Another Battle, Even Thicker Skulls

Address: 1254 24th #1 (photo above) AND #2 - 90404

Details: 2005 building, both units 2 bed/3 bath, roughly 1,150 sq ft each, $316 HOA

Description(s): #1 - Bright, front facing 3 story town home designed by william brantley architecture. Great light, unique details and finishes. Soaring windows, hardwood floors, viking appliances, granite kitchen counters, wooden butcherblock open stairwell, balcony, fireplace, patio and loft with 42" plasma tv . Close to the freeway, hospitals and the best of santa monica

#2 - Just reduced!!!! Back on with price to sell now!! Bright,open ready for you to unpack and enjoy this unique, william brantley architecture! Skylights, solarium doors, hardwood floors, pro chef's ss kitchen - viking appliances wine rack, granite counters, enjoy calm on your zen patio with water treatement, stone bath/shower with bench to enjoy spa like amenities. Looks much larger than it is and you don't pay the cost for sq. Footage. Call la1 to show 24hr

Previous Purchase(s): #1 - 10/20/05 - $885,000

#2 - 1/6/06 - $860,000

Listing Histories: #1 - 1/31/08 - $969,500
Reduced: 02/15/08 - to $969,499
Reduced: 02/27/08 - to $969,399
Reduced: 03/11/08 - to $969,299
Reduced: 03/26/08 - to $969,259
Reduced: 03/27/08 - to $964,999

Is this the new pricing strategy? Make tiny cuts like an idiot in hopes of getting some free press on the Distress Monitor? I love the $40 price cut on 3/26...stupid

#2 - 1/15/08 - $949,000
Reduced: 03/11/08 - to $899,000

Here we have found ourselves yet another battle between neighbors in the same building. Both sellers have current asking prices just about 6% above their purchase prices as they are trying to break even. Unfortunately, prices have already fallen and are falling further with each day that passes. From the description of #2, it looks like they may have just fallen out of escrow but who knows...

#1's pricing strategy is beyond idiotic and they should take a report for wasting both their real estate agent's and our time. Just for being so stupid with the pricing, I hope #2 sells while #1 languishes...Either way I think both of these wishing prices are still too high. Enjoy those carrying costs guys.

Oh, and when you have to say that your "unit" looks larger than it is...well then you know you might have a size issue as well. Smells desperate.

Battle at 2911 4th

Address: 2911 4th #114 - 90405

Details: 3 bed/2.5 bath condo, 1,513 sq ft, $287 HOA

Description: Motivated seller! 3br/2.5ba+office. Don't miss out on this spacious, bright th located in the heart of ocean park. Ideal for family or someone who needs a lot of space! Public records state that square footage is 1513, however may be larger (buyer to verify). Features include:wood floors & open floor plan, updated kitchen w/ stainless appliances, inside laundry, large outdoor patio, 2 sxs parking, great storage! Incredible location just off trendy main. Open this sunday march 30th from 2-5.

Previous Purchase: 6/7/05 - $720,000

Listing History: 6/1/07 - $899,000
Reduced: 07/19/07 - to $865,000
Reduced: 09/26/07 - to $850,000
Reduced: 10/23/07 - to $830,000
Reduced: 03/01/08 - to $799,000

This is currently at 303 days on market...so I don't know how much of a "motivated seller!" this really is. We have seen plenty of 2005 rollbacks so it looks like they have a ways to go with the price cuts.

This seller was greedy and in denial. They could have listed much lower last year and probably made a sale and a profit. Now greed and denial may end up costing this seller because they have some fresh competition. An IDENTICAL unit in the same building just came on market...it might even be right next door (just guessing by the unit #). Check it out.

Address: 2911 4th #112 - 90405

Details: 3 bed/2.5 bath condo, 1,513 sq ft, $300 HOA

Description: Remodeled 3 bedroom + den in great ocean porte location traditional floor plan with master & two guest bedrooms and 2nd level. Den with large patio off living room or could be 4th bedroom. Laundry in quiet side by side parking. Just like a home. 3 blocks to trendy main st & 4 blocks to the beach.

Previous Purchase: 11/16/06 - $710,000 (100% financing)

Listing History: 3/25/08 - $799,000 (same price as #114)

Both units appear to have some type of "remodel" or "upgrade/update" in the descriptions. So you are likely looking at some replaced surfaces in each one. The bed/bath and square footage numbers are exactly the same. They are both asking the same price as of right now.

It would have been smart for #112 to come in and list BELOW the asking price of #114 to show that they are willing and able to get the sale done...except they don't have much room because #112 appears to be a $0 down Mozillo special. Things don't look good for either of these sellers. Prices have already rolled back further than both of their purchase prices. So they are hoping for a sucker to step up or else I would imagine that at least one of these units has to end up trying to do a short sale or may even be foreclosed on (depending on the financial strength of these owners).

Failing To Understand Cycles

Westside Bubble put up one of his great charts showing the downturn of the LA Case-Shiller numbers and we were greeted by some interesting responses.

"This analysis is of the entire LA greater county and does not reflect the returns on the westside."

"the overall average sales prices all over the best areas of the west side are up"

Lets see how 1040 4th Street #111 - 90403 (The Dorchester House) ended up doing. We previously featured this condo here.

