Relative Value Gets Swooped Quickly *Update 1*

I last featured 1015 24th back in early November when I tried to go to the open house but it was canceled because the house went into escrow so quickly.

Remember, this is a 4 bed/3 bath 1,860 sq ft house on a 6,207 sq ft lot which I liked and said was a good relative value.

Listing History: 10/22/09 - $1,599,000

SOLD: 12/23/09 - $1,558,000

A More Rational Rollback

Address: 1436 20th #11 - 90404

Details: 2 bed/2.5 bath 1,493 sq ft townhouse, $252 HOA, 1989 building

Description: Gorgeous Architectural Townhouse. Inviting living space with cozy fireplace & new recessed lighting expand to large patio with mature trees; perfect for entertaining and barbecues. Sky lights fill second floor with light. Cook's kitchen with granite counter tops & new recessed lighting open to breakfast nook with morning sun. Great set up for roommates. Extra storage,Side-by-side parking, & guest spaces. Great Santa Monica location: Yahoo Center,Water Gardens,&Promenade

Purchase History:
11/22/00: $330,000
4/5/05 - $762,000

Listing History: 11/13/08 - $699,000
Reduced down to $589,000

SOLD: 12/14/09: $575,000

So I figured this would be a good contrast with the previous post I just published. Even though I think the market still remains mysteriously strong, this townhouse is in serious rollback territory off of the 2005 price (as it should be). The location is not good as 20th is a very busy street and I think that is a big reason for the exceptional weakness seen here.

This thing was active on the market for almost a complete year and it took over a full year to finally close.

Another Peek At How Cycles Work *Update 1*

I last featured 1328 Franklin #3 all the way back in March 2008!

It is a 2 bed/2 bath 1,152 sq ft condo in a 1965 building. It has been "remodeled" since its last purchase.

Previous Purchases:
3/25/93 - $170,000
7/24/97 - $143,181
10/25/07 - $495,000

Listing History: 9/8/09 - $599,000
Reduced down to $559,000

Sold: 12/7/09 - $550,000

Even though this was just sold as "remodeled", I think this example should serve to show just how hot the market is. Someone just paid 10% more than the late 2007 price and all they have to show for it is some crown molding, surfaces and appliances.

La Mesa Rollback *Update 1*

I recently featured 2158 La Mesa and was interested in seeing the price it might sell at.

Previous Purchase: 11/14/07 - $6,332,000

Listing History: 11/1/09 - $5,795,000

"withdrawn": 12/8/09

Unfortinately, we will have to wait a bit as it seems that it has been "withdrawn". Trying to do something private off the MLS, thinking about re-listing next spring, or just not selling? Who knows...


In other news, the (not so) great Santa Monica bank "First Federal" has finally failed after many months in zombie mode.

Small House Commands Big Price

Address: 1130 Idaho - 90403

Details: 1 bed/1 bath 660 sq ft house, 2,103 sq ft lot, "updated kitchen and bathroom"

Description: Charming Cottage in Prime Location. Rare Santa Monica property. Enchanting Spanish home blocks from the beach and a block from Montana Ave. Incredible original details with updated kitchen and bathroom. Light and bright with a spacious open brick patio for true inside/outside living. Great closet space. Two car parking. Why buy a condo when you can have a house?

Listing History: 10/30/09 - $769,000

SOLD: 12/11/09 - $805,000

This sold at above list price after being active on the market for just 10 days.

What is really interesting to me is how people justify paying these types of prices. Someone just paid over $800k for a 1 bedroom cottage with almost no excess land. The location is good and the interior looks fine -- square footage aside. But its not like you are going to remodel this and its not like you are buying it for the school district (kids and 1 bedrooms don't mix).

I guess in this case I want to come back to the question of what this would rent for. Let's just say that I know someone who doesn't live that far away from this location and he/she lives in a similar 1/1 cottage. I hear rents were in the $2,100 area but have since come down anywhere between 10-20%.

Even if we give this place a premium, I really don't think you could rent it for more than $2,500 and I think current market would be somewhere between $2,000 and $2,300.

But at $805,000 and a mortgage rate of 5% and taxes of 1%, you come out with a monthly liability of over $4,000.

So its still twice as expensive to own as it is to rent. I think that relationship needs to correct further.

Speculating With Some "Aloha" Attitude *Update 3*

I last featured 1328 Hill back in September.

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 it looks like they decided to go ahead with some building and demo work, but are bailing in the middle of the project.

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 (after some construction started): 8/28/09 - $1,299,000

Re-Listed Again: 12/10/09 - $1,299,000
Reduced: 12/11/09 - to $999,000

Here is the old 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

...and here is the new description: House partially demolished. Some demolition and clean up still needed. No access without listing agent. All offers and closing subject to bank approval of a short sale. Will consider all cash or residential pre-approved land financing only.


Ok, so finally, after a year and a half we appear to be done dicking around and might finally find a market clearing level. I think the current asking price is still too high though -- especially since you likely need a very high level of cash to buy this...banks aren't too keen on lending on half completed construction these days unless you put a hell of a a lot down. Go bid $750k cash and see what happens.

Thanks again to Westside Bubble for the photo. Note that the photo is old since it shows the house still standing and the old description says "existing house has had all demo done and is ready to start framing".

90404 - Short Sale/Short Sale/Tax Default *Update 2*

I last featured 3218 Arizona back in March. This remodeled 1 bed/1 bath house was being advertised as a short sale for a long time...

