Move Up Market Just About D.O.A.
The latest reports on increasing sales in Southern California are true! Too bad it's for foreclosure sales in distressed subprime markets, that attract only first time buyers and speculators. This does nothing for the Westside market, where starters homes still hover around $700,000. So forget all the spin and headlines in the media. Here on the Westside, we have record inventories and some of the lowest sales numbers on record. Its literally is a "tale of two cities" or bifurcated market, where the lowest end is surging due to foreclosures and the mid to high end is almost dead on arrival.
The absence of the move-up buyer has drastically affected the sales volume transacted on the Westside. With mostly foreclosure and speculator sales, there are few sellers to buy the next level home. Multiply this by 3 or 4 and selling a home at the highest level becomes much more difficult. Compounding problems on the Westside are difficulties in acquiring Jumbo Loans over $729,500. Lenders such as Wells Fargo are now requiring 20% down and asking for 40% of the Loan Value in savings! Who in the right mind is going to risk that kind of money on a declining asset? Not the banks. That should tell you something.
With Prime loans defaulting at the highest rates now, the Westside is in for a rude awakening. Over 66% of the outstanding mortgages in the U.S. by volume are prime loans. 1 out of every 8 mortgage holders are now in default and the worst is yet to come.
Don't buy the "green shoots" etc. spin. Look at the fundamentals and you'll see the real estate market is sick and getting worse day by day.
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Due to increasing unemployment but mostly a return to traditional lending standards, I am looking forward to buying a house in Culver City when the prices come down to affordable levels at $300K range in 2010...the same prices as was in 2000/01. If you make $100K, you can afford a $300K loan, with a $60K down payment. If you want to pay more for a house, you will need to come up with the rest in cash!
There are some blogs that believe that 2010/11 will be a false bottom, and house prices will continue to decline up until 2015 due to very little credit available and high interest rates.
Baby Boomers starting to retire soon. Although a broadbrush because not everyone "owns" a home, but how are 80 million Baby Boomers, the largest generation, going to sell/downsize/etc. to only 40 million GenXers coming up behind them? Whose going to buy all these Westside, still sky-high priced houses?
What is ur reasonable/realistic ballpark estimate price range for a starter home in culver city/mar vista area (3 bedroom/2 bath--nothing too big)in the next couple of yrs? 500k?
Predicting prices is difficult, but based on median family incomes I would expect a 3/2 starter home to drop down to $300k or less in Culver City/Mar Vista. When I look at the income statistics in various neighborhoods they are nowhere near high enough to support current house prices, that is why we are seeing drops. As interest rates increase home prices will drop even if we have inflation because the payments go up higher than people can afford. With unemployment going up and people leaving the area to find jobs elsewhere prices can only drop.
Starters on the Westside will ultimately drop in the $300,000s when all is said and done. That would be in line with the fundamentals based on income and rental prices.
1515 Kelton in Westwood 90024 sold for $1Mil last week. The last sale was for $445K in 1997. So there are people with money out there, (maybe not too much sense, but...)
At under 1800 feet, this is the smallest and oldest house on the block. In 1997, it would have made a good starter home.
Frank
I believe that Westside home prices will continue to drop, but it is hard to believe that the prices will drop to around 300K. The forcasted housing market correction is based on good data (i.e. REOs/adjusting loans, prime loan borrowers in trouble, housing inventory glut, etc.), however, I have seen no such data to specify where prices will wind up.
What data do you have to support such a contention?
Thanks.
1515 Kelton would have sold for 1.7 million in the 90402. Look at recent sales in the 90402
I would have to agree that there are A LOT of people (doctors, attorneys, financial professions and senior level accountants) on the westside who could easily afford the 700-800k range for a starter home in culver city/mar vista. The above will keep prices at that level for a decent 3/2. LA coastal areas will never fall in line with fundamentals. I think that it would be reasonable to see 3/2 starters going for 500k in the next couple of yrs. Anyone looking to pay under 500k to live in a house in culver city/mar vista may want to consider the valley or further out east.
Yes, but the question is, are there enough people to buy the amount of inventory where people are underwater? Throw in Alt-As and Prime defaults headed our way, and the answer is no. And, if they are making that kind of money, I doubt they would be risking their hard earned dollars on an asset that is losing money at a 15-20% annual clip.
I grew up in the poor part of 90066. My parents had a 1100 sq foot 3/2 home on a 5000 sq foot lot. The houses on my street were all cheap tract homes and many of the neighbors were Japanese American gardeners. In other words, the neighborhood was definitely lower middle-class.
After my mom passed away, we sold the house in 2004 for $575,000. The prices continued up significantly but have fallen again. It was pure insanity to spend $575,000 on my old home. You get Short Avenue Elementary School, Marina del Rey Middle School and Venice High for your 1/2+ million dollars. Plus the house was very, very modest.
In most other parts of the country a $600,000 home is a mansion in a great neighborhood--it's not a small modest tract home 1/2 mile from the Mar Vista Gardens housing project with its gangbangers.
It is unbelievable that so many people who bought in the last 8 years on the Westside still believe that their 1950s vintage tract home is worth $800,000.
