More Livable 90405 Starter Home

Address: 2255 26th - 90405

Details: 3 bed/1.75 bath 1,664 sq ft house, 7,500 sq ft lot, "upgrades throughout"

Description: Located on one of the most desired streets of Sunset Park, this charming 3+2 features a remodeled gourmet kitchen with granite counters, a spacious living room with fireplace and surrounded by windows, and an extra large lot - almost 7,500 sq ft. Upgrades throughout, copper plumbing, detached 2-car garage and hardwood floors. Veggie planters in the lush garden. Quiet, tree-lined, non pass-through street. Near shops, restaurants and parks on Pico and Ocean Park Blvd!

Previous Purchase: 9/18/01 - $599,000

Listing History: 7/5/10 - $995,000

SOLD: 7/28/10 - $1,005,000

The first thing to look at on this is when the upgrades were done. I don't know the answer but you should be cognizant of the fact that they are there...Next, look at the summer 2001 price.

If you use 3% inflation + a 1% premium and compound that over 9 years, you get a current estimated fair value of $850K. Again, this is ignoring the upgrades. If they were done after the 2001 purchase then you would add on whatever value you want to ascribe to them to the $850k to get current fair value. 


Then take a step back and realize that rates are much lower now so you get the affordability stretch as a counter against the fact that the $1mm sales price looks a little above our estimate for fair value. It is interesting to note that this house went into escrow after just 5 days on market and then SOLD in less than a month. That is pretty rare from what I have seen. So I'm guessing someone put up a lot of cash or didn't finance this? I am less familiar with how good the odds are of something going through escrow in a few weeks if financing is involved (my guess is that is rare).

This house is not very big and there isn't much about it that is all that special. But it has been upgraded to the point where you can raise a family in it. Our single YB probably is not looking to buy this. Hence we are going to most likely look at a young family (YF) which might have two solid incomes...or as many have pointed out, one $300k income which could support this.

But looking at what your dollar buys, I don't see how this type of property falls 20% from here. It would be too affordable at $800k. As houses like this fluctuate in value from roughly unchanged to down 5 or 10 percent over the next few years, the market should clear. I think it would take a major economic stumble and/or interest rate spike for this thing to fall 20% and be in range of a conforming buyer with a 10% down payment.

Perfect Apples To Apples Comparison

A

Address: 3019 Prospect - 90405

Details: 2 bed/1 bath 972 sq ft house, 7,500 sq ft lot, short sale

Description: Reminiscent of a European style Bed and breakfast, this house will charm you. 3019 Prospect is a very quaint 2 bedroom 1 bath classic home perched on the Sunset Park hillside - located on a street that is only 1 block long, Prospect is similar to a cul de sac. There are greenbelt vista views and a massive back yard. The lot is 7,500 square feet. This home is very light inside, with great windows, French doors opening to wood patio & steel kitchen counter tops. Walk to shops, parks, golf course, and only 13 blocks to the beach! Excellent Santa Monica Schools.

Previous Purchase: 10/14/04 - $780,000

Listing History: 5/20/10 - $785,000
SOLD: 7/21/10 - $775,000

This is a great example which shows prices in the late 2004 area. This was a short sale which went into escrow after 12 days on market. It is not surprising at all to see something like this sell quickly as it is a good way for someone to get into the single family market on a budget. Buy the shack now in a decent location with a good size lot, save up more reserves as your young family grows so that you can do a remodel, and all is well.

Let us imagine that a young buyer put 10% down on this purchase. Then use a 4.75% 30 year fixed mortgage for the remaining 90%. That interest rate is conservative, as conforming rates are actually a little lower.

The mortgage payment on its own comes to $3,640/month. Add on another 1.5% for property tax and some insurance and your total comes to about $4,600/month. Hell, round it up to $5,000/month...and if I'm not being conservative enough, notice that I'm not giving ANY tax break benefit on the interest.

I think this allows for a buyer to afford this making less than $200k/year. That would allow for a law associate at a top firm who is a few years into the job to afford this. Same for an associate at a top finance firm who has been working for a few years. You guys can make up your own minds, but dirt cheap interest rates are really stretching affordability and they make 2004 rollbacks appear somewhat "affordable". I think prices can certainly continue to creep down and I think they will...but I don't see prices gapping down by multiple "rollback years" with rates low and the economy stabilizing and growing. I'm aware some of you may strongly disagree and I'm ready to take the heat.

