My last post on 933 25th was on January 12th.I said the following: This spec house has now been on the market for over 2.5 months at an obscenely bloated price and they have not made any price cuts.
But see, a funny thing happened the very next day after my post went up...
Listing History: 10/22/09 - $4,488,000
Reduced: 01/13/10 - to $4,250,000
Are all these genius "investors", spec builders, real estate agents, etc taking their cues from a punk kid blogger or is the timing here just a coincidence?
This is a 5.3% price cut. I think they should have cut to below $4mm to show they were serious. The next cut will need to be bigger if they want to attract real interest.
You are right about the need to do a drastic reduction, but don't you think they need to go to under $3mm to get it sold based on the comparable in the previous post? This house is a real pig.
ReplyDeleteLet it rot on the MLS. The Bubble is still slowly deflating in the Westside, there is no room to go on home values but down in this area. It is possible that they are not cutting the bloated price because they can't do so without going bankrupt; if that's the case no buyer is dumb enough to buy now when you can just wait for the bank to come in and repossess. Unlike this seller, the bank can afford to list at a realistic market level and someone will buy this place for closer to $3 million.
ReplyDeleteHey Arti, I respect your opinion,......what do you make of the extremely low inventory in SM? Seasonal? Bank holding things back? Homeowners who refi'ed?
ReplyDeleteI'm curious to hear your thoughts.....I know 4 houses who went into escrow with the last 2 weeks.....
Thanks for the kind words. Regarding inventory levels in Santa Monica, it is a tricky thing to interpret what impact it has on closing prices. First, I would point out that levels are not all that low, they are about where they were in Q4 2007 and only a few less than Q4 2008. Westside Bubble does a great job of keeping up with the data.
ReplyDeleteSecond, keep in mind that this is a relatively small area we're talking about. Just a handful of listings can make it look like an outsize fluctuation when there's only a few dozen listings to begin with at any given time.
With all this in mind, when you look at the closings chart and the sold chart for the same quarter, you see that there was slightly more closings than last year this time (which may explain the slightly smaller inventory), and that this was partly offset by the fact that there there actually more closings this Q than in 2008 Q.
To put it all together, I'd say there's just slightly more buying going on, probably because prices have softened, but that there's also more people listing for the same reason. In terms of what this means going forward, I'd say if everything in the economy stays the same for the rest of the year, we'll see continued buying but stable inventory because there is also increased listing. Good for realtors I think, good for sellers too if they list at a realistic level.
For buyers, it's a whole different story. The good news is that prices are down and the downside is now limited. This is especially true for homes above $1.5 million, those have corrected a lot more than the homes below $1.5. So if you're in the market for the high-end, it's possible to find "relative" value right now (possible, if you look very hard and bargain hard).
(continued)
ReplyDeleteIf you're in the $1.5 million and below market, I'd say it's a whole different ball game. Prices there are still a good 20-30% over where they will be eventually (and corrected for inflation). There is a lot of strength in that category because prices in that range are more downpayment and interest rate dependent, and up to $800k you have a ton of government support. I would stay the hell away from buying anything in Santa Monica under $1.5M for that reason. Too much downside left, which is being temporarily propped up by unsustainable factors.
Unless you *need* to buy now in SM, I'd either look elsewhere (some nice neighborhoods are much farther along the Bubble correction), or wait until next year, when all the government and accounting manipulation run their course and free market forces take over again. For instance, the Fed program of buying $1.3 Trillion in mortgage-backed securities will end in a couple of months, and that will hit prices by hitting interest rates. FHA and Sallie/Fannie will raise their low standards a bit and that will hit the sub-$800k market. The banks have truckloads of shadow inventory to unload, more inventory than everything they have listed on the MLS right now in fact. Finally, interest rates are going up by the end of the year.
All this will "pop" the sub-$1.5 million Bubble that still exists in Santa Monica. Buying before these manipulations are removed is risky, as there is substantial downside left. Also, for anyone afraid of high interest rates, do the math.
Paying 6 or 7% interest instead of 5% is nothing at all compared to overpaying on a listing by say 10%. Realtors and homeowners who don't do math never realize this or intentionally focus you on interest rates to make a sale. When they do do the math, they trick you by factoring in the interest rate over 30 years--when in fact, the average buyer stays in the home for 5-8 years and then you're subject to a new interest rate anyway.
So for sub-$1.5M buy outside of SM or wait a year. Over $1.5M it's actually safer. And understand that high interest rates are nothing to fear, they're your friend. Rates are so artificially low right now that higher rates will only pop the Bubble and get rid of buyers who are over-paying by so much. There is no way the Santa Monica Bubble below $1.5M will survive 8-9% interest rates, you will see significantly lower closing prices at that rate and save yourself from being under-water on your mortgage.
The key is not to buy along with all the idiots who think low rates means it's the time to buy. If you compete with idiots, they will lower you to their level, where they will beat you on experience.
"but don't you think they need to go to under $3mm to get it sold"
ReplyDeleteMaybe or maybe not. I think my point about getting the asking price below $4mm was that they are so grossly out of the ballpark right now that they need to bring the price down by a large degree and get it under the daunting $4mm mark. I have a hard time seeing this sell for over $3.5mm but if it gets down to around $3mm then I think you see a sale happen.
Arti also makes some good points -- especially with respect to the fed MBS buying program coming to and end as well as the FHA standard tightening going on right now. Calculated Risk has done a great job covering these things and I would suggest people follow along there.
Don't know how they can sell this house for the next year anyway since a huge construction project is going on 2 lots away from it..we are on the other side of the construction project and so far it is heavy metal from 8am on..bad luck for us and bad timing for 933 25th!
ReplyDelete