"1515 Kelton would have sold for 1.7 million in the 90402. Look at recent sales in the 90402"
90402! 90402! F*CK 90402! Really, nobody cares.
Anon 2:59PM-
I couldn't agree more! In fact, I find my situation most ironic, brought about by our crazy housing market and the "X" factor.
Like you I am a native Westsider, and I was born and raised in Santa Monica. After leaving CA in 2000 for several years, I returned to find my community overrun with this property speculation insanity.
Ironically, even with a very strong combined income, wife and I cannot afford a home in the same neighborhood my gardener lived when I was growing up! He was a decent guy, and I am not making any judgments about working class vs. white collar- we are all just people trying to make it. It is just that I find it ironic that I now couldn't afford his house, even though I have earned an PhD, and my wife is leads a large organization. I actually went to my old gardner's house when I was a boy and purchased a couple of minibikes off of him. It was simple, a 1940's cookie cutter (with great landscaping!) off of Braddock by Centinela.
I wasn't born with a silver spoon in my mouth, and back in those days Santa Monica was a sleepy middle class town and we were not rich by any stretch. Today, I would love to live in the neighborhoods of Mar Vista, and when I returned to CA I envisioned purchasing a home around Braddock & Centinela. Of course this was before I came to terms with what an insane asylum the realestate speculators and out of town money had made the Westside.
What we didn't account for, and I can vouch for this having lived in several states outside of CA, is the "X Factor." Basically, I didn't take into account that a majority of people in states across the US would give anything, and I mean anything, to live in the Westside/Hollywood/South Bay areas. They migrate to SoCal looking for the "good life" and they bring their parents money and buy into the 90066.
These folks bought next to a sketchy housing project (Mar Vista Gardens), they bought next to old-school dudes who cannot even afford to fix and move the cars rotting in their front yards, or guys who live in dilapidated family homes because their blue collar pensions, are too small to keep up with the rising costs in these areas.
The X Factor-motivated buyers bought in these areas and paid top dollar (and, as we can see with the current "dead cat bounce" are still buying in these areas even as many people realize the market is correcting) even in the face of the horrible neighborhood characteristics . I suppose that they were looking for a slice of the California dream. To someone who grew up on the Westside, I didn't realize the power of the X Factor until I left town and returned.
Me and my wife are here because most of my immediate family still lives around this area. We would love to raise our children in the company of our extended family, however, we are giving the Westside another year (we have been renting for 4 years already) before we relocate to an area that offers a high quality of life (safe neighborhoods, good schools, fun things to do, etc.) and is affordable.
If is frustrating to deal with this process, but I'm not special and I'm not entitled just because I grew up in Santa Monica; if we move we will make a great life somewhere else. People have been priced out of their own neighborhoods for decades, so why should it be any different for me?
The X Factor keeps drawing people from all over the US (and the world!) to SM/Culver City/Mar Vista, and they are often willing to sacrifice all sanity to "afford" a home in these areas.
Sorry about the rant, but it was certainly encouraging to see a fellow native talk about our community and what it has turned into.
I have looked at income statistics by following the neighborhood links on Refin. In an area where the median income is under $100k the homes should be priced at 3x income. Since half rent, even so a starter home should be around $300k. In Santa Monic only 20% of the household earn more than $200k. $200k supports a $600k home. As has been pointed out, many of these neighborhoods are just not that nice with homes that were cheap when they were built.
As an example of how low things can go, I was visiting a friend in Brentwood who bought a fixer in 1994 off Kenter and remodeled and added. She paid $435k for it. It is near the Leave it to Beaver house which she pointed out as we walked our dogs. The neighborhood is crawling with celebrities and there is an original Frank Lloyd Wright across the street from her.
For the patient there are deals. She used to live in a larger home up Mandeville Canyon and they sold, then rented and waited until they found their Brentwood home.
I agree with those who have noted that peopel int hose neighborhoods are still price sensitive, that is how they become as wealthy as they are. My guess is that with her total remodel and addition her home even with downturn will never be below $1,500,000. There are some other dives in that area that will come on the market some day and if they do in a downturn could be a great deal like her place. Lesser neighborhoods are bound to also have very good deals at some point.
I want to ask the guy who grew up in Santa Monica with a PhD what he would consider affordable and what non-westide LA neighborhoods he thinks that are affordable and a good place to raise a family.
"I would have to agree that there are A LOT of people (doctors, attorneys, financial professions and senior level accountants) on the westside who could easily afford the 700-800k range for a starter home in culver city/mar vista. The above will keep prices at that level for a decent 3/2. LA coastal areas will never fall in line with fundamentals. I think that it would be reasonable to see 3/2 starters going for 500k in the next couple of yrs. Anyone looking to pay under 500k to live in a house in culver city/mar vista may want to consider the valley or further out east."
When you wrote this, it was already wrong. Homes in mar vista/venice/culver city have already sold for less than 500k. Anyone buying now is just throwing money away. They'll lose 30-40% of their home's value, maybe even 50%. The foreclosure storm is just arriving. Add in 10% unemployment, unavailable credit, and watch prices collapse. They won't stop until we hit 1998 levels - just like Detroit and Cleveland. Those who don't want to believe it...wanting something to be true (the west side will never drop that far) doesn't make it so.
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