Where Is #103? Newly Built 90404 Condos

Address (photos #101): 1520 16th Street #101-105

#101: 2 bed/2.5 bath - 1,704 sq ft - $1,065,000
#102: 2 bed/2.5 bath - 1,798 sq ft - $965,000
#103: ???????????
#104: 2 bed/2.5 bath - 1,798 sq ft - $895,000
#105: 2 bed/2.5 bath - 1,706 sq ft - $955,000

All of these units have HOA fees of about $240/month and have all been on the market for about 233 days (except #104 says only 80 days). The newly constructed building was completed in early 2007.

Description (Unit #101): Magnificent New town home ,spacious living and dining w/ hardwood floors and fireplace, modern Kitchen with granite counter tops,and Stainless Steel Appliances. master bedroom with LOFT, walk-in closets. Fantastic marble and granite bathrooms. Each unit has private roof top Deck, Patios, Balcony,and 2 private Garages.

Allsouledout first alerted us to this building and thought the situation was interesting because the units have been on the market since June 2007 with no price cuts. PVC also mentioned these units and said:
It's a nice buidling and inside they are really nice, but who wants to pay over a million for no yard and no be sandwiched next to a couple delapitated rental houses? It really is the only nice structure on the block. The builder must have assumed that blocks like this were goign to go upscale along with everything else and they were getting in early. Now they've built a really nice complex on a crappy block. These are quality townhouses, so I bet construction costs were high, and thus the seller can't lower costs much without taking a loss.

So where is unit #103? Did they find a sucker at some point during the last 233 days?

Thanks to Allsouledout and PVC for bringing this building up. This will be an interesting situation to watch...these units still seem pricey for 90404 even though they appear large, new and "nice".

2 Bedrooms in 90403 < $1M

Address: 1044 10th #5 - 90403

Details: 2 bed/2.5 bath 1,579 sq ft condo, $350/month HOA dues

Description: Stylish and bright, this north of wilshire private townhome features: dramatic natural light, wood floors, fireplace, and cooks kitchen w/ custom cabinets, stainless steel appliances. Large master br suite w/ full ceiling skylight and loft. Washer and dryer inside! Rooftop sundeck! Private direct access garage with xtra storage!! Walk to the beach, montana shops, and 3rd st. Shopping and dining. This 6 unit bldg has earthquake insurance. Open sundays from 1 to 4.

Previous Purchase: 3/22/06 - $968,000

Listing History: 11/1/07 - $985,000

After sitting on the market for 90 days so far, it appears that it is time for a price cut. The current asking price represents a mid-2006 rollback and a realistic cut would bring this back to a late 2005 rollback.

It appears that this building was constructed in 1980...the new rules for 90403 condos appear to be showing that it is going to be difficult to get $1M for 2 bedroom condos unless they are on Ocean Ave and/or the building was constructed within the past 5 years or so. There are a few 2 bedroom condos in 90403 that are asking over $1M, are in old buildings and not on Ocean Ave but I expect them to cut prices or else simply not sell. So we are going to test the hypothesis that $1M is the new upper ceiling for 2 bed units (Ocean Ave and brand new buildings exempt for now). This unit here might have had a chance of breaking the $1M mark at some point but I believe it will be many, many years before it has a shot at hitting it again.

If you were to buy this unit at its current asking price, your interest, taxes and HOA fees would come to about $6,600/month.

Another Flipper, Another Likely Loss...And More Delusional Pricing **Update 1**

Thanks to a very helpful reader, we now have another key piece if information about this property. It turns out our flipper here didn't even do most/any of the upgrades.

The property was originally listed on 5/2/06 for $1,749,000 and the description went as follows:

Charming updated Spanish features unique archways, crown moldings, stained glass & hardwood floors thruout. Newly designed kitchen with Viking appliances, Sub-Zero, marble countertops & custom cabinetry. Living room with beamed ceilings & fireplace. Large backyard. New/upgraded electrical & copper plumbing thruout, new sub-roof, new central heating system & new irrigation system. Franklin School District.

