Speaking of 2003 Rollbacks...

Address: 1141 26th #A - 90403

Details: 1 bed/1 bath 647 sq ft condo, $285/month HOA

Description: Great starter condo N. of Wilshire, updated and in move-in condition. Located in a wonderfully maintained complex with beautifully landscaped courtyard. Unit boasts nice kitchen cabinets, tiled countertop, backsplash and newer appliances. Hardwood floors and crown moldings throughout. Across the street from Starbucks Coffee and only minutes from UCLA, Montana Ave., Water Garden and ocean. HOA includes EQ insurance and water.

Previous Purchase: 4/15/04 - $410,000

Listing History: 4/1/09 - $399,000

SOLD: 5/22/09 - $385,000 (only "active" for 7 days before going into escrow)

As has been the case for pretty much the entire decline phase of the cycle, poorly located, one-bedroom properties are leading the way down. One of the main goals of this blog is to try to be forward looking. Here we have a 2003 rollback, but this is a one bedroom unit which is in a very poor location (much worse than 17th street).

I believe this type of rollback is a sign of things to come (with a lag) for the condo market as a whole. We are still not very close to 2003 rollbacks on SFRs but I don't see why we can't get there eventually (again with more of a lag).

Congrats to this seller for pricing aggressively and getting this thing into escrow in a week.

2005 Spec House Breakeven

Address: 734 22nd - 90402

Details: 5 bed/4.5 bath 4,100 sq ft house, 7,550 sq ft lot, 2005 construction spec

Description: REDUCED OVER $500,000! Built in 2005. Two story romantic Hampton's classic home features 5 bedrooms, 4.5 baths + formal dining room, high definition wireless sound system throughout, hardwood floors, large, sun-filled rooms + Home Theatre wiring! The gourmet kitchen + family room overlook a Loggia with expansive seating area ideal for outdoor entertaining, with fireplace, viking grill + refrigerator.

Previous Purchase: 10/20/05 - $3,395,000

Listing History: 10/21/08 - $3,799,000

Reduced to - $3,678,000

SOLD: 5/28/09 - $3,400,000

Congrats to this seller, I think they got the better end of this deal and I am surprised a deal got done considering the small price cut(s) and this "only" being a 2005 rollback.

90403 Townhouse Under $1M Valuation Exercise *Update 1*

We last featured 1015 17th #4 back in January.

Details: 2 bed/2.5 bath 1,674 sq ft townhouse, 1980 building, $251/month HOA

Previous Purchase: 3/8/05 - $860,000

Listing History: 11/6/08 - $839,000

Reduced down to $799,000

SOLD: 5/28/09 - $750,000


This is $448/sq ft but there certainly is a location discount going on (17th is busy). However, looking at this sale price, we see that this is a solid 2004 rollback at least. We have seen many data points which show 2004 rollbacks and I still think 2003 levels are possible by later this year.

For those of you curious about where this thing was in 2001...

1/5/01 - $450,000

I don't know if we will get back to that type of value on a nominal basis, but I certainly don't think that $750,000 is very close to a bottom for this unit.

South of Montana New Construction *Update 4*

We last featured 1024 23rd less than a month ago. This is a 4 bed/4.5 bath 3,500 sq ft spec.

Lot Purchase: 8/8/07 - $1,445,000

Listing History: 10/8/07 - $2,975,000
Reduced: 11/11/08 - to $2,795,000
Reduced: 01/06/09 - to $2,695,000
Reduced: 04/01/09 - to $2,595,000

SOLD: 5/22/09 - $2,425,000

Keep reducing prices and buyers show up.

How Come No One Is Mentioning...

Address: 402 20th - 90402

Details: 5 bed/5.5 bath 5,300 sq ft house, 8,940 sq ft lot - new construction

Description: BEST DEAL IN TOWN, NEW CONSTRUCTION! Prime corner lot in Gillette’s Regent Square. N of Montana. This 2-sty brand new home features hi ceilings, hwd flrs & an open flr pln for perfect living. Enter thru grand entryway to spacious formal LR w/FP & FDR full of light. Gourmet kit has top-of-the-line appliances. Fam rm opens to lg bkyd. There are 4 bedrooms upstairs & a lg ofc/bedroom downstairs. Each bedroom has a full bath. Mstr ste has hi ceilings, huge closets, FP & balcony. Will consider lease.

Listing History: 10/30/08 - $5,495,000

Reduced several times - to $4,288,000

SOLD: 5/20/09 - $4,000,000

I saw that my last post elicited some "feedback" from someone who wanted to know about some other properties which have recently sold but which I have not had a chance to post on. I started with the very first one that they listed (which was 402 20th).

