Eastside Property: Echo Park home without a garage, parking or street sells for more than $700,000

This three-bedroom, 1,400-square-foot Echo Park bungalow that went up for sale in June has a lot in the way of historic charm, lush landscaping and views. But what it lacks is a garage and off-street parking. That’s not unusual for Echo Park but in this case the house is not even located on a street. Instead, the home, which has an address on Avalon Street, can only be reached via public stairway, leaving anyone with a car or truck to find parking on nearby streets. That apparently was no big deal for at least one buyer, who paid $707,000 in a deal that closed this week, according to Redfin.

The sale came after the owners had to knock nearly $70,000 off the original asking price.

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  1. Viewed that house, it was a horrific mix of different, non-cohesive styles. It’s also on a stairway and there is a vacant lot downhill of it (due to fire) that is buildable and that WILL be built on. Congrats to the seller, condolences to the buyer!

  2. The median home price in LA has gone up 26% in just 1 year. Fueled (as usual) by cash buyers/investors/flippers.
    And as usual, the median income doesn’t come close to supporting current values, let alone the rapid appreciation rates.

    Brace for the bust people.

  3. As if the people currently moving into SL/EP earn the median income!

    • I’m guessing the new residents earn a bit above the median income. It is very difficult to get financing these days unless you can truly prove you can make the dough to cover the mortgage. We just refinanced, and even though my wife and I have stable jobs, and only roughly 15% of our gross income goes to the mortgage (and we have 50% equity in the home), it still wasn’t easy.

      • Your observation, together with the other note on how much the prices have increased, makes me wonder if investors (or REITs) are driving these price increases.

        People like to harsh on flippers, but after they flip, they have to turn around and sell to someone (usually in just a few months), so they don’t really explain the price hikes. It might not take that much demand on the part of investors to cause prices to increase.

        • I think investors are a HUGE part of price increases. With savings rates down and the stock market a scary, complicated crapshoot, many people are choosing to invest in real estate and rent it out. Last year when I was looking in Echo Park, most of the buyers were looking for ‘investment opportunities’, not a home to live in themselves. They rent it out for 5-15 years, then sell for a profit. In principle there’s nothing wrong with it, but in practice what we’re getting is a market where a few own many homes and a majority can never afford to buy and have to rent homes a generation ago they could have owned themselves.

          I think we’re in for a market slowdown for sure, but not a bubble burst. Like TF said, buyers are VERY heavily vetted these days. And it all boils down to supply and demand. There’s increasing housing demand, and supply is not catching up.
          I read recently the city’s vacancy rate is historically low. I’m not sure why so many people are still coming to LA or staying here, it’s not known as a hotbed of jobs right now. Entertainment jobs have been leaving and unfortunately that trend seems set to continue. But they are here, and they need a place to stay.

          • part of the housing crunch has to do with people being subsidized to stay even when they don’t have the means to do so… massively extended unemployment benefits, section 8 vouchers, affordable housing covenants, etc. Remove the various subsidies and you’ll see *some* movement. (note: not saying that this is the entire problem, just part of it).

          • @really?,
            At these prices, and actually at any price point in the last 10+ years here in SL/EP, you’re gonna be negative cash flow every month if you rent out, so the only way an ‘investor’ is gonna come out ahead is by relying on huge appreciation rates, which by luck is happening right now.

            That’s all fine an dandy for them—until the market drops out. Even ‘leveling off’ would mean a loss to them.

          • ‘James’ example below of this property’s approx carrying costs is a prime example of that. This property is looking at about $3500 a month carrying costs, yet can only be rented for around $2800 tops.

          • @ fleaman

            I think a lot of the investors (at least the ones I’m talking about) are paying all cash down, or at the very least putting more like 50% down. So their carrying costs are negligible. It’s like putting your savings into an annuity that pays a monthly amount (the rent) and eventually you sell the house and get your principle back, plus a healthy appreciation.

            The real question is: who the heck has 500-750K in cash to plunk down? But this is LA, lots of rich locals as well as out of towners.

          • “Healthy appreciation” is the speculation part. It certainly worked in reverse for those that bought around 2006-2008.

            But yes, all cash in a income property should give a better return than a safe CD account, though the key word there is ‘Safe’.
            No major maintenance issues, tenant issues, market issues (busts), should = a positive outcome vs a high yield CD (which would get you about $700-$800 a month).

            Lets also not forget to take into account the broker’s commission when selling/flipping.

    • Arrak, you’re right, people moving/buying in SL are above the median income level, but the 26% year to year appreciation rise was for Los Angeles, not just SL. Also, SL median home value is quite a bit above the LA median value.