What $2mm Actually Gets You On 15th

Address: 423 15th - 90402

Details: 3 bed/2.75 bath 2,262 sq ft house, 7,500 sq ft lot, "updated"

Description: Light and bright single level Traditional with 3bd+2.75ba. Totally modern and updated, move-in condition. Hardwood floors thru-out, wired for sound. Living room with fireplace and formal dining room opening to front patio. Family room w/built-in entertainment center. Sleek kitchen features white marble counters, stainless steel cabinets, top-of-line appliances. Master opens to large backyard with built-in BBQ and fridge. Perfect for entertaining. Franklin School District.


Previous Purchase: 10/15/08 - $2,365,000

Listing History: 4/9/10 - $2,300,000
Reduced down to - $2,195,000

SOLD: 7/15/10 - $2,000,000

This is an interesting example to compare with the house which I featured in my last post (also on 15th street in 90402). This house here is totally redone, has an extra bedroom and 1.25 baths and is much bigger. However, it sold for LESS than what 334 15th is currently asking. It should be very obvious that 334 needs to come down in price.

Looking at the rollback on this house shows what I would call a pretty modest decline of a little more than 15%. However, I think you might be able to make the case that the October 2008 price was already below what a peak price would have been, so in essence we are looking at a larger peak to current decline. I don't think you can make a case for this to be a 2004 rollback...looks like something later into 2005 maybe.

Very Groovy House...But Overpriced *Update 1*

I last featured 334 15th back in November 2009.

It is just a small, 2 bed/1.5 bath house but there are some very neat details and it is a pretty unique house.

At the time I featured this house last year it was clear that it was overpriced. It (much to my astonishment) went into escrow though and remained in escrow for many months. Well...shocker, it fell out. Now, bring on the price cuts.

Previous Purchase: 2/8/08 - $2,400,000

Listing History: 10/23/09 - $2,250,000
Reduced: 06/30/10 - to $2,100,000

The current asking price represents a decline of 12.5% from the early 2008 purchase price. I would argue that prices are down more than that and that this house will need to reduce the price by a greater margin in order to achieve a sale. I would guess that if a sale eventually takes place, it will be below $2mm.

Refund?? NFW!

Address: 609 7th - 90402

Details: 5 bed/4.5 bath 4,044 sq ft house, 7,450 sq ft lot, 2006/2007 construction

Description: Romantic, custom Spanish 5bd+4.5ba completed in 2007-designed by John Andrews. Totally quiet & private Villa behind hedged, gated entrance. Reclaimed Italian tile entry & handcrafted roof tiles, oak hardwood floors, recessed lighting & wired for sound thru-out. Step-down living rm with fireplace leads to private courtyard with tile fountain. Formal dining room, butler’s pantry w/wine fridge & custom built-ins. Chef’s kitchen features limestone counters, center island, stainless Viking appliances & breakfast area. Family rm leads to both courtyard & backyard through French doors. Gorgeous backyard perfect for entertaining w/firepit, speakers and outdoor Viking kitchen. Spacious master suite with fully appointed walk-in closet, balcony & luxurious bath w/steam shower & spa tub. Large rooftop deck with private mountain and westward views. One-of-a -kind craftsmanship and detailing thru-out! Also avail for lease $14,000/month.

Previous Purchase: 5/11/07 - $3,395,000

Listing History: 7/15/10 - $3,495,000

"also available for lease $14,000/month"

I find it highly laughable that someone who bought a spec house in May 2007 thinks they are going to be able to actually make a profit 3 years later. Big price cuts are in order.

I also think the lease amount they are asking is too high. A very recent rent comp could be 933 25th which just got rented out at $16,000/month. 933 25th was way bigger, had many more beds and baths, was on a quiet street instead of busy 7th, and was brand new. It had cut its price down to $3.9mm. If we guesstimate it is worth about $3.5mm or something around there, it should be obvious that that this house on 7th which I don't think is worth over $3mm is asking too much for rent.

19th Street Townhouses *Update 5*

I featured the 4 new townhouses at 851 19th just a couple posts ago.

For the final update on this building, we have unit #3 which just sold.

#3 Listing History: 8/5/09 - $1,295,000

SOLD: 7/12/10 - $1,260,000

The most interesting thing that I would note on this sale is that #2 which had the same square footage and number of beds and baths actually sold for LESS than what #3 just got. #2 sold back on 4/29 for $1,245,000. So that means that someone actually paid up to get the last unit in the building. This is the start of an epic bull market. Prices are rising, and you need to buy now or be priced out forever.

