Comments Change

So I've been meaning to do this for a while now...

I've rolled the idea around of getting rid of "anonymous" commenting since almost the inception of this great blog. It has been over 2 years now, and we're going to try it out. Rather than list out all my reasons and give a pompous speech, I'll just say that I hope going in this direction fosters a better overall community on this blog.

Finally, I've also changed the comments format so that the comments pop up in their own separate box. I think this might be better than the old format which took you to a separate page. Now, you can see the original post (in all its glory I might add), and comment at the same time. The text box where you type in the comments box is now below the last comment as well which might help if you are responding to a fresh comment in a long chain of comments.

I hope everyone finds these changes acceptable and I hope this might help build a bit of a more of an enjoyable environment on this blog.

I Want a Refund - 90405 *Update 1*

I last featured 2208 Ashland back in March 2009.

Details: 2 bed/2 bath 1,254 sq ft house, 7,000 sq ft lot, "upgrades and improvements"

Previous Purchase: 11/16/07 - $1,449,000

Listing History: 2/4/09 - $1,449,000
Reduced down to - $1,399,000

SOLD: 9/28/09 - $1,380,000



After 177 days on market, this thing went into escrow and just closed. Note that not only is this a rollback from the previous purchase, but the description stated the following:

Too many upgrades and improvements to list since last time on market.

So it looks like the seller sunk a chunk of money into this thing which completely vaporized for them. I still don't quite understand the rationale of buying this at this price point though...seems much too expensive for what this is and where it is located.

Ocean Ave Rollback

Address: 515 Ocean Ave #406S - 90402

Details: 2 bed/2 bath 1,490 sq ft condo, $915/month HOA, 1976 building

Description: Back on the Market. Major reduction. Best value on Ocean Avenue! Elegant living on Ocean Avenue. Two bedroom, two bath condo with partial ocean views from living room & bedrooms, open kitchen, great flow for entertaining, hardwood floors, spacious rooms, plantation shutters, high ceilings, lots of closets, light & bright. Across from Palisades Park & near Montana Avenue, Third Street Promenade, shops & restaurants. Full service building with 24 hour concierge, pool, spa, gym.

Previous Purchase: 11/23/05 - $1,275,000

Listing History: 11/22/08 - $1,450,000
Reduced at some point down to - $1,225,000

SOLD: 9/25/09 - $1,190,000

This segment of the market (high end $1mm+ condo) has largely not participated in the mid 2009 rally. Additionally, there have been a good number of units on Ocean Ave for sale and for rent for quite some time now. Very high DOMs are common (222 in this case), and few sales are taking place. If you are in the market for one of these types of units, you are in the catbird seat. If you are a seller...well, not so much.

Note the very high HOA fee of $915/month. These buildings on Ocean are generally full service and you as the owner thus get to pay a "full service" HOA fee. Similar to my last post, this type of property requires a somewhat unique type of buyer.

Beach Bungalow Rollback

Address: 134 Hart - 90405

Details: 2 bed/1 bath 1,069 sq ft house, 2,357 sq ft lot, 1946 construction

Description: Rare vintage California bungalow in historic Ocean Park Beach neighborhood. Two bedroom, one bath craftsman filled with the old world charm of Nantucket. Enjoy the ocean breeze from the rooftop deck and the amazing sunsets as you relax in the swing on the quaint front porch. Sun filled rooms, beamed ceilings, private garden & yard. Steps to sand, shops & cafes. Come live at the beach!

Previous Purchase: 7/28/05 - $1,495,000

Listing History: 6/9/09 - $1,398,000

SOLD: 9/24/09 - $1,398,000

I took a look at the photos and this place looks kinda neat. Certainly needs a unique type of buyer, but interesting location, nice roof-top deck, etc. I don't need to list the negatives, but obviously they are there too, so I don't mean to be too rosy...

On to price. Good job by the seller of listing at a realistic price. This was on the market for a little over a month before going into escrow -- so I'm not sure why the buyer wasn't able to get a little bit of a concession on the final selling price, but still, this is a good early 2005/late 2004 rollback. Given the strength seen in other segments of the market (condos, conforming loan amount properties), it is good to see that at least some buyers out there aren't buying the hype (literally) of the temporary market bounce.

