No Reason To "Hurry"

A

Address: 2507 California - 90403

Details: 3 bed/2 bath 1,450 sq ft house, 5,060 sq ft lot, "completely remodeled baths"

Description: It's Time. The Last and Best Buy of the Summer for Franklin School, North of Wilshire! Vintage 1929 Beauty with completely remodeled baths! (No expense spared! Italian Carrara Marble Floors, Kohler Spa Tub, Restoration Hardware Fixtures). Newer Electrical Throughout, Newer Copper, Newer AC. Original Integrity and Detail Throughout. High Coved Ceilings, Hardwood Floors and Crown Moldings with Breakfast and Dining Areas. Rebuilt Chimney w/Fireplace wired for Plasma TV. Wonderful Private Yard with Mature Fruit Trees. 1/2 Block to Douglas Park. Close to Montana Shops and Restaurants. Do not Miss this Opportunity. Even a California Basement for Storage!! They don't build them like this anymore. Hurry.

Previous Purchase: 7/9/03 - $1,000,000

2008 Listing History: 11/12/08 - $1,599,000
Expired after 106 days on market

2009 Listing History: 10/30/09 - $1,375,000
 Expired after 26 days on market


Current Listing History: 8/9/10 - $1,499,000

I noticed that the big difference between the current listing and the previous listings is that the house now has "remodeled" baths. I looked at past photos and verified that indeed there appears to be redone baths, but the kitchen is still original. I guess the remodeled baths is why they think they can list the house for $125k more than the price a year ago...


There are several ways we can try to estimate value. The first method is to try and estimate a rollback price and then add in upgrades. So, we take the 2003 price and bump it up about 15% to get into 2005 territory. So call it about $1.15mm...or maybe even $1.2mm given that we have not been seeing as deep of rollbacks recently. Then add on whatever you want to give credit for in terms of bathroom remodel. I think something near $100k would be generous there. Using this method, I don't see how you can value this house at more than $1.3mm.


The second method would be to take a fresh comp from nearby. Well, a few houses down, 2515 California is actually "pending" right now. 2515 California was "extensively remodeled" and had a new kitchen, built ins, landscaping, etc...HOWEVER, it is closer to 26th, the interior is 180 sq ft smaller, has one less bedroom and .5 less baths. 2515 was listed for sale at $1.329mm but it was on the market for a month before hitting escrow and I've heard it will go for less than asking. Using a 5% discount from list, we get an estimate of about $1.26mm (but we will have to wait for escrow to close to see the real answer). So, we've got same lot size, similar location (slight discount for 2515 vs. 2507), but 2515 was more upgraded but 2507 is a bit bigger with an extra bedroom and half bath. Using old 2003 sale prices, it looks like 2507 commanded a 20% premium when looking at both properties when not upgraded. But now the heavier upgrades on 2515 likely shrink that down by at least half...so maybe 2507 still deserves a premium but it might be closer to 10%. That would give us an estimate of ($1.26 x 1.1) = $1.386mm which isn't all that far away from our first method of $1.3mm estimate.

So in conclusion, I don't think you need to "hurry" as the listing for 2507 has stated each of the last three years in which it has been listed. Wait for the price cuts or else do some more homework and come up with a value that you believe to be conservative but fair and go bid. Although I have been more optimistic about things (i.e. I don't believe another massive collapse in prices will come), I will caution that there appear to be some near term clouds on the horizon. I think the stability and even in some cases slight uptick in prices seen earlier this year is unlikely to continue through the fall and winter. I would expect some creep down in prices back to the early 2005 rollback at best with late 2004 rollbacks more common. This would represent a down tick as prices right now seem to be hitting mid 2005 levels in some cases. Much of my reason for concern can be found in the somewhat weaker economic data which has been hitting recently and I would recommend people check up on Calculated Risk to read more.