      The appreciation in SL is certainly up there too. Bottom line is with big booms come big busts. I can’t think of anytime in recent history (50+ years?) in which 26% appreciation home value rates don’t precede a drop in values (usually a big drop).
      It never just ‘levels off’ after those levels of boom, no matter how many times RE agents try to lie it.

      • The 26% increase in one year is just catching up to what projected levels would have been had we not experienced such a major crash in 08. In real estate, as with equities your horizon should be long term (15-25 years). If you graphed the recent drop in real estate, it would follow the same as equities (check those out 1200 – 1500 pts higher than pre-crash levels in 08) so in reality it wasn’t a 26% increase for those who have held property for more than 10 years. A boon for those who bought in the last 2 years but those are in the minority.

        Additionally, demand for new housing starts (building a new dwelling for a family) in the US is between 600K TO 1M per year. During the housing crash, major home builders drastically cut the quantity to less than half for 4 consecutive years therefore until the builders catch up to demand there will be hotter than normal markets. Add to that the climate of southern CA + the “cool factor” of Echo Park and the proximity to downtown/ Hollywood and you have a real estate market that is red hot and will remain that way until interest rate rise substantially. I don’t see anything that could change the demand aspect however…

  4. I’m not as tapped into the EP real-estate market, but here in Pasadena, we’ve seen a recent influx of Chinese all-cash buyers. Previously, they tended to focus on San Marino and Arcadia, likely for the school districts. Pasadena unified is not attractive to Chinese buyers, so I’m not entirely sure the motivation behind the influx to Pasadena. Though, in our case, when we sold our last home, we had five offers on the first day. All Chinese, all cash, all significantly over asking, with short escrows. None had school aged kids. Two lived in San Marino and had just sent them to college, so didn’t need the SMUSD address anymore.

    Are foreign buyers hitting EP and SL? Perhaps that’s behind the push…

    • Good point about foreign ‘all cash’ buyers. That’s happening all over the westside, pushing local buyers there further east. But a lot of the buyers are doing it for investments, buying near popular destinations like the beverly center, the grove, the promenade, etc. to rent out and sell down the line. An economic crisis in Asia would have serious repercussions here in LA.

      • I think that’s a legit concern. I think there’s a bubble in China (though they are trying to temper it). If that bubble bursts, we’ll definitely feel it here.. esp in the San Gabriel Valley..

        • There is a bubble in Asia that’s why the Asian money is moving here. They are parking they’re money here as well as in New Zealand and Australia to keep it safe.

          In regards to Pasadena, Asian money is moving in because they can change things once they have influence.

          There are also a lot of Chinese and Vietnamese associations in Lincoln Heights that lend money to fund real property. My ex-girlfriends family bought house in Highland Park using all cash by going to these associations for money.

  5. My HP-12C financial calculator wants to weigh in here.

    80% of $700,000 = $560,000 1st mortgage (and a $140,000 down payment)

    $560,000 at 4% interest for 30 years = $2674 a month principal and interest
    $700,000 x 1.25% property taxes = $8750/12 = $729 a month in property taxes
    Let’s assume $150 a month for insurance.
    Total payment = $2674 + $729 + $150 = $3553.00 a month.

    Yeah, even with the low interest rates, that seems expensive for a house without parking – unless it’s in the prime area around the reservoir in the Ivanhoe School attendance zone. By the way, I just looked at the map, and I don’t consider this location Silver Lake; seems like Elysian Heights to me. Hopefully the additions are all permitted, lest the new owners end up in a similar predicament to these folks who were recently profiled in the L.A. Times:


    • The interest portion of the payment is, I think, about $1870 (to start), and it and the property tax ($729) are deductible. They total $2600 per month.

      If the owners are in a ~30% marginal tax rate (federal/state), that would reduce the effective payout by $2600 x 30%, or about $780. Then the monthly nut is “only” $2800 (to start).

      • And that’s assuming it’s your primary residence.

        If you rent it out you’re looking at a good negative every month in the ‘hope’ it appreciates greatly.

        Speculation like that hardly ever works out.

        • I’m pretty sure the owners can still take a tax deduction for mortgage interest and property taxes if they rent it out. They’d have to declare the rent $$ as income, but they could deduct mortgage interest, property taxes, and depreciation (value of the structure itself, not the land, divided by 27.5), plus whatever maintenance expenses they incur. I don’t think they’d be even close to positive cash flow if they put 20% down, though – and I just can’t imagine the property appreciating beyond $700,000, which is already pretty crazy for Echo Park.

