Foreclosure Filings Surge in the First Quarter of 2010
The number of houses hit with foreclosure notices in California from January through March was at an all time record of 216,263, according to Realtytrac. That's a 60% increase from the 135,431 during the first quarter of 2009 and a 256% increase from the 84,568 during the last quarter. It appears banks are now getting their act together, after the foreclosure moratoriums and are moving faster on properties in default. Those current numbers now mean, 1 out of every 62 houses in California is now in some stage of foreclosure. Right behind Arizona and Florida. In contrast, the national figures show 1 out of every 138 houses are in some stage of foreclosure.
But the "Westside is different" as many will tell you. Let's see how different it really is. According to Foreclosure Radar, there are now over 200 properties in some stage of foreclosure in Santa Monica. The breakdown by zip code is as follows:
90401 (8)
90402 (26)
90403 (52)
90404 (61)
90405 (64)
Total (211)
Most of these properties are Bank Owned (REO) or scheduled for Auction. If someone had told you 2 years ago, there would be over 200 foreclosure filings in Santa Monica, they would have said you were insane. This is not the sign of a healthy market, especially with the Gov't pulling out it's support last month (RMBS purchases), this month (Tax credit ending) and the banks requiring 20-25% down with FULL documentation,. To make matters even worse, California's unemployment rate just a hit a high of 12.6% last month.
Keep track of your own areas foreclosure statistics, and watch the numbers swell, as the shadow inventory makes it's way onto the market. With a smaller pool of buyers and more inventory, prices will continue their decline.
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128 comments:
Waiting for someone to come and say this is more proof that the fence sitters will be priced out forever. heh.
As always, thanks latesummer for bringing us the cold hard facts of the matter.
Yeah can't wait for some real-turd to come in and say "buh buh but it's DIFFERENT in MY neighborhood. It's ALWAYS a GREAT time to buy, buy now or be priced out forever blah blah blah..." When the reality of the westside market is sell now or be priced in forever (or for at least another 10, 20, maybe 30+ years).
It is a bit different on the foreclosures...the vast majority are condos and townhomes....what percentage of the number is SFR?
This is good if you want a condo, not if you want a sfr.
I think that it is clear from the previous few threads that there are two opinions represented among those of us on this blog
On the one hand you have the people who think North of Montana is special and will not go down from here
On the other hand you have people that do think North of Montana will go down.
OK let's agree to disagree. What about the less interesting SFR neighborhoods - Mar Vista, Palms, and Sunset Park. Is there agreement with regard to those neighborhoods?
Yep, lets talk about Sunset PArk...where are those numbers now...?
So this looks like a great opportunity to get some of these properties. I've been watching the various foreclosure websites for months. They seem to show a ton of properties either in or heading toward foreclosure. But except for one property in NoMo on 20th. I haven't seen a single one come on the market.
So am I looking at the wrong websites or have the banks just been waiting to unload these or is there an insider who is getting everything -- maybe working with Goldman Sachs :)
We heard from the realtor we are working with that he just recently got definite confirmation foreclosures are being sold directly to investors (evidently some funds and other VIPs) w/o ever coming onto the MLS... presumably for flipping, at extraordinary rates. He said he knew somebody who was a long-standing high net worth client at a bank and demanded to be put on their foreclosure list and eventually got all the way through and put on the list. Was asking our realtor about deals that couldn't be located on any real estate listing. I guess the banks have the right to do what they want with their foreclosed houses, but it makes me wonder if they're going to be holding off on short sales/REO so they can give all the deals to their best clients. :/
I'm also unclear how this affects the "shadow market"-- I assume it's still shadow until sold to an actual occupant, which presumably occurs via MLS.
"LS 2009 said...But the "Westside is different" as many will tell you."
Out of curiosity, has any bull, anywhere any time come out and said "Santa Monica is Different", the idea being it wont get hit at all? Seems to me, the typical argument is alot more like this.
Bull: I dont think SM is gonna fall as hard as some areas.
Bear: WHAAAAAT? You think its "DIFFERENT" here?
Bull: I dont know about all that, I just dont think it will fall as hard as some areas.
Bear: WHAAAAT? You think this area is "SPECIAL".
Bull: Again, I just dont think it will fall as hard as some areas.
Bear: WHAAAAT? You think your area is "IMMUNE".
Bull: No, again, I just dont think it will fall as hard as some areas.
And round and round they go.
Maybe the only common ground is a simple statement: if a motivated buyer can't get it together financially in this environment to make a purchase, their chances of getting it together next year, the year after, etc. are slim. If you can't pick up a foreclosure or lowball during this low interest rate period, you need to go to Plan B.
'With a smaller pool of buyers and more inventory, prices will continue their decline'
Really? Am i the only one getting outbid right and left and finding really poor inventory in Santa Monica????
I have had numerous bids declined. None of the homes have sold, however. Sounds to me like a glut of delusional sellers. 2 bids 10% below offer price and no counter. both on the market still after 3+ weeks.
I see lots of inventory in SM.
So, i mostly disagree with you, Anon 2:06.
Inventory yes, but real crap. Small, poorly located, and sellers who don't seem really motivated at all.
Where are the SFR foreclosures and short sales?
Unless you want a 2/1 by trader joe's under the freeway...you are SOL...
