90405 Mediterranean Spec

Address: 2924 16th - 90405

Details: 5 bed/4.5 bath 3,884 sq ft house, 7,039 sq ft lot, 2010 construction

Description: Spectacular NEW construction in prime Santa Monica features nearly 4000 sq ft, 5 bedrooms, 4.5 baths. Volume ceilings, bright open plan, gorgeous 8' mahogany doors, distressed 6" hickory espresso hardwood & marble floors. Custom cook's kitchen features granite counters, tumbled stone accents, huge center island, state-of-the-art stainless steel appliances including double oven, microwave, six-burner gas stove. Spacious fam room w/ cozy fireplace opens to huge outdoor patio area, heated pool and spa complete w/ Jandy control system. Exquisite master suite w/ volume ceilings, custom spa retreat-like bath with corner tub, double vanity, over-sized shower, dressing area, massive dual closets, private balcony and ocean views. Three additional upstairs bedroom suites. 1st floor bedroom suite ideal for Maid's or home office-den. Custom designer finishes throughout w/ great attention to detail. Wired for surround sound & state-of-the-art electronics. Many GREEN design features. A MUST SEE!

Lot Purchase: 4/20/07 - $957,000

Listing History: 12/27/10 - $2,295,000

SOLD: 2/25/11 - $2,235,000


Maybe there is something that I am missing here but I don't see how this developer didn't take a big loss on this. If you take out the cost of the land, the buyer just paid $329/sq ft for the construction on its own. Unless this was really crummy quality, I figure the all in build cost isn't too far away from that number. Then think about all the other costs. They held the land for for almost 4 years. There is a big real estate agent commission check to write, there is the construction loan interest, property taxes, etc, etc. The one thing I will say is that the developer did a good job of listing at a realistic price which allowed the sale to happen quickly. No point in listing way too high and letting the listing get stale and then having to rent it out.

As far as I have seen, there haven't been too many of these types of wretched, overbuilt monsters in 90405 so far. If I lived there I would be somewhat disappointed to see the spec palace type construction. However, longer term, it may be a testament to the 90405 value and a sign that the area is continuing to attract more wealth.

Stale in 90403 *Update 2*

I last featured 2620 Washington back in November 2010 when it had made a second price cut.

Listing History: 6/3/10 - $1,387,000
Reduced down to - $1,299,000

Reduced again down to - $1,269,900

SOLD: 2/10/11 - $1,255,000

This house was on the market for 194 days before going into escrow. From the description, it was also available for rent at $4,600/month. Let's assume for the moment that they could get that rental price.

After putting 20% down, your mortgage payment on a $1mm loan would be about $5,700/month at 5.5%. Property taxes come out to another $1,200/month. You then need to factor in insurance, upkeep, etc but on the other side you have the mortgage interest deduction. No matter how you crunch those numbers, there is still a very big premium being paid to own. I think there has always been a premium to own in this area and there will continue to be in the future, but I could see the premium eroding a bit. Rents may marginally rise while property values come down a touch. But  no matter what happens, if you wait for parity, you will wait forever.

Back Out Of The Shadows

I last featured 942 26th back in February 2010. Before that, I featured it in January 2008. This is an agent owned and listed flip gone wrong. It looks like they couldn't find anyone to overpay for it, so they have chosen to delay the inevitable and rent it out. Stunner, here we are a year after the last listing (as the 12 month lease is likely running out) and the price is STILL too high.

Details: 3 bed/3 bath, 2,477 sq ft house on an 8,329 sq ft lot. Totally flipped.

Previous Purchase: 10/31/05 - $1,549,000


Listing History: 1/19/08 - $2,295,000
Expired after 61 days on market


Re-Listed: 1/28/10 - $1,875,000
Canceled after 42 days on market


Re-Listed: 1/27/11 - $1,985,000


This listing price is too high. The owner is either in total denial about the fact that they have lost a bunch of money or else he simply can't afford to sell it at a true market price. Good luck.

The next property coming back out of the shadows is 2619 Washington which I featured back in November 2009. This house has been listed twice already so now they are hoping the third time is a charm (at this price I don't really think it will be). Just like the house on 26th street, the last listing ended in the house being rented out.


Previous Purchase: 12/20/96 - $715,000

Listing History: 11/3/08 - $2,284,800

Re-Listed: 10/13/09 - $1,995,000


Re-Listed: 1/28/11 - $1,995,000


This seller is listing for the same price as their last try, however the current description cites a "newly renovated kitchen" and from the photos alone I can tell they painted the house. So at least they have spent some money and kept the price the same. A net price reduction. The joker on 26th can't say the same. So I give this house a much better chance of selling than the one on 26th, but I still think they will need to bring the price down by a decent amount.

The last of our trio of 90403 houses coming out of the shadows is none other than the slanted roofed, gaudy fountained, 843 25th. I last featured it in August 2010.


Purchase History:
1/12/07 - $2,100,000
6/21/05 - $1,600,000

Listing History: 7/26/10 - $2,199,000

Reduced: 08/11/10 - to $2,099,000
Reduced: 08/13/10 - to $1,999,000

Re-Listed: 1/31/11 - $1,999,999

This house was the most recently listed out of these three as it was around in the summer of 2010. They came out asking a ridiculous price and quickly cut a few times, but it was obvious that they were still way out of the ballpark. They have raised the price by a nominal $999 this time around. If this seller takes quick action and cuts the price (by a bigger margin than last time) then I think they can sell it. Otherwise, I think nothing happens up around $2mm.

All three of these examples show that we are not out of the woods yet and that we still need to clear through some shadow inventory. At some point I would hope these sellers would realize that the strategy of listing at a price that is too high is not working. As I have shown on this blog many times, if you list a property at a low price, you will create excitement and buzz and likely get a bidding war. I think that in at least 2 of these cases, the owners may be unwilling to go that route because they are underwater and are in denial or can't afford to really sell...but who knows. I will keep an eye out and see what happens.