday, 15 of 24 homes listed for $5 million or more in the Bird Streets neighborhood had been on the market for more than 100 days, according to an analysis by The Real Deal. Another eight on the market now are listed below $5 million.
“The Bird Streets are feeling a pinch right now,” said Aaron Kirman, an agent with Pacific Union International. “They are not what they used to be.”
Sluggish sales have some agents concerned that the neighborhood may be the first — but not the last — high-end enclave whose overpriced spec homes have mistimed the market. Many of those multimillion-dollar homes are still under construction in some of L.A.’s wealthiest neighborhoods, including Bel Air, Beverly Hills and Holmby Hills.
In the Bird Streets, some spec homes — like the one at 9200 Swallow Drive — linger on the market for 18 months or more. In February, its owner, Russell Madris, an information technology entrepreneur, finally sold the 8,484 square-foot spread with a 12-foot outdoor waterfall and ocean views for $14.14 million. It was a price chop of 39 percent from its original listing of $23 million, back in 2015.
Just four years ago, “it was one-for-one,” Kirman said of home construction vs. purchase. “We had one gorgeous house come on the market in the $30 million range, and we had a buyer that was ready to scoop it up in the first two weeks. That happened over and over.”
Not so anymore. A six-bedroom home on 1646 Blue Jay Way, now priced at $11 million, has been languishing on the market for nearly a year and has had its price slashed by 39 percent. Down the street at 1450 Blue Jay Way, a home built in 2017 and currently priced at $15.9 million, has lingered on the market for more than 190 days. Another estate, at 8854 Thrasher Avenue, which is listed for $25.95 million, is now pushing 150 days on the market. It already got a 7 percent price reduction in June.
Among the latest offerings is a sprawling home at 9127 Thrasher Avenue. It is just steps from the former Jho Low home, around the corner from Leonardo DiCaprio’s two-home compound and another short walk to the prized location that Dr. Dre sold for $32 million in 2015. That home, once thought to be a teardown, is still there.
As for Low, the U.S. government later sought to seize his home as part of $1.7 billion it was seeking from him for allegedly conspiring to launder money he bilked from a Malaysian investment fund. A judge last year told the government to hold off on that request and Low now is a fugitive.
To stir up some interest, agents from Compass who have the Thrasher listing, Tomer Fridman and Sally Forster Jones, recently hosted an open house complete with a multi-course sushi meal and a geisha dance performance. Tyrone McKillen, whose company, Plus Development, built the home, attributes the area’s recent sales struggles to an oversupply of mediocre homes.
“Everyone is building these big white shiny boxes, and everyone cuts corners on design and they all end up looking the same,” McKillen said.
“Overinflated”
The neighborhood “is overinflated based on unrealistic expectations from these new developers to the market,” he said.
Those first-time developers have tried to emulate the style of well-known modern designers like Paul McClean, who has worked on several Bird Street homes, including the Low house. A notable version includes the one at 1474 Blue Jay Way that the late Tim Bergling, the Swedish DJ known as Avicii, bought in 2013 for $15.55 million. He died in April.
McKillen, who made his name building homes for the super-wealthy in Bel Air and other prime neighborhoods, worked on the construction of the Avicii house. Before 9127 Thrasher he sold one other home in the Bird Streets, at 1442 Tanager Way, which closed for $25 million in 2015.
Now his company is betting big that the best homes can still sell. Plus Development has five spec homes under construction in the Bird Streets, three of which McKillen expects will be priced between $30 million and $40 million.
Those homes are only adding to the construction chaos in the neighborhood. A sea of pickup trucks, cement mixers and Dumpsters choke the narrow, winding streets. “For sale” and open house signs are poking from the grass on almost every street.
The neighborhood, said Andy Butler, Kirman’s marketing director at Pacific Union, “is in the process of gentrifying from wealthy to uber-wealthy and there is little peace to be had.”
After Low’s and Dr. Dre’s $30 million-plus trades, the neighborhood had a banner year in 2016, when seven mansions sold for a combined $116.3 million — more than any year before or since. Overall, however, the median price for homes that sold for at least $10 million has dropped by an average of 5 percent each year since 2012. The median in 2017 was $12.45 million for five sales, compared to $21.75 million for two sales in 2015, according to a TRD analysis of closed single-family home sales, as compiled by Redfin.
As far back as the 1930s, the Bird Streets was home to Hollywood royalty. Famed director George Cukor lived in a Roland Coate-designed compound on Cordell Drive, on the southern edge of the neighborhood. Back then the Sunset Strip was an unincorporated part of L.A., infamous for brothels, casinos and seedy nightclubs.
By the 1950s the neighborhood started to be known as a place where young Hollywood stars would buy their first show-off home, including Rock Hudson, who once lived on Warbler Place. The Beatles’ George Harrison wrote “Blue Jay Way” on an organ while renting a home on the street. More recently, stars like DiCaprio, Jennifer Aniston and Keanu Reeves bought into the neighborhood.
The panoramic views have always driven home prices, agents say, more than famous designers or experienced developers. In the wake of the housing crash of 2008, spec developers began buying up older homes and replacing them with sleek structures featuring “day-lit” basements and other modern touches that could justify much higher prices.
More spec homes
But development in the Bird Streets is challenging. The lots are generally about a half-acre, smaller than in Bel Air and Beverly Hills, and are rarely flat, limiting the size of homes. There is also limited privacy.
“You can’t really jump in your pool naked at a lot of these houses because there are 14 other houses looking right at you,” Butler said.
And there are few rules regarding construction or neighborhood aesthetics, which is why a newly-built $30 million home can go up alongside a much older $8 million home, Hyland said.
Even with so many homes sitting on the market unsold, more are in the works.
Josh Altman, an agent with Douglas Elliman, is a Bird Streets resident. He recently sold two homes there, and said he is expecting about a dozen more modern spec homes to hit the market in the next six months, including five in the Doheny Estates section of the neighborhood.
“They will be priced between $20 million and $30 million,” Altman said. “It is probably going to be more properties and developments hitting in the next six months than there ever have been.”
For Altman, that means buyers will have lots of choices. For Kirman, the stagnant Bird Streets are reflective of buyers’ growing recognition that the L.A. market is slowing, at least in certain high-end pockets.
After 23 consecutive quarters of year-over-year price increases, the median sales price in L.A. declined 7 percent in the second quarter to $1.3 million, and the number of sales slipped from the year-ago record, according to a report released this week by Douglas Elliman.
“We have a lot of high-end inventory coming on the market,” Kirman said. “So much so that we have more high-end inventory than we will have buyers.”
Correction: An earlier version incorrectly named the street where Rock Hudson formerly owned a house as Warbler Way. It was Warbler Place.