Sunday, May 20, 2007

HIGHER END AREAS begin to FALTER on THE WESTSIDE

According to the LA TIMES Real Estate section today (5/20/07), many of the higher end areas on the Westside, are starting their declines. The BIGGEST LOSERS are : BEVERLY HILLS, BEL AIR, SANTA MONICA, VENICE, MALIBU and PACIFIC PALISADES. Look at these specific areas and others ,by clicking on their individual links on the right hand side of this blog.

Example : BEVERLY HILLS MELTDOWNS

Click the link and then look at the comments.

28 comments:

latesummer2008 said...

Based on my calculations and what I am seeing at open houses, I believe VENICE will be the hardest hit. It has enjoyed some of the greatest appreciation for the smallest houses, on the smallest lots. (HPM) House Price Multipliers are some of the highest anywhere, on the Westside.

Time will tell...

Anonymous said...

Can you please provide a link to the LA Times article? I can't find it. Thanks.

latesummer2008 said...

Can't find the LA Times Link either. Try contacting :

lalandblog@yahoo.com

He is a writer for the LA Times.

Anonymous said...

I believe VENICE will be the hardest hit.

You are probably right. In Venice there is also the element of not-so-nice areas mixed with super high end properties. I could never figure out why people paid so much money to live in a few blocks away from really unsafe places.

latesummer2008 said...

Santa Monica Properties are similar in price and have much bigger lots, bigger houses, PARKING and less of a crime factor. But, Venice has that "Funky Factor".

IMHO it is WAY OVERVALUED...

Anonymous said...

I have also noticed that well priced westside SFR property go into escrow relatively quickly. I am in the market to buy. It means there are still plenty of people on the sidelines with cash.

I can't be the only one who have profited from the recent run ups. I have the cash profit from sale of my two LA homes to invest in new place but I just want one nice westside. I think late 2007 or spring 2008 will be a good time. I always like buying between Thxgiving and New Year's when the crowds are gone.

I don't believe in big declines like 40-50% on westside will happen. Some argue that history repeats itself but I argue it doesn't repeat itself EXACTLY like last time. There are too many new variables. I aim to bid about 20% less than asking...hoping a panicky seller would bite. That's my goal.
We'll see...

latesummer2008 said...

Yes, there are buyers on the sidelines with cash waiting for good houses. But, why would you buy IF, prices are trending down and they continue to go lower?

Anonymous said...

Shortcut to arrive at your Price per square foot of house (P/SQFToH): just divide the sale price (SP) by the Land Square Footage (LSQFT). I don't know if we can reasonably consider that a good measure of the "Price per Square Foot of House"... which of course, calls into question the value of the HPM calculation...

latesummer2008 said...

The HPM calculations values the HOUSE (P/SQFoH) and the LAND (P/SFToL) independently. This is important because MOST of the value HERE in So. Cal is in the LAND. The HPM gives you a ratio of HOUSE/LAND to give you independent values of BOTH, and breaks it down further,by $/square foot. This can be very helpful when pricing other homes in a specific area.

Up until now, prices for homes are based on $/square foot of HOUSE only. This is erroneous. Although, not perfect, HPM gives you a baseline to work with, using standard size houses on regular lots.

Houses themselves actually depreciate each year, It is the LAND that normally appreciates. Or in this case, is NOW depreciating.

Craig said...

Latesummer,

I love your enthusiasm and attention to detail with regards to the west side bubble. Just wanted to let you know that I posted info on a foreclosure which will be taking a big loss over at the west side bubble blog. Maybe you and west side can get together and merge blogs or something...we need more people in Los Angeles to get informed about the bubble so whatever makes it easy for the most people to follow is what I think may be best.

I don't mean to be rude but I think the whole house price multiplier is a bit over the top. Yes, what you are trying to track/show makes sense but I think that as we chronicle the decline in values it will be best to expose the lending practices that influenced all of this and then show price declines/movements. Obviously bigger lots in good locations command a premium, just as bigger square footage but I think things just get messy and convoluted when trying to boil it down to a long formula. Just my opinion...hopefully we can get more support for Los Angeles bubble tracking going. Keep up the good work

FSD said...