Condo Bounce Continues

Address: 1322 Harvard #B - 90404

Details: 2 bed/1.5 bath 1,444 sq ft condo, 1974 building, "remodeled", $280/month HOA

Description: Lovely Santa Monica Townhome. 2 levels remodeled w/2 patios. Garden entry, bamboo floors, gourmet kitchen with beautiful cabinets, glass tiles and sub zero. Laundry and powder room downstairs, 2 bedrooms upstairs. Master with high ceilings and green belt views. Central A/C and heat. Gated garage.



Previous Purchase: 8/4/06 - $570,000

Listing History: 5/18/09 - $649,000
Reduced at some point to - $629,000

SOLD: 9/3/09 - $629,000

This is a continuation of the temporary stabilization/rally in pricing and activity which I have talked about here for some time now. The flurry of activity has been especially prevalent in lower priced units and especially lower priced condos (like this one). However, this example looks especially shocking. Somebody came in and paid up above a late 2006 price and it looks like some minor interior remodeling was done. Geeze...The best thing I can say to those of you in the market to buy a condo is to wait til this madness dies down. Even if you are bullish and think prices have largely stopped going down for the foreseeable future (I don't agree with this), there is no point competing with people like this buyer. Prices for this type of unit were recently in 2004 territory and on their way to 2003 levels early this year. I would expect weakness to show up again as we get into the winter season.

Flipper(s) Getting Pasteurized *Update 1*

I recently featured 2641 32nd here.

Previous Purchase: 9/11/07 - $1,070,000

Listing History: mid 2008 - $1,499,000
Reduced later in 2008 to - $1,399,000

Re-Listed: 8/3/09 - $1,199,000

Withdrawn: 9/17/09

So just three days after it was featured here, it looks like someone stepped up and LEASED this gorgeous pasture as the listing description now states: **Property has been leased and no longer on the market.

Interesting. So now this flipper is 0 for 2 on this thing. They tried to sell it for their bloated flip price in 2008 and failed. It appears they then rented it out for a year. Fast forward one year later to today and they have failed yet again to sell for what was still a bloated price. Once again it has been rented. So should we expect to see this flop back on the market next summer? I guess we'll add this underwater property to the shadow inventory...In the mean time, the flipper will likely be slowly bleeding cash as there is no way this property is even close to cash flow break-even. I'll go on record and predict that this property could have sold for a higher price today than it will be able to sell for in a year. So the flipper is betting against this idea and taking a big gamble that they can endure negative cash flow for another year AND get a higher price next year than they could have gotten today. Good luck.

But speaking of underwater flippers failing to cut their prices down to market and instead getting themselves into negative cash flow rental situations, I'm reminded of a property in 90402 that I just checked up on.

703 25th - 90402 is a 5 bed/5.5 bath 5,220 sq ft house on a 8,700 sq ft lot which has recently been upgraded/redone.

Previous Purchase: 6/17/08 - $3,000,000

Listing History: 11/6/08 - $4,688,000
Reduced down to - $4,195,000

Withdrawn: 9/4/09

This has been an interesting property to follow. The house itself was originally built in 1936 but from the listing description when the flipper bought this property, it was "renovated in 1991". The flipper bought the house in mid 2008 and quickly went to work by resurfacing, painting, etc. The square footage never changed though. Somehow, the flipper thought that less than 5 months of work and some sprucing up would net him a cool profit of $1.688mm. Even worse, he was finishing up his work on the property just as Lehman was failing and the entire world economy was going into a tailspin. But that certainly didn't stop the flipper from going for nearly $1.7mm of profit. Torpedoes be damned!

The seller then decided to cut the price just 10.5% over the course of the 302 days that this thing sat on the market. Finally, the property was "withdrawn" and the following was put in the description: Property has been leased. Please do not call Seller if you would like information on this property please call listing agents.

So there you have it. Add this one to the shadow inventory. And take a look at the photos from the two listings (before and after the flipper upgrades) and see if you can figure out how they thought they were entitled to such a massive profit for their work...