Don't expect to find a goldmine in foreclosures, maybe a one-off deal here and there. I worked at the largest CA lender during the early 90's in the REO div, and got a first hand look at the people and practices. The REO guys are not the same dopes who made the loans - they are hard-core collateral lending guys and ex-factors.
An area is scored and indexed - imagine SM as being a 85-90 on a recovery scale of 100. Low index areas will get wholesaled off, but the REO guys will ride high-index areas, for years if necessary, to keep the overal recovery ratio high. Any out of index deal is highly scrutinized, maybe something terrible by the freeway could get a disposition pass.
FYI, I thought I could get something in SM at the time as a deal from the bank, no dice. Ended up getting a low-ball offer on a 3 year unsold property being rented out by the owner. So much for REO 'deals'.
These foreclosures affect the comps, appraisals go down, prices go down.... Put on your seat belts.
This idea that the banks can unload the properties to insiders and then the insiders can market them for a terrific profit makes no sense to me.
The bank will sell the property to whomever the banks believe will offer the highest price. Period. Bankers don't give away money (except to themselves via bonuses.)
If the insiders' bids are high enough to satisfy the bankers, there's no rational argument that there will be a significant margin left when the insider turns around to unload the property retail.
By definition, there are no stronger buyers than the insiders. All other buyers are weaker and can only offer lower and/or more shaky deals.
So then, why would the (smart) insider take the "deals"?
No. This argument makes no sense. There is no way by passing inventory through some third party to circumvent the basic facts of increasing supply and decreasing strong buyer demand.
Whether they are handled by bankers or anybody else, the properties must either come to market or rot on someone's balance sheet as vacancies or underpriced rentals.
ON the market, they immediately exert strong downward pressure on price. Off the market, they eat away at the confidence of all informed sellers and buyers, exerting another kind of downward pressure.
If it is true that a lot of foreclosures are and will be occuring, prices must fall, whereEVER it's happening.
It looks to be true... but we'll have to wait and see.
(What will happen in the higher priced more "desireable" areas, is that after the decline, the prices will still be higher than the lower priced areas... but that doesn't mean they won't be a lot lower than they are today. The special areas ARE special and will retain relative value. But there is no such thing as absolute value.)
dog-walker
Dogwalker, I have real life experience that contradicts what you are saying.
I live in a small enclave of Valley Glen(Van Nuys) where there is some pent up demand of buyers due to it being an ethnic enclave(Armenian). This small enclave has a number of large range style homes and properties. Three properties in the surrounding couple blocks were recently purchased. None of these were on MLS. They are currently being renovated entirely. The houses in this enclave generally sell in the $550-750K range depending on size. Houses nearby, but not in the enclave, are listing at $230-450K. I'm willing to bet a whole lot of money that a shady realtor taking kickbacks used the nearby comps to convince the banks that their properties were not worth a whole lot due to being deteriorated(all three properties are in awful shape....the only ones in the neighborhood like that) and got a cash "investor" all lined up for the bank, probably at a song.
So the sop is this...buy up all inventory in an area with pent up demand, pay 1/3 what the property would sell for if its fixed up nice, put in $100-200K in renovations, and list one at a time.
Bingo, you've instantly manipulated a micro market.
Can anyone confirm singles family homes in foreclosure in Santa Monica????
Where?
latesummer2009: Shouldn't you change your username to latesummer 20xx ?
where xx= current year + 2.
Per Redfin on 90402 YOY:
Median sold price down 51%
Median sold $/SqFt down 7.3%
It might be a couple of years, or it might be Japan style and a lot longer. Who knows with all this gov't intervention. Regardless, prices have declined, and are continuing to decline. Sell while you still have some equity left. You might find some sucker.
I am looking hard at everything in the Franklin 90402.
I appreciate the good people on this blog explaining why prices should be down right now.
But what do I see? Let's look -
421 23rd street. Five bedroom house 4.4 million
628 24th. Five bedroom house. 3.8 million
470 19th five bedroom house 3.5 million
510 18th four bedroom house 3.2 million
229 22nd four bedroom house 3.2 million
613 16th five bedroom 3.1 million
The decent homes, the ones that you can actually live in (rather than the ones you need to fix up) are all over 3 million.
Heck, 304 14th was built in 1963 (almost fifty years ago) and they are asking 4.3 million for it. On a smaller than normal lot (under 7500 sq foot lot) and you can't even send your kids to Franklin (it is outside the Franklin district) 4.3 million
Who is doing all the buying here? Who is pushing up all the prices in the Franklin district ? Can anyone in the trenches tell me who it is that is actually buying these houses for 3 million plus?
"Anon said...latesummer2009: Shouldn't you change your username to latesummer 20xx ?
where xx= current year + 2."
He already did once. His name used to be latesummer 2008. Hard to say what he does from here. If he adopts the rolling 2+ year method, he will be an out of touch permabear. If he keeps his 2009 name, his reluctance to buy thereafter will be just embarassing.
either way, hes f'ed. The day he figures this out, I expect we will log on to our computers, click onto this site and suddenly *POOF* its gone - with LS200X never to be heard from again...
naw, he is a real cat...bringing us the numbas, keeping it real.
whassup LS2009? U out thar?