Here we have a high end spec house which obviously had a wildly delusional seller at first. $5.5mm? Good joke. However, we have to give a bit of credit to the seller because it appears that the re-list game was NOT played (correct me if I am wrong), and the seller continued to cut the price until they got down to a market level (instead of the fantasy level they started at).

So now the question is, how do we view such a data point? Is this sale a sign of a healthier than commonly portrayed market? Or is it another sign that we have already experienced a material decline in prices with the potential for more?

Let's start with price. The fact that they had to cut by $1.5mm from original asking is actually somewhat immaterial. Any fool can price his house wherever he wants (although in theory there must also be an equally foolish or desperate real estate agent willing to attach his or her name to the listing so the pricing shouldn't be too crazy unless the agent is OK with completely embarrassing themselves). So this seller could have listed at $8mm and we would have said the house was down 50% from listing...I think you can see my point.

What we need is a comp from a few years ago in order to really see what is going on with prices...luckily, I happen to have toured a house with similar characteristics about 2 years ago on 20th street. Hot damn!

635 20th was a brand new spec house which sold on 3/29/07 for $4.6mm.

However, if we look at the stats, it is a 4 bed/5.5 bath 4,683 sq ft house on an 8,940 sq ft lot.

So this house has one less bedroom and about 600 less square footage than our recently closed 402 20th.

So if we add it all up, we have an unadjusted $600k decline (13%) over two years. If we adjust for square footage (we will ignore the bedroom difference to be generous), we are going from $982/sq ft to $755/sq ft which is an adjusted decline of 23%.

Both houses are on 20th street, both are on corners, both have the same lot square footage and both were (equally gaudy) new specs. Pretty good apples to apples over a 2 year time frame -- exactly like my last post about the "green" apples to apples decline of 22% in a year and a half. You getting the picture now?

Now that we have price out of the way, let's talk about transactions. I have said all along that we should expect transactions to take place during this bear market. The pace has obviously slowed (substantially), however the mere fact that some pretty high end properties are selling here and there doesn't really tell us much. Overall volume is what counts and it is down substantially -- so crowing about a handful of transactions for big dollar amounts during the seasonally strong period of the market doesn't mean anything if you don't also compare the overall volume to years past...Also, as for this blog, I think people need to remember that this is just a little hobby for me. I don't have the time (or desire) to feature every transaction. However, what I attempt to do is present a true look at where the market currently is and where I believe it is likely to go (to the extent I believe such speculation is warranted).

Actually, since we are touching on transaction volume, I suggest you read this which was posted today on Calculated Risk. To state the obvious, most/almost all segments of the Santa Monica market would be classified as a "high-end" coastal type market which has NOT seen the same robust pickup in transaction volume of the inland areas. I have said before that I believe many of the hardest hit areas which are now seeing substantial volume increases are either at or very near a market bottom. Probably no appreciation coming for (quite) a while in those areas, but the downside has pretty much exhausted itself and real market clearing activity en mass is setting a floor. I don't think we should expect things to play out in the same fashion in high end ares like SM necessarily however. I have warned against bears drinking kool-aid...we likely won't see foreclosure rates anywhere near those in the hardest hit areas and we also likely won't see similar extremely large nominal price declines.

In conclusion, I think examples such as this one show us conclusively that prices have fallen over at least the past two years for spec houses -- and the declines seem to be somewhere in the 20% neighborhood. With a decline of 20% from an early 2007 price, I think it is fair to say that we are seeing 2005 or 2006 rollbacks here...

Given the "lagging" nature of high end areas (like 90402 and much of SM), and given the growing inventory without a corresponding surge in sales, I think it should be fairly clear that we should expect to still see some more price declines in the near term. After that, you get into a highly speculative game where some think further sharp declines will occur while others see a "leveling off" or even a modest rebound (highly unlikely in the short/intermediate term in my opinion).

Finally, although I know I am guilty of taking some shots at common real estate agent practices, I think the bashing is old ("so 2007"). I will likely be moving to delete senseless bashing and name calling going forward.

High End "Green" Apples to Apples Decline *Update 1*

We last featured 133 17th about a month and a half ago. See the previous post for more details (in short, this is a new spec home being marketed as "green").

Listing History: 10/30/08 - $4,800,000

Reduced: 02/21/09 - to $4,495,000

Reduced: 03/04/09 - to $4,199,000

Re-Listed: 4/30/09 - $3,695,000

When I last featured this house, I said the following:

At over 160 days on market, more than a month since the last price cut, and additional spec house competition now on the rapidly declining market, I think it should be pretty obvious that this property needs another good price cut and that they won't get any bids that start with the number "4".

