West of 4th Rollback

Address: 311 Marguerita - 90402

Details: 5 bed/4.5 bath 3,547 sq ft house, 11,183 sq ft lot, "remodeled"

Description: Located in the highly desirable north of Montana of Santa Monica! This Remodeled 5 bed/4.5 bath spacious home is located 1 block from the ocean. Features include a gourmet cooks kitchen with granite counters, top of the line stainless steel appliances, hardwood floors, sunny indoor courtyard, living room with soaring ceilings and family room that opens up to large landscaped entertainers backyard. The master has a luxury bath, walk in closet, steam shower &spa tub. This is truly one of a kind!

Previous Purchase: 4/2/07 - $3,895,000

Listing History: 3/4/10 - $3,295,000

SOLD: 5/27/10 - $3,200,000

Zillow shows a listing for this property back in January 2009 for $3.7mm but I don't have the full history on it.

The sale price for this represents a loss of $695,000 which is about 18% off the early 2007 sales price. That seems like a fairly modest loss (in terms of percentage). I'm not sure when the remodel was done but I'm guessing before the 2007 sale so it is a moot point. If not, that would explain why the gross rollback seems more modest, but I don't believe that to be the case.

Clean This Up Already!

Address: 310 22nd - 90402

Details: 5 bed/5.5 bath 6,505 sq ft house, 7,550 sq ft lot, 1989 construction

Description: Bank approved short sale = ready for immediate close. Exquisite Mediterranean villa with 6,505 sq ft including full guest house on beautiful tree lined street. Grand entertainer rooms include large formal living and dining room, library and gourmet chef's kitchen with top-of-the-line appliances. Beautiful master suite w/ luxurious master bath w/ spa tub. Additional media room, gym or playroom downstairs. Great square footage, exceptional design and quality of construction.

Previous Purchase: 8/19/03 - $2,650,000

Current Listing History: 10/7/09 - $4,495,000
Reduced down to - $2,975,000

I have featured this property before...it has been listed for rent...listed for sale for a long time...it has been in pre-foreclosure for a while but the auction date keeps getting pushed back. It is currently scheduled for auction on 6/1/10.

I don't know if the bank is serious about selling or what, but I think this is a pretty attractive price if it comes down about 10% from here. Buying a late 2003 rollback would be pretty solid.

Delusional on Hill *Update 2*

I last featured 2470 Hill back in September 2009. This is a 4 bed/3 bath 3,668 sq ft house on a 7,000 sq ft lot. It is a very heavy remodel which was completed in 2008.

Previous Purchase: 1/2/04 - $929,000

Listing History: 4/24/08 - $2,288,000
Reduced: 09/05/08 - to $1,999,999
Increased: 10/01/08 - to $2,200,000

Re-Listed: 8/27/09 - $1,850,000

SOLD: 5/20/10 - $1,750,000

19th Street Townhouses *Update 3*

When I last featured the new townhouses at 851 19th, I said that unit #3 was no longer in escrow (although #2 was).

Well, unit #2 sold on 4/29/10 for $1,245,000

...and unit #3 is back in escrow "looking for backup"

However, unit #4 is still active with no price cut.

It FINALLY Sold!!!

Address: 723 22nd - 90402

Details: 4 bed/4.5 bath 4,000 sq ft house, 7,550 sq ft lot, "remodeled"

Description: This is a great opportunity to live in a remodeled, 2 sty custom home with a versatile floor plan & terrific indoor/outdoor feel. The home features hardwood flrs, recessed lights, white oak doors & Milgard windows, a gourmet kit that connects to an eating area, & a fam rm that overlooks the priv yd. The garden has a pool with an automatic cover, large grassy lawn & a dining patio area. The home has generously sized BRs as well as a spacious office that can be personalized to fit one’s needs.

Previous Purchase: 11/1/02 - $1,849,000

Listing History: Zillow shows a listing from back in late 2007 as the first...asking $4mm

They re-listed many times...they cut the price many times...delusional all along.