Dogwalker - It is obvious that you do not understand how the real world works.
Anyone old enough to remember American Savings, Home Savings, Lincoln Savings, Western Federal Savings,Glendale Federal Savings etc. and the 1980s looting of the FSLIC???
Here's how it worked. The financial institutions foreclose on properties and then sell the best properties at a steep discount to third parties who actually represent friends, family members and employees of the bank.
After three years, title is transferred to the intended owner who then sells the property at a higher price and pockets the difference. I know someone who realized a significant profit on the sale of a house in Orange County this way as an employee of one of these savings and loans.
For those of you who have this fantasy about the "market place" setting prices, wake up to the fact that in the aftermath of Reagan deregulation, corrupt insiders are the individuals in a position to take advantage of the true discount prices on real estate. This will be particularly true of premium homes on the westside.
"For those of you who have this fantasy about the "market place" setting prices, wake up to the fact that in the aftermath of Reagan deregulation, corrupt insiders are the individuals in a position to take advantage of the true discount prices on real estate. This will be particularly true of premium homes on the westside."
Crazy stuff... how about 90402 Franklin prices are being artificially inflated by Goldman Sachs straw buyers? Conspiracy theories aside, the market is set by participants, not bystanders. There is no shortage of qualified buyers, just unwilling participants at current prices.
IMHO, as time drags on and prices soften, the uptick in transactions will surprise perma-bears. Declaring good SM neighborhoods DOA for a decade is a disconnect from lurking buyer demand.
Uptick in foreclosures, you mean. This won't surprise the well informed, who know there just aren't that many qualified buyers (folks with a sufficient down and verifiable income, which is now required). Truth is that million dollar plus homes aren't selling very well. In 2009,there were only 18,621 homes in CA that sold for over $1 million. Yet, the LA county alone, the MLS has 3,349 for sale, and there are another 2,205 in some stage of foreclosure. These are facts. Underwater SM home debtors should stop with the bs and hyperbole. Citing a fool or two who bought a house, or a fool who thinks there house is worth some ridiculous price, isn't evidence of anything other than stupidity. The trend is down, down, down.
"This won't surprise the well informed, who know there just aren't that many qualified buyers (folks with a sufficient down and verifiable income, which is now required)."
Nope, not many qualified buyers at all. Nothing but bad credit cockroaches looking to buy on the Westside. Maybe 90402 will turn into a Section 8 zone after all the homeowners get foreclosed.
Let's see what's happening in CA: Record unemployment, highest foreclosure rate in recent history, state budget deficits through the roof, businesses fleeing, 1 in 3 house debtors underwater, very little home equity, tax increases, aging babyboomers with no one to sell to, rising interest rates, etc., etc., etc. Oh, but things are rosy in SM? Not! Just look at Redfin, and we're not even in the middle of the ball game.
"Let's see what's happening in CA: Record unemployment, highest foreclosure rate in recent history, state budget deficits through the roof, businesses fleeing, 1 in 3 house debtors underwater, very little home equity, tax increases, aging babyboomers with no one to sell to, rising interest rates, etc., etc"
Sounds like the 1970's, with cities in trouble, recession, stagflation, etc - and then the Iranian and other immigrants landed and bought into the US future. Maybe it is time for another wave of immigrants to buy SM on sale, squeezing out the pessimistic and under-performing locals.
When you are a hammer, the world looks like a nail. When you are downbeat and defeated, time to step aside - a lot of folks see beyond the crisis of the day and want in. I am not a bull, but the reality is if we don't want SM other people do. Look at what happened to BH and other areas, the newcomers gladly jumped in and gave new life to the area.
Look at what happened to BH during the last housing downturn. It took a big crap. THAT is reality, and that's what's happening now to SM, BH, Malibu, Manhattan Beach, PV, etc., etc., etc. This has nothing to to do with attitude, it has to do with seeing things as they really are and not through rose colored glasses.
Anons 10:57 and 7:10 make sense.
OK, a scrap for the Bulls here - its all taken a heck of a lot longer that I could have imagined, when I started monitoring property prices in areas I liked, waaay back in winter 2006.
I really never imagined that prices on the Westside would have stayed as high, or been quite as stubborn in coming down, as they have.
Scrap for the Bears here - despite all the happy talk, it doesn't appear that prices are going up. Yes, people will fall on single sale prices and declare the end of the housing recession, but the Big Picture begs to differ:
For all the reasons cited above, there's no channel - either psychological or financial - for prices to increase at double digit rates.
So, I'm increasingly of the opinion that we're in for a decade of attrition, much like Japan had in the 90s - some sellers will get it, bite the bullet - lower prices and increase their chances of selling quickly.
Others will keep on listing/withdrawing/relisting their property at pretty much the same (rexpensive) price, and continue to fail to sell.
Either they will tap out all their reserves until they fall into foreclosure, or they will realise that they're losing more in holding costs than they will make in holding out for a full-price offer, after 1+ years on the MLS.
In any case, the whole thing has changed from 5 years ago.
A little good news for the buyers who are fearful that their purchases may go down...
Just went to the Tax Assessor Board yesterday and showed them 3 comps of recent sales in my area. Took my property tax bill down by 3K a year. Not bad for 20 minutes work....
