As Sales Pace Slows, Values Flatten for Priciest Homes.

HOME sales activity in some of L.A.'s most prestigious neighborhoods has suddenly cooled in recent weeks, according to several real estate professionals.

High-priced markets such as Malibu, Holmby Hills and Beverly Hills -- where There were close to 20 home sales above $10 million in 2000-- are especially slow, reported Bruce Nelson, founder of John Bruce Nelson & Associates, a real estate firm that specializes in the high-end market.

Many other high-end markets have leveled out.

For example, the median home sales price in Pacific Palisades rocketed from $285.56 per square foot in the fourth quarter of 1997 to $363.23 in the third quarter of 1998 -- representing nearly a 30 percent run-up in less than a year, according to DataQuick Information Systems of La Jolla.

But after that it suddenly flattened, rising only slightly to $375 in the fourth quarter of 2000, translating to less than-a 1.5 percent annual rate of appreciation.

"It's definitely slower than it had been," Nelson said. "Many people feel that it's peaking and actually has peaked. It will be interesting to see if the slowing is because of the lack of inventory or because many of these people have been hurt by the Nasdaq (downturn)."

Many analysts expect activity to continue shifting to entry-level homes this year, while prestige markets are not expected to see the activity or price appreciation they have enjoyed in recent years.

Current trends indicate that the number of high-end sales will remain flat through much of this year, while prices will continue to increase, although at a slower pace, said John Karevoll, an analyst with DataQuick.

Industry observers speculate that the cooling is partially due to the Internet boom fading -- resulting in a correspondent fading of demand from high-flying tech executives in search of expensive homes.

Many potential buyers watching the stock markets have taken a wait-and-see stance, while lowered long-term interest rates are likely to bring more entry-level buyers into the market.

"Buyers don't wish to keep paying new record prices," said Scott Gibson, executive vice president and general manager for Southern California with Coldwell Banker, the largest residential brokerage firm in L.A. County. Slower: Fewer B "You're going to see a little softening in prices.

Bob Todd, founder of Manhattan Beach-based RE/MAX Beach Cities, agreed.

"'There was a definitely flattening toward the last quarter, but it seems to have kicked back in," he said. "It's hard to tell."

Even with a slowdown in activity, Nelson said properties in premiere neighborhoods are not in danger of losing value the way they did in the last cycle. While the late-1980s' up cycle was driven in large part by speculation, homeowners who live in the homes and usually pay in cash have driven this market.

"There's so much more money in comparison to the late '80s," he said. "The fortunes that have been accumulated have been staggering. There's never been anything like this before. The (stock) market has gone down, but these people have made vast amounts of money."

Nelson further pointed Out that his firm handled more $5 million-plus home sales in 2000 than in any prior year. Those transactions usually involve buyers looking for an empty lot, or one with an existing home that they then tear down to build a new, bigger one. Todd's offices, which handle properties in coastal cities from Venice to Manhattan Beach, saw 2000 sales activity remain level, while prices appreciated 17. percent, compared with 1999 levels. He expects slightly less appreciation, at the high-end this year.

No collapse expected

What happens next is no small question. At the end of the last real estate cycle, top markets such as Beverly Hills saw home values drop 50 percent or more.

But few expect that level of collapse to happen in today's market. The regional economy remains strong and the housing market has showed no indications of a downturn.

"For all of L.A. County, we're not seeing any neighborhoods in decline," said analyst Karevoll. "It's just a question of how much an increase they're in the midst of -- and where on the curve they are."

Already, activity has shifted from high-end homes to the mid-range and entry level. Countywide, home sales activity showed a strong performance in 2000, remaining virtually the same as 1999 levels. But lower-priced areas such as Lancaster, Norwalk and Lake View Terrace have seen their share of sales activity pick up.

The general trend is that the snazzier the neighborhood, the earlier it started to recover in this cycle and the further along it is in terms of appreciation.

Neighborhoods such as Brentwood and Beverly Hills emerged from the last recession as early as 1992, while other did not begin their ascent until 1997, Karevoll said The closer to the ocean a property is, the earlier it started to rise. Any property within a mil two of the ocean has probably already recovered any value lost in the last downturn.

"I'm not sure anything has already peaked," Karevoll said. "There's one thing I'm absolutely positive about: Prices will up this year. They will not go down."

Adjacent neighborhoods

The sharpest appreciation rates over last four years, from the end of 1997 to end of 2000, have been in areas adjacent higher-end neighborhoods -- Los Fe Echo Park and Pasadena -- or in beachfront areas such as Manhattan Beach and Venice. While Venice and Echo Park have continued to blaze forward -- accompanied great changes to the communities th selves -- cities such as Palmdale, Lancaster, Lakewood, Canoga Park, Walnut and Montebello have also started to move to forefront.

The ups and downs of prestige homes and prime neighborhoods are tougher predict than smaller homes and entry-level markets, Karevoll said. They rise higher strong markets and drop lower in w ones. High-end buyers have more discretionary income, and for all practical poses, they're in a much larger market place.

"People won't come from London buy a home in Lawndale. They will come to Beverly Hills," Karevoll said.

A key indicator to watch is the stock market, which well-off residents are likely to keep an eye on, he said.

"The people who buy at the high end much more plugged in to the ebb and flow in other parts of the economy," Karevoll said.

Brokers in Beverly Hills, Malibu, Holmby Hills, Palos Verdes Estates and Man tan Beach note that sales activity slowed in many prime neighborhoods in the last of 2000, a time during which the st markets suffered a broad-based selloff.