Our delusional flipper purchased the place on 8/29/06 for $1,760,000 and thinks that he can now get $2M for adding no value. Hello??!! The market has changed dramatically since late 2006. Breaking even would be a blessing for this flipper, and here he is trying to turn a profit. The fact that he has not done any of the major upgrades makes the current $2M asking price all the more laughable. We are going to need to see some major price cuts to get this thing to move.

Another Flipper, Another Likely Loss...And More Delusional Pricing

Address: 865 Harvard - 90403

Details: 2 bed/1 bath flip attempt. House is 1,400 sq ft and lot is 7,900 sq ft.

Description: Charming Spanish Bungalow. Updated throughout - Viking Range, Subzero, custom cabinetry. Central heat and air. Large backyard with room for a pool. Desirable Franklin Elementary School District.

Previous Purchase: 8/29/06 - $1,760,000

Listing History: 1/16/08 - $1,995,000

Base Holding Costs: $200,000

Upgrade + Selling Costs (estimate): $150,000 - $250,000

This flipper is likely to lose $100,000 at a minimum. This is because they overpaid for a teardown at the peak of the market. The upgrades look minimal/aesthetic in nature. New kitchen cabinets, surfaces, appliance, paint job, maybe some landscaping, etc. For all this I have estimated a cost of $50-$150K.

Of course, we haven't even considered the highly likely future price cuts (and/or acceptance of an offer below list price).

If I were a buyer or a buyer's agent, I would look at 829 Princeton which is on a same size lot but with a bigger (3 bed/2 bath - 1,800 sq ft) house which recently sold on 10/30/07 for $1.68M

I would also look at the house right across the street, 840 Harvard which is on a same size lot but with a substantially bigger (3 bed/2 bath - 2,285 sq ft) house which recently sold (before the mortgage market meltdown) on 7/17/07 for $1.95M.

Then I would look at alternatives on the market right now...you can get so much more than a 2 bed/1 bath shack for $2M...and if you can pony up another $300K you can get something bigger and better AND in the holy land of "the 90402". This flipper will not get this price and we are awaiting the first price cut.

"The 90402" - Part 1 **Update 4**

Listing history: 11/29/07 - $2,550,000
Reduced: 01/04/08 - to $2,475,000
Reduced: 01/18/08 - to $2,399,000

416 17th was previously featured here 3 times already. Our 4th update is yet another price reduction. Remember when lot value was almost up to $2.4M? Now you can get an entire 2 story house AND the lot.

What Is Going On Here?

Address: 2606 Highland Ave - 90405

Details: High end, newly (2006) constructed modern house. 2 bed/2.75 bath

Description: Material honesty & structural integrity are honed in the “House of Sand”. The steel H-columns frame the floor to ceiling windows creating a seamless dialogue bwtn the interior & exterior. The primary pool level of this “smart house” offers the master suite connected by a gallery to a generous flex space for private or public usage. The 2nd story, connected by floating ebony stairs, encompasses the open kitchen, living rm + a secondary private space. Ocean views & plenty of subterranean parking.

Previous Purchase: 8/17/07 - $3,000,000

Listing History: 1/11/08 - $2,999,999

The gentleman who appears to have constructed this house bought the tear down back in 2002 for $593,000. This man was also a real estate broker who had/has his office on Main Street here in Santa Monica. He put the house up for sale in mid 2007 and found a buyer willing to pay $3M.

Something must have gone wrong in our buyer's life or maybe it is just a change of heart. But for some reason, just 4 months after shelling out $3M, he is now trying to get his money back via listing the house for the same amount he bought it for...except even if he can get his price, there will be somewhere around $150,000 in transaction costs.

Why would this buyer be so quick to try to bail? If he could afford a $3M place, one would think he wouldn't care about the market falling further, right?

If this were a house out in the inland empire, many who read OC Renter's blog might think that this 2007 buyer was a "straw buyer" or something of that sort. I am not suggesting that, but I am genuinely curious as to what is going on here. Anyone have any more info?

