Saturday, August 1, 2009

West LA 90064 Starter Home Drops Almost 40%

Here is yet another area on the Westside that is experiencing a significant decline. This entry level home in West LA has dropped 38.7% or $261,000 in under 3 years. That's a decrease of over $90,000 per year. At this rate, you would lose your 20% down payment in less than a year. Not to mention, what could happen with the Alt-As and Prime recasts on the horizon. Here are the details for 90064:


11817 Gateway Blvd., LA 90064
2+1, 1151 sqft, Lot Size 2744 sqft
Built in 1947

SOLD on 6/20/06 for $675,000
SOLD on 4/30/09 for $414,000 (-38.7%)

Fill out the survey to the right and guess what this home sells for at the bottom.

Lately I have been hearing stories about multiple offers on some "low priced" homes. My question is, what kind of offers are they and do they close escrow? Sure they're a handful of buyers that feel they have to move during summer. And someone with weak hands will ultimately overpay for a home. What happens once summer is over and we head into the Fall? Throw in lost equity, loan reset/recasts, more layoffs and the big squeeze could be on.

27 comments:

Anonymous said...

Gateway is a major throughfare street. Location sucks. and what is that lot size?

Basically, a condo would be a better option than this SFR.....

Bad comp. Not indicative of the comps in area.

Anonymous said...

What kind of premium does vintage architecture (i.e. 1927 Spanish, 1906 Craftsman) command, if at all?

Anonymous said...

I am so bewildered that there are sellers out there of 1000 square foot shack, 2 bd/1 ba, hardly any closet space, at an asking price of $700,000 in West LA. The small 5000 square foot lot, house built in the 40's that needs a lot of work, and no parking available on the street. Is it really the weather, the jobs, the location???

If it is the weather, then explain to me all the low end properties in area west of Culver City, called Del Rey? Why aren't they fetching for the same prices?

If it is the jobs, what/where tremendous job creation occured since 1999 in West LA?

If it is location, explain to me what is unique about these locations that these same shacks sold for less than $250K in 1997-1999?

What we have witnessed is a an epic housing bubble especially in West LA. Don't believe me, go on realtytrac and type in any west la zip code and find out how many houses are in pre-foreclosure..

I am so looking forward to seeing the carnage occur later in 2009 through 2011..

Anonymous said...

2:41PM - You call this a bad comp? But the prices being compared are for the same house! It's the perfect comp! You sound like another know-nothing realtor.

The point is the price of houses in that 'hood have dropped...and the evidence is perfect.

Anonymous said...

As long as there are morons who buy close to list, prices will remain "sticky". And there are a lot of morons in this town. People still think they can "make money" buying RRE. Not buying rentals, but buying a house, living in it for a while, and selling for a big profit. This mindset is gonna have to die to get a real correction. It will, but it takes forever...

Jon H said...

We have been waiting for evidence that Westside home prices are starting to melt down like the rest of the US. I am finally starting to see numbers from April/May/June that confirm this. I certainly hope the pace picks up, b/c we are really hoping to take advantage of the current interest rates.

I am shocked at how many people, my friends, business colleagues, and others, are convinced prices are going up. I tell them about all the blogs/Websites/etc., but their opinions are set in stone.

Whenever I ask what they base their opinions on, I receive three answers in order of frequency:
1) The have a "hunch"- the Westside, they reason, is forever hot and we have only seen a momentary break in the prices;

2) The mainstream media has reported that we hit the bottom and now things will go up; and,

3) Any one of a number of RE and associated people have told them the market is going back up (this includes, btw, contractors as well as RE agents).

I am so amazed at how little research people actually do before forming an opinion about the market. If you look at the above reasons, none of them are based on any data whatsoever. Still, people make the biggest purchases of their entire lives based on the above...!!!

Thanks for your continued work bringing evidence to the table LateSummer2009!

Anonymous said...

JonH,
I think it's the water, or some sort of Kool-Aid; we have friends that excitedly quote pretty much the same reasons why West LA RE is not going down/will go back up.

Here's a simple decision tree that'll work anywhere:

Start-> Are the home prices in a neighborhood 3-4x the mean income for the 'hood?

No? -> go back to Start.
Yes? -> Homes are affordable and it may be time to buy.


FrankH

Anonymous said...

Were home prices ever 3-4x income in upper middle class desirable areas? CC/Mar Visa have become that in the last five yrs--even though parts of it still look shady. I would think not. I just don't think the 3-4x income ratio holds any water in super attractive metro areas. I am from the city of San Francisco, and I ALWAYS remember that housing prices were more than 3-4x of income. Why would the westide be different? I think the ratio is probably something like 5-6x out here. Either you gotta save 1/3 to 1/2 of a 150k/yr salary (after taxes) for 5-6 yrs or mommy/daddy will have to help. I guess in the past ppl used to leverage equity built up from their previous home, but there isn't much left is there? Don't get me wrong housing prices will mostly likely fall, but even if the current 650k 3bd/1.5ba falls to 500k (that'd be a 23% decrease), one would still have to make 150k per/yr to afford it under the 3-4x income ratio, and that's assuming there's a 20% down payment.