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

SOLD: 2/29/08 - $450,000

This is a loss of over $100K, or 19%, in less than one year (and we aren't even including any selling fees or holding costs). Put in the 6% commish and you are almost at an even 25% loss. I wonder if the seller of this north of Wilshire and close to the water unit knows that prices are going up?

To play nice, we will feature a few more quotes which are more in touch with reality.

"Santa Monica is behind the rest of LA because most in Santa Monica can hold out longer than in other areas. This will change eventually. It could take some time." I'm not 100% convinced with respect to the ability to hold out longer although it seems very plausible. However, this person is 100% correct with their forecast for SM to lag. We have been saying this all along. Markets take a long time to turn over.

"...if a property checks all the boxes, it sells fast . Check out the 866 Princeton listing for instance. It spent no time on the market at all" Agree. Especially with SFRs, if it is in a good location on a good lot with a somewhat realistic price it will sell. This is a better response than blanket statements saying how special and immune SM is.

"The problem is the market has come down so fast that it really has not caught up with the elite zip codes of LA." I believe this is from the same commenter who made the first bullish comment (top of post).

Hopefully people learn something from this site. We are reiterating our previous ideas regarding the facts that this is a long cycle with years to go until a permanent bottom is found. Areas outside of LA got hit first, then east LA and less desirable areas started weakening. Then west LA started showing some modest declines. Then finally we started to see some short sales and REOs show up which produced losses in the outlaying areas of SM (and these were generally crappy condos). Then we started seeing evidence of weakness everywhere. Looking at simple median prices or averages can be misleading because of many factors such as upgrades since many of the houses and condos selling today have been upgraded substantially since their last sale. Single family homes priced well in good locations are still selling (even quickly at times) but prices have softened. Condos continue to get slaughtered and we are expecting to see more weakness in higher end townhouses and new construction over the next year or so. Buckle up.

"This is classic denial.
Not yet.
Not me.
Not that bad.
In this case, we're seeing the ever-shrinking "it's not my area" denial. First it's not LA. Then it's not Santa Monica. Then it's not my area of Santa Monica, then it's not my street, then finally, NOT MY HOUSE."

Face Lift on 25th

Above is an older picture of 1015 25th which was used for our first update on this property. Before going over all the specifics of the situation all over again, lets check out the face lift that is currently going on. See below

Chopped down the bushes, got rid of the decaying wood paneling and re stuccoed the front. Also looks like they are currently putting tiles on the front porch. Grew a little grass as well.

So as we saw last time, they couldn't get the place rented out at their asking price of $4,500/month and they have been sitting on this property since January 2007 when they bought it. They listed it for sale in January 2008 and have not cut the price. Wonder if this face lift will attract any interest? I guess this sort of makes those "Preliminary plans included for contemporary new home" less relevant.

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

We don't quite know what is going on here but it certainly seems like a more motivated seller would just save themselves the trouble and cut the price. Maybe still some delusion that the "spring" selling season will bring a phat bid. We believe in free markets here, so this seller has every right to sit on this vacant property for as long as they want. But I'm sure that all the young families on this block would like to see another family join them...at least they grew the grass back though...got rid of that sheik foreclosure lawn look.

90402 Lot Value + Location Discount *Update 1*

476 26th - 90402 was previously featured here a while back. It is an 8,700 sq ft lot but it is on 26th so it needs a major location discount. Lets see how that discount is coming along.

Listing History: 11/7/07 - $1,950,000
Reduced: 01/12/08 - to $1,795,000
Reduced: 03/21/08 - to $1,685,000

We are now sitting at 138 days on market. I don't know which photo is less attractive, this new one or the previous one (see last post on this property).

The only other true lot value situation that I am aware of in 90402 right now is 1140 San Vicente which is an empty 9,630 sq ft lot...but it too needs a location discount if you ask me.

And here is the pricing for it so far after 55 days on market.

Listing History: 1/29/08 - $2,195,000
Reduced: 03/12/08 - to $1,995,000

These two lot value properties alone don't necessarily prove anything but they add to the growing pile of evidence that values are falling everywhere, even in "the 90402". Thank you to the reader who e-mailed and alerted us to the second price cut on 476 26th.

"Honey I Shrunk The Condo"

This is a funny unit which we previously featured in September 2007. The address is 1517 Harvard #9 and it has followed the lead of so many others and is playing the relist game.

Remember, this unit is 242 sq ft!!!!!!!!!!

Previous Purchases:

12/17/2004:	$200,000
04/30/1998:	$56,000
07/15/1996:	$27,000

Old Listing History: 5/16/07 - $414,000
Reduced: 05/25/07 - to $395,000

New Listing History: 2/20/08 - $360,000

So here we have our seller still completely in denial and still incredibly greedy. When we first featured this unit, we hadn't seen any 2004 rollbacks. Now we have featured a handful of them. Of course, most of our 2004 rollbacks have been on marginal units (often small 1 or 2 bedroom units). Do you think this unit might meet our criteria? If so, doesn't it make it all that more pathetic that this seller is still listing the unit a full 40%+ too high?? At the current price they are still trying to get a whopping $1,488/sq ft. Maybe a few exterior photos could make the unit more attractive to buyers?

