Saturday, October 11, 2008

Beverly Hills 90210 Sales Volume drops over 70% in September.

Yes, even the most famous zip codes are feeling the effects of the Real Estate decline. The number of sales, TSV (Total Sales Volume) and ASP (Average Selling Prices) measured YOY (Year over Year) plummeted, according to Melissa Data last month. It is important to realize how these numbers reflect loans being transacted BEFORE the current seizing up of credit markets. October could even be worse.

Here are the latest numbers:

WESTSIDE

Beverly Hills 90210
TSV (-70.8%) , ASP (-70.8%)

Bel Air 90077
TSV (-68.2%) , ASP (-55.6%)

Marina del Rey 90292
TSV (-58.2%) , ASP (-28.8%)

West Hollywood 90069
TSV (-54.9%) , ASP (-22.5%)

Westwood 90024
TSV (-51.9%) , ASP (-35.9%)

West Hollywood 90046
TSV (-48.7%) , ASP (-31.6%)

Santa Monica 90405
TSV (-40.7%) , ASP (-22.9%)

Brentwood 90049
TSV (-35.8%) , ASP (-5.4%)

Beverlywood 90034
TSV (-6.9%) , ASP (-22.4%)


BEACH CITIES

Playa del Rey 90293
TSV (-71.6%) , ASP (-23.3%)

Redondo Beach 90278
TSV (-27.1%) , ASP (-22.1%)

Manhattan Beach 90266
TSV (-15.7%) , ASP (-17.9%)


As the loan picture gets worse, both Total Sales Volumes and Average Selling Prices should decline even more.

22 comments:

sm_landlord said...

Thanks for the post, and it's good to see that prices are finally starting to move down on the West Side...

But as other posters here have pointed out, this hasn't really hit the good stuff yet. I see the wishing prices in the LATimes RE adverts look just as crazy as ever, and I wonder how people are missing the message that the markets have been sending. Maybe it's just that there is so much friction in the RE markets, unlike stocks and bonds. It looks like capitulation in the high-end housing market will have to wait until the option ARMs blow up next year, although I expected to see more movement by now.

When I see 2/2 conapts still listed at over $1 million in Santa Monica, there is still a loooong way to go.

And the scraper/rebuilds are still priced like it's 2006. I think First Federal holds a lot of option ARMs on those places, and they are currently carrying a D- rating from Weiss/TheStreet.com I wonder what their headquarters building will sell for?

latesummer2009 said...

Yes, overpriced RE on the Westside is finally starting to slide. Soon people will realize how ez credit over-inflated prices. Especially in Santa Monica.

Alt- A Loan resets, among other factors will punish the Westside in 2009. I'm afraid we are just getting started.

It will be interesting to see what a Westside Starter SFR finally settles out to be.

My guess - $300s.....

Anonymous said...

Not a chance. The westside SFHs wont come down to $300K. Keep dreaming. They will fall 20-30% at the most and it'll happen slowly, over the next couple of years. The westside is way too desirable, and a lot of foreigners move to L.A from countries where the median income level is much higher than the US. As long as there are people with money (and the westside is flooded with them) the prices will stay artificially high. There will be a slight adjustment/correction so that the prices correlate with the already corrected prices in the outskirts of L.A, but nowhere near $300K for a SFH. At $300K your average middle class American family would be able to get into the westside and that's just not gonna happen. If anything, the westside/affluent areas will expand along with demand to include more surrounding areas. Add that to the fact that the government is paving the road to hyperinflation and you're probably more likely looking at smaller price drops than what I suggested above.

Anonymous said...

The whole 'Alt ARMs resetting' thing claimed by Late Summer is not all that.

It is getting way easier for a savvy homeowner to call his/her bank up and ask for a reduction or rate freeze....I have done it, and 4 other homeowners on my block have too. People in SM are smarter than you think....

The prices will stabilize in the market....homeownership is still the best way to build long term wealth.

latesummer2009 said...

When I say 300s on the Westside that means $300-$390s for an original Mar Vista 2+1 on a small lot. That represents a 50% price cut from the peak. And I think you can look at all areas declining as much for starters homes, including Santa Monica ($400-$499).

Unless banks negotiate some type of major loan principal reduction, prices will continue to drop and it won't matter what kind of terms people have.

We are in for an L-shaped recession/depression that will wash out all upside down homeowners stretching back to the early 2000s.

As for foreign money, it will go where it is a good investment. Not the U.S.

Anonymous said...

Late Summer,

You are a tough 'Bear' in this market....I say you are too doom and gloom, although I have been waiting patiently for prices to drop like everyone else, so I can jump in and buy some prime property in Santa Monica....I WISH it would drop, and now maybe it will....but probably not for years to come.