There are no secrets or short cuts to owning a modest home in highly desirable part of town. For the most of us mommy/daddy ain't going to help, all we can do is bust ass and SAVE.

just trying to be real.

Anonymous said...

I definitely will not vote for Obama and any of the Dems in my district and State. They suck. All they want to do is provide welfare to the ones who took out irresponsible mortgages. The ones who did not buy and saved are being punished by Obama's polices which are sustaining the fucking bubbles by the Fed printing money. Cash for clunkers--give me a break and PIPP shit.

Anonymous said...

I've been monitoring 90064 for a year now. I do not think we are anywhere near a 40% decline yet for a starter home. This example seems to be a half lot, possibly in the landing flight path to the SM airport. The low end (flight path closest to the airport, or adjacent to the freeways) falls the fastest/furthest. Judging from the open houses I have attended, 90064 is closer to a 15-20% decline from peak. In the meantime, I am happy to remain a renter... someone has to have disposable income to support the remaining local businesses!

Anonymous said...

Anon 9:01 - I've lived in Westwood all my life, and housing has always been about 3x-4x the median household income around here. In the 90s, 1-2BD condos would be between $150-$200K, a starter home around $300K-$400K. Yes, there are much more expensive homes, but there are plenty of small SFR in the area.
It all changed around 2002, and even now, condos are $300K - $400K+ for 1-2 bedrooms, small SFR are between $800K and $1.1M. Incomes have absolutely NOT increased to keep the ratio at 3x-4x. You can look it up in the census data. In fact, median incomes in Westwood have not changed by much.

No Kool-Aid, wishful thinking or waves of mythical high paid (but money stupid) professionals and rich parents will change the 3x-4x ratio for sustainable home mortgage that have decades (if not centuries - if you look at Europe) behind it.


FrankH

Anonymous said...

Amazing how history repeats itself. So many people have such short memories.

Doesn't anyone remember the LA RE collapse from the late 80s through 1997? (and that was before Option-ARM lunacy)

Everyone cheered today as the Nasdaq hit 2000. (>60% below its level in 2000)

Those who think prices will stick and the correction is over, must be either (i) in the RE business or (ii) under 30.

And for those who think the high-end is immune, see the link below. (and it's from a lender!)

http://www.firstrepublic.com/lend/residential/prestigeindex/losangeles.html

Jason

Anonymous said...

Frank,

I think prices will fall, but not to 2002 levels. I think you need to add other components that are keeping prices high: reurbanization movement, wealthy immigrants and inflation. Census data is on a volunteer basis, and I believe that the large apt renting population in Westwood significantly brings down the median income. A more accurate indicator would be the avg. westwood SFR owner median income. I bet you it is at least 250k for ppl who owned a SFR in Westwood who bought in the last 5 yrs. You remind me of my parents who bought in a very middle class neighborhood in the late 80s, which has now become a barely affordable area for ppl making 250k a year based on your ratio. Just ask yourself, if you were to sell your house today, how much would you ask for? 3-4 the median income? Probably not.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

No historical perspective here at all. SM has seen waves of big ups and big downs. I have pix of the heyday of POP, and I have memories of SM in the 70s as "the last great seaside slum" [thank you, Stacy Peralta...] We're on the downslope right now. No amount of yuppie whining is going to change that. In a few years, the tenor will have turned from, "we're waiting for a bargain in Santa Monica" to "No way, we wouldn't want to live in Santa Monica, at any price." Don't believe me? Live and learn. It already happened once in the last century, during an economic downturn not as serious as the present one.

Of course, nobody will believe me, or care; that's the nature of cognitive blindness. But you might want to consider: I was the guy who, in late 2003, wrote the following in a major city newspaper: "Maybe my decision not to buy in the current interest-rate never-never land -- just having the patience to sit still -- might, in a year or three, be reframed in the rear-view mirror as the shrewdest of financial speculations."

And here we are, with prices retracing to 2002 levels. It's not done yet. And all you delusional alt-a/option-arm mortgage holders are going to be fleeced. Sorry to be the one to tell you.

Anonymous said...

As a "yuppie," I have to admit that Frank and others have been around the block a little more. I am almost 30, and all I have seen in my adult life are sky rocketing real estate prices. No one truly knows how much prices will drop in the next few years, but I do know that it most likely will not go up--which is quite a change from perspective.

