Address: 2515 California - 90403Details: 2 bed/1.5 bath 1,267 sq ft house, 5,060 sq ft lot, "extensively remodeled"
Description: Extensively remodeled with great taste, quality and custom finishes. A santa monica traditional designed to depict the southern california lifestyle offering an open indoor outdoor floorplan ideal for living and entertaining. Featuring a cook's kitchen with wine cooler and stainless steel appliances open to the living room, dining area, den, hardwood floors, custom crown and floor moldings, recessed lighting, extensive use of granite, ceasar stone, tumbled marble, custom built-ins, nooks and crannies, private grassy garden, a large patio with an outdoor dining area, stainless steel bbq, fire pit, water feature, lounge area and much much more!
Previous Purchase: 1/17/03 - $742,000
Listing History: 6/8/10 - $1,329,000
To figure out what this is worth, I propose using slightly above 10% annual appreciation during the bubble times of 2003-2005 and trying to get a late 2004 estimate. Using this method, I get about $900k as fair value BEFORE the "remodel".
Now, you need to add in the remodel costs. What I find amusing is that there are ZERO interior photos on the listing, yet they go on and on about how great the interior is. WTF?
Anyway, from the small square footage, I'm assuming no walls were moved and that this was a more cosmetic remodel with landscaping outside.
Is the remodel worth $429k? I think that number is steep and that this listing is overpriced. I also don't particularly care for the location given the proximity to 26th street and the small lot size.
I think if you were to cut 10% off of this and come to about $1.2mm you would generate a lot of interest despite the flaws (location, small square footage of house and lot) because this is a cheap way into the SFR category in this area. At $1.2mm they would still be getting $300k for the remodel which might even represent a profit!
What do you guys think?
I don't like the idea of trying to find a price by trying to guess an appreciation level from the last sale; the appreciation level has to be something of a guess, and you also have to assume the last sale price was at market.
ReplyDeleteBetter to look at the average price per square foot in the zip code for the property type over the last 6 months or so. You can do this on a number of websites; using Redfin, I found a range of $700-$900/sq ft. generally over the past 6 months, with only two examples out of that range ($673 and $1077). Even at $900/sq ft., which should be reserved for full size lots in good locations with immaculate interiors, you only get $1.1 M for current market value.
This is to say nothing of the fact that current market value remains a bubble-inflated joke. If you make $400,000 a year and have $240k sitting around, you should be able to find something better to do with your money than buy this house.
I toured this house. The floor plan is very open -- I would suspect that the remodel involved taking walls down around the kitchen. Brand new kitchen, everything seemed new and really nicely done. Cool built-ins in the seating area off the kitchen; nice back patio.
ReplyDeleteThe back yard seems a little lost -- they were trying to dress it up with gravel, but it's basically a blank slate.
Off the garage, there's a "bonus room" that could be a play area or office. No bathroom.
Of all the stuff I've seen in 90403 (and that's all SFRs under $2 million), this is the nicest one I've seen. I need 3 BRs and would prefer a bigger lot, so it's not for me, but I was heartened to see a house in my price range well done for a change.
But I agree, the price should come down a bit.
I'm exactly on the same page with Epsilon.
ReplyDeleteThis place is worth $1.1M in Bubble terms, which means their list price is too high even for a Bubble market.
In non-Bubble terms (i.e. what it will be worth in 2 years when we've completed the correction), this is worth about $850k. It's a smallish, ugly place with old construction that won't stand out a poor neighborhood. It'll go for $850k post-Bubble because the area and land value are valuable, that's it. It went for $900k in 2003, which was already way into the Bubble, so there's no way it's worth much more than that.
SMDM, you've grown very dovish. I don't blame you, the correction is taking years because the government is flooding the system with more cash through free money from the Fed and direct free money via the FHA and Fannie/Freddie. This can't last forever, and that free money too is being exhausted. We're about halfway through the correction, but we're not close to finished.
After the last So Cal bubble that peaked in '88-89, home prices didn't finish going down until '95. Ask anyone that bought in the late '80s and they'll tell you how their downpayment vanished they were stuck under-water for years and couldn't sell until the late '90s. This Bubble is even bigger, government knows it but they're trying to keep the hot air in it just a little longer. Just till the November elections at least.