Hmmmm...thats not doing it. How about something more "alive".
Nope...a little grass (even the best stuff) doesn't validate a price of nearly $1,500/sq ft. I am still going to have to say that this is one of the most delusional sellers I have seen in a long time. We need to see this price cut to below $300K before this has any chance. I almost feel sorry for this agent as they are clearly wasting their time with this unit. Why would they even take this listing? Maybe they are also delusional? Again, situations like these show just how far we have to go before we can talk about bottoms in the cycle. We are years away. Tattoo that on your forehead.

Thinking (Wishing) Buyers Are Stupid

Address: 1524 Franklin #A - 90404

Details: 1 bed/1 bath 514 sq ft condo, $183/month HOA

Description: Your entry-level clients will absolutely love this one. It is a beautifully updated, staged, bright, and charming home. Move right in! This could make a sound investment property with the right ltv ratio. Excellent santa monica schools - go to schoolmatters.Com to research all three public schools. Close to colorado office buildings, and very convenient for commuting. Sold in 2005 for $445,000. Open house schedule: 3/23 2-5, 3/25 11-2, and 3/30 2-5.

Previous Purchases:

07/27/2005:	$445,000
07/22/2003:	$220,000
06/02/2000:	$115,000

Listing History: 3/19/08 - $419,000

There are so many sadly ironic things about listing I hardly know where to start. I guess we can begin with the "could make a sound investment" line. This is funny because the current seller has an out of town address listed on the ownership records. I guess they didn't have the correct LTV or something since clearly this "investment" of theirs didn't work out (oops, or maybe they just bought a crappy, tiny unit at the peak of the biggest bubble ever). As far as the agent talking about the LTV, they are barking up the wrong tree. It is the purchase price that matters here...

Second, we see that the agent is publicly acknowledging the fact that this is a 2005 rollback and using it as A SELLING POINT in the description. I don't have any problem with them doing this, but I find it funny none the less...and I haven't seen many other agents use this tactic (yet). Note to all agents out there: You will get my attention and likely get your properties featured on this blog if you make it easy on me and let me know about the rollbacks in your descriptions. Keep it up!

Ok so if you are a potential buyer you might think that you are getting a great opportunity to buy an entry level condo which could work out as an investment (especially since it is already a 2005 rollback; booya!).

But then there is this pesky other little detail that the agent has left out and which you would certainly want to know. Unit D in this very same building is a foreclosure currently on the market "looking for backup" after 2 price cuts and with a final asking price of $405,500. OK, no big deal right? The only problem is that Unit D happens to be a 2 bed/1.5 bath with over 350 more square feet. We have been watching Unit D as we featured it just 2 posts ago. So because this unit has several square feet of granite, it should compensate for the extra bedroom, half bathroom, square footage difference and price difference?! Good luck.

Third, this is the smallest square footage I have ever seen staged. Barely over 500 sq ft...

So does this seller think buyers are stupid? Are they just wishing upon a star? This little 500 sq ft unit is doing its best to look presentable but if buyers are doing any type of homework I hope they will think twice when looking at this listing. When looking at a unit like this one, I am almost certain that we could see late 2003 pricing at a minimum down the road. Looking at the sales history shows us that we would then be talking about $220K...even if the current seller did the upgrades here, I doubt they put that much in (how much money could surfaces on 500 sq ft be?).

So go ahead and buy this great investment property now. I'm sure your almost 50% potential downside will let you sleep well at night. On a broader level, examples like these show that we are not near a bottom. At a real bottom you won't have so many sellers in denial with wishing prices...the market will be determining fair value via forced sales and liquidations (short sales, foreclosures, long time owners who can afford to dump at marking clearing prices).

Property Taxes are a Bitch

Address: 2610 31st Street - 90405

Details: 2 bed/1 bath 1,216 sq ft house, 9,000 sq ft lot - "sold as is"

Description: Sunset park home with huge 9000 sq ft lot with room to expand for a remodel, or tear down and build new home. Sold as is condition. Listing agent/broker is owner.

Previous Purchase: 6/12/07 - $1,200,000

Listing History: 1/15/08 - $1,225,000

First off, lets give some credit to this seller/agent for making a prominent and very public disclosure that they are the owner. I know many here have disagreed with me with respect to thinking that a disclosure is a big deal but I like to see it. This agent/broker must have been studying too hard for the real estate exam and not paying enough attention to the rapidly deteriorating market conditions when they bought this place though...we jokingly suggest this because this agent/broker's license was issued in August 2007, just 2 months after the purchase was made. Bad timing...


Now lets think about taxes for a minute...Of course we don't personally know this seller/agent but if you are in the real estate business, late 2007/early 2008 was likely a tough time (even for the best veterans of the industry).

Installment 1			Installment 2
Tax Amount	$6,146.29		Tax Amount	$6,146.28
Penalty Amount	$614.62		Pen/Cost Amount	$0.00
Total Due	$6,760.91		Total Due	$6,146.28
Paid Amount	$6,760.91		Paid Amount	$0.00
Balance Due	$0.00		Balance Due	$6,146.28
Delinquent If Not Paid By			Delinquent If Not Paid By	04/10/2008

Here we can see that the very first property tax payment was late (thus generating a late fee of $614.62). The second one appears to still be outstanding and due in a few weeks...

This is a tough situation because as a potential buyer in this situation you clearly have the upper hand...but even if this seller wanted to lower their price to get it done, they might not be able to without getting the bank to accept a short sale (assuming the property has a high CLTV). Can anyone dig up some loan info?