Rates always fluctuate too, I bought when rates were high (almost 8%), then refinanced, like 3 times in 5 years..have a 4.8% fixed now....
I found that inventory and prices were better when rates were high, so I got the property I wanted at the price I wanted, but not the interest rate that was reasonable.
There is ALWAYS a tradeoff. When rates are low, inventory of good, well located homes is down. Prices are usually higher too to reflect the lower borrowing costs.
Things are always fluid and you will have options (don't listen to the 'you will be underwater forever' crap on this blog...)
"Look at what happened to BH during the last housing downturn. It took a big crap."
Sure did, same for SM etc., driving out the dumb-ass yuppies and climbers w/o substantial assets. Which leaves the folks with substantial assets, and their relatives and countrymen who know how to take advantage of economic chaos.
I am not saying foreign money will bail out local R/E or other parts of the economy. I am saying the buyers left with the resources to make cash and substantial down offers are not the same yahoo's who bought into the bubble. Far as I am concerned in my neighborhood (90402), good riddance to the marginal, and a warm welcome to the substantial. Hopefully the dumps in need of repair with crappy landscaping will get foreclosed, and buyers who can afford to make improvements and re-build will move in.
Speedingpullet
since you are originally from the UK why don't you comment on prices in London? My friends in London tell me that flats are selling and they are selling today at +15% compared to where they were at the bottom.
Please comment
Anon 12.26 - I've been over here for over a decade now, so my knowledge of London's housing market is probably less comprehensive than yours....
Fair enough
but my understanding is that a year ago London Flats were 20 times income and today they are up 15% to 23 times income
Point being that in London, high unemployment doesn't prevent home prices from going up.
Speedingpullet, you have always been honest and direct with us and we thank you for that.
If I remember correctly, you plan to buy a house here in Los Angeles due to employment in the entertainment industry. What gives you conviction that this employment will continue here in Los Angeles?
I mean James Cameron and Peter Jackson may love LA but they don't make their movies here. The cost of doing business is just through the roof. So much better to do all aspects of the movie in Canada or New Zealand.
Yes the deal making will always be in LA, and the agents and producers will have to live here. But the rest of the jobs? not so sure.
Speedingpullet remember that high paid executives "had to buy" in Grosse Pointe since the jobs were in that area. Then one day the cost of doing business led most of the good jobs to permanently leave. Consider the analogy to entertainment jobs in Los Angeles
Speedingpullet remember that high paid executives "had to buy" in Grosse Pointe since the jobs were in that area. Then one day the cost of doing business led most of the good jobs to permanently leave. Consider the analogy to entertainment jobs in Los Angeles
Bad anology - there were never high paid jobs in the Grosse Pointe area. The auto jobs were in downtown Detroit (GM, and Chryler in the old days before Rochester) and Dearborn, a good 15 miles away. The majority of auto execs moved to the Northern suburbs (Birmingham, Bloomfield Hills, etc.) over 20 years ago.
The main reason was to avoid Detroit blight and crime, and to send their kids to suburban schools and activities. Grosse Pointe has zero decent restaurants (look in Zagat), little premier retail, crappy cinemas, etc. My point is there is no compelling atmosphere or services in GP, so of course people hit the exits.
Quite the opposite in LA and the Westside; people move here to take advantage of what there is - mild weather, relatively clean air, restaurants, outdoor rec, very good private schools, gated enclaves, premier shopping, beach properties, etc. Entertainmnet production may leave, but the execs are still here, and will be here for a long, long time.
"What gives you conviction that this employment will continue here in Los Angeles?"
Sure anything could happen. Entertainment could leave LA, Finance could leave NY, Government could leave DC for cheaper digs. If thats your fear, you really shouldnt be in the market to buy.
Frankly, you should never buy. Just rent and stay nimble so you can go where the jobs go. Not a snark. Im just saying if thats the types of fears that you dwell upon, perhaps buying just isnt for you - ever.
"Entertainmnet production may leave, but the execs are still here, and will be here for a long, long time." No, you're completely and utterly wrong. The top executives are now located in NY and have been for quite a while. Other than Disney, no major film production companies have headquarters in LA. And, entertainment is slowly leaving LA, although I'm sure it will never leave 100%.
I bailed out, fortunately, at the height of the housing bubble and didn't get back in. All I see is a market in decline. There is no evidence the market isn't continuing to decline, so I'm not jumping back into the market. Recent statistics (there is a link on Patrick's website) indicate that the housing wealth has largely deteriorated, so I have to disagree with the view that there remain very many with substantial assets. I thinking in a couple of years I'll be able to buy back my 90402 house at half the price I sold it for.
"No, you're completely and utterly wrong. The top executives are now located in NY and have been for quite a while. Other than Disney, no major film production companies have headquarters in LA. And, entertainment is slowly leaving LA, although I'm sure it will never leave 100%."
You are using a very narrow view of entertainment media. The broader view of LA includes execs (maybe not the very top C level in some cases) from the gaming companies and studios (Activision, EA, Take Two, etc.), online (too many to mention), Fox, WB, MTV,etc. The SVP, EVP, Pres, GC, divisional etc. level folks are +$500k/year, and there are a bunch per company. Add in the tech VC, P/E, entrepreneurs, already cashed-outs, etc. and you have a sizable number of high income folks.
