Market Update -- Health From The Bottom

Let's start with the 90405 as our "lower end" single family zip code and examine the current state of the market. Looking at the most entry level portion of this zip code (which I will define as properties with asking prices of under $1mm), we see that there are 14 properties on the MLS. Of these 14 properties, 11 are in escrow. That means that 79% of the inventory below $1mm is currently in escrow in 90405. Even more amazing is that the 8 lowest priced properties are ALL in escrow.

To me this means that there is a clear lack of supply and that there really is healthy demand out there. I'm even seeing some of the "location discount" properties go into escrow as the lack of supply combined with low interest rates and a healthier economy is pushing buyers to absorb even subpar inventory due to a lack of alternatives and the sheer "cheapness" of this low end supply. You can call me crazy, but next time a decently located, properly priced property comes onto the market in 90405 I challenge you to go to the open house. Observe the serious buyers all excitedly looking over the property and then get ready for multiple offers to come in.

Next, let's switch gears and head up to 90402 (both NoM and Canyon). There are 16 properties on the MLS in the entry level price area (which I will define as under $2.5mm). Of these 16 properties, 10 are in escrow. This equates to 63% which is no doubt lower than the 79% we observe in the lower end 90405 but it is still quite respectable.

Again, to me this all adds up to a lack of supply and a clear demand for more supply by buyers. This is keeping prices pretty stable. The low rates and growing economy are helping as well. Inventory is of course seasonal, and there will no doubt likely be a healthy increase as we get into spring, but I think it is unlikely we will see enough of an increase to overwhelm the clearly pent up demand and cause prices to deteriorate by a meaningful margin.

This inventory situation is playing out in many other places across the country. This recent Calculated Risk post shows that existing home inventory is now at its lowest since early 2005 and is back to a healthy 6 months of supply at the current (low) sales rate. Those sitting around hoping for a flood of properties to hit the market and push prices down seem more and more likely to be disappointed. I am not calling this an especially strong market, nor do I see prices rising materially, but I am a lot more encouraged by what I see going on than I have been in some time.

Clean This Up Already! *Update 3*

I last featured 310 22nd back in November 2011.

This is a REO that has been sitting on JPM's balance sheet for well over a year. They re-listed it a while back (but I didn't do an update at the time) for the same price as they had it listed previously. That is an asinine course of action. Banks should not be in the business of carrying stuff like this for so long. Keep cutting until you find the market price and let it go.

JP Morgan foreclosed on 7/13/10 for $3mm. This was a case of the borrower refinancing themselves into a pickle once in 2005 and again in 2006. They bought this place in August 2003 for $2.65mm.

Old listing: 9/19/11 - $3,360,000
Reduced down to - $3,259,000

New listing: 12/4/11 - $3,259,000

Low Inventory = Stable Prices

Address: 2707 6th - 90405

Details: 3 bed/2 bath 1,596 sq ft house on a 6,000 sq ft lot

Description: This timeless craftsman is located on one of the largest lots in Ocean Park! A classic beach inspired home seconds to the sand. Enjoy this 3 Bdrm/ 2 Bath home that encompasses beautiful details throughout; including original built-in bookshelves, a cozy wood burning fireplace bordered by wooden columns, breakfast nook with glass doors & crown moldings throughout. Absolutely stunning backyard with a lush garden & a Wisteria arbor. Separate bonus room & bathroom, that is unpermitted - perfect for your own studio or home office. Build your dreams and take advantage of the Ocean views from a second level! This is truly a one of a kind home.

Previous Purchase: 6/21/05 - $1,425,000

Listing History: 10/27/11 - $1,465,000

SOLD: 12/22/11 - $1,403,000

This house went into escrow after 8 days on market. It seems like prices for more attractive properties aren't dipping any more. There are some zombies out there on the MLS and almost all of them have location problems or other major defects (which aren't being properly taken into account via much needed lower asking prices). But for the most part, when attractive properties come on the market they tend to go into escrow quickly. Seems like demand is more than sufficient to handle the slow dribble of good properties, and thus prices have been fairly stable around here for some time. Of course, buying has gotten even cheaper even with flat prices since rates keep hitting new lows. Ignore all the scary headlines about national home prices hitting new post bubble lows...things have been stable here for some time and I don't see any change to that coming.

Palisades Bargain Buying

Address: 891 Chattanooga - 90272

Details: 3 bed/2 bath 1,273 sq ft house, 5,200 sq ft lot, short sale

Description: *** Short Sale *** Approved by BofA with previous buyer. Light and bright 3 bedroom/2 bath California Cottage on quiet street in great Palisades neighborhood. Updated kitchen & baths with recessed lighting. Living room with fireplace. Two bedrooms with french doors that open to large and private grassy backyard. Additional features include: covered front porch, hardwood floors, updated copper plumbing, central heat & A/C, 2 car garage.

Previous Purchase: 7/22/05 - $1,350,000

Listing History: 4/20/11 - $949,000
Reduced down to - $899,000


SOLD: 12/29/11 - $917,000


I don't follow the Palisades closely but someone e-mailed me this listing. This short sale just closed for 32% off the July 2005 sale price. That is a pretty deep rollback for what looks to me like a decent property in a decent location. I don't think you can get rollbacks this deep normally, but seeing this bargain makes me think it is a good time to buy in the Palisades.