Kudos to the seller for actually reducing the price and showing that they want to sell. However, shouldn't a buyer (and/or their agent) who is looking to spend $3mm+ on a home be able to see right through the re-list game being played here? If I were a buyer looking at a listing such as this where a re-listing strategy was being employed, I might actually take offense that the listing agent(s) and/or their seller(s) would think that I would be be either a)too stupid to see through this minor attempt at obfuscation or b)too lazy to conduct even a minor amount of due dilligence. I don't really mean to pick on this particular seller or their agent(s)...it seems the re-list game is very popular across the board. Rather, I just want to highlight how silly and even potentially counterproductive I think it may be.

Oh and one more thing...since the original post was about an "apples to apples" comparison. If we now look back to the comparable 533 23rd from the last post, we can see just how much value has eroded over the past year and a half. 533 sold on 11/21/07 for $4,745,000. Here we have our very comparable 133 17th now asking $3,695,000. Assuming 133 17th can actually get $3.7mm, we are looking at a decline of $1,050,000 (22.1%) in a year and a half.

Let Me Dust Off My Crystal Ball...*Update 2*

We last featured 1021 12th #104 back in September 2008 when the foreclosure listing first popped up on the market.

Original Purchase: 4/7/06 - $530,000

Originally Listed: 7/30/07 - $585,000
Reduced: 08/21/07 - to $575,000
Reduced: 09/07/07 - to $500,000

Trustee's Deed Upon Sale: 5/13/08 - $374,250 (Morgan Stanley Trust is the buyer)

REO Listing History: 9/4/08 - $384,500

Reduced ?? times - to $299,900

SOLD: 5/18/09 - $270,000 (49% decline from 2006 purchase)

Remember, this is a 1 bed/1 bath unit under rent control (not sure of current rent) and the description for the property said the following:

Cash offers only due to 7 out of 23 units are owned by 1 entity.

Also remember, this was originally an attempted short sale when they first listed it in 2007 at levels 50% above the current sales price.

90405 - Townhouse Rollbacks **Update 2**

We first featured 2615 6th #L back in September 2007. Shortly thereafter, we did an update in October 2007 when we found out it was also available for rent @ $3,500/month.

Remember, this is a 2 bed/1.5 bath 934 sq ft townhouse sporting bubble accents such as granite, stainless, etc.

Previous Purchase: 6/2/05 - $791,000

Listing History: 8/22/07 - $799,000

Re-Listed: 1/15/09 - $781,250
Reduced: 03/05/09 - to $739,000

I don't know if this is still available for rent but according to the description, the "seller says sell". We'll see what happens. Another price cut would show us that the seller really wants to sell. Actions speak louder than words.

Short Sale Goes Through In 90405

Address: 2450 Euclid - 90405

Details: 4 bed/3 bath 2,239 sq ft house, 6,750 sq ft lot, "short sale approved by lender"

Description: Price reduction! Short sale approved by lender - Agents please see private remarks. Sunset Park Spanish built in the 1920's. LR rm features wd flrs, high ceiling, cozy fireplace & large picture window. Sep formal diningrm leads to a bright kitchen & breakfast area. 3 bdrms downstairs w/ generous closet space. French drs lead to deck & grassy yard w/trees.Large master bdrm upstairs w/ oversized bath tub, separate shower & walk in closet. Roof top deck w/ partial ocean views. Bonus room/office.

Previous Purchase: 12/22/06 - $1,400,000

(Incomplete) Listing History: 9/26/08 - $1,375,000

Five?? price cuts later: Reduced to $1,048,000

SOLD: 5/12/09 - $1,068,000 (23.7% decline from late 2006 price)

Please see Westside Bubble's original post and comments for more details and commentary.

As many of you know, I have previously advised staying away from short sales for the most part as they can be tough to actually get done since many lenders have remained too delusional for too long. In many cases, I stated that you would likely get a better deal just waiting for the foreclosure. Here it looks like the lenders were willing to actually take a market bid. I see this as a positive for the pool of buyers out there, a positive for the lender (likely avoids further costs and market depreciation via the foreclosure route), a positive for the former owner (better to have a short sale against you than a foreclosure), and a positive for the overall market. Working through distressed inventory and distressed owners will still take quite some time, but I think it is encouraging to see short sales go through...One can only hope that it means more people (and lenders) are getting to the "acceptance" phase of the housing bust.

247 20th -- 90402 Foreclosure

You can see photos + info here. Thanks for the link.

Previous Purchase: 4/13/03 - $1,500,015 (per Zillow...anyone want to verify?)

Bank Buyback (US Bancorp): 4/21/09 - $1,570,210


So now we just need to wait for the REO listing. Anyone have any other info on this for now?

