I last featured 229 22nd back in March 2009 when I said that it was at least $800k overpriced.Details: 4 bed/4.5 bath 4,227 sq ft house, 7,550 sq ft lot, 2003 construction
Previous Purchase: 5/19/05 - $3,200,000
Listing History: 2/17/09 - $3,999,999
Reduced down to $3,600,000
Expired after 178 days on market
Re-Listed: 1/12/10 - $3,200,000
This is a nice apples to apples pricing situation because the house was built in 2003 so we don't have to worry about a remodel situation muddying the water in terms of valuation estimates.
I think $3.2mm is too much for this though. This pricing segment is not subject to the same level of government intervention/manipulation as the lower priced segment and things here are a tougher sell. And for all the talk by some about how things are getting purchased quickly, I think these examples show that there is likely a fair amount of "shadow" inventory which needs to be worked through. That's why there isn't a "V" bottom going on and I think we have a few more sluggish years ahead.
Why does a house that doesn't sell because it was listed way too high prove there is a fair amount of "shadow" inventory which needs to be worked through? This house didn't sell because it was overpriced not because there is shadow inventory. If this house was priced right or low and didn't sell then you may be able to make the shadow claim as being a potential reason. Your apples to apples comparison is making inferences about bananas.
ReplyDeleteI would call this shadow inventory because the original listing expired and then the property was off the market. If one were to simply look at the market and observe the level of inventory after the original listing expired they would not see this unit (and the others like it) until each of those units came back to try their luck again. So while at some points it may appear that there isn't a large amount of inventory, I would argue that there are likely a fair number of people who still want or need to sell but simply weren't willing to accept reality last year or even the year before.
ReplyDeleteBut enough on this -- I think the interesting thing to watch here will be what price this sells at. It is priced as a mid 2005 rollback right now and I think it will have a tough time getting a bid at that level.
Most quality places in 90402 have been going for 2004 prices. Maybe 2003 prices if they get a deal. I'd consider this quality compared to the fixer uppers and lipstick remodels out there.
ReplyDeleteWarChest, how would you go about figuring the 2003-2004 value when there is only a 2005 sale? Reduce by 3% per year?
I would get decent 2003 sale comps in $/psf and apply it to the home's sf. Just try to find good comps that are somewhat similar.
ReplyDeleteI'd go 10-20%/year. 2003 = $2.2-2.6M.
ReplyDeleteOr Redfin shows a 12/2001 sale of $960K, most likely for the land only, plus 4227sqft, $300-400/sqft = $2.26-2.65M for 2002 new price.
The market is nowhere near this yet.
Warchest's shadow inventory comment is dead on given the LARGE overhang of lux foreclosures that will be put out on the MLS in the coming months. Just run an NOD check in your favorite zip code.
ReplyDeleteMy take:This home sells for 3.0m within 90 days.
Have a great weekend.
Mr Jumbo Mortgage
www.thegreatloan.com
"WarChest, how would you go about figuring the 2003-2004 value when there is only a 2005 sale? Reduce by 3% per year?"
ReplyDeleteWell, if real estate conditions had been normal then yes, you might be able to make the case that using a rough, inflation type figure would make sense. But because we were in the midst of a massive, unprecedented bubble, then I would go with at least 10% and probably not more than 20% as "J in SM" advocated.
I decided to take the average sale price per sq ft in 90402 as reported on zillow in 2003 and 2004. That put this house at $2.6 - $2.9.
ReplyDeleteI'd go as far as to say this house is slightly above average for 90403 due to its age and materials. Some of the average sales prices in '03-'04 were fixer uppers which are not comparable to this place. My guess is this will skew toward the upper end of the scale. It will probably sell for $2.9-$3 which would have been a good price in 2003 or an average price in 2004.
correction: I meant 90402 when I wrote 90403 in the above comment.
ReplyDeletejust a thought
ReplyDeleteamazing to me that urban land is so valuable
I would have thought that people would be leaving the cities to enjoy doing business on the internet.
There is trouble in paradise. Santa Monica schools are having money trouble and threaten to raise property taxes.
California government at all levels looks to be bankrupt.
That does not bode well for the value of anything. People are leaving the state to avoid hig taxes already. Maybe with terrible services and high taxes California will start losing population like Detroit.