Finally Sold

841 Franklin - 90403 (last featured here) finally sold. Remember, it was the overpriced view house which we found was also available for rent at $9,000/month and then reduced to $8,000/month. Here is the pricing history:

First Listed: 1/22/08 - $3,499,000
Reduced: 02/16/08 - to $3,150,000

Sold: May 2008 - $2,730,000 (22% lower than first listed)

Also, 476 26th - 90402 (last featured here) finally sold. It was the tear down on 26th street north of Montana which sat and sat for months. Here is the pricing history:

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

Sold: 05/29/08 - $1,575,000 (19% lower than first listed)

Houses will eventually sell if you keep bringing down the price. What a concept.

I Want a Refund...And Some Profit

Address: 517 14th - 90402

Details: 3 bed/2.5 bath (not sure/conflicting data), 2,063 sq ft house, 7,500 sq ft lot

Description: Spanish classic w/many charming details - decorative fireplace w/ batchelder tiles & arched windows in the living room, clerestory window w/wrought iron fleur de lis fixture in family room leading to the backyard, hardwood floors in many rooms. The bright kitchen has good storage & double ovens. The master suite w/ walk-in closet opens to the yard, with pool and spa. There is a formal dining room. The ca. Basement w/laundry and storage, could be a wine cellar. Baths have been updated.

Previous Purchase: 9/2/05 - $2,005,000

Listing History: 5/1/08 - $2,388,000

There are some discrepancies between the listing and zillow/property shark regarding number of beds and baths. I am inclined to speculate that this is a 3 bedroom with an office or something which is being counted as a (small) 4th bedroom.

This is another "can I get a refund" type listing. It is ironic that both these houses have the same address and are only one street apart!

One could argue that Euclid is a better (less busy) street -- and since these are both (near) tear downs on identical lots with identical addresses, that this listing on 14th is overpriced by almost $200K since the Euclid house is asking $2.2M.

The sellers here have held longer than the Euclid house -- so it is up to us to speculate what was going on here since the (peak of the market) purchase in September 2005 (talk about top ticking it!). Were they going to do a spec house here or major remodel? Did they have it rented out for a while while they were getting plans ready? Who knows...maybe a reader can shed some light on this for us.

It looks like they didn't put much money into it though...they claim that the baths have been updated. But look at the kitchen counters and floors and some of the doors and windows. This house is in need of a major upgrade or complete demo. Problem is that the new houses on 14th are having trouble even getting bids in the $3.5-$4.0M range and there are several still lingering for sale.

Given all of the above, I think anyone paying over $2M for this is overpaying...but it would not be terribly surprising to see this go for $2.1-$2.2 (so we are looking at an initial seller delusion factor of roughly 10% based on this estimate).

*Extra* - After doing a bit more digging, it looks like the couple that owns this house are both insiders. The "Mr." has a brokers license under what appears to be a commercial real estate firm named after himself. The "Mrs." had a salesperson license which expired in 1998. Also seeing at least $1.5M in CFC variable rate loans. Lastly, note the previous sale in April 2002 was for a meager $1.125M. Congrats to that seller who almost doubled his money in a little over 3 short years. It is not normal for properties to double that quickly...

Tell Us About You (some more...)

**Moved back up to the top per reader request**

Saw this post on Manhattan Beach Confidential recently and thought a lot of the comments were interesting.

I think it would be great if people could talk about their own situations with respect to Santa Monica real estate. It would be interesting to hear from those who have bought or sold recently as well as those who are renting, etc, etc.

Thought this would be a way to generate some good discussion and learn a little more about our readers...and I am way too busy watching American Idol to do a real post! (just kidding).

The Refinancing Disease

Address: 1921 17th Street #1 (don't see it on the MLS, but Zip Realty is showing it)

Details: 2 or 3 beds/2 bath (conflicting data), 2,219 sq ft condo

Description: This is a short sale! Beautiful and chic townhouse in the heart of santa monica! Within walking distance to the college, cafe and shops.

Previous Purchase: unknown (Property Shark shows 1996 but doesn't give a value - - Zillow shows 1991 for $285K).