I think they are dreaming with their price and would be lucky to get anything much higher than $1.05M. If you think I am crazy, take a look at foreclosure.com or foreclosureradar.com and check out all the NODs in the area and the foreclosure on 32nd. There is clearly distress in this hood coming down the pipeline which will bring with it lower prices in the future. Lastly, anyone live around here or have experience with this area? I am less familiar with this part of SM and would be interested in hearing the pros/cons and maybe a discussion of proximity to Ocean Park Blvd, the airport and the 10 freeway.

"D" Stands For Default *Update 1*

1524 Franklin #D was first featured here back in January 2008.

It is a 2 bed/1.5 bath foreclosure which has been on the market for a while. Lets recap.

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

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

*UPDATE*
Two further price cuts later and we are now at $405,500

Currently listed (as of 3/17/08) on MLS as "looking for backup"

So if the current buyer who is in escrow goes through and we assume he pays the current asking price of $405,500 then we are looking at a loss of 37%. Hopefully this buyer played hardball and will end up getting this property for under $400K. We will keep a watch out to see if this closes. Lets all give thanks to these patriotic knife catchers...we need them to drive hard bargains and set new, low comps for the neighborhoods.

"The 90402" - Part 6 (Canyon) *Update 1*

333 East Rustic Road was previously featured as a failing flipper back in December 2007.

Previous Purchase: 7/26/06 - $1,500,000

Listing History: 10/10/07 - $1,659,000

*UPDATE*
Reduced: 01/12/08 - to $1,599,000
Reduced: 03/14/08 - to $1,549,500

We are now at 159 days on market. This latest price cut was well overdue and it is certainly too small, but this flipper doesn't have a lot of room to work with before the losses really get big.

"The 90402" - Part 4 **Update 2**

222 7th #208 was last featured here in February.

Previous Purchase: 6/6/05 - $545,000

Listing History: 6/18/07 - $599,000
Reduced: 07/14/07 - to $589,000
Reduced: 09/05/07 - to $569,000
Reduced: 11/13/07 - to $529,000

Relist History: 1/18/08 - $495,000

Thanks to "anon" in the comments of our last post we have gotten the sale data.

SOLD: 3/13/08 - $465,000

Almost 3 years of ownership for this seller and they get to walk away with a loss of almost $100K. Real estate always goes up, especially in Santa Monica, especially near the water and especially in "the 90402"...Sadly for this new buyer, conditions in both the real estate market, capital markets and the economy seem to all be taking another massive leg down right now so I can imagine that this unit may still have another 10%+ of downside left before finding a level where it will stagnate for many years. At least they can brag to their friends that they got a 2004 rollback.

Freeway Foreclosure...Really a "Great Area"???

Address: 3121 Urban Ave - 90404

Details: 2 bed/2 bath 1,475 sq ft house, 6,168 sq ft lot - foreclosure

Description: Bank owned! Fantastic opportunity to own an updated home in santa monica. Updated gourmet kitchen with granite counter tops and travertine floors. Italian tile in updated bathrooms with designer fixtures. This open floor plan is flooded with natural light and perfect for entertaining. Mostly wood floors. There is a den off the living room with a fireplace. Great price and great area.

Previous Purchase: 9/26/06 - $1,390,000

Bank "buyback": 1/29/08 - $1,040,000

Listing History: 3/7/08 - $836,900

Now lets take a closer look at the "great area" in which this is located...

and in case you still can't see how close you are to the 10 freeway...


At this point I think we have seen that the "description" portion of many property listings have been stretching the truth...but this one goes too far. We'll see you at the first price cut.

Child: Mommy, what do I need to do to be successful and have a house of my own?

Parent: Well honey, you just need to work hard and get a great job. Then you need to scrimp and save up over $160K so that you have enough for a down payment. Then you need to make an income of almost $200K/year and you will finally be set...I mean, then you can go buy a great house like this one in a "great area" right on top of the freeway.

Right Next Door to "The Princeton"...

Address: 2708 Arizona #A - 90404

Details: 4 bed/2.5 bath 1,833 sq ft condo in 1988 building, $250/month HOA

Description: Spacious (nr 1,900 sf), 4 bedrm, 2.5 bath front unit with tons of natural light! Unusually open floor plan for t.H. Kitchen w/granite counters, built-in ss appliances w/viking stove, wine refrig. Living & dining w/maple floors, & wood-burning fireplace. Feels more like a sf home! Bright bedrooms upstrs w/over sized closets. Top floor: 4th bedrm/bonus w/skylights & huge closet; perfect for art/music studio! Opens to roof-top sun deck. 4-unit bldg w/low hods. Don't curb app. Cent ac, sm schools!

Previous Purchase: 4/30/03 - $467,500

Listing History: 2/7/08 - $949,000
Reduced: 03/14/08 - to $899,000

When we previously featured "The Princeton", we got the following comment from "anonymous":

"The unit in the next door building (3 bedrooms with a 4th or bonus room) while needing some cosmetic work is much much nicer and although listed in the $900,000 range can be acquired for $850K or less."

It seems like anonymous may be correct with respect to pricing because I don't know how this person still thinks that their property should be worth double what it sold for in 2003. We will keep watching for some more price cuts and we won't be surprised when they arrive...