A RE agent came to my door to see if I knew anyone close to foreclosure or willing to do a short sale. Lots of hungry opportunistic wolves at the door....

Anonymous said...

The whole 'Alt ARMs resetting' thing claimed by Late Summer is not all that.

It is getting way easier for a savvy homeowner to call his/her bank up and ask for a reduction or rate freeze....I have done it, and 4 other homeowners on my block have too. People in SM are smarter than you think....

The prices will stabilize in the market....homeownership is still the best way to build long term wealth.

Are the banks going to do it for the buyers as well? You overpaid. You're screwed. Deal with it.

latesummer2009 said...

It could take years to unwind these prices, however it might not. Keep your eye on the VELOCITY of price declines when they happen.

You might be surprised...

Anonymous said...

Anon. 623 sounds like a realtor to me get off this website and preach your "now is a great time to buy" bullshit somewhere else You don't buy a home to build wealth you buy a home to live in that stupid realtor commercial "60% of the average homeowners wealth comes from its equity" thats terrible I live in a home valued at 800k and I make 2 times the required income to afford it why don't I buy something double the price well because I'm not an idiot like 90% of these California Morons As for the these toxic loans resetting theres too many people who would need a 50% reduction to stay in there home thats not going to happen the government isn't going to bail out the idiots who helped cause this mess in the first place at the expense of the tax payer even if they did prices will still fall because the loans that inflated these prices are gone or the area will stagnate for a very long time until incomes catch up plus during a market correction the high end is usually the last to fall we saw the inland empire get punished the middle of the line is being punished right now then its the high ends turn if you think prices are "normal" then you have the mental capacity of a llama

Anonymous said...
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Anonymous said...

Sorry late please delete the second comment, didn't mean to send it twice.

Anonymous said...

Late, how can people make such idiotic claims. I mean really "oooooh the Westside areas are super desirable oooh they won't fall in price". Umm... if you look at sales history for all these homes"a few years ago" it was half of what it is now. If the "nice areas" kept expanding and stayed at these prices who in the hell will pay for them? There aren't enough foreigners to screw around with stuff and 90% of all Westsiders are upper middle class people not Movie stars. Is it because a lot of these morons think these high prices are reality? T

Anonymous said...

I have to agree that this late guy is over bearish in his claims. Your talking about westside is crashing and talk about $300k for a starter home in the same sentence. So your saying that $300k for a westside neighborhood home is where we are heading? You must be on crack. We all know the valley, Inland, compton ect should all be $300-$500's. but Santa Monica will never be. Wishful thinking. By the way your stats are misleading and nonsense. So you start off by saying that the average selling price in Beverly hills is down 70% ??? what does that even mean? where do you get that? so prices are down 70% in BH.. LMAO

sm_landlord said...

Anonymous@3:05:
"We all know the valley, Inland, compton ect should all be $300-$500's."

Beg to disagree. The Valley is all over the map - Encino is not Pacoima, Woodland Hills is not Van Nuys. Nothing in Compton should be over $100K. Nothing in Pacoima should be over 100K.

The neighborhoods on the Westside should fall to about where they were in 1997, adjusted for inflation. That would put your typical house in 90402 at about $1.2 million, your typical house in 90405 at about $500K, and your typical house on the hill in 90066 at about $400K.

This is in 2007 dollars.

So Last is not *that* far off...

rosebud said...

Hi Latesummer, can you give the breakdown of sfr's to condos in the melissadata you're reporting? Might shed some light on some of those stats.

Melissadata just doesn't cut it since it includes condos and sfr's together. But... if you like melissadata, look up 90402: TSV was up 1000% last month, with ASP up 44%! My point is, this stuff is inconsequential on an individual zip code basis without knowledge of the sales mix.

Anonymous said...

its also meaningless data with the number of sales we are talking about. If in a given month 20 homes sold last october, but only 13 sell this year - thats 35% decrease. But thats only 7 home difference. The number of sales don't warrant that significant of an alarm. It means something, but its not significant enough.

latesummer2009 said...

The main issue here is loans or lack thereof. You have to look at the amount of loans being made and how that is affecting the market, and:
Why aren't there many sales?
Why is the average selling price dropping?
Why is the total volume decreasing?
Because we are in a declining market and the buyers and banks both know it.
Why would anyone in their right mind risk a down payment on an investment that over-priced and obviously declining?
Why would you pay a mortgage that is double what a property would rent for, without paying taxes, insurance and maintenance?
What do you think about $300,000,000 of Alt-A loans ready to begin resetting in 2009?
What about the job losses and the recession we are in?
Who is going to lend to people now with prices declining?
How many people have 20-25% down and the real income to qualify for current prices?