Final Listing History: 12/17/09 - $2,795,000

SOLD: 5/5/10 - $2,556,000

I'm not sure when the remodeling was done but I don't think the buyers here got a bad deal. They got a lot of house in a good location for not all that much more than peak lot value. This is similar to my previous post.

You are certainly getting more for your money these days if you stay disciplined. It will be interesting to see how things shake out with the current international market drama and fears of a possible economic slowdown.

Free House With Bubble Lot Value

Address: 234 22nd - 90402

Details: 4 bed/5 bath 3,761 sq ft house, 7,550 sq ft lot, 1993 construction

Description: This “Eames” modern-style home is situated on a quiet, tree-lined street. Featuring four bedrooms and five bathrooms, hardwood floors, great room with fireplace, private office on first level, sunny westerly exposed yard with room for a pool, two-car garage with alley access. Enjoy all “North of Montana” living has to offer.

Previous Purchase: 6/14/94 - $950,000

Listing History: 2/5/10 - $2,479,000
Reduced down to - $2,395,000

SOLD: 5/12/10 - $2,300,000

Remember when people were willing to pay almost this much for just the lot?

Looking at the previous purchase, we see that the current sales price represents about a 5.7% compound growth rate over the 16 years from purchase to purchase.

Roll It Back

Address: 627 Euclid - 90402

Details: 2 bed/2 bath 1,244 sq ft house, 7,500 sq ft lot, "remodeled details"

Description: This beautiful & bright home exudes sophistication w/ its fine remodeled details, while still maintaining its long-established traditional charm. With 2+2 & a den, the property features plenty of natural light & striking touches throughout. The yard is private & inviting, perfect for a BBQ complete w/ a beautiful salt-water pool & spa. Great location North of Montana, close to shops & restaurants.

Previous Purchase: 10/23/07 - $2,298,000

Listing History: 1/30/10 - $1,980,000
Reduced down to - $1,849,000

SOLD: 4/9/10 - $1,749,000

This is a loss of $549k (24%). A previous sale took place in July 2003 for $1.4mm but I don't know when the "remodeled details" were done so it is hard to do exact rollback analysis. At worst this sale that just took place seems like a later 2005 rollback based on the 2003 price and at best maybe it is closer to a late 2004 (when adjusting for upgrades). Hard to get an exact read but either way it doesn't seem super attractive.

July 21, 2008 -- Lies, Delusion, or Both?

I drove past the former First Federal Bank branch (now OneWest Bank) on Montana and 17th the other day and decided I should dig up this gem of a letter which I have been holding onto for quite some time. You can click on it for a larger image. I encourage you to read both pages of it. To start, I will quote a few of my favorite lines from the first page (above).

...First Fed has nearly twice the regulatory capital required to be considered "well-capitalized." We believe we have more than enough capital to withstand this current market cycle.
...we decreased our originations of Option ARM mortgage loans in late 2005.



Below is the second page of the letter.



Some more great lines (from the second page above):

We are not a "complex" financial institution like many others...
First Fed is not currently in any danger of being taken over by the FDIC nor do we foresee any scenario that could even put us in that position.

Our current stock price is unrelated to our capital and is based on investor perception...Our stock price does not reflect our financial soundness or your deposit safety.

Bottom line: First Fed has been in business since 1929 and we've weathered many economic cycles. We are equipped and ready to weather this cycle, and will bounce back quickly as conditions improve.

First Federal failed 12/18/09...more than a year after this letter was sent out, but the writing was on the wall for a long time and this thing was in zombie penny stock status for quite a while before finally being seized by the FDIC.
The branch on 17th and Montana was where I opened my first bank account. I remember wheeling a bunch of pennies over there with one of my Franklin classes when we did a fundraiser for the rain forest or something like that. I once saw a celebrity in the parking lot as a kid...fast forward and I remember looking through 10-Q reports a few years ago and being worried about how much negative amortization interest they were booking as profits before actually receiving it.