As far as "The Princeton" goes, we have now had the same 3 units on the market for over 2 months with no sales. This has induced a recent (too small) price cut of $50K per unit (just under 4%). We have observed that motivated sellers (and properties that therefor actually sell in this market) generally cut by around 5% after 30 days and become more aggressive as time goes on. In this market, you want to get attention from the buyer and then force them to be worried that if they don't put in a bid soon (and near your current price), someone else will step up and buy it before another cut induces even more competing buyers to become interested. All that being said, I don't think that too many people are worried about not getting their chance to buy a unit at "the Princeton"; partly as evidenced by the following price cuts.

#101, #102 - Reduced: 03/12/08 - $1,290,000 to $1,240,000
#103 - Reduced: 03/12/08 - $1,275,000 to $1,225,000

I don't see any of these units selling at these prices...especially with this unit right next door offering similar specs for $350K less while still itself being priced too high...

Uh Oh....A 2004 Rollback In The Canyon (90402)

Address: 236 W Channel Rd - 90402

Details: 3 bed/3 bath 2,042 sq ft house on a 3,615 sq ft lot - "Exquisitely remodeled"

Description: Enchanting 1930's english cottage 1 bl. From the ocean. Exquisitely remodeled w/highest quality & details, 3 bd / 3 ba, master suite w/private office entrance and ocean views. Magical third floor bedroom. Gourmet kitchen w/limestone counters and top of the line appliances. Cozy den/media room opens w/french doors to courtyard garden w/ outdoor fireplace. Private deck w/hot tub. Santa monica canyon jewel.

Previous Purchase History:
4/3/06 - $2,300,000
10/15/04 - $1,960,000
8/1/01 - $1,180,000

Listing History: 10/22/07 - $2,399,000
Reduced: 01/19/08 - to $2,299,000
Reduced: 02/29/08 - to $2,125,000
Reduced: 03/11/08 - to $1,999,000

Everything is fine...nothing to see here...just a 2004 rollback on a single family house in "the 90402" although this is the canyon so it is not the formal 90402 (and this lot is TINY!). The canyon has shown weakness a lot quicker than the walk streets. Like we have always said...no area will be immune and we are being proven correct as we keep finding these rollbacks. Different areas show weakness earlier than others, but it is arrogant and also ignorant to believe that any area will be spared from the record real estate decline we are going through.

Canyon Flip - For Sale Or Rent

Address: 386 Entrada Drive - 90402 (for rent link)

Details: 2 bed/2 bath 1,044 sq ft house on a 7,800 sq ft lot - Flipped condition

Description: Mediterranean villa for your most discerning clients! Custom features throughout complete with ultra entertainment system, copper recessed lighting, steam showers with glass tile design, open sun patios, skylight, wood floors, custom kitchen cabinetry complete with self-closing drawers, onyx fireplace and newer a/c and heat, newer electrical and plumbing equipment. Ideal location nestled between the Santa Monica stairs, steps to the beach, restaurants and shops.

Previous Purchase: 3/31/06 - $990,000

Listing History: 2/4/08 - $1,999,000

Also For Rent: $6,750/month - "Fully furnished & ready to go!"

I don't know where this flipper gets off calling this thing a "Mediterranean villa" because there is nothing "villa"-like about a 1,000 shack with some new surfaces and coat of paint. Maybe we should start a new series called "pimp my shack" because this thing would be a great example to start with. I love how the description says "for your most discerning clients"...I would imagine that the most discerning clients would be almost offended by this gaudy box.

There have been more than a few flips in the canyon area which have lingered even after a few price cuts, so it will be interesting to see how this one fares. It is on a more crowded street and I have a very hard time thinking anyone will be ponying up this kind of cash for this place. And for the amount they are trying to rent it for, you can get a nice place north of Montana on a much quieter street. Check out this furniture which is included if you rent it...and the onyx fireplace...yikes. Oooh is that a mini bar in the right hand corner? Looks a little cramped.

Another Peek At How Cycles Work

1328 Franklin #3 is a 2 bed/2 bath 1,152 sq ft condo that we previously featured back in September. It was featured as an example of a unit which would be competing with the units in 1315 Franklin which we had also previously featured. Out update today comes because we have found out that 1328 Franklin #3 has sold...and because the previous sales give us a glimpse into what may happen with prices on units like these.

Previous Purchases:
3/25/93 - $170,000
7/24/97 - $143,181 (4.3 years held = $30K loss)

Listing History: June 2007 - $575,000
Reduced: 08/08/07 - to $555,000
Reduced: 09/12/07 - to $525,000

SOLD: 10/25/07 - $495,000

In our last comments section, Price Stout said:

"#110 is a great lesson in what a foolproof "investment" housing is.
June 1, 1990: purchased for $244,000.
May 26, 2000: resold for $229,000.
Lousy condos in lousy neighborhoods make renters look darn savvy."

and then also said:

"Another great data point: #107 appears to be the same size and sold for $220,000 in 1989 and then for $120,000 in 1995!
Real estate only goes up."