"If you make $400,000 a year and have $240k sitting around, you should be able to find something better to do with your money than buy this house."
ReplyDeleteHow many of those types of people are there who are interested in SM real estate? Based on your comment, you believe it's a relatively small number, when in reality it's far more than you believe. If you're a halfway decent attorney you should be able to achieve those numbers 7-8 years post law school.
SM has changed from the SM of 2000. I'm not calling a bottom, and a lot depends on interest rates and where they go over the next 24 months, but to look at a chart of SM housing prices and look at a chart of nationwide incomes and then make some projection about SM real estate is naive and foolish. I was out buying in 2000, 2001, and again recently and the playing field has changed in SM, significantly (and I make far more than I did in 2000).
"This can't last forever, and that free money too is being exhausted."
ReplyDeleteBernanke's almost out of bullets!? The man has his own factory, he will make 5 trillion more if he has to. We're in for a dime in for a dollar at this point.
"After the last So Cal bubble that peaked in '88-89, home prices didn't finish going down until '95. Ask anyone that bought in the late '80s and they'll tell you how their downpayment vanished they were stuck under-water for years and couldn't sell until the late '90s."
There was a big bubble in the late 70s- take some of your own advice and ask someone who bought in the 70s what happened in the early 80s.
I am sooo happy I bought in the early 90s...even though I continued to lose money, maybe even my down payment by 1994-5.
ReplyDeleteBut who cares? It was annoying...but not if you were planning on hanging in there for the long haul....now that same house (its a lucrative beach rental now) is easily worth 4 times what I paid for it and has allowed me to trade up to a bigger house and it makes me thousands every month in rental income. Plus I can leave the house and lot to my kids....
You all should see long term value...not what you think is gonna happen in 2 years....or you will be on the sidelines forever.
It's not that I think there are a small number of people that make $400,000... just a small number of people looking for small starter homes that make $400k. If you have a family, this home doesn't work for you. DWR, you may be making a lot more than you were 10 years ago, but that's because you have 10 more years experience. Entry-level professionals aren't making more. New lawyer salaries have gone from $125k to $160k over the past decade, but that still doesn't get you anywhere near a small starter home in any westside neighborhood.
ReplyDeleteIf rich young professionals can't afford entry level homes in decent neighborhoods, then this market is still out-of-wack. Even if you're looking at a long-term investment, fifteen minutes will tell you that even bonds beat housing as a long-term investment strategy, so why sink money into a deflating asset? Being on the sidelines forever isn't always a bad thing. Warren Buffer was "on the sidelines forever" for tech stocks, and despite the myths, it really is ok to rent.
Why are you guys talking about making $400k?
ReplyDeleteLet's assume this house sells for $1.25mm and the buyer puts down 20% (which is a nice round figure of $250k). That means you need to borrow $1mm.
At 5.5% you are looking at a mortgage payment of $5,700/month. Add on $1,200/month in property taxes and you get $6,900/month. Then you need to factor in insurance but upkeep/repairs should be minimal since it was recently redone. So maybe use a figure of $7,500-$8,000/month for all in cost.
Using the high end of our range ($8,000/month) comes to $96k/year. A 33% DTI then needs an income of just $288k/year.
I'm not saying I want to live in this house and that it can't go down in value in the short term. But I don't think you are buying this for $850k in a few years if rates are still anywhere near as low.
I'm not trying to be "bullish"...its just that you aren't going to buy this place for 30% less in a few years without a major economic collapse or interest rate spike -- both of which I don't think will happen. I think prices are going to be basically flat at best with a slower downward bias.
ReplyDeleteBut I could be wrong! And if so, then I guess I stand to benefit since I don't own a house! I'm just calling it like I see it. If you wait around for houses to be dirt cheap in this neighborhood you aren't going to ever pull the trigger.
"It's not that I think there are a small number of people that make $400,000... just a small number of people looking for small starter homes that make $400k."
ReplyDeleteThat house might be a starter home now, till someone buys it and sinks 400K into it turning it into a 3000 SF home. And as warchest said, if you make 400K and have put away some money, you can afford much more than this house, or you can buy this house and turn it into what you want.
"If rich young professionals can't afford entry level homes in decent neighborhoods, then this market is still out-of-wack."