Listing History: 5/17/08 - $575,000

At this point you might be thinking to yourself; how could this be a short sale if it was purchased at some point in the 90s for such a low amount?

Well, Property Shark is showing that AT THE PEAK OF THE BUBBLE (12/1/05), these people did a $680,000 re-fi (most likely cash out) with Option One. Option One is no longer in business because of stupid lending like this...

Of course, most re-fi loans are "recourse" which means that the lender could go after other assets of the defaulting borrower. Problem is, there are just too many of these in the pipeline and it isn't worth all the extra time, expense, and hassle.

But the bigger picture here is that the housing bubble was principally driven by excessively loose lending standards. It was rampant...even in Santa Monica. So while some may (incorrectly) say we are "immune" and "different", I would simply suggest that we went through the same speculative run up and we are currently going through the same painful fall as just about everywhere else. And for those who think houses in SM are different, get a Lexis/Nexis subscription and have a look at a few blocks of houses...you will be stunned to see how many people did cash out re-fi deals and HELOCs during the peak bubble years. As the jet fuel (loose lending) is removed from the once raging fire, we will continue to slowly but surely see prices leak lower until we are supported once again by tried and true fundamentals. This is how cycles work. And as always, remember that it is in the interests of just about everyone involved in real estate to try and persuade you that fundamentals don't matter and that it just may be different this time around (this is how transactions are driven and people get paid)...problem is, they are asking you to believe that trees grow to the sky.

"The 90402" - Part 6 (Canyon) *Update 2*

333 East Rustic Road was first featured here in December 2007. It was then featured again in March 2008 after having cut its bloated price a few times.

At the time, we said the following:
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.

Let's see where we are today.

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

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

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

*UPDATE 2*
Reduced: (date unknown) - to $1,350,000

There is no question the canyon is taking a harder hit right now than some other areas. For those who know the canyon area well, care to tell us why you think this is (aside from the obvious answers which are applicable everywhere such as too much leverage, speculation, crappy loans, fundamentals totally out of whack). Is it the non SM school district issue?

This listing is now 225 days old. These sellers have been chasing the market down -- albeit at too slow of a speed and from too high of a starting point. The potential loss here is now big. Sorry to be the bearer of bad news...don't shoot the messenger, but times have changed and the market still has a ways to go down.

Can I Get a Refund Please?

Address: 517 Euclid - 90402

Details: 5 bed/2 bath 2,179 sq ft house, 7,500 sq ft lot

Description: New to the market and mls 5/16/08. Enchanting 1920's spanish fixer on a private lot with mature landscaping and a large backyard. This is lot value and a great deal! Home features hardwood floors, 3 bedrooms downstairs, 2 bedrooms upstairs. Best priced home north of montana. Open sunday 5/18 and 6/1. Brokers open 5/20. Tenant occupied other showings must be scheduled mondays bet 11-2pm and thursday noon and 3pm. Sold 'as is'.

Previous Purchase: 6/7/07 - $2,250,000

Listing History: 5/16/08 - $2,195,000

Allow me to speculate. This house was purchased with the intention to do a major remodel or to build a new construction spec. Because it takes a while to get plans and permits all in place, the buyer decided to rent it out to generate some income in the mean time -- hence the "Tenant occupied" portion of the description.

Time goes on, and it becomes more and more clear that speculating (even in the holy ground of the 90402) is a losing proposition. Can I get a refund please?

"The Princeton"...Luxury Amongst The Rent Control *UPDATE 1*

This is somewhat old news and a couple people mentioned it here earlier, but I walked by these units the other day and saw the for lease sign. Its official.

We previously featured these three new units at 1301 Princeton here. They are now also for rent at $4,500/each

The units are all still for sale at $1.24M, $1.24M, and $1.225M after each having $50K reductions on 3/12/08

The developers are all desperate and are having trouble finding buyers for their new product at the current bloated prices. This has implications across the board. Excess inventory puts pressure on the overall existing condo/townhouse market. New units failing to sell also means that tear down multi-unit properties are put under further pressure because so few developers will want to be going forward with new projects right now. There are a bunch of duplex, triplex, fourplex properties out there on the market right now at bloated prices. The prices went up so much because of the value to be had via future development. Now that nobody is developing, these units will have trouble and fall quickly -- especially when any form of rent control is applicable. Potential purchasers of multi-unit properties beware.