Before

After

More Sunset Park

Address: 1629 Wellesley - 90405

Details: 3 bed/1.75 bath 1,478 sq ft house, 5,489 sq ft lot, "upgrades"

Description: FANTASTIC OPPORTUNITY FOR A WONDERFUL HOME LOCATED ON ONE OF THE BEST STREETS IN SUNSET PARK. NESTLED ABOVE THE STREET IS THIS WARM & INVITING HOME THAT'S IMPRESSIVE THE MINUTE YOU ENTER THE FRONT DOOR. THIS WELL MAINTAINED PROPERTY HAS AN OPEN LIVING SPACE, GENEROUS SIZE ROOMS & EXCEPTIONAL FLR PLAN. BOTH BATH ROOMS HAVE BEEN UPDATED. OTHER UPGRADES INCLUDE NEW CNTRL HEAT SYS & WATER HEATER; ALARM SYS; REBUILT BRICK RETAINING WALL IN FRONT YARD; MSTR BDRM HRDWD FLR & MOST KITCHEN APPLIANCES.

Previous Purchase: 11/21/06 - $985,000

Listing History: 5/6/09 - $1,089,000
Reduced at some point to - $1,039,000

SOLD: 9/15/09 - $1,025,000

There certainly seems to have been a little flurry of activity in this price range in 90405 recently. There was someone who commented about this a while ago and their comments were treated with suspicion. Well, I don't think there is much debate to be had. The end of summer brought forth some surprising strength.

This sales price is ABOVE the late 2006 selling price. It appears that the house has been updated though so it likely is not an apples to apples situation. However, the upgrades described appear to be less than material in my opinion. The photos also do not show that very significant, costly upgrades were undertaken. Thus, I was surprised that this house sold for this amount.

Don't get me wrong, I certainly agree there is a good chunk of decline left to come, but in cases like this, I think it is still surprising to see these sales happening at these levels.

Canyon Rollback

Address: 14130 Attilla Road - 90402 (canyon)

Details: 4 bed/3.5 bath 3,508 sq ft house, 6,882 sq ft lot, 2001 construction

Description: Simply exquisite 4 bedroom/3.5 bathroom Mediterranean retreat in Santa Monica canyon done “to the nines” with designer touches and sophisticated finishes throughout. Living room features a pitched, two-story wood beam ceiling. The spacious Master bedroom includes private verandas, a fireplace, large walk-in closet and a bathroom that brings a luxurious spa experience into your home. Simply stunning.

Previous Purchase: 11/22/06 - $3,385,000

Listing History: 7/16/09 - $2,925,000

SOLD: 9/9/09 - $2,795,000

So here we are moving way up north from 90405 and into the canyon. This house looks pretty nice and is 2001 construction, so we get a good apples to apples rollback situation.

The property was only active on the market for 11 days before going into escrow. This shows that the seller was ready to be realistic as they priced it decently and quickly accepted an offer below asking price.

The loss for the seller comes to $590,000 (17.4%). Thinking about it another way, if they had put down 20% as a down payment in 2006, they lost over 87% of their down payment. If I had to guess, the current sales price probably represents a late 2004 or early 2005 rollback price.

"Espresso & Toast"

Address: 1225 Grant - 90405

Details: 3 bed/2 bath 1,466 sq ft house, 6,037 sq ft lot, "renovated", "remodeled"

Description: THE PERFECT DAY: Wake up to the smell of crisp ocean air. The beach is calling & only 12 blocks away. Morning light streams in your bay windows- dancing off the pitched ceilings. You make a quick espresso & toast, in your beautifully renovated & spacious kitchen. 3 Bed + 2 Baths, wood floors, wood-burning fireplace, remodeled baths, built-in speakers, gorgeous open floorplan. You’ve got the perfect home on a corner lot & the rest of the day to bbq in the grassy backyard w friends. Life is good.

Previous Purchase: 4/13/04 - $865,000

Old Listing History: 4/3/08 - $1,395,000
Reduced multiple times to - $1,299,000

Re-Listed: 8/4/09 - $1,046,125

SOLD: 9/9/09 - $1,040,000

This house was listed all the way back in early 2008. I believe that the house could have sold for more than $1.04mm back then if the sellers had been realistic and aggressive. Oh well.

So here we've got an early 2004 purchase price and then some upgrades on top of it. If you adjust for the upgrades, the current sales price likely isn't too far from a mid 2004 price.

Note also that with the current listing, the house went into escrow after just 4 days. So in one respect, it appears that the sellers learned from their initial mistakes in 2008 and decided to price realistically and take advantage of strength in the market when it appeared.