It's all about supply and demand, isn't it? 10 years ago I wasn't competing against many two-income couples who both make 200K+ minimum. Now they're closer to the norm, bidding on SM real estate- and not just NOM properties. I can't put a metric on it, but SM real estate is far more desirable to very well off people than it was a decade ago.
The freeways suck, and there are tons more law firm, Hollywood, finance and internet jobs on the westside than there were a decade ago. Those people have to live somewhere, and they're not going to commute 60+ minutes each way.
"You all should see long term value...not what you think is gonna happen in 2 years....or you will be on the sidelines forever."
ReplyDeleteIf you had waited a couple years to buy in the 90s, you could probably have 2 or 3 beach rentals plus your move-up place- was it worth it to buy 2-3 years too early? Anyone who waited in 2007 is clearly way ahead of the game and will end up far better off than those who didn't wait, so you're off base with your comment. The question now is, with rates at all-time lows and prices down 25-30%, does it make sense to wait any longer.
"I think prices are going to be basically flat at best with a slower downward bias.
ReplyDeleteBut I could be wrong!"
And you have been. I've been one of your very first readers, and I remember years ago disagreeing with you in a post saying that it will be much more severe than you think, and you did make an entry at the height of the crisis that you were too shy in your estimates of the size of this bubble.
The same thing is happening now. Don't be fooled just because the collapse has taken a short pause as the government is flooding money into the bubble to keep it going just long enough for an election cycle. There is NO private market right now for mortgages, NONE. It's all government money, whether through FHA or Fannie/Freddie. There is an enormous amount of shadow inventory and zombie listings, underwater homes and other holders praying for a comeback of the bubble so they can unload. This will not come. The slightest prick, like a bare .25 move in interest rates, and we will be on our way to the second half of this correction. All the metrics are still off.
dwr: The freeways suck, and there are tons more law firm, Hollywood, finance and internet jobs on the westside than there were a decade ago.
ReplyDeleteI am doubtful of tons more Hollywood and Internet jobs on the Westside today than in 2000. Do you have any concrete statistics to back that up?
As for finance and law jobs, I'm sure that we did see a surge of jobs, related to managing the mortgage bubble. But that is going away now. What service are these tons of bankers and lawyers going to provide going forward? Why do we need tons more financing and lawyering on the Westside in 2010 than we did in 2000?
Simple "population growth" is probably not an answer, since if you take out illegal immigration, the population of California has been declining for the last decade. Even if you add illegal immigrants back in, the net growth in population is very small and wouldn't explain the appearance of tons of new jobs.
Not totally a fair characterization. There has definitely been a migration of the "creative class" to the Westside over the last 10-20 years. This is part of the wealth migration to the Westside that has been taking place during that time period that WarChest & DWR describe.
ReplyDeleteMany of the Internet jobs in 2000 were fly by night start-ups comprised of just out of school kids. Proportionally far more of the jobs are with established Internet businesses.
Many more successful entertainers have moved to the Westside and set up office in Santa Monica as well. So while the overall industry may be down from 2007 (but still significantly up from 2000) you are also seeing production companies moving from Beverly Hills to Santa Monica.
On finance, I do not think mortgage brokers are where the real money in finance is. Just take a look for yourself how the LA and Westside money management firms have grown AUM (Assets Under Management) since 2000. That is ALL that needs to be said about that if you understand the way the business works. For instance, check out firms like Dimensional Fund Advisors & Wilshire Associates to see how much they have grown since 2000. So, yes, the absolute dollar value of banking and lawyering going on is significantly bigger than ten years ago.
Crash Random, I realize this is in specific response to the points in your post. But I actually can't see how you can seriously imagine nominal 2000 real estate prices. Just the amount of wealth and liquid cash created in the world since then is tremendous. A lot of it sits on the sidelines on the balance sheets of the wealthy, corporations, and commodites exporters.
The amount of change and growth in the economy is tremendous since then and the only thing that could possibly take us back would be some sort of gigantic economic implosion really greater than the Great Depression. I won't rule that out 100% but it's highly unlikely and the response of the global governments would be to print money anyway.