Previous Purchase: 9/23/05 - $490,000

Listing History: 6/20/08 - $639,000
Increased: 06/24/08 - to $659,000
Reduced: 07/18/08 - to $629,000
Reduced: 08/06/08 - to $599,000
Reduced: 08/21/08 - to $575,000
Reduced: 09/04/08 - to $525,000
Reduced: 09/18/08 - to $499,000

Re-Listed: 3/3/09 - $410,000

Re-Listed (again): 9/24/09 - $439,000


SOLD: 11/25/09 - $438,000

Sold, Sold, Sold

Just trying to quickly clear out the spreadsheet a bit here. First off is 721 19th which is a 5 bed/3 bath 2,418 sq ft house on a 8,940 sq ft lot.

Westside Bubble featured this house in September under the title of "Lot of house for $2M". Lots more info there on condition, etc.

Listing History: 9/14/09 - $2,050,000

SOLD: 11/23/09 - $2,149,000

This certainly did look like a lot of house for near $2mm and the market agreed. It sold for $100k more than asking after just 17 days on market. Still a decline from peak values certainly, but also a reminder that this market remains well bid when decent merchandise is priced
appropriately.



Next up is 63 Village Park Way which is a 3 bed/2.5 bath 1,520 sq ft condo in the "Village Park" community in 90405. $360/month HOA, 1974 construction, "updated baths".

I've never been into this area but have driven by a few times in the past and it seemed nice. Anyone have any thoughts on it?

Previous Purchase: 7/12/00 - $390,000

Listing History: 8/2/09 - $859,000

SOLD: 12/4/09 - $830,000

So this property took a bit longer to sell (67 days) and it sold for a bit less than list. But still, it seems everywhere you look, decent merchandise is selling quickly and there doesn't appear to be much additional downward movement in prices for the time being.

Market Strength Continues

Address: 3101 3rd #3 - 90405

Details: 2 bed/1 bath 695 sq ft condo, "remodeled", 1956 building, $140/month HOA

Description: Ocean view from your livingroom! Amazing location aprx 3 blcks from the beach in the highly desirable Main Street neighborhood. Minutes away from great shopping and entertainment. Charming beachside architecture & lush grounds w fantastic ocean views. This condominium has been completely remodeled. Kitchen with granite counters, stainless appliances and newer cabinets. Mouldings, hardwood flooring & designer paint colors throughout. Elegant bath with well-laid marble stone work.

Purchase History:
6/27/05 - $576,000
9/26/02 - $292,000
4/2/98 - $188,000

Listing History: 7/9/09 - $579,000

SOLD: 12/4/09 - $555,000

So this property claims to be a two bedroom, but with under 700 square feet, those rooms must be pretty small. From the photos (click the "sold" link above) you can see that this building looks like an old apartment building and the inside of this unit has some lipstick on it.

I don't know what it is, but I still have a hard time taking interiors like this seriously...but I guess you throw a few square feet of new material on the counters and some new paint on and buyers lose their minds. Whatever; have fun paying property taxes on the inflated valuation you get thanks to the faux luxury upgrades...I don't know when the "remodel" was done on this unit, but determining when it was completed will give a better read on the rollback here. Even if you assume the seller sunk the money into this unit, the buyer who just bought this still didn't get a great deal in my opinion. If the upgrades were done before the 2005 purchase, then I think the buyer really overpaid.

From most signs that I can see and most things I'm hearing, the market remains well bid for anything halfway decent in 2005 or earlier rollback territory.

Expensive Lipstick

Address: 3019 Linda Ln - 90405

Details: 2 bed/1.5 bath 1,352 sq ft house, 5,589 sq ft lot, "remodeled"

Description: Entertainers Retreat: Zen, Just Finished, 100% Remodeled, modern Sunset Park home Amazing, Open, Chefs kitchen with Caesar stone counters, exotic imported Zebrawood cabinets with reeded glass front drs, Ultra-efficient BOSCH Stainless steel appliances. Bathrms wonderfully done, white quartz tiling in the main bath. Drk stained hardwoods, beautifully textured accent wallpaper in entry & living rm. All New double pane windows, Stunning landscaping, lighting, towering waterfall off living rm


Purchase History:
8/1/07 - $940,000
6/23/03 - $649,000

Listing History: 8/19/09 - $1,345,000
Reduced at some point to - $1,249,000

SOLD: 11/30/09 - $1,249,000

The description says "remodeled" but I think it looks more like a face lift or a "lipstick remodel" since it appears to be just surfaces, appliances, and landscaping that was updated. Maybe I'm being finicky, but I think a real "remodel" is where you do some serious demo work and extend square footage, etc.

The market is so hot that somebody came along and bought this place at a big premium to the 2007 price. Even if you account for some remodel costs, I think somebody really overpaid -- but hey, who cares? Rates are low, and the tax credit is just so huge (riiight) so you better go buy now before you are left behind...

If I were to try and value this at a more rational level, I would start with the 2003 price and add a little bit of premium to that since we aren't really back at 2003 prices yet on entry level SFRs. Then I would add in some value for the upgrades...and no matter what your assumptions, you won't get anywhere close to the $1.25mm that someone just paid...and remember, this is just a little bitty 2 bedroom house on a small lot! Nuts.

Finally on another topic somewhat, Arti's comment from the last post (We're all just waiting for the government to run out of money and stop reinflating the bubble) made me think of this article which I recently read. I thought Rich made some good comments in it -- and for those of you unfamiliar with his housing website, piggington, check it out here.