Flipper Getting Pasteurized

Address: 2641 32nd - 90405

Details: 2 bed/2 bath 852 sq ft house, 9,600 sq ft lot, "restored and updated"

Description: Live, work, play and grow in spectacular restored and updated 1928 Spanish on an unbelievable huge green pasture. Plus there is a second structure with two beautiful connecting offices or studio. Beautiful trees, flowers, shrubs and landscaping. New stainless steel kitchen, and hardwood floors. Great character. Grant school. Also for lease.


Previous Purchase: 9/11/07 - $1,070,000

Listing History: mid 2008 - $1,499,000
Reduced later in 2008 to - $1,399,000

Re-Listed: 8/3/09 - $1,199,000

Westside Bubble has a good post on this property from back in 2008. He even included the listing history for the listing where the flipper bought this in the first place. You can check it out here.

It looks like the flipper failed to get a buyer last year and rented it out for about a year, starting sometime in the summer. Notice that the property is also now available for lease. They will be bleeding cash if they lease it out and are delaying the inevitable...

One thing to note is that it looks like the flipper added the second bathroom and updated the kitchen etc (again, see Westside Bubble's post)...

..But who cares about these "upgrades" when you have a little 852 sq ft house on a big lot asking $1.2mm? The flipper bought at a big bubble price and did some upgrading. Figure out how much you want to discount the upgrades and figure out how much the lot should be worth and you've got your valuation. I think getting over $1mm for this will be tough.

Delusional on Hill *Update 1*

2470 Hill was first featured here back in October 2008. This is a 4 bed/3 bath 3,668 sq ft house on a 7,000 sq ft lot. It is a very heavy remodel which was completed in 2008.

Previous Purchase: 1/2/04 - $929,000

Listing History: 4/24/08 - $2,288,000
Reduced: 09/05/08 - to $1,999,999
Increased: 10/01/08 - to $2,200,000

Re-Listed: 8/27/09 - $1,850,000

As you can see on my last post for this house, there may be some issues with location -- but I am not an expert on this area so I will defer to others and advise you to see for yourself.

The price increase last year appears to have taken place alongside a cheesy marketing ploy by one large real estate firm when it claimed to be having a "10% off sale". Here we are a year later and they have cut the price by only $150k from the previous low asking price of $2mm. That is a reduction of less than 10%. I think it will take a reduction of much more to move this property.

Speculating With Some "Aloha" Attitude *Update 2*

1328 Hill was first featured on this blog over a year ago. An update was then done in late 2008. It is a tear-down on a 6,440 sq lot which is owned by a real estate agent. As I said before, it appears to be a failed spec venture -- and now it looks like they decided to go ahead with some building and demo work, but are again bailing in the middle of the project.

The photo to the left was provided last time I featured this property by Westside Bubble. I do not have a current photo, but judging from the listing description, the house is now gone and a garage is built.


Previous Purchase: 7/10/07 - $1,050,000

Listing History: 6/30/08 - $1,278,000
Reduced: 07/23/08 - to $1,178,000

Re-Listed: 11/14/08 - $1,098,000

Re-Listed Again: 8/28/09 - $1,299,000

New Description: Plans and permits approved for new 2 story approximately 2500 square foot, 4 bedroom, 3 bath. Currently under construction and new garage has been built, existing house has had all demo done and is ready to start framing. Great location and completed house will have views from both front and rear of 2nd story. Rendering on current sign is not what house will look like ~ new rendering coming soon. Agents please see private remarks

At first, I thought they were nuts for jacking the price up $200k over what they couldn't sell it for at the end of last year. Then, I realized that they have demolished the house and built the garage. So to try and figure out an overall fair value, you need to account for this work. However, I would argue that taking over a project mid-course could probably be messy and somewhat restrictive in terms of allowing you to really build a customized property.

You also need to think about the fact that the land was bought for $1.05mm not too far away from the peak...so you need to give that a good haircut to try and value the underlying lot. Finally, you might need to apply another discount because I would believe getting a loan on attractive/normal terms for this situation might not be possible or very easy at best. What do you think? Anyone have an updated photo I can use?

Lower-End Seasonal Strength Holds 2004 Price Level

Address: 1333 Yale #6 - 90404

Details: 2 bed/2 bath 1,113 sq ft condo, 1962 building, "renovated baths", "updated kitchen", $278/month HOA

Description: Bright Top Floor Condo in a Lovely Gated Courtyard Complex with Lush Landscaping! Two Bedrooms and Two Renovated Baths, Updated Kitchen, Smooth Ceilings, Washer and Dryer Hookups, Custom Built Closets and Oversized Outdoor Patio. Move In Condition!



