We'll have to wait and see. I would love it if someone would e-mail me with any additional info while we wait.
Tuesday, February 28, 2012
Watch This Bargain Fly Off The Market *Update 1*
We'll have to wait and see. I would love it if someone would e-mail me with any additional info while we wait.
Friday, February 24, 2012
Ashland Bids-A-Plenty
Details: 3 bed/1 bath 1,417 sq ft house on a 7,000 sq ft lot, fixer
Description: Property is 100% available. Location, location, location. Traditional style 3+1 prime Sunset Park location. Fixer upper. Step down large living room with brick fireplace, wood beam ceiling. Formal dining room. Kitchen with breakfast area. This is a great and rare opportunity to own a home on a 7,000 sq. ft. lot. Property has oversized double garage and potential parking for 6 cars. Where in Santa Monica can you find this? The opportunities are endless. Remodel the home, enjoy “as is”, add on a second story, or tear it down and build a brand new house. It is all up to you. This property has a lot to offer and is priced to sell.
Listing History: 2/9/12 - $899,000
Now "looking for backup" after 13 days on market
The second house off of 23rd and right by the airport...I won't say anything else about location because you already know how much of a location snob I am. I'm surprised to see this go into escrow so quickly but we'll see where this closes.
Address: 2333 Ashland - 90405
Details: 3 bed/2 bath 1,742 sq ft house, 7,000 sq ft lot, better condition
Description: This beautiful 3 bedroom 2 bath traditional enjoys Sunset Park's best family location with Clover Park & Grant School just blocks away. This wonderful open floor plan is flooded with natural light, opens to a gorgeous pool & spa area, and a larger master suite. Whether you are relaxing by the pool, playing at Santa Monica's best park (Clover Park), walking your kids to school, or strolling to Thyme Cafe and Bob's Market, this home has everything you need to enjoy Santa Monica's famous lifestyle - great house, great location, great pool. There is also a detached garage that's been converted into a bonus room with a ¾ bath that would serve as a great pool house. Life is good!
Listing History: 2/9/12 - $1,195,000
Now "looking for backup" after 13 days on market
This one isn't too close to 23rd but still...airport proximity! Two houses pretty close to each other go into escrow quickly. Entry level and mid level stuff staying firm. Spring is here, the stock market at multi-year highs, rates super low. I'm surprised to see these both go into escrow quickly but hey, maybe things are firmer than even I thought!
Tuesday, February 21, 2012
Really Bad Pricing Strategy *Update 1*
Today the price was essentially cut again as they are playing the re-listing game and have started out with a price $30k less than the old listing.
Listing History: 11/11/11 - $1,379,000
Reduced down to - $1,329,000
Re-Listed: 2/21/12 - $1,299,000
The old listing was canceled after 102 days. During that time there was a lack of inventory and pretty firm demand out there. Yet these sellers decided to be aggressive on pricing and started too high. They cut the price by $50k but that was too little, too late. So here they are back again with a reset DOM and a price just $30k lower than before. I think that is stupid. If any buyers cared within $30k or so of the last price they would have just negotiated and gotten into escrow.
From this, we can deduce that the current price is still too high. So they have already wasted their opportunity to show that they have learned from their past mistakes. These sellers are either stubborn/greedy or somehow leveraged and are simply not able to cut much further. I think they would have been better off re-listing at $1.179mm or so and getting the price bid up by multiple offers. It would be a shame for them to let this listing get stale again like the last one. I've seen this house in person. It's a little goofy and not as clean around the edges as I thought it would be. They aren't going to be able to be so aggressive on pricing and get top dollar. Maybe someone should print this post out and put it on their doorstep. Maybe I would do that if I were a potential buyer of this property.
Thursday, February 16, 2012
Rent Vs. Own
These are the four major components of "ownership" costs. I would also add a fifth category for maintenance but we'll get to that later.
However, when we compare ownership costs to rent costs, we have to remember that when renting you are paying nothing towards principal. So I would argue you should look at ITI vs rent and omit the P (Principal) component. I have argued this for a long time and you can go back and look at my old posts where I talked about looking at rent vs an interest only mortgage (hence, no principal).
To simplify, I'm going to look at what these numbers cost per $100k of purchase price.
You can get a 30 year fixed for under 4% but I will use 4% to be conservative. (You can also get 5/1 ARM money below 3% but we won't go there...).
Interest = $333
Taxes = $100
Insurance = $15
This comes to $448/month. However, interest and taxes are deductible on your taxes. Since we are talking about westside properties, you are most likely falling into at least a 28% if not 33% (or higher) tax bracket. I will be conservative and use 25% to account for some AMT and other restrictions.
