Thursday, January 1, 2009

2009 Will Mark Major Real Estate Declines on The Westside

This year, real estate meltdowns measuring 20% or more, will permeate the Westside. The most common factors leading to the declines will be:

1) Reduced or Negative Equity
2) Job Losses in FIRE (Finance, Insurance and Real Estate)
3) Commercial Bankruptcies
4) Alt -A, Option ARMs, and Prime Mortgage Resets
5) Foreclosures and REOs
6) Increasingly Stringent Loan Requirements
7) A Reduced Pool of Qualified Buyers
8) Renting being a Favorable Option as Opposed to Buying

No neighborhood will be spared, as affluent communities will show the biggest declines. Once the declines become more apparent, the only remaining question will be one of Velocity. How fast and how far will it go? Beginning and mid level areas of LA have been correcting to 50% off or more. The Westside will ultimately follow. At 50% off, buyers appear to be returning to the market, by nibbling on foreclosures and properties in default. This point may come to the Westside, after the traditional selling season, or "Late Summer of 2009".

The goal of this blog is to establish mini forums, whereby the public can document "closed sales" and their observations of Westside Meltdowns in the following areas:

1) Malibu
2) Westwood
3) Pacific Palisades
4) Beverlywood
5) Santa Monica
6) Bel Air
7) Brentwood
8) West Hollywood
9) Beverly Hills
10) Century City
11) West LA
12) Culver City
13) Mar Vista
14) Marina del Rey
15) Venice

I'll begin each Meltdown Section with comparable sales found on Zillow. When possible, I will calculate the Annual Rate of Decline (ARD) to help determine the "Decline Velocity". My hope is, "local experts" will emerge in each area, as the declines become more obvious in 2009.

The first Meltdowns of each area are already posted. To begin, simply scroll down to the Meltdown Area of your interest in the posts below.

20 comments:

Anonymous said...

Latesummer -

your blog is outstanding, thank you

I am only interested in the 90402 market - can you run a discussion that focuses only on that zip?

thank you

other people may be interested in other zips

latesummer2009 said...

Thank you, I try to deliver useful facts on closed sales to help inform the public. With the internet changing the way people get information, we should all have access to important real estate data.

To start 2009, I am opening up all areas on the Westside. Once we get the ball rolling, we can concentrate on specific areas. I know, 90402 is of great interest. Perhaps, we could begin some conversation in the "Santa Monica Meltdowns" section below.

Anonymous said...

Late summer....you seem to be focused on the low end (condos,bad streets,etc) and not prime SFR stuff here....not a good comparison.

I would say you are still on a major fishing expedition to find market crashes here....

Anonymous said...

Sadly, I think the Anonymous post is right. The discounts just aren't that grand.

I mean "sadly" many different ways too.

1. Absurd price of home ownership. Pricing is still way, way out of range for mere mortals.

2. I just don't see the economic contraction coming to this region. These houses are primarily owned by people with a wealth of choices. Entertainment, health care and legal service monopolies seem to be rewarded well for their aquiescence, so it all looks good from their chairs.

Latesummer2009 said...

Many of these homes are condos, as they are easiest to compare. In addition, it is always the fringe homes that are affected first in an area. The Westside is not all entertainment millionaires. Continued Job Losses, Loan Resets and a Change in Consumer Psychology, among others, will eventually affect this area.

Granted, there are wealthy people here, that don't have to sell. But, that % becomes smaller and smaller, as we progress through the next couple years.

The other point you are missing is, volume has dried up, as the RE food chain is struggling without its lower level participants. Move-up buyers can affect 2,3,4 or more transactions.

Every other real estate crash has ultimately hit high end markets. Why would this one be any different?

Anonymous said...

I am hungry - really really really hungry - to buy North of Montana. I am with you, Latesummer, I am with you in predicting a massive violent crash North of Montana.

That being said, perhaps you can have a special section of your blog in which we can discuss North of Montana and nothing but North of Montana.

if you survey your readers you might find that they would visit more if they could know there is a place to discuss that hood and no other hood

Anonymous said...

Just to be clear - if you host a special discussion place with just the 90402 and nothing but the 90402 I think you will attract some incremental readers

latesummer2009 said...

Done.. All those interested in 90402 can go to:

http://santamonicameltdownthe90402.blogspot.com

Or you can click the link to the right.

