Tuesday, April 3, 2007

Westside Wannabe Sellers in Denial

Here we are in the 2nd month of the spring selling season, and "Wannabe" sellers here on the Westside are still hoping for last years' prices. I guess they don't understand "How" to sell a property in a declining market, or they are:

1) Totally in denial
2) Totally misled by realtor CMAs (Comparative Market Analysis) based on old comps
or
3) Totally upside down (Speculators & FB who purchased in 2005-2006)



IMHO, it is probably a combination of all 3 factors.

In seeing properties lately on the Westside, I have noticed mainly, marginal properties with differing levels of external and functional obsolescence. Perhaps, freeways, airports, busy streets etc. (incurable defects) or botched floorplans. My guess is ,these were purchased late in the game and are now trying to be unloaded. However, they are just sitting on the market. Others are hoping , they can wait, until the market rebounds.
Another scenario is, those who purchased with exotic loans, have ARMS resetting, or HELOCS, could live rent free for a year as the foreclosure process takes place. Regardless of what financial situation they are in, they're a certain percentage of "homedebtors" that will have an effect on home prices, here on The Westside. Now that market psychology has changed and easy credit is ending, real sellers will cut thier prices and cash out, before the real damage takes place. Comparable sales will trend down and sellers will be chasing the market downward, towards foreclosure.

Now that you have heard mine, what is your take, on the current Westside Real Estate Market ?

Also, if you are interested in specific areas of The Westside such as Brentwood, Santa Monica, Pacific Palisades, Malibu, Mar Vista, Rancho Park/WLA, Beverly Hills, Century City, Venice, Westwood, Beverlywood, Bel Air, West Hollywood, Culver City and Marina del Rey, click on those links to the right, in the Blog Archive.

11 comments:

Guybrush Threepwood said...

Thank you for this blog, it's providing valuable insights into current and anticipated market conditions. I'll be relocating to the Westside from Denver later this year. My reaction to 2007 Westside asking prices per square foot is "are you kidding me?" Having lived in Northern California for decades prior to Colorado, I remember both the early 1980's recession/mess and the 1990-1997 California real estate rollback/stagnation.

Craig said...

Hey guybrush (and others who don't know already),

There is an additional westside blog at http://www.westside-bubble.blogspot.com/

I hope it is ok to throw that link in. I don't know the creator or have any association with the blog, but I do hope to get as many people as possible to check out both this blog and that one so that we can get a better feel for the market.

I was too young to be paying attention to real estate back in the early/mid 90s but from what I have seen and heard from others, there was roughly a 1/3 decline in quite a few areas. As always, the premium areas will continue to be expensive and condos/marginal areas will be the first to drop and will drop the hardest. Also note that nominal prices don't need to drop by that much to have a significant impact...if prices slightly decline for long enough, the real declines will be there (don't worry, I won't start telling you to buy gold).

I really like having two blogs dedicated to the west side and I hope to contribute as much as possible. It would be great to get some pics of various properties up on this site as well.

latesummer2008 said...

Yes, that is exactly the idea of this blog. We need to educate people about realistic prices for homes, here on the Westside. We are just starting on the downside, of one of the biggest speculative bubbles in history. Only this time, it will effect many more people, as it is the housing industry. My hope is, more concerned Westsiders will add their knowledge about each specific area. (Brentwood, Malibu, Santa Monica, Pacific Palisades, Rancho Park, Mar Vista etc.) Then, buyers will have more real data, to make informed decisions, instead of just real estate industry jargon and spin. Homes should be for living in, and not a gamble. Westside-Bubble is another informative website that I encourage others to see, as well. Also, in the future, I hope to post photos here. Meanwhile, tell others about this website and westside-bubble, in order to get the FACTS out!

Craig said...

Yahoo real estate has a new "foreclosure" tool that lets you put in zip codes and see any notice of defaults, foreclosure sales or REOs. I don't know how up to date it is but I put in 90403 (Santa Monica) and there were a few homes that had notice of defaults filed...I didn't look at the service that long but more info may be available if you do a free registration. I will look into it.

latesummer2008 said...

Sounds good. Any information that could help us value the current market, would be helpful. I noticed an REO condo for sale in Santa Monica, on 7th street across from the high school. 2+1, new kitchen etc. for 469K. I'll try to find the address later.

latesummer2008 said...