This brings the net monthly payment down to $340. I will now add in a little under 1% cost for maintenance which brings us to a total net monthly cost of about $400. Assuming zero tax deductions, the gross cost comes out to $508.
Before the bubble ever burst we talked about how properties in desirable areas generally wouldn't get to or through rental parity even at the bottom of the cycle. However, I would argue that by using the numbers above you can find many examples where properties (more skewed towards entry level than the top of the market) are currently selling close to or at rental parity. I believe rents are firm and aren't going down. This puts in a good floor for prices and that is a big reason why you are seeing stability in the market right now.
Looking out more than just a year into the future you need to remember that your housing costs are fixed for the most part if you buy. However, the rental rates you use in these exercises are subject to increases. Over many years I think inflation will take its toll and help boost rents. Meanwhile those who buy are not subject to rental increases. Instead, they will accrue benefits of a lower fixed cost which will ultimately manifest itself in higher nominal property values over time.
I'm happy to hear some rebuttals to this way of viewing things but I think this is how to do it. In this case we have zero down payment. However in reality, a responsible buyer will put at least 20% down. Since your money is making less than 1% these days, you are actually benefiting as you will implicitly be earning the interest rate of your loan (4% in my example) instead of less than 1%. So you can't make an argument about opportunity cost of capital. Secondly, I think this continues on toward principal payments. I'm not including them here, but essentially you are earning the cost of the loan on that money when you pay down your principal. Granted, when you rent you aren't forced to pay any principal. But in my mind, being forced to pay principal isn't the worst thing in the world as you are essentially being forced to buy a bond paying 4% which enables you to gain all the future upside in the housing market.
So in real life, we are looking at $400/month net cost of owning per $100k of house. So does a $1mm property rent for $4,000/month? I would say that is about where rents are these days...We are close enough to parity that if you have a stable job and have the down payment saved up, you don't have much to gain at all by renting.
Monday, February 13, 2012
Really Bad Pricing Strategy
Details: 3 bed/2 bath 1,945 sq ft house on a 7,500 sq ft lot, remodeled
Description: Unique hip & creative living! Linda Brettler inspired remodel using a blend of original and inventive materials to create fun, comfortable & livable spaces. Featuring concrete solar heated pool & spa off master. Wide open floor plan. Large living room w/ wood burning fireplace. Oversized windows & beautiful oak flooring throughout. Left center hallway with hidden laundry separates private bedrooms from living spaces. Formal dining room opens to courtyard & Gourmet kitchen w/ 6 burner Viking, industrial deep sink, stainless appliances & cabinets, granite counters & multicolored cork flooring. Office or guest off kitchen. Large step down family w/ cement flooring, sound system & stained wooden ceiling panels off kitchen connects to outside patio area & yard w/ artificial turf. Master bath w/ dual sinks & shower heads, glass tiles & walk in closet. Sliding glass doors off family and master truly create Santa Monica indoor/outdoor living. Detached garage with private ally access.
Listing History: 11/11/11 - $1,379,000
Reduced down to - $1,329,000
This is how you don't want to do it. The sellers listed too high from the beginning and then have cut the price just once by a measly $50k. This listing is now at 94 days on market. I went to one of the early open houses and there was plenty of traffic. But the backyard (and parts of the house) are a little odd and not in the greatest of shape. Yes, this is a good 3/2 in a nice location but they just pushed too hard with price and have not been flexible enough on cutting. There has been a small amount of inventory for some time and there are plenty of buyers out there. But these sellers have shot themselves in the foot as this listing is now stale and still overpriced. They need a more material price cut ASAP or else they should take it off the market.
Sunday, February 12, 2012
FLIPPERS! *Update 1*
Despite my dislike for this location and the dark colors inside the house, I said that it was a good 3/2 with solid square footage.
Previous Purchase: 7/1/11 - $755,000
Listing History: 12/8/11 - $1,039,000
SOLD: 2/10/12 - $1,020,000
The market is stable and inventory is low. I think you will be disappointed if you sit around and hope for another big leg down in prices. The economy is looking pretty good and rates are as low as they have ever been. I don't think anyone buying is banking on big gains in prices. People are buying because things have stabilized and they are moving on with their lives. With rates down here, the rent vs own equation is much closer to parity. I don't love this house or the location but I think these buyers did alright.