Latesummer - I am glad you started this blog, but I agree with Craig that the focus on RBX and HPM is a bit distracting (and I am a numbers guy, an Engineer). Especially to casual observers.
I would keep those features somewhere on your Blog, but since now the weakness is starting to show on the west side in both statistical (median price) and anecdotal cases. These tools could play more of a supplemental role.

Keep up the vigilance.

speedingpullet said...

I third that - no offense meant, but the numbers are something I can do myself. The formulas are interesting and all but .....not as good a blood.

I want blood! BLOOD ON THE STREETS!!!


And answers.

OK - mystery time.
2601 Midavale, 90064
....Zestimate $910K (at time of sale)
Asking Price $979K
Sold on 12/28/06 - for $4,295,454

WTF?

Anyone have any info in this sale?

Craig said...

Speeding,

Here is the info. It looks like a typo or something in Zillo because the records show the following:

Sale Price: $ 1,050,000 (Full Amount Computed From Transfer Tax)

Property Use: MULTI-FAMILY DWELLING (2-4 UNIT) BUILDING
Mortgage Type: PURCHASE MONEY
Lender: GREENPOINT MORTGAGE FUNDING INC
Loan Amount: $ 840,000
Type of Financing: ADJUSTABLE RATE
Interest Rate: 7.37 %


Mortgage Type: NON-PURCHASE MONEY
Lender: GREENPOINT MORTGAGE FUNDING INC
Lender Type: MORTGAGE COMPANY
Loan Amount: $ 100,000
Loan Type: STAND ALONE SECOND
Due Date: 1/1/2037

Looks like its a 10% down situation with an error in zillow. The only odd thing is that the records say that this is a multi-family dwelling (or at least zoned for multi family). I don't know this area or if this could be true but that may explain some of the value of the land if this is the case.

speedingpullet said...

Thanks for that, Craig :-)

Anonymous said...

Hey latesummer -- I wasn't trying to be rude about the formula, just pointing out that it doesn't actually value the house at all in the P/SQFToH. The formula basically multiplies by the square footage of the house, then divides by it, which means it doesn't factor into the equation. That's why when you boil the equation down, you can arrive at the P/SQFToH by just dividing the SP by the Land square footage... which doesn't really make sense for an independent measure of the price per square foot of house, right?

John said...

we have to be careful as we find and document anecdotal cases of price fall that it is not just as easy to find cases of price rise. An example, I just sold my Hollywood Hills home for $830k in mid march. Bought for $596k in Dec 04. Admittedly not westside but still desirable LA. I sold it to an investor who also recently bought another house up the street from mine. She paid all cash, having made money on the sale of her other major property.

latesummer2008 said...

You can document meltdowns however you wish on this website. I am merely giving you away to value the House and the Land independently. In So.Cal, MOST of the Value is in the LAND. Approximately 80% in fact for most standardized homes on standardized lots.

For Example:

1000 sqft house on a 5000 sqft

1000 / 5000 = .20

The value of the house would be 20% of the Value. The Land would be 80% of the Value. When houses are normally valued, they only quote by the square foot of the house. It doesn't give you any idea of what the LOT SIZE is, which is MOST of the value.
Also, you can't use the Land Square Footage and Sales Price to figure out the Value of the house. It doesn't nmake sense.
Once you use the HPM formula a few times it's easy. I can get a good idea of HOW well priced a property is using HPM and how much they paid per square foot of Land as well as how much they paid per square foot of House. This is important if you want to price something else that is comparable.
SQUARE FOOTAGE of the HOUSE is Minor part of the TRUE VALUE. In reality, it is the LAND, that you are paying for mostly here in So.Cal.

Anonymous said...

No question most of the value's in the land. I'm just pointing out that the formula you're suggesting for P/SQFToH is actually just the Sale Price divided by the Lot square footage. So, I agree... that's not a good way to look at the independent value of the house. But see for yourself: divide the Sale Price by the Lot Square Footage on any of the examples, and you'll arrive at the P/SQFToH value (actually a little more precise because you get rid of the rounding errors). But again, you're right, it's not a good measure for Price per Square Foot of House.

latesummer2008 said...