And as I said last time, good luck to these developers trying to get one and a quarter million for these units on Arizona in 90404. The buyers just aren't out there at anywhere near these prices. But on the other hand, it might be cool to rent one of these just because you wouldn't have anyone else surrounding you!

Bailing Speculators in 90403

Address: 1018 Yale Street - 90403

Details: 2 bed/1.5 bath house, 7,900 sq ft lot -- teardown quality

Description: Great opportunity in prime santa monica! Traditional style home, 2 beds, 1.5 bath with library/office as possible 3rd bedroom. Formal dining room, spacious kitchen, living room and laundry room, large back yard with covered patio. The lot is in a rare, yet highly prized position of being on a double alley. Choose your option- move in now, remodel or tear down. Finished floor plans available for a 4,800 sq ft, 5 bed/4.5 bath house. No showings until tuesday 5/13.

Previous Purchase: 12/5/07 - $1,375,000

Listing History: 5/9/08 - $1,629,000

Here we have a seller that is clearly delusional. How do we know this? Well, they thought it would be a good idea to buy a teardown and draft up plans in December 2007 -- right as things were starting to get ugly. Could they really have thought that it was a good time to build a spec?

They are also exceptionally delusional for thinking they are entitled to a profit of $250K despite the fact that they have only held the place for 6 months during what is shaping up to be potentially the worst national housing slump since the great depression...And yes, we have already gone over the "but its different here" and the "westside is immune" crap already.

The last piece of information that shows just how ridiculous this listing is comes in the description.

"The lot is in a rare, yet highly prized position of being on a double alley."

Last time I checked, being on a double alley is a NEGATIVE and does not add any value. Come on Ellen, you are a veteran and should know better than to put in a line like this. Your assistant/temp/intern needs a talking to. Good grief, this seller must really be hoping they can find a fool...

On a macro level, when we see examples like this it shows that even up until less than 6 months ago, delusional flippers/speculators/developers, etc were willing to provide the constant "spec house" bid for tear downs. Good luck finding that now without a loss. The market will not be anywhere near a bottom until sellers like this one either come to grips with reality (or else find themselves forced into reality via a slow negative cash flow bleed via renting out their alligators).

If I were a potential buyer of this property, I would bid $1.3M and be goddamn serious about it.

Thanks to our reader that tipped us off to this.

Can't Escape The Bubble

Thought I could take a little break from the housing bubble...but that turned out to be harder than I imagined.

Posting will pick up shortly but should remain somewhat sluggish for a while. I will be working on responding to e-mails shortly. Thanks for all the comments.

Another Countrywide $0 Down Foreclosure

Address: 1225 Washington Ave #3 - 90403

Details: 1 bed/1 bath, 589 sq ft condo, 1959 building, $141 HOA dues

Description: Bank owned, Prime Santa Monica Location! Walk to Montana shops and restaurants. Hardwood floors, redone kitchen with granite counters,new cabinets, laundry inside unit, plus private garage for easy parking and extra storage. Property sold in AS-IS condition. All offers must be accompanied by a Countrywide Home Loan pre-qualification. See private remarks for Lock Box info. and REO details

Previous Purchase: 3/7/05 - $441,000 ($0 down, Countrywide loans)

Lender "Buyback": 1/28/08 - $393,638 (also the amount "owed" to Countrywide)

Listing History: 4/29/08 - $414,900

Countrywide is listing this unit for about 5% more than what they were owed by the delinquent borrower. If they were lucky enough to get their asking price, they would pretty much be covered as this 5% cushion would cover most of the selling costs. Unfortunately, I don't think they will get their asking price. Let's see some of the older sales on this unit to see where we might ultimately end up.

4/26/02 - $245,000
3/7/00 - $175,000

The current asking price is an early 05 or late 04 rollback. I would imagine for a unit like this, in this market, we might end up seeing a mid to early 04 rollback which would put the value of this unit somewhere in the mid to high $300K range.

This is yet another classic example of the bubble at its best. Someone bought at the peak of the market with $0 down and got both their first and second mortgages from Countrywide. There is the classic "redone kitchen with granite counters" and "new cabinets"...but sadly, this doesn't change the fact that you are looking at what is just a 589 sq ft apartment.