Another Agent/Broker/Developer Property - No Public Disclosure Of Course

**Photo credit: Westside Bubble
Address: 1053 17th - 90403

Details: 2 bed/1 bath teardown on a R2 zoned lot (4,160 sq ft)

Description: Charming starter home in fantastic north of Wilshire location and in the Franklin Elementary School district. Preliminary plans included for contemporary new home. Sold "as is". ZONED R2 - can build 3 units on property (please confirm with the City). TENANT OCCUPIED. PLEASE DO NOT DISTURB TENANTS.

Previous Purchase: 1/25/07 - $998,000

Listing History: 1/8/08 - $1,300,000

The owner AND listing agent for this property is the same guy who owns AND is listing 1015 25th. Remember, he bought 1015 25th on 1/12/07...just 2 weeks before today's featured property. This owner/agent is also the president of his own construction company. Given that his company seems to be doing much larger projects than single family flipping or 3 unit condos, I would guess that both of these properties here were "side projects" or something of that nature.

Given these facts I believe that this owner got pretty good deals on both of these properties and was planning on doing a substantial remodel/rebuild on 25th and also developing condos on the 17th street lot. Then things changed and he is now simultaneously bailing on both projects. I wonder why that could be? Given this individual's background, one might be inclined to go so far as to call him the "smart money" (obviously that is up to you to determine). The point is, when the veteran developers are bailing, the market is not getting better anytime soon. This is just one more piece of evidence that the bulls will not be able to refute.

This is not a "starter home"...it is something that will be bought for the development potential (just as this guy initially did). Seems like every other house on the market has some sort of "plans" or "permits" coming along with it. That should set off alarm bells to market participants.

Now to the issue of disclosure. This is another example of a property which is owned by and listed by an agent and where there appears to be no disclosure of these facts in the public description. Some interesting comments were made in the comments section of the last post. Here is a brief explanation of the Freakonomics issue:

"Levitt's analysis of 100,000 transactions in the Chicago area revealed that agent properties sold for 3 to 4 percent more than similar client properties, and that agents kept their own homes on the market for 10 percent longer than client properties to get the highest price.

The findings document what industry critics have claimed for some time, namely that some listing agents put their own financial interest ahead of clients because they are more interested in closing the deals quickly than holding out for the highest price for their seller clients. Levitt blames the industry's traditional two-sided commission structure for failing to properly motivate listing agents, who typically receive just 1.5% of the total sales price after a four way commission split.

If listing agents are more motivated to make the deal work than getting the highest price for their seller clients, should they be called "Dealtors" instead of Realtors? Or should the industry's commission be reformed or abandoned all together?"

The point here is not to bash real estate agents. What I am getting at is that in many other financial transactions and forms of advertising, public disclosures must be made when a potential conflict of interest occurs. If I am a buyer walking into the open house off the street, how can I possibly be receiving fair information from the listing agent if they also own it? How can a conflict of interest not occur here? The best way to address this in my opinion is to require public disclosure in all online descriptions of properties as well as on the listing sheets at open houses. This is not to say that I think buyers should be absolved of any responsibility to perform adequate due diligence...Its more that I view these situations as such glaring conflicts of interest that proper and prominent disclosure is the least that should be required.

You don't have to agree with me here but that is how I see it. And for an industry which is absolutely plagued by a destruction of confidence (see recent law suits, fraud complaints, etc), I don't see how agents would not be in favor of increased disclosure and transparency. The idea is to make the market the most fair and efficient by allowing all market participants to have equal information (and be able to obtain said information in an easy fashion).

There is so much more that could be said about this (and other aspects of the real estate transaction model), but I don't want that to be the main focus on this blog. Obviously, the next step in this discussion would be to ask: "If what Warchest is saying makes sense, why has there not been a greater push towards more transparency and openness in the market?" The answer is fairly obvious but it is not something that we will touch upon right now.

Another Agent Owned Flip Attempt

Address: 942 26th - 90403

Details: 3 bed/3 bath, 2,477 sq ft house on an 8,329 sq ft lot. Totally flipped.