Well here we are with another example of a property which was held for many years which still took a loss. Another thing to note is that I doubt anyone would claim that 1993 was the peak of the market...most likely it was similar to today. Not the peak but certainly in the upper/middle portion of the decline. Todays purchase at $495,000 looks like a sub 5% cap rate so I doubt this is a true cash flow investor stepping up and buying here. For units like this, I expect values to continue to drop and then stagnate for a long time. All you single family house folks are going to have to keep waiting though as the bust takes a little bit longer to get to your properties...be patient.

How Foreclosures Bring Down Values

Address: 2519 Kansas Ave #109 - 90404

Details: 2 bed/2.5 bath 1,367 sq ft condo, FORECLOSURE

Description: Reo - foreclosure, yes this is a bank owned town home in santa monica (Distress Monitor insert - "OH SHOCKER!"). This two level gem, has upgrades and is ready to sell. Bank has priced this unit competitively. Open living room and kitchen, upstairs laundry, nice wood style flooring throughout the home. Light and bright. Call for more information, any offers wiill (how about a spell check?) be submitted on/or after 3/8/2008

Back in September 2007, allsouledout alerted us to this developing situation on Kansas Avenue.

"In the "lower end" condo realm, you might want to keep an eye on these two units in the same building:
2519 Kansas Ave (90404) (both units 2BR/3BA, approx 1380 sq ft)

Unit #110: LP: $639,900 DOM: 118, no price reduction last sale Feb '03 @ $355K

Unit #109: LP: $639,950 (tricky!) DOM: 76, no price reduction LAST SALE Aug '06 @ $630K prior sale Jul '03 @ $370K

This is an interesting one ... same building, looks like the same unit (although #110 listing says it's slightly larger), one seller with theoretically a lot more wiggle room in price, the other seller basically trying to break even. I wonder, given that #110 was listed first, if the owner of #109 woke up one day, ran the numbers and said, "wait - even if they get what they're asking, we would basically break even!" ... Who blinks first???"

So here we are six months later...and unit #109 obviously failed to sell as it is now being marketed as a foreclosure. Lets take a look at the numbers.

#109 Previous Purchase: 8/3/06 - $630,000

Failed to sell at $640,000 last year

REO on 1/16/08 - Unpaid Debt Listed as $544,890.31

REO Listing History: 3/5/08 - $549,950

So looking at the "unpaid debt" we can see why this is being priced where it is. Tricky. Anyways, this is a terrible location and not a very good neighborhood...and it is CLOSE to the freeway.

So we know that #109 is now being marketed as a foreclosure...and surely there will be more price cuts to come (how many people with $100K down payment and a 6 figure salary want to live here?). But what about unit #110 which was also for sale last year at the same time as #109?

Remember, these are exactly the same specs on these two units.

#110 Purchase History: 2/27/03 - $355,000

#110 Listing History: 5/24/07 - $639,900
Reduced: 11/09/07 - to $599,900

Wow...at 289 days on market, #110 needs to wake up. You just got undercut by $50K by the bank. You should still have equity to work with (you didn't HELOC all of it did you?) so it is time to fight back and undercut the bank. I would recommend that #110 reduce their price to $499,000 ASAP.

The clock is running. In early 2003 and late 2003, these units sold for $355,000 and 370,000 respectively. For a bad location like this, I would say a late 2004 rollback is justified at a minimum right now, and we are rolling back further every day. This is a great example of how foreclosures bring down values to where they should be. This REO is now forcing #110 to face reality. It makes it so that no buyer will be interested in #110 unless it is at least as cheap as the REO unit. So until we see a price cut, #110, you are ON NOTICE.

90403 - Stanford House

Address: 866 Stanford - 90403

Details: 3 bed/2 bath 2,028 sq ft house, 8,000 sq ft lot, "2003 expansion/remodel"

Description: Simple elegance. Move right into this classic 30's traditional, re-interpreted with a modernist flair. Original details such as wood floors, tray moldings and vintage wood paneling blend seamlessly with the modern elements of the 2003 expansion/remodel. Spacious, bright interior with 3 bedrooms + den + 2 baths and over 2000 sqft of living space. Remodeled eat-in kitchen & updated baths.

Previous Purchase: 8/22/02 - $900,000

Listing History: 3/6/08 - $2,075,000

First thing, these people have to be absolutely kicking themselves for not listing at this time last year. But other than that, they have done everything pretty well. They bought in summer 2002 and if we believe the 2003 date on the expansion/remodel, then they must have gotten to work pretty quickly on planning their upgrades (either that or said upgrades are more minimal in nature than we might otherwise think...I am leaning towards this until proven wrong).

It is hard to tell how much they spent on their upgrades and how much of a real "expansion" they did. Judging from the pics, the description, and the total square footage, I would estimate the expansion and "remodel" to be relatively minimal and more aesthetic in nature. With that in mind, remember that this house was built in 1939!

I have a bit of a hard time believing that they will get their asking price for various reasons, but one that comes to mind is that 2714 Washington was a much larger house (4,400 sq ft) which had to cut its price all the way down to $2.35M from an initially inflated $2.85M. If anyone has any info on whether it sold, please let us know.

Also, like Washington, Stanford has some traffic issues to contend with as it is used as a bit of a thoroughfare by speeding motorists. Unlike Washington, there are no bumps or dips on Stanford...only stop signs at Montana and Washington so I have seen plenty an asshole speeding down this relatively long, open stretch.