Another interesting thing to look at here is the property tax situation. The unit is listed as having a "defaulted tax roll" and I am seeing that they were behind by $13,743 but that this amount was paid on 10/25/07. Don't know if this amount was paid by Countrywide or not, but it appears that the last two payments (one due in December and one in April) have both been paid on time. So that is yet another fun aspect of being the foreclosing lender -- you get to pay the property taxes!

Lastly, I will be taking a break from blogging for a week or two. So when you don't see any new posts for a while, don't worry and think to yourself, "did WarChest get attacked by an angry, pitchfork and for sale sign wielding mob of real estate agents and desperate flippers?".

Freeway Foreclosure...Really a "Great Area"??? *Update 1*

We previously featured 3121 Urban Ave - 90404 back in March when the foreclosure listing first hit the MLS.

Remember, this is a 2 bed/2 bath "updated" 1,475 sq ft home on a 6,170 sq ft lot...

It is also literally right on top of the east side of the 10 freeway - Hence a major location discount is needed. Let's see how that discount is coming along.

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

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

Listing History: 3/7/08 - $836,900
Reduced: 04/05/08 - to $824,900
Reduced: 04/17/08 - to $809,900

Yes, we believe there was some sort of fraud here at some stage...I mean, look at this location and tell me who in their right mind would pay nearly $1.4 million for this?!...and what stupid lender would loan against this collateral at such an obviously bloated price?!

Desperate Flippers - For Sale or Rent

Address: 1123 Berkeley Street - 90403

Details: 3 bed/2.5 bath 2,000 sq ft flipped condition house, 9,000 sq ft lot

Description: Beautiful and classic traditional in the heart of santa monica. Light and bright and meticulously maintained with many custom details throughout. Gourmet kitchen with granite counters and stainless steel appliances. Features hardwood floors throughout, recessed lighting, french doors, living room with fireplace and large master suite. Marble floors in updated bathrooms with designer fixtures. Expansive 60 x 150 lot.

Previous Purchase: 8/10/05 - approx $1.45M (need help with exact value)

Listing History: 4/14/08 - $1,798,000

Also Available For Rent: $7,500/month

I have not been inside this house but from the photos, it looks like the upgrades are relatively cosmetic in nature. The lot is large which is certainly a plus, but I don't believe that it outweighs the negatives here. This house is only 6 lots away from that ghetto grocery store. I know this area well and yes, that grocery store has some shady folks hanging around there and parking their RVs in the parking lot. The second negative is the fact that this street has a light on the end of it and is busier than some of the others. Of course the biggest negative is the bloated price but that is obvious...

The trend of flips and semi-flips (2 year holding period or so) failing to sell at a bloated market price is here. The sellers are figuring this out and are thus simultaneously listing their overpriced, granite covered shacks for rent at astronomical prices. We recently featured the overpriced view house on Franklin trying to do this. Westside Bubble recently did a post on the "Ashland Architectural" and I see it is also listed for rent (as it was last year when it was listed for sale and rent simultaneously). We have featured several others on here and we are seeing more and more cases of people trying to rent out their alligators to try and do anything to stem the cash flow bleeding.

This might be a viable and smart strategy if the market was going to be coming back later this year or even next year. But sadly, all signs are pointing to a more prolonged downturn...and besides, real estate cycles don't turn that quickly. Didn't any of these westside speculators study a little market history before making their "investments"?

I'm feeling charitable so I will give some free advice to this seller and all the others in similar positions:

1. List the property slightly above where you think it might actually sell for.
2. If you receive any offers near your listing price, accept them!
3. You likely won't have #2 happen so you need to cut the price by 5-10% after 3 weeks on market to show you are serious.
4. If you still don't get anything near your asking price, you need to ask yourself how you want to take your loss - a slow bleed (renting out, holding on market for your wishing price, etc...all the while your property is further depreciating) - or a quick band-aid rip (reducing further to find a real buyer).
5. Here is the important part: I believe the band-aid approach will turn out to save you money in the long run - its just harder to do, both mentally and emotionally.