Wednesday, February 8, 2012
Watch This Bargain Fly Off The Market
Details: 2 bed/1 bath 1,296 sq ft house on a 8,350 sq ft lot
Description: Charming California Spanish cottage in the best location in Santa Monica. Walk to Montana shopping area. Could be redone beautifully. Large yard with mature fruit trees.
Previous Purchase: 2/27/04 - $1,485,000
Listing History: 2/5/12 - $1,295,000
Before we go into anything, it is probably worth knowing that this house is the middle house of three consecutive properties which were all owned by one family. The house to the north of this one was rebuilt and is still owned by the family. This middle one has been rented out over the years. The one just south of this one is 933 25th which is the ugly spec house that has been in some stage of foreclosure for some time. The owners of these three properties sold the lot at 933 25th for $1.52mm back in March 2006. So as of right now, the sellers of this house own this one and the one to the north.
All that is important because we can look at this family's original purchase of 933 25th as a good comp. They bought 933 25th in December 2003 for $1,385,000. I am not sure, but you might be able to argue that since it was the same buyer for all three of these houses, they may have been willing to pay more than market price to secure three consecutive lots.
Any way you slice it, the current asking price of $1.3mm would represent a rollback well into 2003. That is much deeper than almost any rollback I have seen in this area. And this property is in a prime location on a nice big lot, just begging for someone to develop it or come do a major remodel. Remember, the actual house here is basically worthless, its the land that matters.
Compare this bargain asking price of $1.3mm to the property at 2919 Washington which I just featured. 2919 Washington is on just a 6,000 sq ft lot and was asking $1.325mm and went into escrow quickly. I would argue this location here is at least as good and this lot is materially larger, which is really important because it boosts the square footage you can build.
I will be very surprised if this sells for asking or below. I think the sellers are being smart and listing at a very attractive price and I'm sure they will have a number of bidders who will have to pay well above list price to get this property. Let the multiple offers fly!
Sunday, February 5, 2012
90403 Entry Level Solid Demand = Stable Prices
Details: 3 bed/2 bath 1,271 sq ft house on a 6,000 sq ft lot
Description: OPEN SUNDAY 12 NOON - 2 P.M. THIS 1940'S SANTA MONICA BUNGALOW HAS BEEN OWNED BY THE SAME FAMILY FOR OVER 45 YEARS. AND NOW YOU HAVE THE OPPORTUNITY TO MAKE IT YOU OWN. FEATURING THREE BEDROOMS AND TWO BATHS. A FORMAL LIVING ROOM WITH A WOOD BURNING FIREPLACE, DINING, DINING AREA, LARGE KITCHEN, SERVICE PORCH, A TWO CAR GARAGE AND GUEST ROOM ATTACHED. LOCATED IN THE FRANKLIN ELEMENTARY SCHOOL DISTRICT AND WITHIN CLOSE PROXIMITY TO ALL OF THE SHOPS, CAFES AND RESTAURANTS IN THE NEIGHBORHOOD.
Listing History: 1/26/12 - $1,325,000
I saw this property come onto the market and instantly though, "hot damn, that is exactly what multiple buyers out there are going to want, but I wonder if they are pushing it a bit with that price". Then I remembered that during the time since we have seen a comparable property in the same area sell, interest rates have continued to fall, the stock market has continued to go up, and the economy has kept growing. Add to all that, there is literally no other supply of this type of entry level property in this area. Given all these positives I figured that they would have a good chance of getting their price.
After being on the market for just 8 days, the property went into escrow and is currently "pending". So I think they got their price or damn close (or maybe even more). They didn't even have to have an official "open house" to get the thing to pending (although it is supposedly open today). A broker's open house on Tuesday is all you need to sell a property like this these days if it is priced right and well located.
But let's go back to price for a moment. The best two comps I know of are the following:
2620 Washington - (which I featured on the blog) 2 bed/2 bath 1,380 sq ft on a 6,800 sq ft lot (semi-remodeled). SOLD 2/11 - $1,255,000
2624 Washington - (MLS link here) 3 bed/1.75 bath 1,539 sq ft house on a 6,728sq ft lot (Spanish house). SOLD 7/11- $1,250,000
Both of these houses are closer to busy 26th street so I think some discount is relevant. However, the current house in escrow has a smaller lot and smaller interior square footage. You can play with the pros and cons a bit and make adjustments but any way you cut it, it seems like prices are pretty stable for these types of properties. It is also interesting that for both of these comps, they started out asking higher prices and the properties did not fly off the market. They had to cut down into the $1,250,000 range to sell. Now, this property is starting $75k north of that and instantly went into escrow. That should tell you which way the market is going.