So here we go...asking almost $2.1M for a 2,000 sq ft house built in 1939 on a non premium street (my opinion). If we are comfortable with late 2002 prices not being too bubbly, we can guesstimate what this house should be "worth" without the excess of the bubble. If we say they spent $300K on all upgrades, we come to a price of $1.2M. We will then be generous and give an inflation + 1% growth rate (say about 4%) and get to somewhere in the neighborhood of $1.5M. Adjust your remodel costs to what you think is reality as I am just guessing here.

At this point though, due to the small amount of inventory in this area, I could see some unfortunate soul buy this for not too much under $2M...remember, these things take years to correct.

How About A 2004 Rollback On The Water?

2221 Ocean Ave #207 was first featured in December 2007 as our second ever 2004 rollback candidate (see post below this for an update on our first 2004 candidate).

Previous Purchase: 8/4/04 - $580,000 (90% financing)

Listing History: 9/8/07 - $699,995
Reduced: 09/23/07 - to $685,000
Reduced: 10/14/07 - to $625,000
Reduced: 10/31/07 - to $585,000

And now for the update:

Sold: 1/23/08 - $579,000

Wow, not only is this our second confirmed 2004 rollback, but this selling price represents a whopping 17.3% discount to the original asking price. While this is a one bedroom unit (and one bedrooms have shown more stress than 2 or 3 bedrooms), we have to recognize that this is a unit in a building literally ON THE BEACH. No, waterfront properties, even you are not granted "immunity".

Update On Our First 2004 Rollback

607 Ocean Park was first featured here and then here.

1. 607 Ocean Park is a 1,495 sq ft, 3 bed/2 bath townhouse
2. This townhouse was purchased on 1/6/05 for $1,000,000
3. 100% financing was used with both loans from "Impac Lending Group"
4. Townhouse was put on the market around 6/22/07 for $1,099,000
5. No sale was made, and the foreclosure went through on 10/3/07 with Deutsche Bank Trust 2006-Opt3 becoming the new owner for $832,150
6. Property was listed on 11/21/07 for $950,000

Now for the update:

Sold: 12/24/07 - $935,000

Another 100% financed property that couldn't sell and got foreclosed on. This appeared to be a pretty nice unit, close to the water...and now, it is an official 2004 rollback.

Idaho Preforeclosure - Lesson NOT Learned From Past Cycle *Update 1*

We featured 1105 Idaho #209 back in September 2007 when it was on the MLS being marketed as a short sale.

Purchased: 10/3/05 - $559,000 (100% financed by Indymac)

Listing History: 5/14/07 - $535,000 (121 DOM at date of post)

So did this 714 sq ft, 1 bedroom condo end up going through with the short sale?

Well...no. When we first featured this property we also noticed that foreclosure.com had a "notice of default" filed against the property. Hmmmmm...

Lender Forecloses: 1/11/08 - $432,000 (Deutsche Bank)

New Listing as REO: COMING SOON TO AN MLS NEAR YOU!!!

I would recommend taking another look at the initial post for this property as this unit has a very telling history. It was bought by someone in 1990 and then sold by that person in 1998 for a $37K LOSS. Thats right, by buying at the top, the 1990 buyer lost money even after holding for 8 years. As we have stressed over and over again, real estate is subject to VERY LONG CYCLES. I expect this current cycle to be no different.

Again, this is another example of something that a potential buyer in the area would likely find very interesting, yet it is also something that I don't believe many agents would either know about or disclose (especially if they were a selling agent). This is also why I can be so confident that we are in the EARLY stages of a long, drawn out decline. The very first wave of foreclosures is just starting to hit. These will drive down prices and add to inventory. Markets don't bottom when all the sellers can cling to their wishing prices and when the first few foreclosures are getting ready to hit the streets...Keep hording your money and your patience, you will need a vast supply of both.

"The 90402" - Part 1 **Update 5**

416 17th was featured here, here, here, and here (posts in chronological order).

To summarize, here is a time line of what happened to this flip.

Purchased: 10/18/06 - 2,042,000

Flipper then "remodeled and updated" with "an updated kitchen w/ new cabinetry and all new bosch appliances. New wood floors."

Listing History: 11/29/07 - $2,550,000

Also Listed For Rent: $9,000/month

Reduced: 01/04/08 - to $2,475,000

Rental Price Reduced: $8,450/month

Reduced: 01/18/08 - to $2,399,000

And now thanks to "anon", we have learned that a sale finally took place.

Sold: 2/26/08 - $2,360,000

This sale has not shown up on Zillow or Property Shark yet, but we are going to trust our data given to us and we will double check when it hits the public sources.

A couple of comments on this situation. First, this flipper took a decent loss when you factor in remodel costs and the hefty holding costs. Of course if you just looked at nominal prices here (i.e. the stuff that goes into "median price" statistics), you would be ignoring the holding costs and the upgrade costs and you would get something showing that this property had "appreciated" when in reality it did the opposite. Second, we are seeing the same trend where the property ultimately sells for less than asking price even after a few price cuts. While this flipper was still dreaming with their initial asking price, they weren't in complete fantasy land like a lot of other listings out there (selling price was only 7.5% less than original asking). It wouldn't have been that crazy to think that a house like this would have listed for around $3M not too long ago...so we give credit to this seller for not being in complete denial.