I would love to see income statistics for LA and the westside, although I'm not sure how to find good ones. At least in the legal profession, though, most of the big white-shoe firms in LA have gotten significantly smaller in the past 5 years... firms that used to bring on 40-50 new people a year now hire 15 a year; significant layoffs; etc. What I read about Hollywood is that it's struggling with the tax incentives being offered by other states and countries, which California is too strapped to match, and so there's significant overcapacity these days. It's certainly possible that there's been a massive growth in Westside wealth over the past decade, but I'd need to see concrete numbers to believe it...
ReplyDeleteI also still think you'd need $400k to feel comfortable buying this house. My household income is around $300k, and this would feel like a significant stretch. Granted, I still have student loans, but a 33% DTI seems risky for anyone. You're putting a ton of your net worth into the housing basket at that point.
I'll buy that Santa Monica is different, both in comparison to 10 years ago and in comparison to other areas of LA. I'll even buy that Venice, Mar Vista, West LA are also different just because of their proximity to Santa Monica. But what justifies the prices we still see in Mid-City? Los Feliz? Atwater Village? Echo Park? Many of those areas are still, like Santa Monica, floating well into bubble prices (whereas SM seems to be early-to-mid 2005, those areas are probably more like early-to-mid 2004). To me, the fact that prices are still relatively strong in other, less-blessed areas (i.e., areas for which the hyper-local factors discussed in the posts above cannot explain current pricing) suggest that what we are seeing in Santa Monica and surrounding areas has less to do with hyper-local factors and more to do with macro factors, e.g., a concerted effort by all involved to maintain prices at inflated, unsustainable levels.
ReplyDeleteAlso, on the points about the cycle in the 90's, think about the combination of unprecedented factors which combined to save those who first jumped into the market in '89 through '92 and were upside down until about '98 or '99 -- interest rates began to fall in the mid-to-late 90's; independent Hollywood took off in late 90's through the early naughts; there was a mini tech-boom in Pasadena and on the West Side in the late-90's; Bush-era defense spending stimulated what was left of the SoCal defense industry; and most of all there was an administration (w/ ample support of the Fed) that intentionally created a housing bubble of unprecedented size which, in turn, threw a whole lot of money into SoCal through mortgage "professionals," developers, contractors, etc. How could anyone reasonably expect a replay of events that could come anywhere close to duplicating that? We're out of powder on interest rates; most of what was left of the defense industry has since gone to Texas; independent Hollywood has scattered throughout the world and is on life support here in LA; there's no need for developers, et al., for years to come; and the mortgage industry basically has been consolidated in North Carolina. And that is just the absence of positives that we had going for us in the late-90's -- we now have, unlike in the late-90's, a whole other set of well-worn problems.
I think we all know prices are going to fall in real and maybe nominal terms; it's just a matter of whether that happens quickly and dramatically or is drawn out and excruciating.
"There is NO private market right now for mortgages, NONE."
ReplyDeleteI just got one, dude.
"At least in the legal profession, though, most of the big white-shoe firms in LA have gotten significantly smaller in the past 5 years... firms that used to bring on 40-50 new people a year now hire 15 a year; significant layoffs; etc."
ReplyDeleteWhen I was a newbie lawyer (15 years ago), most of the big firms were downtown. Now there are far more in Century City and even Santa Monica.
There is no way the big firms in LA are smaller now than they were 5 years ago. They may have downsized for a year (nationwide, not just in LA) and might be taking on fewer first years than they used to, but there are more high-paid lawyers in LA than there were five years ago, and especially vs 10 years ago- and many more of them are on the westside now.
"Simple "population growth" is probably not an answer, since if you take out illegal immigration, the population of California has been declining for the last decade. Even if you add illegal immigrants back in, the net growth in population is very small and wouldn't explain the appearance of tons of new jobs."
ReplyDeleteThe illegal immigration issue is important, but not for the reason you mention- people are flocking to the "quality" areas in LA for a number of reasons- traffic, schools, crime. And there aren't many quality areas in LA, sadly.
"I am doubtful of tons more Hollywood and Internet jobs on the Westside today than in 2000. Do you have any concrete statistics to back that up?"
ReplyDeleteDrive up and down Colorado and then check out which of those places were around in 2000. Google google and yahoo in Santa Monica, for starters.
Gus,
ReplyDeleteI agree with you on your first point. Many bears attack Santa Monica as being overvalued with arguments that "such property could not be worth that much...look at how [insert adjective] it is".