If you think this is bunk, you do not work in any of the above industries. If you work in the above, check your company roster or directory. Add 'em up.
Actually, I consult to many of those companies. You don't know how wrong you are.
I am in one of the above (and have been with others), and just counted 22 SVP's and above positions on the org chart (corp, div's etc.) in LA. Some are making serious bank. There are also a lot former folks from my company out there as well, who made bank along the way and are either coasting, doing the same or better elsewhere, or have started their own thing.
Maybe you are consulting deeper down the food chain.
Oh, good grief... 0_o
Why do these threads always seem to degenerate into 'rich people and foreigners will save our property prices'?
Anon 7:21 - glad to hear you know a resounding 22 people that can afford a $1.75 million house.
I'm sure their entrance into the housing market will make a real dent in Westside inventory. Not.
Though, I can assure you, not many people in the games industry make 500K per annum. More like 200k for upper management and less for Seniors and Leads.
And even at 200K, you're looking at and 800K - 900K place, tops.
But I'm sure you'll be able to find an anecdote about how everyone in video game makes a meeeeelion bucks a year - in which case please let my husband know, he's doin it rong....;-)
But I'm sure you'll be able to find an anecdote about how everyone in video game makes a meeeeelion bucks a year - in which case please let my husband know, he's doin it rong....;-)
If he is not near the head of a studio, getting stock option grants, RSU's, and at least 50% annual bonus, he is doing it wrong, or at least has to move up the ladder.
Riiight.
I take it you're a dev company expert then, yes?
I am grateful for the commentary
I was not aware of the fact that SVP level people at the above named firms took home 500k on average a year
I do business with many of these SVPs and wasn't sure how they could afford the houses they were living in.
But now that I know the number if 500k it all makes sense.
I am not a bull and not a bear, but it is good to get accurate info on how much people are taking home
Nice to see the Bulls and Bears are coming back to life. This blog was never intended to say one side was right or wrong. Only to have useful conversation that is backed up with facts. It's OK to state your opinion, but give us some evidence to your claim. Otherwise your just "poppin off".
Question: Since we have started the Spring Selling Season, exactly HOW MANY homes are actually selling? Wer'e not just talking about the cream of the crop, that everybody and their brother is after in 90402. I would venture to say the total number of sales is hardly robust, to say the least.
With all the Gov't intervention, I'm afraid the declines will be slow and steady over the next 5 years or more (Japanese Style).
I have to say that this thread takes a very narrow view of who is buying in Franklin 90402 right now.
Our esteemed competitor at SM distress monitor captures it better with the following thread --- read it - it makes it clear that the buyers in Franklin 90402 may be drawn from places other than the entertainment industry
_____
..As I said, the education that your son or daughter will get at Franklin is the SAME as the education they will get at other schools in Santa Monica.
If that is what matters to you, do not send them to Franklin.
The difference at Franklin is in the parents. You tend to find parents with higher levels of professional attainment at Franklin than you do at the other schools. For example, Franklin has more dads who are surgeons and radiologists. The other schools tend to have more pediatricians and GPs. Franklin has more dads who are alumni of the top 3 law schools and the other schools tend to have more alumni of the other law schools.
It doesn't make the dads at Franklin better people, but they do tend to be folks who had higher test scores than the dads at the other schools. And they tend to be people who studied harder in school themselves and just achieved more academically.
Pediatricians contribute a lot to society, but anyone in medicine will tell you that on average the surgeons and radiologists are a little more academic than the pediatricians.
Anon @ 3:55 and 3:57PM - well said on how if your fear is the entertainment industry will leave LA, you should never buy.
The sad truth is the only thing we have to go by is the status quo and assuming it will go on forever. It may, or it may not. And it may change for the better or the worse.
I have a brother who wants to buy out near DC, but he wont because "what if a dirty bomb goes off, my property value would plunge". Well, when, if ever can you safely say that a dirty bomb WONT go off? Put another way, when will it be safe in your opinion to buy?
The answer of course, is it will never be safe to buy according to a criterion that assumes the status quo will change. My brother should just recognize that about himself, and be happy as a long term/permanent renter. There is nothing wrong with this. I suspect some here who have those same fears of entertainment leaving LA would be better off if they did the same.
Nobody here has any fear that entertainment will leave LA. Some here are being objectively reasonable that this not the time to buy, given all of the indicators that the middle and upper tier housing markets are continuing to crater. Perhaps you have some fear yourself, like how underwater your house is.
"Anon said...Anonymous said...
Nobody here has any fear that entertainment will leave LA. Some here are being objectively reasonable that this not the time to buy, given all of the indicators that the middle and upper tier housing markets are continuing to crater. Perhaps you have some fear yourself, like how underwater your house is."
_________________________________
Really? Cuz, heres what anon at 1:53 said.
"If I remember correctly, you plan to buy a house here in Los Angeles due to employment in the entertainment industry. What gives you conviction that this employment will continue here in Los Angeles?
I mean James Cameron and Peter Jackson may love LA but they don't make their movies here. The cost of doing business is just through the roof. So much better to do all aspects of the movie in Canada or New Zealand.
Yes the deal making will always be in LA, and the agents and producers will have to live here. But the rest of the jobs? not so sure."