A lot of people still want to debate and argue about 90402 and whether it will hold up, etc. I find this exercise extremely boring as it has literally been beaten to death on this blog and on Westside Bubble. I will simply reiterate the thesis that this blog has laid out all along. There will be no area that is immune (and no, this doesn't mean that 90402 suffers only 10% of the pain of the other areas). Prices have already weakened in 90402 as we have been showing on this blog. The bulls and the real estate community have an extremely strong vested interest in protecting this area as it is their "sacred calf", so beware of all the excessive spin that has somehow become assumed "fact" to the believers.

New Photo And Listing Date ** Update 2 **

We first featured 311 Ocean #104 back in September 2007. The seller then played the famous "relist game" in October 2007. Then in November 2007, it appeared they were finally ready to accept a big loss when they made a big price cut. Lets take a look at the pricing history below.

Real Estate Agent Purchases Unit: 5/31/07 - $1,627,500

First Listing History: 6/9/07 - $1,799,000
Reduced: 07/10/07 - to $1,725,000
Reduced: 07/25/07 - to $1,695,000
Reduced: 07/28/07 - to $1,635,000

Second Listing History: 10/8/07 - $1,595,000
Reduced: 11/8/07 - to $1,495,000

SOLD: 1/9/08 - $1,450,000

Hopefully readers find it useful to look back to some old postings and see how much properties actually sold for. I believe that it won't take long for people to realize that there is a trend in place. The initial listing price is almost always a complete fantasy. Then come some price cuts (if they are small then they are nothing more than an insult). Once several months go by and at least 1 big price cut takes place, a sale may take place at yet a further discount to the already discounted asking price.

I think looking at these trends is important because it allows us to see what is really happening in the market. If you are a potential buyer in the market today, your real estate agent is not likely to tell you that the initial asking prices and even the prices after a few cuts are nothing more than wishing prices. You are unlikely to get the in depth looks at seller behavior that you get here. You won't be advised to bid 15% below an already reduced asking price. This is not really an attempt to bash real estate agents...it is more of a "buyer beware" and a wake up call to buyers today. Do your homework, be unrelenting, and if you insist on buying anything in this market, make sure you are lowballing by a pretty good margin...because as we will see over and over, it is often taking much LOWER prices to get properties to actually sell. The bulls were unrelenting on the way up with their obscene bidding wars, "range-based" pricing, and koolaid induced arrogance so it seems only fair for the rational buyer to play tough on the way down.

Ultra High End Relist...Now $1.7 Million Cheaper *Update 1*

Just another quick update on a closed transaction. We last featured 506 Palisades here.

Previous Listing: Sometime earlier in 2007 (Westside Bubble featured it in May) - $7,950,000

Current Listing: 11/1/07 - $6,295,000

SOLD: 12/6/07 - $5,900,000 (showing at least one mortgage for $3.92M - variable rate)

The guy who bought this looks legit (please do not post his name or any info here in the comments). Santa Monica is still a great place to live (especially when very wealthy) and sales will take place here and there as we have always maintained.

"The Princeton"...Luxury Amongst The Rent Control

Address: 1301 Princeton (#s 101, 102, 103) - 90404

Details: 3 newly built townhouses, 1,700-1,980 sq ft each, 3 bed/2.5 bath, $300/month HOA

Website: 1301princeton.com

Description: 3bd/2.5ba+top flr loft/office & patio, direct access private sxs garage, open lr-dr-fr w/fp, walnut flrs, gourmet kitchen w/bosch ss appliances, stone counters. Upstairs master ste w/vaulted ceilings, french drs open to patio balcony, walk-in closet & luxurious bath w/double sinks, kohler fixtures, jet tub & separate shower. 2 addt'l bd & 3/4 ba upstairs, powder bath downstairs, w/d hookups, 2 zone hvac, sec.Intercoms, 100 gallon water heaters, pre-wired for the millennium & more! Open sat & sun

"Anon" recently said, "Meanwhile "the princeton" is asking 1.3 each for 3 new townhomes..."

This reminded me to feature this new building (which I have also had a chance to walk through already). The picture above is a photo of the flier for the new units. As you can see, we have 3 relatively similar "Mediterranean townhomes"(as described by the website) which are all priced just under $1.3M.

When walking through these units I found myself wondering, "who would pay $1.3M to live on busy Arizona in 90404 and be surrounded by a bunch of dilapidated buildings filled with old rent controlled tenants". I have since thought about it some more, and I'm still wondering. Again, these are just my opinions, but I really don't like Arizona (way too much traffic everyday as all the commuters desperately try to get east in the afternoon/evening), the trees around here suck and drop those berries everywhere and also don't let enough light in, 90404 doesn't have as good as elementary schools, you are bordered by Wilshire (one block north) and Santa Monica (one block south), and you are living amongst a lot of renters in some ugly, old buildings...Oh, and I really didn't like the lay outs of these units and there was a bunch of wasted space on the very top level (basically a space where there wasn't anything) so I would think that usable square footage may be less than advertised.

Lastly, as far as the idea that "Arizona and the college streets was a haven of sanity from the run up in prices"...Well, I would say far from it. I believe these areas and a lot of 90404 in particular are due for big pain since prices got boosted up by speculating on condo conversions (old apartments with an added slab of granite) and as we have seen, this area was where a lot of weakness first started showing up.