While we're on the subject of looking back at the wretched excess of the housing bubble and the financial chicanery which enabled it, I want to highly recommend The Big Short by Michael Lewis.
It is a pretty quick read and highly entertaining while at the same time, highly educational. I thought I knew a good amount about the relationship between Wall Street and the mortgage market but this really opened my eyes. Here is a little excerpt:

There weren't enough Americans with shitty credit taking out loans to satisfy investors' appetite for the end product. Wall Street needed his bets in order to synthesize more of them. "they weren't satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn't afford," said Eisman. "They were creating them out of whole cloth. Once hundred times over! That's why the losses in the financial system are so much greater than just the subprime loans. That's when I realized they needed us to keep the machine running. I was like, This is allowed?"

Delusion Never Dies...(on 25th street)

Address: 839 25th - 90403

Details: 5 bed/3.5 bath 3,270 sq ft house, 8,350 sq ft lot, 1987 original construction, "extensively remodeled in 2008"

Description: Lovely contemporary Spanish extensively remodeled in 2008! Charm, spacious elegance and quality throughout. Designer details include Brazilian Cherry Wood Floors, Plantations Shutters, Pella Double-Paned Windows, Sconces, dramatic open Foyer, beautiful staircase, gorgeous stone fireplace. A Chef's Kitchen with all the amenities featuring w/Wolf, Subzero, Miele appliances including built in coffee maker, steam cooker and a 50-bottle Wine Fridge. Open family room leads to patio, fire pit, serene fountain and grassy yard. Master Suite features large walk-in closet, scrumptious bathroom w/over sized shower, soaking tub, Travertine stone floors and Grohe fixtures. Two additional bedrooms upstairs. Wired for Panasonic Phone/Intercom System, Alarm, Cat-5 and built-in Russound 6-Zone Sound System throughout the home. Instant Water Heater, 2-Zone HVAC. 2-Car Garage w/extra room for storage. First Showing Broker's Caravan Tue, May 11th, 11-2pm. Public Open House Sun, May 16th, 2-5

Previous Purchase: 12/27/06 - $2,128,000

Listing History: 5/7/10 - $2,875,000

This house was rented out for a while and more recently they did an interior remodel and landscaping. Looks like a bunch of fancy lipstick as the original house is 1987 construction and I don't think it looks like any square footage was added or major walls moved. The location here is good, lot is good sized, all the bells and whistles on the remodel, etc...

BUT, the big thing (as always) is the delusional price. They paid a peak bubble price and sunk some $$ in and now think they are going to get a fat profit? Remember, this is not new construction. An actual NEW house sold across the street (848 25th) back on 1/8/08 for $2,850,000. The market has declined a good amount since then...it all adds up to me thinking 839 25th is asking too much...15% too high?

Jokers -- Fools -- Clowns *Update 4*

I last featured 933 25th in March 2010.

Listing History: 10/22/09 - $4,488,000
Reduced: 01/13/10 - to $4,250,000
Reduced: 03/06/10 - to $3,895,000


EXPIRED after 174 days on market

***EDIT***...They are trying to rent it out

Rental Listing: 4/12/10 - $19,000/month

Back On Market Again!? *Update 1*

This is a somewhat interesting tale of a two bedroom condo, 1524 Franklin #D - 90404, which has now produced losses for two different owners...and I've been featuring it the whole time on this blog.

To start off, you should go back to my last post in March 2009.

Previous Purchase: 8/29/06 - $640,000

Listing History: 12/17/07 - $463,500

Two further price cuts later - $405,500

Sold: 4/29/08 - $405,500

And now its back again with some new appliances, granite, cabinets, etc...

Listing History: 2/21/09 - $489,000
Reduced down to - $469,000

Re-Listed: 2/26/10 - $439,000

SOLD: 4/27/10 - $442,000

So what happened here was that a traditional bubble buyer paid $640k in summer 2006. They then got foreclosed on and ultimately the bank sold the unit for $405.5k in early 2008. The buyer of the foreclosure then spruced it up with some new granite, cabinets, etc and tried to sell it in early 2009. I don't think they were trying to flip it necessarily though. They might have just gotten into something where they then lost a job, etc...They couldn't sell it for a high $400 number so they shelved the listing and brought it back early this year and finally got rid of it. Given remodel costs as well as holding and transaction costs, they took a fair sized loss...Hopefully the current buyer is a real holder and will actually be willing and able to live in this thing for a while.