Description: Mediterranean masterpiece located in prestigious Franklin School District North of Wilshire, just 1 block south of Montana. Completely renovated & expanded from the ground up, this major remodel was finished with full attention to all the finest details! All new Viking appliances, granite counters, Travertine floors, top designer lighting. Master suite boasts professionally finished his & her walk-in closets, spa tub. Fountain in courtyard, fruit trees in back. Detached 2 car w/ enclosed storage

Previous Purchase: 10/31/05 - $1,549,000

Listing History: 1/19/08 - $2,295,000

The listing agent for this flip is the owner as well. Where is the disclosure?...or is that only in "private" remarks?

Holding costs for this have been over $250,000 and construction costs are of course a big question mark. Granite, travertine, and stainless steel are cute but paying $2.3M to live on a very busy street seems like a tough sell. Remember, these folks just cut their price down to $1.8M for their 90402 tear down on 26th and it still hasn't sold.

This is another example of an agent/speculator/flipper trying to exit the market. These are the folks who have driven the market the last few years. Do you think they will be back to buy up new properties anytime soon? Without their constant bid, will values rise or fall? And as they all simultaneously bail on the market, will that help prices or hurt them?

Where are the bulls now? Where are the buyers willing to pay $2.3M for a south of Montana house on 26th? Where is the disclosure that the agent is the owner?

90405 - Flippers Under Pressure **Update 1, A New Year Relist**

We last featured 834 Maple back in October. See the previous post for more details but to recap, this is a remodel/flip attempt being done in a location which we are not that excited about (block from Lincoln/carwash/Arco).

This flipper bought almost a year and a half ago for $1.2M, did an "exquisite" remodel and then listed in mid/late 2007 for a whopping $2.1 million. They then cut the price down to $1.975 million but still couldn't find a buyer. So they did what so many other failing flippers did and went for the "relist in the new year/spring".

New Listing History 1/9/08 - $1,829,000

This represents a price cut of almost 13% from its first listing price. Some people think that list prices aren't falling. I guess if you didn't know this was listed last year for more then you might not get it. Others will look at this and say "values are going up" because a $1.2M property is now selling for much higher (of course the upgrades make up the difference).

Others who are paying attention and can see the writing on the wall see this as yet another bailing speculator who won't be back once he gets rid of this alligator. Is should now be exceedingly obvious that speculators and funny money drove most of the bubble (and yes, prices in SM). This was a pretty depressing week as far as economic news flow, market action, credit worries, etc. As bearish as this blog is on real estate, we don't celebrate recessions, job losses and general contractions. Rather, we try to face the facts and stare reality head on. After seeing what is going on across all risk based markets (yes, SM real estate is in there) and after seeing example after example on this blog, how can you not agree with what we have been saying all along?

Getting Lower...Still Not There Yet On 23rd

Address: 1440 23rd #209 - 90404

Details: 2 bed/2 bath condo, 938 sq ft, $245/month HOA, needs some "TLC" condition

Description: Bring your handyman to this 2-bedroom/2-bath Santa Monica condo just a mile from the beach and located next to the famed Bergomant Station, Water Gardems [Do real estate agents not know how to use spell check??]. & St. Johns Hospital. This condo needs a little TLC, but what potential. Open floor plan with lots of windows and natural light. Create instant value by updating the Kitchen, baths and floors. Building and Courtyard are being renovated. Turn this condo from outdated to new and chic. A Must See! Priced to Sell Fast. HURRY THIS WONT LAST!

Previous Purchase: 2/9/1990 - $212,000

Listing History: 1/7/08 - $438,980

Recently Closed 2/2 Units In Same Building:
Unit #303 - 10/10/07 - $541,000
Unit#304 - 2/21/07 - $551,000

A reader in the last post alerted us to this property. They thought it could be considered "incredibly low priced". It probably looks that way to the suckers who bought similar units this year (one of them just 4 months ago) for about $100K more than this listing. However, when looking at this unit, you have to remember that it is nothing more than an apartment. To pay interest, taxes and HOA fees here you are looking at expenses of over $3,000/month. Given the location and the condition, I would have a hard time seeing a unit like this rent for more than the low $2,000s. Negative cash flow of $1,000/month can't be that fun.