It is a new blog concentrating only on that zip code.

Anonymous said...

I enjoy your blog.
I live in South Redondo (90277). I am eager to be a 1st home owner and have waited a long time and continue to wait for the right SFR. I have noticed an increase in activity down here over the past couple weeks. Inventory is drying up a bit and things are getting sold - seems like the rates might be bring some buyers out.
I am hoping to see more properties come on the market as I read that we should see a flood of them this year.
Just wanted to share that people in the South Bay (Torrance/Redondo Beach) seem entering into the market with prices still pretty high.
Thanks

latesummer2009 said...

Prices are still to high compared to historical norms. Some people will always overpay because, they perceive a bargain, based on overinflated prices.

We still have a ways to go, IMO...

Anonymous said...

I'm with the Redondo Anonymous reader.

I was in a restaurant at Rosecrans/Sepulveda (Jan 2009 ~$20/plate) where we have been patrons for years and the place was just as busy as ever. Waitress said things haven't slowed down at all. I've had that same experience at all of my regular take-out places too.

Based on the good-business reports I'm getting, I think the volume of houses for sale will just fall off and stay extremely slow while their residents continue living the privileged W.L.A. lifestyle.

Why would North of Montana be any different? I doubt all those residents in their mega-million dollar homes feel any kind of effect on their daily living.

They are some of the prime beneficiaries of the Cheney Administration. The Cheney party is over. Soon the Obama party begins and they'll be the prime beneficiaries too.

Anonymous said...

Let's keep politics out of this blog -

the bulls agree w you but the bears think that the recession will hit the good areas soon

i know for a fact that many of the big money makers in Manhattan beach were making the money from real estate development - it was a great business - buy a farm in the inland empire, slap up cheap trackt houses and make a fortune.

Most of these guys are about to go BK so i am a bear on MB

in the 90402 most of the money came from non real estate related sources so i am more of a bull on the 90402 but time will tell

Anonymous said...

90402 prices will not go down much. In my opinion, that is the most ideal location in all of LA. There's obviously limited supply and there doesn't seem to be a shortage of demand.

Drew said...

There seem to be a lot of folks who "would like to see" housing prices drop significantly from the reduced prices they have already dropped to.

The problem is, wishing is not the same as being. "Would like to see" may or may not hold up to the economic fundamentals of the market

On another blog I frequent, people are always saying they "would like to see" the price of gold drop another 30%, however unlikely that may be.

Remember, the only people selling now are people who *have* to sell. This is a very small minority of the total market. Most people can still afford to hold onto their homes -- even if they might wish to move, or even if they are underwater -- and will continue to hold onto them until the market improves.

And remember too -- there is a big difference between a "meh" condo or a run-down SFR in a marginal location and a good-quality house in a "prime" location.

latesummer2009 said...

Unfortunately, the market is not improving. And job losses are heating up. 693,000 lost jobs in December! Consumer psychology has changed dramatically. I don't hear of many people rushing out to buy a house. Most, are now concerned about jobs. Companies will be cutting down to the bare bones in 2009.
Your right about people "having" to sell. I'm afraid those numbers will swell significantly in 2009, with loan resets, foreclosures and job losses.

Evan said...

Just came across your blog and will add it to my Google Reader...

...hate to be in this position, but my wife and I have turned into vultures. Good timing I guess, but we're in two secure jobs and are looking to buy. We're one of the few people that hope the housing market crashes farther.

latesummer2009 said...

Evan,

Patience will be rewarded. Old fashions will be in fashion again. Such as, saving for a real down payment (20% down) and clean credit. Banks will be salivating to find customers like this, once the financial mess gets cleaned up. Unfortunately, we could still be years away from that. Save your money and start zeroing in on neighborhoods, blocks, even houses you might want to buy, then WAIT....

Good luck.

circuitjp said...

A lot of money in the Westside comes from the movie and entertainment business and if that business starts slowing considerably, you'll find things turning around.

A lot of funding for big movie projects came from hedge funds and these are crashing on a daily basis, even Speilberg is having a problems finding funding. I don't hink joe-film-guy is going to have better luck to finance his indy and/or comic book film.

latesummer2009 said...

I would have to say "seed" money for all sorts of projects has dried up. With people cutting back on going to the movies as well as "hedge" money disappearing, the Westside will feel the pain like everyone else.

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