________________________________
Hmmm, you said "Nobody" here has any fear that entertainment will leave LA. If so, please interpret what Anon @1:53 said above and reconcile this with your statement.
$500,000 of income does not a $3mm house buy. How to explain $3mm houses in 90402?
Assuming they have not somehow inherited or salted away very large down payments, then, in the absence of the stupid loans from 2002-2007, the prices will have to drop if the buyers are this $500k crowd.
$500,000 of income does not a $3mm house buy. How to explain $3mm houses in 90402?
$500k times XX years of savings + stock options + bonuses + spouse working + exits from business ventures + the occasional rich aunt who dies.
Easy.
Let's say that someone who has zero savings, zero assets and a 500k income can not afford to buy the typical decent $3 million house North of Montana
. We all agree on this one
That being said, $1 million in savings means that this person only needs a mortgage of $2 million
At 6% interest, a $2 million mortgage is only $120 thousand a year. Figure $35 thousand in property taxes and a $120 thousand mortgage - total $155 thousand a year - it is pretty easy to spend $155 thousand a year on housing if you are pulling in $500 thousand gross
So yes the $500 thousand dollar job people with a mil in savings can and do buy houses for $3 million
the real issue is, why have so many of these people who used to want a $3 million house in beverly hills decided that they would rather today buy in the Franklin 90402?
I don't sense any fear at all in 1:53. How you read fear into that I don't know. 1:53 is just commenting, and I agree because I know the LA business marketplace, that companies of various industries, both large and small, are leaving LA and CA. Moreover, many wealthy individuals are leaving CA because they don't want their incomes smacked with high taxes. Thus, the pool of buyers with verifiable income and downpayments is shrinking, and prices have nowhere to go but down.
No rational person could think prices have anywhere to go but down. Read the papers, look at the facts. We're in the middle of the great recession.
Oh! can we please get off this subject of 'Who is the rich person that can afford 90402'???????
Some people can afford it, end of story.
Next post pllleeeaaasseee.
Actuallty, I truly am fearful that the entertainment industry will leave LA en masse.
Costs are so cheap the rest of the world that I dont see how we compete on a long term basis. And its not just Canada or New Zealand as I said earlier, its Malta, Romania, its frankly everywhere.
IMO, now that the genie has been let out of the bottle, I dont see how its ever going back in. I truly am fearful that in 40 years we will be alot like detroit, just with much better weather.
True, other industries may come in, but that wasnt my point. That is why I cant fathom why Speedingpullet who is in entertainment is so sanguine about coming here to buy. Sure right now, there is still plenty of work in the industry at large to support prices - but what about 10-20 years from now when she decides to sell?
Speedingpullet, if you are still out there, I am hoping you can address my question if/when you can get around to it.
I'm not in 'entertainment' - I'm in games. Big difference.
L.A is just one of many worldwide hubs in the industry.
As I mainly work contract, it doesn't make a hill 'o beans difference where I physically live. However, the Other Half works in a development studio where he needs to actually show up every day - hence the reason we're still within commuting distance of Westside.
Believe me, if it weren't for the work, we'd be somewhere else entirely, L.A is a decent enough town, but you literally have to pay me to be here.... ;-)
As for 'coming here to buy' - I've never said I did. I came here for the work, and haven't bought in the decade we've been here.
As for being 'worried' about selling down the line - well, its the primary reason that we didn't buy earlier.... we'll only buy when it makes financial sense to us.
It still doesn't, we'll rent and keep an eye on property in areas we like and see what the prices do.
If we do buy and lose money 10, 20 years down the road then A) I'd just consider it rent for the duration, as I've never considered owning to be 'free' and B) I could be run over by a bus tomorrow so there's no point in fretting about things you can't control. Unlike the price you pay in order to own.
So, in answer to you question: a) I'm a tightwad and b) meh, life's too short to worry about stuff like that.
Interesting to see how the gaming industry has changed. It is more like film than it used to be. That is, one big hit can carry a company for a long time. I hope you're part of the next big hit.
I just wanted to comment on who can afford 90402. The bottom line is right now, with all the delusional sellers still living in 2006, many of us can't buy (I probably could but I'm not stupid). However, I think that when the mania ends many of us should be able to buy. Like I said in an earlier post, when a crappy little house is selling for $1M+, you know something's wrong with the market. It might take a while, but eventually prices will bear rational relationships to incomes and rents. That is what this blog is about -- discussing where we are today, the evidence that the market remains overpriced, how long we think it will take for the market to normalize, etc. And, it's funny watching the comments of the bulls, who are obviously completely out of touch with reality.
Well I for one wish that the average Santa Monica resident could afford the average 90402 home. But things have been out of whack for a long time.
Take a look at the sales completed so far this year - houses North of Montana in Franklin have changed hands at 3 million and above. this is not funny money, this is real buyers with real cash paying up to be in that neighborhood.
I feel pressure to move soon - so my kids can be all set for the start of the school year in September but there is just nothing we could live in long term for under 3.0 million
Browse the listings yourself. I wish the buyers would go on strike but they aren't. They are opening their wallets
Did anyone on this blog see 234 22nd street before it went in to escrow? How much work was needed before you could actually live in it?
I am trying to figure out the specs on this one - is it a comp for the rest of the neighborhood?