The westside (Westwood and Santa Monica) are gems, and regardless of how much overall prices go down, they will still be relatively expensive places to buy.

Anonymous said...

Anon 4:24 - Inflation does not cause housing prices to double (or more) in less than 10 years. I used the median income for Westwood, which is higher than the average, and it really hasn't changed much in 10 years. Show me real numbers - not guesses - to support the claim that Westwood (and therefore the Westside) RE prices will remain high because of "rich immigrants". People who've bought homes in Westwood in the last 5 years are probably badly leveraged, because driving around the 'hood, you just don't see a major change of living standard, compared to 10 years ago. If anything, it's stayed the same or dropped.

Westwood and the Westside will always be expensive, because people with higher incomes tend to live here rather than say, in a trailer park in Barstow. But homes have always been at around 3 - 4x the median income (which will be higher in Holmby Hills..."adjacent" than in the "slums" south of Wilshire)and they'll go back to that.
The last 10 years have been an obscene aberration and the bad economy will help correct the situation.

And would I sell my place for 3-4x median? No, of course not - not if there's a Greater Fool willing to pay 10x the median for it!

FrankH

Anonymous said...

The numbers speak for themselves, but other data is all around for those just paying attention.

For example, I love how some news organizations are reporting the end (or lower slide) in the housing market.

During my hour commute (I live in the westside and work in the west valley), the following were the most prolific radio advertisers on the morning drive during the boom:

HMS Capital (no-doc specialist)
Best Funding ("Fernando Perez is your friend in the mortgage business." What a joke.)
Countrywide Home Loans

Now you hear the following: California Association of Realtors; ReMax; and all the "loan modification" sharks (i.e. the same people who screwed folks on the way up).

Coincidence? Hardly.

BTW, for those who don't know. Realogy, the parent company of Coldwell Banker and Sotheby's is, itself, near bankruptcy. High-end immune? Guess not. See the following link (Realogy's financial statements) for an interesting read. What a disaster.

http://www.sec.gov/Archives/edgar/data/1355001/000119312509108447/d10q.htm

Anonymous said...

90064 is one of the most overpriced neighborhoods. Sellers asking $650K+++ for 2&3-bedroom hovels a stone's throw away from the 10 freeway... ridiculous!

Anonymous said...

if considering the valley, any neighborhoods that u recommend? 400-500k range, 3/2 house, nothing fancy and too far from west LA for work?

We just can't wait it out any longer.

Thanks.

Anonymous said...

Why can't you wait? just find a nice rental home for the time being, no one will ever know the difference. You'll save money over buying, and be in a better position to time the market bottom

I swear I don't get the pathology behind "I can't wait"

Of course you can, I know it sucks but would you rather rent a nice place for 2 years, then find a home to purchase... or loose your down payment between now and when the market bottoms out?

Anonymous said...

People are so stupid. You can't change that. You can't even make tactful suggestions. I remember, three years ago, I'm sitting in Coffee Bean trying to mind my own business, and there are three loudmouth idiots close by trumpeting, "If you can afford to rent, you can afford to buy"... Oh, god, I wanted to stay quiet, but I couldn't help myself. "Look," I snapped, "you can get in right now and lose half your equity, or you can rent for a few years, and buy twice the house you've been renting at the same price. Right now, renting is the best deal you can make." Me, I've been renting my home in the Hollywood Hills for five years. When I consider the money I've *already* saved on a home purchase just by waiting (if I'd bought, say, today), I calculate that I've been netting -- after rent and housing expenses -- about $4,500/month, every month, for the last five years. My expectation is that when all is said and done, it'll be closer to $7k/mo. Everybody five years ago thought I was an idiot. Well, let me tell you: I'm a financial professional, and now even my landlord (one of the aforementioned who thought I was an idiot) is tapping me for financial advice. Right now, the only real advice I have is, "try to learn from your mistakes, and try to develop a sensitivity to the hysteria of boom -and- bust." Because there's going to come a time in the next half-decade when residential RE makes sense again, and it'll be *exactly* the time when MOST F'ING SHEEP LIKE THE PEOPLE ON THIS BLOG (ahem, sorry) are saying things like, "real estate doesn't make sense any more; it's permanently finished as an asset class" etc etc. That day will come. But, just like at the peak, nobody will listen to me, just like they didn't listen five years ago.

latesummer2009 said...

The results of our reader poll are in.

The price of a starter home in West LA 90064 at the bottom will be:

$250K - $299K (41%)
$300K - $349K (27%)
$350K - $399K (14%)
$400K - $449K (17%)

More than 2/3 of our readers felt a starter home in 90064 will be between $250K - $349K.

Low $300Ks seems about right.

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