This property is also being featured as an example of how I think the market is behaving right now. First, long time owners (like this one) can afford to undercut any competition and/or recent comps in order to make a sale happen. Second, and more importantly, the theme we are stressing here (and have been for some time) is that real estate is highly cyclical and takes a long time to go through its ups and downs. Starting last year we saw some of the first foreclosures and short sales show up in Santa Monica. Of course, they were in marginal locations and almost exclusively condos. This is not surprising. Weakness takes a long time to spread to the more desirable areas/units.

Just as the first signs of weakness showed up in the least desirable areas (inland empire, Sacramento, inland SD), the first signs of weakness in SM have generally been on units like this one. However, we have shown lots of examples of weakness showing even in the holy grail of "the 90402". With every new short sale, foreclosure and failing flipper, it becomes more and more clear that a sustained period of weakness is here to stay and will surely touch all areas. We don't expect a full melt down right now or even this year necessarily. Again it takes time. So take a deep breath, remind yourself that trees don't grow to the sky (even in the best zip codes) and be glad you aren't a highly leveraged speculator right now.

90402 Lot Value + Location Discount

Address: FRONT OF THE HOUSE (...actually, 476 26th - 90402, but don't tell anyone because it is a secret).

Details: 1,600 sq ft tear down on busy 26th street on an 8,700 sq ft lot

Description: REDUCED $155,000.00 DON'T MISS OUT ON THIS GREAT PROPERTY The house is 1600 sq. feet with original charm and in need of TLC OR DEVELOP your new dream home on this ideal, sought after location north of Montana. Den Has walk-in closet so could be BE.Either way its a great property and being sold in as is condition. Drive by this great property. Buyers to be approved by direct lender. Seller selects Services. Trust Sale

Listing History: 11/7/07 - $1,950,000
Reduced: 01/12/08 - to $1,795,000

I don't know why they don't give the address on the listing...there are flags and a sign out front so its not like it is a secret or anything. Anyways, there is a location discount here since 26th street is busy...and then there is the falling lot value discount as well. I think this is still really expensive for something on 26th, but this seller gets credit for not doing a stupid little $10K price cut. The divots are getting bigger.

And is this another camera phone picture or something?!

Speechless...

Addresses: 924 5th #2 and 828 5th #5 - 90403

924 5th - 1 bed/1 bath, 618 sq ft - Location, Location, Location! For cash investors. Under market value. Great 1 bedroom, 1 bath, gated parking, rooftop sun deck. Unit is sold with tenant protected for life under rent control.r TORCA lease termination only upon voluntary leave or death. Rent collected is a small fraction of market. Condo conversion. Short Sale, subject to bank approval.

828 5th - 0 bed/1 bath, 502 sq ft - Location, Location, Location! Under market value. Great for investment or owner occupied. Spacious studio in Mediterranean building. Patio, upgrades, built-ins. Tenant occupied month-to-month. Short sale, subject to lenders approval.

924 Purchase: 6/20/05 - $329,000 (100% financing)
924 Listing: 1/9/08 - $281,400 (short sale)

828 Purchase: 5/26/04 - $376,000 (100% financing)
828 Listing: 1/9/08 - $320,000 (short sale)

What is going on here? The seller is the same person on both of these units. The first one is a TORCA unit which means it is being rented at an obscenely low rate and the tenant can't be kicked out (thanks City of Santa Monica!!). That means negative cash flow. The second unit appears to be tenant occupied but on a month to month basis...so it could likely be reset to market rent quickly...although it also is likely a negative cash flow situation (why else would you try to short sale it?)

The seller that is dumping both of these units is also...A REAL ESTATE AGENT! The agent bought both of these properties (surely as investments since they are both tenant occupied) a couple of years ago. Both are 100% financed. Wow...and the 828 unit could almost be a 2003 rollback.