Apples to Apples -- Far From 2002 Pricing

Address: 838 10th #2 - 90403

Details: 2 bed/2.5 bath 1,300 sq ft townhouse, 2002 construction, $600/month HOA

Description: Prime location near montana ave. Hello babalu & father's office. Quality construction. Open floor plan & high ceilings. Hardwood flrs thru-out. The kitchen has custom cabinetry, granite counters & stainless steel appls & opens to the dining room that flows into the living room which features a fireplace, built-in sound system & dual access to a lush patio. Master ste has walk-in closet & luxurious bath. 2nd bdrm ste has beautiful tiled bath. Inside laundry, 2-car garage w/direct access & more.

Previous Purchase: 5/6/02 - $549,000

Listing History: 4/28/09 - $879,000

This asking price is 37.5% above the mid-2002 price and due to the construction being done in 2002, we have a nice, apples-to-apples situation.

I don't really have a great read on how close to "market" this current asking price is (I would need to do a bit more work), but the point I wanted to make here is that I have seen quite a few condo/townhouse situations recently where current asking prices are about 35% or so above 2002 prices. Obviously, SELLING prices are really what count, and I have still seen a few good examples where the recent selling price is roughly 30% above 2002 prices.

I recently featured a 1 bedroom which was getting close to a late 2003 price...I think the rest of the market is headed in that direction. But we are clearly still a ways away from 2002 pricing. I think we have a good shot of getting there on a real basis and will likely get there on a nominal basis (at least for weaker quality, poorly located, and/or 1 bedroom units).

But other than speculation like this (which I try to avoid for the most part), there isn't a ton going on right now. I also want to mention that I have become very busy lately and will likely be posting much more infrequently than I would like for the next month or so. As always, please feel free to e-mail if you think I am missing something that needs to be featured.

Fail

Address: 2246 Cloverfield - 90405

Details: 3 bed/1.5 bath 1,338 sq ft house, 6,750 sq ft lot, comes with plans for remodel

Description: This enchanting spanish home is located on a tree-lined street in sunset park. Gorgeous home with 3 bedrooms 2 bathrooms that retains all it's original charm - coved ceilings, wall sconces, large picture window in living room, fireplace & hardwood floors. Very light & bright, built-in bar with french doors that lead to entertainers deck & hot tub. Parking for up to 8 cars (or rv, boat, etc.) with easy direct alley access. Finished 2 car garage could be used as an office/bonus room. Large grassy backyard with trees & enough room for a pool. Blueprint plans for a multi story family residence have been prepared and ready for city approval. Move in now and build later.

Previous Purchase: 7/24/07 - $1,080,000

Listing History: 4/26/09 - $1,149,000

Have these jokers no shame? I have spent a good deal of time showing what types of sellers you want to avoid...this is another great example. This thing needs to get well under $1mm to have a shot at selling. Finally, isn't this street a bit busy and doesn't it have speed bumps? Location discount may certainly apply (when trying to compare this to other semi-lot value type situations.

Near 2003 Pricing - Getting Closer to Rental Parity?

Address: 423 Idaho #3

Details: 1 bed/1 bath 661 sq ft condo, 1968 building, $208/month HOA, "remodeled"

Description: Attractive, remodeled condominium home in a choice location apprx. four blocks from the Ocean, "The Stairs" and The Promenade. Hardwood floors, designer tile, newer stainless appliances. Gated and secure parking. Charming ten unit building one block from Montana Avenue.


Previous Purchase: 2/12/04 - $400,000

Listing History: 3/5/09 - $449,000

SOLD: 5/1/09 - $430,000

First off, we should acknowledge the seller for pricing at a near market level and quickly taking a bid. This thing was only on the market for 12 days before going into escrow. Good job.

Second, I would like to know if the "remodeling" of this unit was done before or after the 2004 purchase. If the remodel was done after the purchase in 2004, then this could be looked at as a very early 2004 or late 2003 rollback. If it was done before the last purchase, then this is closer to a mid 2004 rollback.

Finally, I would like to ask readers here what they think about this price level in comparison with rents. I think a place like this would be able to command a rent north of $1,800. So if we look at $430K at 5%, we get $1,800/month of interest. Then add in $200 for HOA and another $400 for tax and you are at $2,400/month + principal. Finally, you need to think about the tax break...that probably gets you down closer to $2,000 + principal.

I know for a fact that rents are under a good deal of pressure right now. I think they will continue to be pressured for a while longer. So maybe the rent on a unit like this goes down closer to $1,500/month...but it looks like a nice enough unit (compared to many of the crap rentals out there) and it is north of Wilshire and near the water. You aren't going to be able to rent this type of unit in this location for $1,000...

The sale before the one in 2004 was on 8/2/02 for $320,000.

I still think that this unit probably declines in value for a while longer and it then likely stays fairly stagnant in price for a while as the economy starts recovering and inflation heats up -- and while I personally would never buy a 1 bedroom condo, I am curious to see what you guys think of this rent vs buy comparison and how much more you think this place (and its comparable rental rate) declines.