Saturday, February 4, 2012
Location Snob Rollback *Update 1*
Previous Purchase: 8/15/08 - $1,607,000
Listing History: 11/4/11 - $1,425,000
Reduced down to - $1,389,000
This price reduction brings the rollback from 11.3% to a little over 13.5%. I think it is too little too late. As I said in my last post, this is a lovely house but in a bit of a challenged location due to busy 11th street and they are asking too much relative to what they paid in 2008. This pricing strategy has hurt them as the listing is now stale and buyers know they are being unrealistic. Despite my optimism on the market, overpriced stuff is going to just sit and sit. If you don't get serious interest in the first week or two of your listing, you need to cut the price. These people waited way too long and didn't cut by enough.
Thursday, February 2, 2012
"How could she get a Sunset Park lot essentially $300,000 under market?"
Well, my sharp eyed readers have noticed that it is back on market...the lot has been readied and you can now buy it with plans for the bargain price of $950,000.
From greengroovymom: Gaby Schkud, the realtor who lives next door to 1328 Hill bought the house after seeing it slowly fall into the banks hands. I think it is a little suspect. I think she had inside information, and was able to broker a deal at that price....something doesn't quite seem like that was a regular sale on the open market. She must have known the banker's agent and had other 'ins' with the bank....kinda sucks for us regular folk looking for a deal too.
Is this type of thing not regulated? How could she get a Sunset Park lot essentially $300,000 under market?
Remember, it SOLD on 10/14/10 for $575,000 when it was listed as a short sale for $999,000. It was on the market for just 8 days before going into escrow and selling for 40% less than asking.
Property Shark shows that on 10/14/10 the Schkud family trust was listed as the "seller" who deeded over the property to a "buyer" listed as Bruce Mitchell/The 1328 Hill Street LLC. This raises flags for me and I don't understand exactly what happened. Remember, Bruce Mitchell is a real estate agent in the same office as Schkud and he was the original owner who bought this place back in 2007 for $1.05mm and supposedly short saled it here. So why is he (and the Hill St LLC) listed as the most recent "buyer"? Maybe Schkud family was an investor in it with Bruce originally and they deeded over their interest (seen here) just prior to the short sale going through? And maybe the current owner isn't listed on Property Shark? I don't have enough access to records to figure it out. I would very much like to know who the current owner is. If it is either of these parties then I wonder how they would be able to explain buying this via short sale essentially from themselves at half the price? Maybe they cut a deal with a second lien holder or something...I don't know. There are possible explanations but something doesn't look right here. Maybe a smarter more plugged in reader can help out.
Aside from all this, the current listing is overpriced. Too much airplane noise there for the empty lot to be worth north of $900k.
Wednesday, February 1, 2012
Full Circle -- Veteran Housing Blogger Buys Home
I was first introduced to the housing bubble idea by a guy named Rich Toscano. He was a self proclaimed data nerd who made an extremely powerful and eye opening powerpoint presentation to a group of us taking a mortgage finance extension class back in late 2005/early 2006. He started a website, piggington.com, where he laid out his case for the upcoming housing bust. He tracked the San Diego bubble throughout the bust and always had a bunch of nicely put together graphs looking at inventory, price history, and various relationships (price/rent, etc).
His graphs and commentary became more positive over the past year as prices had fallen and various affordability and price/rent relationships all showed signs of bottoming. So it didn't come as a huge shock to learn that he recently bought a house after renting throughout the downturn. I recommend readers here check out his graphs which I find helpful when thinking about my own situation. I don't necessarily share all his views and future predictions when it comes to macro topics, but I think his rationale for buying is interesting to read through. Rich seems to actually be somewhat late to the party as many of his informed, wise readers have posted stories about their own housing purchases over the past few years. But I think it really says something and it goes back to my point about the market getting healthier as we see financially conservative, educated buyers picking up properties based on their need and desire for shelter (rather than speculation as was often the case in the past). Rich admittedly is not trying call a full bottom, but he has made it clear through his excellent graphs and his personal actions (and those of many of his readers), that buying has become a very compelling proposition.
As an aside, I found myself smiling when I read the following discussion about the lack of inventory in San Diego (and LA and Orange County). Lots of people frustrated with the current situation and hoping for an increase. I see it as bullish since clearly there is pent up demand and the market should be able to absorb a good amount of inventory without a big negative impact to pricing. Remember, they (and I) are looking at year over year inventory so seasonality is not the cause. Also note the discussion on what some of the housing related stocks have been doing recently...
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