Lastly, a quick Google search on the name of this seller reveals that she is an EMBA student at an expensive private university in the area. Here is an excerpt of a profile for her real estate company:

"I am a very motivated individual with an innovative concept that I would like to see come to fruition...I am a licensed real estate agent in California and Arizona...I am very competitve (SIC) and aggressive in getting my business projects developed...I will guarantee a ROI."

Our question would be: How can you "guarantee a ROI" when you are currently short selling two of your own failing investments??!! How about a little truth in advertising?

Judging by some of the first few listings of 2008, this year is going to be a train wreck.

"The 90402" - Part 8

Address: 241 24th - 90402

Details: 2,069 sq ft, 3 bed/2 bath house on an 8,700 sq ft lot. Upgraded, remodeled, flip condition...whatever you want to call it.

Description: Very charming, extensively remodeled 30’s Spanish gem on one of the most desirable streets north of Montana. Beautiful Architecture and gardens. Hdwd flrs, beamed ceiling and fireplace open to a private courtyard with a fountain. Cozy den with fireplace and beamed ceiling. Cook’s kitchen adjoins sunny breakfast rm with orig. built-ins. Rich detail throughout includes tiles, stenciling, hardware and coved ceilings. Private rear yard with pergola. Quiet tree-lined st near Brentwood Country Mart.

Previous Purchase (estimate): 3/11/05 - $2,530,000
**EDIT** we have a reader who informed that the previous purchase price was $2.439M and that the original asking price (when purchased) was $2.249M...wow, the days of bidding wars seem so far away.

Listing History: 1/9/08 - $2,895,000

Zillow and Property Shark don't show the purchase price but judging from tax records, it seems that this was bought for about $2.5M in March 2005. It looks like a lot has been redone on the house but it doesn't look like a full remodel (hence the smallish 2,000 sq ft interior). I don't believe it was reassessed for tax purposes so I think the $2.5M price is about right. Please correct me if I am wrong here.

Anyways, this is another example of a real estate agent owner who is selling. The agent who owns it is not the listing agent, but again, there is no disclosure that the owner is an agent in the public description.

If my purchase info is in the ballpark, then this most likely comes out to a loss due to the "extensive remodel" as well as holding costs. Add in the selling costs, the staging costs (looks staged from photos), etc and the money really adds up.

It would be hard to say whether this was destined to be a flip from day one. This is the seller's main residence (they are claiming the homeowners exemption on property taxes) and it is listed as their residence on the California DRE site as well. But again, there is the approximate 2 year holding period (here it is actually almost 3 years) and then the "list in the spring" strategy going on here.

Finally, I believe houses like these have thrown off the data and will continue to do so in terms of showing higher prices. This is because so many houses and condos in SM (this one included) were remodeled, upgraded or fixed up in one way or another during the boom. So while it would not be surprising to see this sell for higher than its 2005 purchase price, it would actually likely be a loss when factoring in all the upgrades (we ignore holding costs here). You have to look deeper into the numbers when people run around claiming victory because prices are holding or are "only" down slightly.

90403 - Negative Cash Flow (Part 2) *Update 1*

1015 25th was last featured as part of our "rent vs buy"/"negative cash flow" series.

Lets recap: This tear down on a 6,207 sq ft lot was purchased by a property developer/investor on 1/12/07 for $1,200,000. It sat for months and months, developed a brown lawn, and then sprouted a westside rentals sign in the front yard. The asking rent was $4,500/month...hence the negative cash flow.

Now our update...yes, they are trying to sell it...FOR MORE than they bought it for.

Listing History: $1/8/08 - $1,475,000

Description: Fantastic north of wilshire location; franklin elementary school district. Preliminary plans included for contemporary new home. Sold "as is".

Here is the timeline:
1/12/07: Investor purchases from executor of estate (elderly person likely lived here many years and recently passed away). Investor thought $1.2M was a bargain and surely this could be a tear down or heavy remodel opportunity

1/07 - 9/07: "Preliminary plans" are drawn up but reality sets in and investor realizes market is getting worse...maybe now is a bad time to go through with a big project. Who'd a thunk?