Ok, I'm kidding about that. But we've got to tip our hats to the developer for getting pretty close to list price on all 4 of these units and actually selling them, unlike so many others who have pussyfooted around and now have a bunch of high end townhouse rentals to worry about.

Jokers -- Fools -- Clowns *Update 5*

I last featured 933 25th in May after the sale listing expired (at 174 DOM) and we found out the property was then being listed for rent on the MLS.

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

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

RENTED: 7/9/10 - $16,000/month

The developer has to be eating massive losses on this. They bought the lot (with plans and permits I believe) for $1.95mm all the way back in August 2007. They then spent a ton of money building this thing and it has been almost 3 full years now since the lot purchase.

We all saw how the builders and developers were minting money during the bubble...examples like these here show the other side of the coin.

19th Street Townhouses *Update 4*

I last featured the townhouses at 851 19th back in May.

You can go back and look at the previous posts for info on #1 and #2 which I covered after they sold.

Unit #3 is still "looking for backup"

But the runt of the litter in the back (2 bedrooms instead of 3 bedrooms) has SOLD after the re-list game was played. The previous listing for it "expired" after 291 days on market.

The re-list appeared on 6/4/10 and it went into escrow just 10 days later. Note that the re-list was at the same price as the original listing ($1,095,000).

Re-Listed: 6/4/10 - $1,095,000

SOLD: 7/8/10 - $1,060,000

It certainly took a while to get this to sell but given that the developer has been able to get these things to sell near the original list prices I've got to think they are somewhat happy with the outcome.

90403 SFR Entry Level

Address: 2515 California - 90403

Details: 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?

Price Cut Needed on Franklin

Address: 1124 Franklin - 90403

Details: 3 bed/3 bath 2,515 sq ft house, 9,000 sq ft lot, 1935 construction but upgraded kitchen and baths

Description:Gracious family home on a sunny quiet street in Franklin Elem district!Gourmet center island kitchen opens to family room, large formal living and dining room!Master suite features luxurious glass tile steam/shower bath, walk in closet, high beamed ceilings, and an attached office/work- out room/nursery. This is an allergy friendly home, central heat & air, hardwood floors.Bonus room off garage is ideal for office/maids/storage. Large lot with a long driveway that is gated.

Previous Purchase: 12/7/04 - $1,775,000

Listing History: 4/29/10 - $1,899,000

I don't know when the upgrades were done but I'm guessing before the late 2004 purchase. If that is correct, then this is an apples to apples situation. They are currently asking for a 10% profit on their late 2004 price which would put the asking price in late 2005 territory which is well above market. I would suggest that it would be appropriate for this to sell around the price at which it was purchased in late 2004. There needs to be a price cut for this to move.

Marine Short Sale

Address: 1214 Marine - 90405

Details: 2 bed/2 bath 1,418 sq ft house, 5,100 sq ft lot, "remodeled in 2006", short sale

Description: Bank approved short sale. Remodeled in 2006. Stylish home with attached bonus room. Featuring hardwood floors, recessed lighting throughout, custom tile in the bathrooms, stainless steel appliances and granite counter tops in the kitchen, master suite with walk-in closet, and French doors that open to a private patio. Nice front yard with lots of bamboo and a two car garage. Flat screen TV & washer/dryer is excluded.

Previous Purchases:
12/16/05 - $835,000
8/16/06 - $1,099,000

Listing History: 1/21/10 - $1,099,000
Reduced down to - $949,000

SOLD: 6/26/10 - $925,000

I've included both previous purchases so you can see where the flipper bought it in late 2005 and then where it was "remodeled" and sold in 2006. You will notice I am assuming the flipper did the upgrades prior to the 2006 sale.

If this is indeed correct, then the 2006 price and the current sales price are a good apples to apples comp. This short sale amount is just 16% below the 2006 sale which would put this roughly into early 2005 territory. As I have said before, that seems sort of where the market is right now but given some 2004 rollbacks showing up and a slowing economic outlook and housing market outlook, I don't think 2005 purchases are great right here.

...but hey, they closed before 6/30 so they got that tax credit! and they scored a "short sale" so it must have been a bargain, right?...right?

EDIT -- You have to be in contract by April 30th to get credit...also house can't be over $800k purchase price, and there are income limits. No tax credit possible here.