"That is what this blog is about -- discussing where we are today, the evidence that the market remains overpriced, how long we think it will take for the market to normalize, etc."
Actually, that would be an echo-chamber where all of us who want to see big price declines will affirm to one another such big declines are right around the corner, dismissing any evidence to the contrary.
Thats why I am glad the bulls are here. Yes the taunting is unbelievably childish and annoying, but they do us a very valuable service. They occasionally offer up a nugget of insight are right more often than I would like to admit on the westside. Thank goodness for that otherwise this blog would be a worthless site where we see what we want to see versus what the market is trying to tell us.
Bulls, I hate you, but bless you too :)
"They occasionally offer up a nugget of insight are right more often than I would like to admit on the westside."
I am a reluctant bull, owning 5 SM houses over the past 20 years, each time thinking I screwed myself and will go broke. I always figured the worst thing that can happen is I will take a financial bath, a net worth step backwards, but will wake up same as always, and kicking-ass to do better. If we go into a Japan-style stagnation for a decade or more, great. R/E sucks, I will quit moving up and have more discretionary income to spend on lifestyle items.
If you can't roll with the punches, don't buy, keep renting.
If you think the end of CA and LA is around the corner, don't buy, keep renting.
If you can't afford or stomach a net worth decline, don't buy, keep renting.
Skip the angst about home prices, stupid sellers, collapsing economies, increased taxes, etc. and just rent. Maybe it is never a good time to buy given your outlook. No animosities to bears, just figure out your persoanl situation and act accordingly. Pissing on bulls is a losing deal (and vice versa).
Even Realtors are bearish. I talked to mine yesterday and she said she had no hope of prices stabilizing until employment improves. In the office where her daughter works as an attorney 60 lawyers were just laid off. She recommended I wait at least 6 months. This woman has been selling real estate for over 35 years and knows her stuff. She also said the repos are just starting to hit the higher end.
Like Speedingpullet we are here because of my husband's work and otherwise would move since CA taxes are just too high. We also have been happy renters here and will wait. We have owned many homes and still own one we rent out. Owning costs too and there is nothing so special about owning that we want to lose money doing it.
"Anonymous said...
I don't sense any fear at all in 1:53. How you read fear into that I don't know."
"Anonymous @ 1:53 said...
Actuallty, I truly am fearful that the entertainment industry will leave LA en masse."
BWAHAHAHAHAHAHAHAHAHAHA! Suck it!
I still don't see any fear in the original statement.
"Yes the deal making will always be in LA, and the agents and producers will have to live here. But the rest of the jobs? not so sure.
Speedingpullet remember that high paid executives "had to buy" in Grosse Pointe since the jobs were in that area. Then one day the cost of doing business led most of the good jobs to permanently leave. Consider the analogy to entertainment jobs in Los Angeles"
Where's the fear? All I see is speculation.
We looked at 234 22nd St before it went into escrow--it requires significant work so it's not really a comp. The posters who are writing that the only nice family homes available in 90402 for a four person family are over $3m+ are correct. Do I agree with this pricing? No, I think it's too high. Unfortunately there are just too many people with money who can buy. Who, you ask? Big law firm partners making $1m, doctors married to lawyers, etc making combined incomes of $1m, mid level investment bankers making $1m, entertainment execs, small business owners, people with wealthy parents or who have inherited money, people who have been able to make substantial equity in real estate over the years, etc, etc. The total number of these people is not that great but it is enough compared to the inventory of homes available in 90402. It's just the reality of supply/demand. Now whether people are smart or foolish to pay $3m for basically a nice tract home on a postage stamp lot--that's another discussion.
Is 90402 that desirable? Why do people with substantial wealth and/or incomes choose to want to live there? There are larger estates in BH, Palisades, Brentwood, and BelAir. 90402 has the Franklin school (some rich people want the option to consider public school), it is convenient to beaches, downtown SM, and is more of an inviting family neighborhood than some of the estate areas. However, those qualities can be found all over the US for a lot less than $3m--even in OC, SD, etc it will cost you a lot less. Is being in an upscale but family oriented neighborhood in LA worth that much of a premium?
It is not worth that premium to millions of people.
In fact I bet if you showed the Franklin 90402 to every person in America you would have 290 million people who told you it was crazy to pay $3 million for a normal house in the Franklin 90402
But you don't need 290 million people to be excited about the Franklin 90402 to keep prices high. You just need about 50 people a year who are eager to pay $3 million to live there
Prices are set on the margin, and a marginal 50 people a year can hold the prices at $3 million
The argument on this board is about whether those 50 people a year will show up, checkbook in hand. The bulls say yes, they will keep showing up. The bears say no, they won't.
But no one here, no bull and no bear, thinks that the average person in America or even the average affluent person in America thinks $3 million is a fair price to live in the Franklin 90402. We all know that America thinks $3 million is crazy.
Now what about the people that live in Brentwood or PP? Well we all know the same house on the same piece of land that costs $3 in Franklin 90402 costs $1.9 right now in Brentwood and PP.
No one who owns in Brentwood or PP will admit to your face that they really wish they could have afforded the Franklin 90402. You won't find a single person who admits that the Franklin 90402 is much better than Brentwood or PP.