10/07: Maybe the market will come back next year. Lets stem the bleeding by trying to rent it out at $4,500/month

10/07 - 1/08: Brown lawn doesn't attract any interest, although a new and funky westside rentals sign sprouted up.

1/08: Shit, the market is screwed...but some palace builder is building a supposed $5M palace one block north. Maybe we can find a sucker to make us whole and buy this thing for $1.475M. Maybe they won't notice how much smaller the lot is or maybe they will love the sweet alley location...maybe they even like hearing a bit of traffic noise from 26th?

And the kicker is that the real estate agent for this listing is...The owner himself! Wonder when he was planning on disclosing that?

This is just a taste of what we think is coming this "listing season". More speculators bailing, more price cuts, more "for rent or sale", etc...There will always be a handful of ultra wealthy folks who can afford to ignore market cycles (palace builders, la mesa buyers), but for the vast majority of the market (yes, even "the 90402"), the trend is down.

26th and Wilshire...Another One

Address: 1141 26th #D - 90403

Details: 1 bed/1 bath, 640 sq ft, $230/month HOA

Description: This is a charming unit with wood floors, dining room, crown molding and soothing paint.There is a nice view to the north looking over the courtyard and to ther south there is a nice view of vegetation. This complex is just north of wilshire blvd and comes with a one car garage. Just a short walk to starbucks and douglass park.

Previous Purchase: 5/6/05 - $477,000

Listing History: 10/8/07 - $499,000
Reduced: 01/04/08 - to $465,000
Increased: 01/07/08 - to $469,000


This is part of the same complex where we had one of our first foreclosures featured on this blog.

Lets evaluate what may have happened here.

1. Seller buys near peak of market.
2. Seller can't wait to take advantage of 2 year holding period tax free gain.
3. Seller REALLY can't wait for 2 years to be up after getting tired of bad location and high holding costs.
4. Seller finally gets to list 5 months after 2 year time restriction expires. By that time, the price they are hoping for will allow them to roughly break even after commission...they have given up on making any profit.
5. After 3 months of no bites, a loss is finally accepted...

6. Oops, we dropped the price by $4K too much...better raise it back up??!! WTF?

Who is going to pay $733/sq ft to live in an apartment complex on 26th and Wilshire? Think any young execs making six figures want this place? Good luck.

Where Are Prices Right Now?? *Update 1*

1040 4th Street #111 was last featured here in October. While many properties are playing the "pull and relist in a few months" game, this one has lingered on market and now cut its price again. It is now at 198 days on market.

Here is another "new year price cut" which is further exacerbating the loss.

Purchase Price: 4/10/07 - $555,000

Listing History: 6/28/07 - $550,000
Reduced: 08/23/07 - to $530,000
Reduced: 10/02/07 - to $510,000
Reduced: 01/04/08 - to $490,000

Simpsons Spoof On Housing Bubble

Last night's new episode of "The Simpsons" featured Bart writing the phrase seen above on his teacher's (Edna Krabappel) chalkboard. A sign of the times...something like this would not have been seen when the market was going up or even plateauing.

Here is a Wikipedia explanation of the chalkboard gags (includes every one ever done).

The image above is not from the actual episode (could not find it on the web), but the website here allows you to make images such as the one seen above.

Did anyone else notice this while watching the Simpsons last night?

"The 90402" - Part 1 **Updates 2 and 3**

This failing flip (416 17th - 90402) was first featured here less than a month ago. Our first update came shortly later when we found out the property was also available for rent at $9,000/month.

To recap, this place was purchased in October 2006 for just over $2M. It was then "remodeled and updated". In our first post we looked at holding costs, transaction costs, and potential upgrade costs and showed that this flipper is going to take a big loss on this property.

Our update today is that after about a month on market, the price has been cut. We are not surprised...actually a little disappointed at how small the price cut was. 2.9% price cuts aren't going to make very many people jump. I would say this is more of a signal to the market saying "we are ready to deal, we need to sell this thing and will be willing to negotiate".