          I think the folks who are buying in most of Northeast L.A. now in the hopes of appreciation are nuts. The area is too popular. My bets would be on Altadena, Northwest Pasadena, maybe Sunland/Tujunga, maybe Lincoln Heights/El Sereno, and possibly parts of L.A. like the Adams-Normandie area – areas that people still turn their noses up at. (Sorry to end on a preposition.)

          • @james

            “– and I just can’t imagine the property appreciating beyond $700,000, which is already pretty crazy for Echo Park”

            I can remember when a loaf of bread was .25 and a gallon of petrol was .45 now the same are 4.00 and 4.50 respectively. It is dangerous to be ignorant about inflation and to not protect yourself from it. Especially when our government is diluting our currency at the current rate. I can tell you that while we may get some stabilization in home prices over the next couple years, in 10 years that same home will be selling for over a million. Check history, it doesn’t lie.

          • @Grahm,

            It BETTER be worth at least a $1m in 10 years, considering the $275k spent in interest alone (assuming a $600k mortgage), $87k or so on property tax, not to mention maintenance, insurance, etc.

            You’d barely break even—if even that. Especially after you account for inflation ($1m in 10 years is worth less than $1m today).

            It’s dangerous to think you’ve ‘profited’ from rising home values when you don’t account for your Total costs.

          • Yes I was assuming the home owner in this situation was savvy enough to keep his leverage point somewhere between 25 – 45% and using the equity to reinvest. Certainly that assumption also goes with the not so well accepted fact that a single family home is not an asset if you live in it.

            To avoid the sensational rebuttals of eastsiderla land I was saying “over 1M” actually it would likely be closer to 1.4 -1.8 million given the circumstances…

  6. Yeah, all the signs are there for properties being speculated on vs living in as ‘homes’. Otherwise these buyers would just rent for much less. The tax benefit doesn’t make up for the difference.

    This isn’t much different than the previous RE boom years. The question is; has anyone learned their lesson? Apparently not enough. Though, it’s their $$$ I guess….

    • I think many buyers get swept up in a frenzy and tell themselves, “If I don’t buy a house now, I’ll forever be priced out of the market.” That seems to be what happened in 2003-2007, and it seems to be happening again. I don’t feel particularly sorry for anyone who can afford to pay $700,000+ for a single-family home; I feel bad for the middle-class folks who are stretching on a dual income to afford a $450,000 home in a marginal area and crossing their fingers that the neighborhood will improve.

  7. Bubbles will come and bubbles will go but if your house is in a desirable area it’s value will increase. My folks bought a two bedroom in the South Bay in 1967 for $33,000. They sold it 40 years later for $2.1M. I’m sure it went up and down some in that period but…

    Check this 1981 article on the bubble bursting back then. It all seems so quaint now, calling the Westside “a region of by no means opulent homes” and lamenting that the house Ronald Reagan bought for $29,000 in the ’50s wasn’t finding any buyers at its current $1.7M. Of course it sold for $2M 7 years later and then again this year for over $5M (that’s an average appreciation of $100,000 a year btw).


    • RE bubbles of past (before ’90’s) were fueled by the economy, i.e., median income levels rising. Back then the median income could buy the median valued house. Rents were less competitive to owning.

      The RE bubbles of today are fueled by RE speculation, not by rising median incomes. Today rents are WAY more competitive to owning.

      SL has always been a desirable area, but only few in LA knew about it. The RE bust of ’96 and ’07 pushed average values down, even in SL. But today, due to media hype and such, SL has become THE destination, and that makes predicting the SL bubble a little harder.

      Either way, any speculation that leads to a bubble will lead to a bust. It’s economics 101, and a ‘desirable’ area like SL hasn’t been immune from it in the past, it won’t be immune from it in the future. Though it might go much higher before it busts (compared to less desirable areas).

      • @fleaman

        Yes, Today rents are WAY more competitive to owning. Especially when you have local government (LAHD) dictating how much a landlord can raise the rent. BAAAD IDEA!

        • That only applies to certain properties (i.e. not single family homes, nor units built after ’77 I think), and of course when a tenant move out the landlord can raise the rent to market rate or higher if they so wish. Also, on a single family home the landlord can evict a tenant by moving themselves into the home for a certain time period.

          But I’m guessing you already know that as I’ll gander you’re a landlord and/or a RE agent/broker?

          As for whether that is a ‘bad idea’ or not, that is of course a topic WAY to big to be discussed here. Suffice it to say there are pros/cons involved—it’s not a black and white issue.

          While landlords might in general loath the RSO (rent stabilization ordinance), they will on the flip side defend Prop 13 ’till death.

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