Santa Monica is valued fairly compared to valuations elsewhere and generally LA is valued fairly compared to other areas.
The question is not the direction of Santa Monica or even LA real estate prices relative to other real estate prices. Bears will lose on that argument. People without much wealth or income proportionally spend more on real estate that people with higher levels of wealth or income. Higher end real estate can sometimes be undervalued mathematically compared to lower end real estate.
So, to me the question is really, are real estate prices overall falling, stable, or rising? And that question can really be expanded to are asset prices generally falling, stable, or rising? I.e. are we facing deflation or inflation? I believe that is a very difficult question to answer with the so-called experts really split down the middle 50/50 given the inherent complexity of predicting the world economy, politics, etc. It's only a little easier than predicting the weather and it is inherently predicting interest rates. Anyone who tells you otherwise is naive.
So all of this debate is good and informative. I try to see everyone's point, absorb it, and take in the grain in truth in every statement.
I don't think I'm smart enough to be smarter than everyone but I do feel that I am smart enough to realize that.
DWR,
ReplyDeleteI agree, the jumbo market is much stronger than it was last year. If you look at the market, there are plenty of banks that have re-entered the jumbo market after staying out in 2009. Current rates are around 5.5%. They do prefer 30% down now for loans above $1m (i.e. larger jumbos).
"For instance, check out firms like Dimensional Fund Advisors & Wilshire Associates to see how much they have grown since 2000."
ReplyDeleteUm...except Dimensional has relocated its headquarters FROM Santa Monica TO Austin, TX...
From the Austin chamber of commerce website:
"We chose to locate in Austin because of a high quality of life, moderate living costs and a strong entrepreneurial climate. You want a place that has a good labor pool. And it was important to have a place where people want to live."
— David Booth, CEO, Dimensional Fund Advisors
Ultimately, I think everyone here is spinning their wheels trying to come up with reasons/examples which justify some type of paradigm shift. It is all speculation -- the same type we saw at the start of the bust where people said SM real estate would not fall because there were so many rich people with so many fancy jobs.
What we know is that this is a very expensive area to live relative to other parts of LA (even relative to many of the "nicer" areas) -- and all the evidence points to a continuation of it being relatively more expensive. That tells you little about whether there is some tangible reason why a certain amount of excess appreciation will stick but I just don't think anyone can tell you with any degree of real certainty what year nominal rollbacks will prove to be the ultimate bottom. I don't think you stand a chance of seeing something in the neighborhood of 2000 or 2001 nominal rollbacks...but there is a lot of fluff to still wipe off between that time period and late 2004 so I see the odds favoring somewhat lower nominal prices in the future; just not in a gap down type move.
To further my argument that citing anecdotal evidence is an exercise in futility, I could point toward the continual vacancy/out of business problem being seen on Montana combined with continued vacancy in some office buildings (the building on 20th where Audrina from the Hills "worked"). Speaking of Yahoo, I thought they gave back a bunch of space...although I heard something about E-Harmony coming in.
ReplyDeleteThen I could bullishly talk about people I know who are young, make huge salaries, and even who work for highly profitable companies which are actively moving to Santa Monica. I could talk about how R+D Kitchen and Father's Office on Montana are constantly packed, the promenade so jammed that you can't get parking or the continued large scale development projects going on right now (new mall, major UCLA health care facility on 16th and Wilshire, talk of a new AMC mega theather on 2nd, etc).
Point is, I don't think you are going to gain some type of great insight when looking at these issues. I have been guilty of ignoring the ultra-powerful effect of interest rate changes in the past and I will suggest that they are a bigger thing to focus on than all the above. I would then suggest that nobody here has a clue where they are going over the next few years. We could look more Japanese and they could go much lower. We could FINALLY see the inflation everyone seems so afraid of and rates could move up. I have no idea and neither do you.
One more thing -- this house is now "Pending"
ReplyDeleteSorry WarChest...this is a game played at the wealthiest levels so I don't expect you or most others to be familiar with it. It is not unprecedented for financial firms to set up a "headquarters" office in a no tax state and move some accounting or back office there. The advantage is that the very top few people who are rich enough to only fly private can then set up residence for tax purposes but they never spend more than 180 days anywhere anyways. Plus the backoffice personnel are cheaper there and they don't form the competitive advantage for the firm. However, most of the very highly paid professionals still stay in the main location in CA (or NYC).