Listing history: 11/29/07 - $2,550,000
Reduced: 01/04/08 - to $2,475,000

Although this price cut isn't very big, this is our first price cut featured in 2008. Get ready for many more...also, the house is open today so go check it out and let us know how it looks (yes, listing you are welcome for the free publicity).

**Edit** Update 3
The rental asking price has been recently reduced and is now at $8,450/month. This represents a 6.1% reduction whereas the asking price was reduced by 2.9%. It will be interesting to see if they reduce again and if the asking price's 50% delta holds.

100% Financed, Investment Property Short Sale **Update 1 + Now Competing With A Bank**

We previously featured 2045 4th #107B because it was a classic example of an "investor" trying to unload a tenant occupied, 100% financed property via a short sale.

To recap, we are looking at a 1 bed/1 bath unit that is 630 sq ft. It was purchased in late 2005 for $501K and was first listed exactly two years later in late 2007 as an attempted short sale for $459K.

Our update comes in the form of a price reduction on 12/29/07 from $459K to $425K. Additionally, we found a late added comment on this blog which stated the following:

"The building has termites and the owners are going to be accesed (read: assessed) big time early next year. I rent in the building and know the Pres of the HOA. Wouldn't buy this for $375,000. Ms. Catalina is busted."

Obviously we don't have any way of verifying this (yes, this is a blog...not the Times) but thought we would post it anyways. Do your own due diligence.

To further complicate (or make more entertaining for us on the sidelines) the situation, we now have a fresh foreclosure in the same building.

Address: 2045 4th #306B - 90405

Details: 1 bed/1bath, 699 sq ft, $310/month HOA

Description: Bank owned foreclosure. Bright & breezy 1bed + 1bath condo w/ lush landscaping courtyard, pool & spa! Great location! Close to pier, beach, shops, restaurants, farmer's market & 3rd st promenade. Well maintained property. Serene private balcony. Hurry, won't last long!

Previous Purchase: 8/30/06 - $540,000

Listing History: 12/17/07 - $499,900

"Bank Buy Back": 6/21/07 - $460,113 (owner now listed as First Franklin Trust 2006-Ff15)

..."Hurry, won't last long!" I have a hard time believing this.

While this foreclosure is 70 sq ft larger than the attempted short sale still on the market, it seems like they may have a hard time selling it as they are a full $75K higher than the short sale property. So it will cost you $1,000 for every square foot that this foreclosure is larger than the short sale, the horrible rent/own numbers combined with the high HOA make this impossible as an investment to rent out, and then there is the potential termite issue to deal with. I think the bank will be very lucky to get their $460K back.

"D" Stands For Default

Address: 1524 Franklin #D - 90404

Details: 2 bed/1.5 bath condo, 867 sq ft, $252/month HOA

Description:Reo - bank owned upper (rear) floor condo. Nice starter unit in a quiet santa monica neighborhood. Close to the media district and artistic colorado blvd on the west side. Perfect for that single intern starting out or "pied-a-terre" for the traveling business person. Large light and open living room/ dining room, generous bedrooms, guest bathroom and large balcony. Property is easy to show. Offers will be presented starting on 12/20 - don't miss this opportunity for your first time buyers

Previous Purchase: 8/29/06 - $640,000

Listing History: 12/17/07 - $463,500

This is a massive 28% loss before any fees or holdings costs and it is assuming the bank (HSBC Bk Trust Series 2006-Asap6) can get their asking price.

Were these photos taken with a camera phone or something?

Under $800K Inventory Per Zip Realty

Here is a freshly updated graph showing "entry level" (almost all condos) inventory broken down by zip code. The surprising build going into fall gave way to the very strong seasonal trend of lower winter inventory. Condos have already been hit hardest in Santa Monica as we have seen many short sales and some foreclosures already. I expect this to continue and I expect inventory to rise significantly from seasonal lows which may have already been reached or may be reached in the next month or two.