1835 7th St #A, Santa Monica, 90401 is the address. Price is 479.9K. Bank owned, new kitchen and bath, hardwood floors, small building. Probably a Torca Conversion, originally. Still too high, but interesting to see an REO only 5 blocks from the beach.

latesummer2008 said...

I have linked a new site in the HELPFUL LINKS section called "Dr. Housing Bubble". It is a must read on the future of the Southern California, U.S., and global housing markets. Check it out !

Anonymous said...

I am a life long Santa Monica (90402) Resident and have watched in horror as home prices have increased 300% over the last 5 years.

The question I keep asking myself is: will prices decline on the westside (and in other high barrier to entry/low supply areas) as they did in the period from 1990-1996?

There are two issues I see here:

1) Did affluent people, professionals earning $100-$500K+, take out the same kind of risky mortgages (IO, ARM, Neg-Am) to get into Santa Monica homes priced 10X their annual income, the same way that $60K households did to buy in the Inland Empire?

2) Have the "old guard" of middle-class homeowners in Santa Monica been entirely replaced by a new class of ultra-wealthy people?

The general theme here is that I believe the top 5% of american people that own 90% of the assets in our country now exist in their own economy, an economy that has detached from the overall one that is set to suffer from the bursting of the housing bubble.

It seems clear to me that homes priced above $5 Million can only be purchased by these elite people who will remain unaffected by any general economic downturn or tightening of credit. Many of them are likely paying cash.

The grey area seems to me to be homes currently priced between $1 and $4 Million, which now makes up much of the SFR housing stock in SM.

So the two key questions to figuring out whether house prices in SM will fall are: how many folks in these houses have taken on way too much leverage and are vulnerable to rate adjustments, etc., and how many folks in these homes have livelihoods that could be vulnerable to an overall downturn in the economy?

If the people who bought in SM over the last 5-7 years are all among the plutoratic overclass, then I don't see prices falling much, even in a credit crunch/recession.

If some of them are simply "working rich" professionals, who are over-leveraged, then prices could fall significantly.

Whew! A bit long-winded, but there it is.

Any thoughts/responses?

latesummer2008 said...

INMHO we need to look at what the BIG PICTURE is for CREDIT in the country and globally. The CRAZY CREDIT offered in the past is over. This will dramatically affect the quanity of buyers in all levels as it works its way up the housing food chain. remember, an entry level transaction can affect 2,3,4,5 or more transactions up the chain. Also People at the top (SM for example) get nervous quicker, once property values begin dropping. ESPECIALLY, if they have purchased in the 2000-2006 years. Last RE Bust, markets at the top suffered the worst, and this will be no different. Perhaps worse because, many have nothing to lose as there was minimal "ACTUAL BUYER INVESTMENT". They can simply live (rent) until the bank actually throws them out.
The RESULT is INCREASED SUPPLY and LESS DEMAND = PRICE DROP. Basic Economics 101.
Keep your eye on the "SANTA MONICA HPM/RABINDEX in this blogsite and I will be documenting price declines as they come in. Personally I believe VENICE will suffer the worst, as it is even more overvalued than Santa Monica.

Anonymous said...

Everything here is wrong. The stats are as selective and wholly misleading as Bush /Cheney's "intel" on Saddam's WMD. West Hollywood 90048? What planet is this? It's great that someone out there is choosing education over fat commissions, but how well are you educating the children if you can convince yourself of this utter insanity? Please find a more productive hobby.

Clare said...

many "owners" on the westside are in utter denial and delusional. they WILL NOT get 2004-2006 pricing period. perhaps they enjoy sitting on the market for 200+plus days without an legitimate offer. You have the working rich--the doctors, CPAs, "professionals" who have BWMs, Lexus, ranger rover, and are lving in a 1million sale price home with little to no money down, they are MERELY ONE paycheck away from destitution and financial collapse. All it takes is one illness, housing repair, job loss--and the working "rich" are SCREWED. Many of these people also have the funny money loans, pick a payment garbage. JUST YOU WAIT--2010-2011 very bumpy ride. HUGE UNEMPLOYMENT RATE, DEPRESSION IN CA. NO MORE GOVT. HAPPY TALK BIASED NONSENSE.