Previous Purchase: 3/23/04 - $465,000

Listing History: 7/29/09 - $510,000

SOLD: 9/1/09 - $510,000

This condo went into escrow after spending just 6 days on market. The buyer ended up paying the exact asking price. I have previously described some of the reasons why I believe the lower and mid level portion of the market is holding up well right now. It appears that strength is continuing to create quick sales for properties such as this one.

As a result, prices appear to have stabilized for the time being at roughly mid 2004 levels. This unit appears to have been upgraded (I'm assuming after the previous purchase), so adjusting for this gives a bit of an earlier rollback.

I continue to believe that activity will settle down a bit and prices soften as we get closer to the end of the year.

25th Street Auction Date Rapidly Approaching *Update 3*

I last featured 805 25th in early August when I found out that it had indeed gone back to the bank at auction. The bank has moved somewhat quickly (I say somewhat because, well, its a bank processing a REO and we know they haven't been very quick lately...).

Details: 2 bed (+ office)/2.5 bath 1,329 sq ft townhouse, $240/month HOA, 1974 building, updated

Description: Fantastic opportunity to own a townhome on a residential, tree-lined street surrounded by million dollar homes and estates. Property features 2 bedrooms + office/bonus room/possible 3rd bedroom and 2.5 bathrooms. Recessed lighting, eco-friendly bamboo floors, plantation shutters, crown molding, inside laundry, side by side parking, and extra storage in garage are just a handful of the property's amentities. This bright and light home with outdoor patio and second floor balcony offers tree top views and ocean breezes. Enjoy walks to the beach and strolls to the renowned cafe-lined montana avenue as you enjoy the relaxed lifestyle that santa monica offers. Don't miss out on this great price and beautifully upgraded unit!!

Previous Purchase: 6/25/04 - $639,000

Listing History: 8/7/08 - $899,000
Reduced at some point - to $889,000
EXPIRED: after 185 days on market

Auction Date: 6/22/09
Auction Amount: $762,000

SOLD (at auction to bank): 7/1/09 - $578,378 (Onewest Bk FSB now the owner)

REO Listing History: 9/1/09 - $721,000

First, I'll comment on the funny listing description (or at least funny to me). One, you aren't going to walk to the beach from 25th. You might ride a bike but that's about it. Two, you probably aren't even going to walk to the cafes/shops on Montana from 25th -- but more importantly, I think its funny that they mention this because Montana isn't "cafe-lined"; its vacant storefront-lined. But I guess the blunt truth doesn't exactly sell real estate these days...

So what about the value on this unit? Well, its on the corner of 25th and Montana, so there is a major location discount that should be applied due to the busy/noisy street its on. However, a potential buyer could slip into this place easily with a conforming mortgage and still snag a tax credit if they act quickly. They could use the office as a third bedroom and rejoice in their ability to send their kids literally across the street to Franklin.

So obviously there are pros and cons. For me, location is everything and I would not think about touching a place like this -- but we have to acknowledge that there are potential buyers out there who very likely may overlook the flaws and jump in. I think a mid-2004 rollback is probably where this segment of the market is right now (although of course I believe it will shortly resume declining). I don't know when the upgrades were done, but either way, I think this place is at least $50k too high with the current asking price.

I think the very smartest thing the bank could do right now is act very quickly. There has been a lot of good news lately, the tax credit combined with many other factors I have spelled out previously is boosting this segment of the market, and summer is rapidly coming to a close. They need to try and hook a buyer in the next month or I believe they will be chasing the market down through the fall. The initial asking price does not strike me as aggressive, so we'll see. If they had listed this at $600k, they would have immediately had multiple offers above list and they would have closed it quickly. I believe that may have been a more prudent course of action, but I guess we'll see.

As to our other foreclosure situation for the SFR on the corner of 25th and Idaho, here is the history with an update.

Previous Purchase: 11/14/01 - $950,000

Auction Date: 6/22/09
Auction Amount: $1,880,000

6/26/09 Update: auction pushed back to 7/30/09

8/8/09 Update: auction pushed back to 8/31/09

Current Update: auction pushed back to 9/14/09