ReplyDeleteAsk around...you'll see this game is played in both CA and NY on a regular basis. However it takes multiple homes (often including international), private planes, and often boats to play it.
However, WarchestCM, I do agree with your general comments.
ReplyDeleteAs I said before, it should be intuitive that it is very difficult to predict the economy, interest rates, the stock market. If it were easy, everyone would be rich. Well, why is it that everyone is so convinced they can predict home prices then? After all, home prices are heavily dependent on those factors.
Nevertheless, armchair forecasters constantly seem to have unbridled conviction in their views as a real estate bear or bull.
As you point out WarchestSM, there are a million anecdotes and theories for why home prices will rise or fall. Yet he so called experts and "smart money" who spend every moment of their professional lives thinking about these issues and discussing them with other experts are on both sides of the table.
Why is it everyone thinks they can call deflation vs inflation?
Also, WarchestSM, there are plenty of other financial firms in SM & Westside. In the mid 90s a good portion of the financial firms were in downtown. Now they are all for the most part (other than a few good exceptions) in Century City, Westwood, Brentwood, and SM.
ReplyDeleteFor instance, check out firms like Dimensional Fund Advisors & Wilshire Associates to see how much they have grown since 2000.
ReplyDeleteDrive up and down Colorado and then check out which of those places were around in 2000. Google google and yahoo in Santa Monica, for starters.
Those are vague anecdotes. When I say "concrete statistics" I mean something like this: according to the November 2009 "Report on the Creative Economy of the Los Angeles Region," by the Los Angeles County Economic Development Corporation, the number of Los Angeles jobs in motion picture and video production increased 11% between 2003 and 2008.
Well, that is decent growth: maybe not rocketship growth, but respectable, and frankly a lot more than I expected, given the constant crying about how Hollywood dying. (However, the LAECD report predicts near-zero growth in this sector between now and 2013.)
But I actually can't see how you can seriously imagine nominal 2000 real estate prices.
I don't expect a return to nominal 2000 prices and never said I did. Nominal rents have gone up 35-40% since 2000 and I consider rent to be a much more "real" indicator of housing supply and demand.
Epsilon,
ReplyDeleteI'm not saying that I completely disagree with you but want to ask the devil's advocate question of why is the argument that young professional couples making $400k buying entry level housing for $1.25m such a sign that housing is overvalued?
I think there are a lot of good bearish arguments (e.g. amount of leverage in the system, economy, etc) but whenever I hear an argument that is basically "well, 20 years ago, ABC could afford to buy XYZ" that is a flawed framework. Another version of this argument that floats around is "doctors can't afford to buy in North of Montana".
My opinion is that the housing market in LA has continued to evolve along with the economy, traffic, and lifestyles. Large global cities like LA are expensive and $400k annually often only buys "entry level" housing. Other examples of cities like this would be SF, NYC, London, Paris, Hong Kong, etc. In these cities, the density levels only permit entry level incomes to buy a condo in "space in the air".
LA is different from those cities but in an interesting way. In Santa Monica, you can still get a nice piece of land...as we all know, it's the land that is expensive, not the home. If the home were somewhat bigger and nicer the price wouldn't be that much higher percentage wise.
I would argue that $400k annually is a lot for one person but not that unusual for a household--and in most households obviously both people work.
For instance think of the Bay Area as an example, WarchestSM's $288k is basically just a two engineer household...the foot soldiers of the tech industry for example, which should be solidly middle class. Up in the Bay Area if they wanted to live in Palo Alto (which is similar to Santa Monica), they would only be able to afford entry level housing. If they wanted to live in San Jose (which is perhaps, San Fernando Valley), they could buy a nicer family home (but still nothing close to fancy).
I don't really like the bullish argument premised on the "well, stuff is really expensive in NYC, London, Paris, etc so that justifies high prices here".
ReplyDeleteLA is much different in geographic terms as there is so much more sprawl here and we don't have one real city center (and I say this as someone who works in downtown LA). However, I think the thing to think about when comparing is that you have a very large and diverse economy here (and in the aforementioned cities) which inevitably produces a fair amount of wealth and high income earners.
