Details: 3 bed/2 bath 2,028 sq ft house, 8,000 sq ft lot, "2003 expansion/remodel"
Purchase History:
8/22/02 - $900,000
7/2/08 - $2,011,000
Current Listing History: 9/24/10 - $1,599,000
SOLD: 10/20/10 - $1,578,000
This sale price works out to a loss of 21.5% over just 2.25 years and this is totally on an apples to apples basis since the remodel work was done in 2003.
I had forgotten that I did a previous post on this property. At the time, it was on the market for $2.075mm and I said: At this point though, due to the small amount of inventory in this area, I could see some unfortunate soul buy this for not too much under $2M...remember, these things take years to correct.
It turns out someone paid more than what I thought the market would bear as it sold for $2.011mm instead of the under $2mm that I thought would happen.
But where I think I really nailed it was when I said the following:
If we are comfortable with late 2002 prices not being too bubbly, we can guesstimate what this house should be "worth" without the excess of the bubble. If we say they spent $300K on all upgrades, we come to a price of $1.2M. We will then be generous and give an inflation + 1% growth rate (say about 4%) and get to somewhere in the neighborhood of $1.5M.
So now that a lot of the bubble excess has worn off, we see that this very house did sell in the $1.5mm range! The fact that it is on the higher end of that range is due in my opinion to the need for prices to still correct a bit more.
There you have it. Had the 2008 buyer been reading this blog and looking at the cycle of market prices, they could have waited a few years and saved a boatload of money. Not only that, they would have been able to purchase NOW with historically low interest rates!
I've been noticing that the high end all around town - from Silverlake to Westwood and even Santa Monica is beginning to crater. Sure, this is just anecdotal evidence from some guy, but I watch the market pretty closely.
ReplyDeleteThis house will definitely be worth less in one year than it is selling for now. The question is: will it be 5 percent or 20 percent less?
Whatever the number, I think it's becoming clear that we are looking at a lost decade of appreciation. In 2012 there will be plenty of houses selling for 2002 prices. Ouch. That's one hell of a hangover. I hope the party was worth it.
With this transaction, maybe NOW 90403 is actually going up (or at least stabilizing) over the past year... or the new buyer just paid too much.
ReplyDeleteFor your consideration: 954 26th, 3/2 Spanish, 1,563 sqft house/8,350 sqft lot, sold for $1,300K in July 2009.
The house on 26th is 465 sqft smaller than the one on Stanford, but it sits on 350 sqft more of valuable SM land which they're not making any more of. And kids at either address can attend Franklin Elementary. There's the traffic on 26th to consider, but wonder if it would now go for even less than $1,300K.
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ReplyDeleteThis comment has been removed by the author.
ReplyDeletedwr, I see you removed your comment about my estimate of the remodel being wrong by a factor of 10.
ReplyDeleteI was going to ask you to once again please not come on here with such a hostile attitude. I was then going to quote the old description of the house -- "the modern elements of the 2003 expansion/remodel"
When I buy something you can feel free to hook me up with the contractors that can do something like that for $30k and I will be most happy!
warchest,
ReplyDeleteWhat was expanded exactly?
OK, it looks like the old SF was 1808 and it was a 2/2, now it's a 3/2 with 2028 SF, and there are new countertops. Is that 300K worth of work?
ReplyDeletedwr...do you live in another dimension?
ReplyDelete1000 sq. ft. plus remodeling the other bath, plus remolding kitchen?
uh yeah, that would cost $300K....
2028-1808= 220 SF. Nice try.
ReplyDelete"remodeling the other bath"
ReplyDeleteNo evidence of that, and your statement infers that they added a bath. It went from a 2/2 to a 3/2- do you understand what that means?