Yes you are right Anon. Good observation. But what's important is, it gives you a RATIO of HOUSE/LAND. By giving you that ratio, you can see HOW MUCH per square foot you are paying for the HOUSE and HOW MUCH per square foot you are paying for the LAND. By adding those 2 values together, you can now get a relative multiplier (HPM), of HOW expensive that HOME (House + Lot) is compared to others similar, in the same area.

Of more value are the INDIVIDUAL NUMBERS of Price per Square Foot of House (P/SQFToH), and Price per Square foot of Land (P/SQFToL). If you have these recent figures, it helps you value a property in the same area, with a different size house and/or lot.

Especially, in a declining market.

Paris2LA said...

This was on Ben's blog today re Sta Monica: http://www.surfsantamonica.com/ssm_site/the_lookout/news/News-2007/May-2007/05_23_07_City_Manager_Urges_Caution.htm

latesummer2008 said...

La Times Real Estate Section (5/27/07) dropped a BOMB on Higher End Areas of ORANGE COUNTY today.

Year over Year Median Price Declines for HOUSES:

Newport Beach (-51.7%), only 6 sales!
Capistrano Beach (-48.3%), only 7 sales!
Laguna Beach (-32.4%)
Corona del Mar (-24.4%)
Trabuco Canyon (-22.6%)
Yorba Linda (-20.5%)

Westlake Village (-22.9%) in Ventura got Whacked also.


This doesn't look good for HIGH END AREAS anywhere in SOUTHERN CALIFORNIA.

Get ready for the RUSH TO THE EXITS...

latesummer2008 said...

Higher End Areas in San Diego, Orange and LA counties are among the weakest, according to the latest DataQuick information. I have included the DataQuick Real Estate News on the right hand side of this blog, in the "Helpful Links" section.

It gives you Year over Year Prices for:

1)Number of Sales for SFRs and Condos
2)Median Price for SFRs and Condos
3)Change in Median Price for SFRs and Condos
and
4)$/sqft of Homes

According to those numbers, Southern California is in for a Long Summer....

latesummer2008 said...

Anyone here, want to try and guess, the BIGGEST LOSERS for the month of MAY?
Dataquick sales will be out in a few days, and we should know.

I'll make my guess:

Bel Air 90077
and
Malibu 90265

latesummer2008 said...

Westside has kept it's pricing so far. How much longer can it hold out? There will always be a premium, but with the lower ends of the real estate food chain faultering, how many people can really afford $750K for a fixer?

I figure $450K for a fixer on the Westside is where were headed. 3 x yearly income of $150K ( 2 people @ 75K salaries )

That's 450K / 750K = 40% drop on the high end. 50 - 60% drop possible on the low end..

latesummer2008 said...

Malibu has been getting creamed lately, and appears to be the "Biggest Loser" Going back the last 2 months of November (2005 & 2006) Sales Volume has dropped from :

(2005) $41,790,000
to
(2006) $16,758,000 (-60%)
to
(Nov 1 -10, 2007)$1,554,000 (?)

WOW...........

Numbers are according to Melissa Data.

latesummer2008 said...

"Biggest loser" in October is still Malibu. LA Times Sunday November RE Section Southland Home Prices says:

Malibu 90265 14 sales, $1595K median price (-34.9%)

latesummer2008 said...

The Westside does appear to be faltering now, after holding out. According to DataQuick, in their CA County Section for November, prices have slumped year over year (YOY):

Under the "LA Selected Areas"

LA Westside
$1220K median price (2006)(51 sales)
$820K median price (2007)
-$400K (-33%)

I guess the Westside is not immune..

Anonymous said...

I still think it is so over valued for these homes. The prices people think are ordinary aren't. And why are poepl buying into homes they CAN"T afford. Ridiculous. I hope the crash continues. I am patient.