Good points, Steve. I certainly know plenty of dual-professional couples that earn $400k, and maybe my argument that prices must be out of whack because that's the income for entry-level is wrong.
ReplyDeleteI would be very curious too see income stats in LA more generally for the high end; I've looked up Santa Monica and LA stats in the past, and only found median numbers that weren't that helpful. The number of millionaire households has grown since 2000, and, perhaps the best points, rents have gone up since 2000, but both in the realm of 40%.
I know DWR is wrong; the big national law firms are definitely smaller today in LA than 5 years ago. Latham, Gibson, O'Melveny, Kirkland, etc., were all bigger in 2005 than they are today; I think Quinn is the only major firm that has expanded. Litigation has done well, but several major practice areas have dried up (my firm basically no longer has project finance, development, securitization, etc., lawyers... these types of lawyers, who basically did work related to the housing bubble, used to be about 15% of the firm; now there are only 5 or 6 left). Some of the mid-majors are definitely growing; friends that have been laid off from the national firms have moved over to them... but at lower pay.
Yes, anecdotes are cheap, but data on inflation, rent, etc., suggests that prices today shouldn't be more than 40% higher than where they were in 2000, and we're still have a while to go to hit that. Unless I see numbers suggesting there are higher incomes in LA today, I have to assume that housing prices will eventually fall back to the trend line... which is basically the rate of inflation, and the next few years are likely to be deflationary.
"Those are vague anecdotes. When I say "concrete statistics" I mean something like this: according to the November 2009 "Report on the Creative Economy of the Los Angeles Region," by the Los Angeles County Economic Development Corporation, the number of Los Angeles jobs in motion picture and video production increased 11% between 2003 and 2008."
ReplyDeleteJust so we're clear, I was right and you were wrong, right?
epsilon,
ReplyDeleteHere are the numbers I could find:
National Law Journal top 250 firms by year:
2006- 121,423 attorneys
2007- 128,213
2008- 133,723
2009- 126,669
I couldn't find anything earlier (or the 2010 number), but the law.com articles said the average growth had been around 5% till the drop in 2009. Therefore, one can assume the number was below 100,000 in 2000. I'm sure you won't concede that you were wrong, but you were.
Of course, this doesn't even address the issue of where geographically those attorneys work.
We're actually talking past each other, DWR. My point was that the major firms IN LA have shrunk, and that a lot of practices at those firms that were related to the bubble have died.
ReplyDeleteYou've cited much broader data that says nothing about major firms in LA. Your stats have no geographic limitation and the top 250, frankly, also goes beyond what I would consider "major firms," --- i.e., those paying $160k + bonus for first year associates and recruiting at the major national law schools. Those are the numbers that would interest me, and I don't think they exist. I could give you data on my firm (smaller today than 2005) and law school (higher percentage of grads without jobs than in 2005, and lower average salary), but that would be too narrow, and frankly, I'd rather not identify myself any further.
So I still have no idea which of us is right.
dwr: Just so we're clear, I was right and you were wrong, right?
ReplyDeleteJust so we're clear, I asked if you had any hard data to back up what you were saying.
You seemingly did not.
I then generously gave you some data of greater value than what you gave me.
Since then, I have found more and better data on Hollywood jobs. (I haven't looked at the Internet sector yet.) I notice that, due to fluctuations in the industry, one can cherry-pick the statistics to make the desired rhetorical point. If you literally measure job growth since 2000 (a peak year), you will find basically no growth. If instead you cite growth since 2001 (a bust year, to be followed by a sharp recovery) your statistics would give the impression of robust growth.
Averaging out the booms and busts, the long term trend this decade has been job growth at about 1% per year. Total payroll in dollars has grown at about 3% per year.
Does that correspond to the "tons of Hollywood jobs" you had in mind? I guess we'll never know, since "tons" is a pretty vague term.
I should also just note---we're debating an irrelevant issue. I'd like to see income stats for the west side of LA for 2000 vs. 2010. Getting into a pissing contest about lawyers won't actually address that issue at all.
ReplyDeletecrash random and epsilon were both here posting at 1:40AM on Sunday morning? I don't want to start any scandalous rumors...
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