Early 2004 Short Sale Rollback

Address: 1239 9th #7 - 90401

Details: 1 bed/1 bath 598 sq ft condo, $164 HOA, 1987 construction, short sale

Description: Short Sale - Priced to sell fast! One of a kind one bedroom townhome. Extremely bright end unit with only one common wall. Laminate floors in living room. Relaxing spa tub in master bath. Central air and heat, laundry inside, 2 car side by side parking plus full attic for incredible storage. Low HOA dues.

Previous Purchase: 10/28/05 - $440,000

Listing History: 9/29/09 - $349,000
Price raised to - $395,000

SOLD: 4/27/10 - $385,000

This went into escrow pretty quickly but took a while to close because short sales usually do...Looks to be roughly a 2004 rollback.

How Do The Numbers Add Up?

Address: 1147 Centinela - 90403

Details: 5 bed/6 bath 4,700 sq ft house, 9,000 sq ft lot, new construction

Description: WOW! Brand New Construction! Franklin School District! Custom Cape Cod! Beautiful tree-lined street south of Montana in upscale Santa Monica quiet neighborhood. This never before lived-in 5 bed/6bath home boast approx 5000sq ft of living space including a bonus basement great for storage/wine cellar. Hardwood floors throughout, spacious bedrooms, gourmet kitchen and Viking appl's with a wide open floor plan. Grassy backyard with room for a pool on a 9000 sq ft lot. Close to Brentwood golf, shops and restaurants. No expense spared. A MUST SEE!

Previous Lot Purchase: 11/21/07 - $1,475,000

Listing History: 10/8/09 - $2,995,000
Reduced down to - $2,795,000

Re-Listed: 1/27/10 - $2,795,000

SOLD: 4/7/10 - $2,650,000

I saw that this spec house sold and wanted to run the numbers. From the buyer's point of view, this works out to having paid $564/sq ft for the whole package. But another way to look at it is to see what they paid for just the construction (holding the lot value constant at the price that the builder paid for it). If we do that, we see that they paid exactly $250/sq ft for the construction. Not too shabby. If we bring the lot value down to what it might be worth today, we need to chop off somewhere between $300k-$450k...Let's use $375k as our discount, which would bring the lot value down to $1.1mm. Even after doing this, the buyers today just paid $330/sq ft for the construction.

From what we keep hearing, it seems like you would probably be hard pressed to build something for yourself for $330/sq ft; especially when you factor in all the architecture, landscaping, permitting, etc...then there is the holding cost that you incur if you are building for yourself...you've got to still pay property taxes on the lot and you've got to pay rent for a year while your house is being built! So I guess my point here is that it seems the buyer saved themselves a lot of hassle and maybe even a fair amount of money.

From the builder's perspective, we see they are into this thing for lot value + taxes + money holding costs (we'll just use 5% on the lot value amount to be conservative) + all building and related costs + 1/2 realtor fee ("owner is listing agent" so they only pay half).

= $1,475 + $40 + $185 + $65 + building costs

So basically the big question mark is what it cost them to build this. If we use $200/sq ft and assume the builder is the seller (thus, no markup), we get $940k.

Using $940k for the build cost, we come to a total of $2,705,000 when including the other costs. That is not much more what the buyers just paid! If I had to take a guess, I would say the loss for the builder is larger than $55k though because I think my assumptions here are overly conservative on their costs.

This Won't End Well *Update 2*

I last featured 3409 Pearl back in January 2010.

I suggest going back to the very original post on this property for some more commentary from various readers on their opinions of the location, etc...

Previous Purchases:

03/03/2008:	$1,055,000
12/16/2005:	$845,000
12/12/2003:	$655,000

Listing History: 6/23/09 - $1,149,000
Reduced several times to - $799,000

SOLD: 4/22/10 - $808,000

The upgrades to this property were done before the 2008 purchase. So this short sale which just went through represents a 23.4% decline from the 2008 purchase and is essentially a mid 2005 rollback with the upgrades thrown in for free (so maybe that is something like a late 2004 rollback on an adjusted basis?).