Need I go on?

Westside prices have dropped roughly 10% and have another 40% to go. Once foreclosures kick in you will see dramatic changes.

latesummer2009 said...

That $300,000,000 of Alt-A Loans beginning to reset in 2009 are in California alone. Over twice the volume of the subprime mess.

That's when the real pain begins here.

Brian said...

300's for a 2+1 SFR is already here people

Just saw a 765sq ft 2+1 in Culver City list for $299,900

and it's not going to sell either as it's a bit of a fixer, i'd guess it goes to 240 os maybe even less.

I've been watching the westside market like a hawk for the last 6 months and i'm totally convinced that we'll see decent 900+ sq ft SFR's in the 300's within the next 6 months or less.

Mike D. said...

@ Anonymous October 12, 2008 3:23 PM

The westside SFHs wont come down to $300K. Keep dreaming. They will fall 20-30% at the most and it'll happen slowly, over the next couple of years. The westside is way too desirable, and a lot of foreigners move to L.A from countries where the median income level is much higher than the US.

I hear the foreigner argument all of the time but I don't buy it. Sure, rich foreigners might buy some places here and there, especially in very high-end areas (BH, PP, Wilshire high rises, Malibu, MB, etc.), but they aren't going to come in en masse and buy up 1950's 1200 SF 3/2 SFR's in places like Mar Vista or Rancho Park or Culver, which are much more representative of the bulk of properties that make up the "Westside."

Go door to door in any of these neighborhoods and you aren't going to find many rich foreign owners. You might find some well-educated immigrants who have jobs here, but they're be part of the same labor pool that is competing for these houses anyway. The foreigner argument was used in the 1990's bust and didn't pan out then either. West LA is a huge market and likely close to 95% or more of the owners live and work here.

No one is saying that you're going to be able to buy a house north of Montana for less than a million, but when we're talking median prices for an area as big as the Westside, then we mean you should be able to get a decent, typical 3/2 on a 5000 SF or bigger lot in areas like Mar Vista, Rancho Park, Culver, Sunset Park, etc., for somewhere in the $400~500k range, which at the peak were going for double that. The median could easily be down to the $300's due to the large number of <1000 SF 2/1's on 2500 SF lots that are all over the Westside.

The real question is, what has changed in regards to the fundamentals of the market since 2000 or so other than lending standards that can explain the rise in prices? Not much. Incomes don't explain it and interest rates don't either. Since for the near term lending standards are going to be at least as restrictive as they were in the years preceding the bubble we would expect prices to fall back in line to where they were around 1999-2001 or so, adjusted for wage inflation for the region (which hasn't been too significant).

We simply cannot maintain 2007 prices across an area as large as the Westside with a weakening economy and without 2007 lending standards. A lot of people have no problem believing that over 8 or so years we could experience 300~400% appreciation in most of the Westside, but then can't fathom prices falling back 50%. But the simple truth is the fundamentals of the market as they stand today don't support current prices. That's why sales have fallen off a cliff. There simply aren't enough buyers out there able to get financing to create the sales needed to keep prices where they're at. It's simple supply and demand. The loose lending created a lot of demand that pushed up prices, but that's gone.

I think it's largely a matter of anchoring. People are using the most recent prices as points of reference and have a hard time accepting that they can fall so far from there. In the short run that will likely cause a freeze up of the market, but over time the fundamentals will always win out. With the wave of option ARM recasts coming over the next few years, along with the foreclusures they will bring, sellers will be forced to sell for what the market will bear. They can't hold out forever, especially if a lot of these sellers are financial institutions; at some point we will see capitulation. It may not be happening as quickly as many of us expected, but I still believe it's by far the most likely outcome given the situation.

latesummer2009 said...

Mike, that was an epic post. I have been trying to convey what has been happening here since, the beginning of 2007. Unfortunately, many Westsiders believe its different here. I like to call it the "Hollywood Effect". Obviously there are SOME people that are very wealthy here and we are bombarded by media, it is the norm in LA. The fact remains, it is not.

This Credit/Housing Bubble was a once in a lifetime event, perpetrated by unregulated lending. Unfortunately, our financial system now finds itself on a precipice because of it.

In hindsight, we will see the Countrywides, WaMus and Wachovias were the ones that drove our economy into the ground. Those originated loans will be the basis of significant RE price declines in 2009. The financial landscape has dramatically changed since 2007and RE sellers better get used to it. Otherwise, they will be chasing the market downhill, with a good chance of ending in foreclosure.

Thank you deregulation, it is great to see how "The Unbridled Free Market" takes care of things..

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