I would bet that for many people, Brentwood or PP are just as good. But again, prices are set on the margin. There are people today with $3 million in buying power that know they can buy in Brentwood and PP for $1.9 that instead choose to spend $3 million in Franklin 90402.
If you as a person don't feel compelled and driven to own in the 90402, if you aren't hungry for the 90402, then don't buy there. Because everyone that buys in the Franklin 90402 is paying a huge premium. If the premium isn't worth it to you then don't pay it.
One more thing, if you desperately want the Franklin 90402, but can only afford PP or Brentwood, psychologically the best thing for you to do is convince yourself that you really don't like the Franklin 90402. It can be emotionally harmful to go through life craving something you can't afford. Better to convince yourself that you are satisfied with what you can indeed afford (Brentwood or PP)
Yeah, 90402 is better than 99.9999% of America...therefore it is worth it.
End of story, supply and demand you idiots.
Where's the fear? All I see is speculation.
The fear is when 1:53 confirmed what she was saying before:
"Actuallty, I truly am fearful that the entertainment industry will leave LA en masse."
I saw it. You didnt. I was right. You were wrong. Suck it...
"But you don't need 290 million people to be excited about the Franklin 90402 to keep prices high. You just need about 50 people a year who are eager to pay $3 million to live there"
Yep - same thing with indian artifiacts, or anything else desired by the wealthy. A 19th century mint condition sioux or lakotah baby cradle can go for 20-50K.
99.99999% of the population says - thats crazy "I" wouldnt pay more than $100 bucks for that thing.
Guess what folks the 99.99999% of you dont set the market. Its the .00001% that does.
Lots of the bashing of the Franklin school on this blog is motivated by envy
Are there areas of Bentwood where on can buy a home for $1.0 to $1.2M?
Corrected typos:
Are there areas of Brentwood where one can buy a nice home for $1.0 to $1.2M?
Yes there are plenty of places in Brentwood where you can buy a really nice home for $1.2 million
I just saw 3466 Mandeville Canyon Road - they are asking $1.2 million but I bet they will take less. This is a really nice place, on a lot that is bigger than a Gilette Regent Square lot. All in all this house would be $3.0 million in the Franklin School district North of Montana.
This is Brentwood $1.2 million vs Franklin $3.0 million
True apples to apples.
You need to decide for yourself what is the better deal for you and your family
Why don't you explain to us what you choose to do.
Mandeville more than 1/2 mile from Sunset is horrible....save your dough
SM is okay but it's just not that special. Just look at the rent prices. Whoever thinks the people making the big bucks will keep the prices up is dreaming. There's just too many other nice places. Last I checked on Redfin, prices were way down from last year. And it looks like there's a good chunk of foreclosures and bankruptcies in the works. What a drag for anyone that bought in the last 6 or so years.
"SM is okay but it's just not that special"
To you....to you.
To that 0.00001% who buys here, its the most wonderful bang for the buck in the LA basin!
Someone just said that the location of the house for 1.2 million is not good
that may well be true. Thanks for that comment
But the person asked, is there a nice house for 1.2 million in Brentwood and the answer is yes.
you may not like the location but it IS brentwood and it is 1.2 million
After the person asking sees the house I want them to comment here about it
Not everyone on this blog will wind up owning in the Franklin district. It is time to discuss alternatives to Franklin!!!
"At 6% interest, a $2 million mortgage is only $120 thousand a year. Figure $35 thousand in property taxes and a $120 thousand mortgage - total $155 thousand a year - it is pretty easy to spend $155 thousand a year on housing if you are pulling in $500 thousand gross."
If you earn $500k per year, you take home about $300k. So, if you spend $155k on "rent from a bank" and taxes, you have (assuming some of it is deductible) about $170k left over to spend -- kids schools, cars, etc. So this means No savings (other than the house, if the equity can ever be tapped)? I think one would be close to house poor, in fact...
Please knock off the Franklin obsession, not all 90402 buyers have kids, or plan to send their kids to the local public school.
Franklin matters to stupid people who use it as a snob thing, and to resentful folks on the outside looking in. It is just a grade school for god's sake. I live in the district, don't have kids in school, and don't give a crap. I don't, and my neighbors don't, talk about Franklin as a neighborhood asset, just a place to slow down on school days and not get a ticket. Real estate salespeople care, apparently bloggers care, and a few over-excited Type A moms care. FYI, I plan to vote against Measure A, the school increase, because I am not interested in funneling more homeowner $$ to the brats.
I can't believe that everyone on this blog lacks a historical perspective. Am I the only one here who has seen this market for a while?
When I moved to LA in 1990 the two choices I considered for my family were, buy a teardown on the Manhattan Beach Strand for $900 thousand & build or buy a teardown in the Franklin 90402 for $900 thousand & build.
Fast forward 20 years. That piece of land on the Manhattan beach Strand is today selling quickly for $5 million bucks and the lot in Franklin 90402 is selling for $1.6 million
Do the math. Land on the Manhattan Beach Strand is up MORE THAN 5X in 20 years and the land in the Franklin 90402 is up less than 2x in 20 years
Do the math. You will find that the relative affordability of the Franklin 90402 is much much much better today than it was in the past. Franklin 90402 premium is much smaller than it used to be. The true elite doesn't live in the Franklin 90402.
Move to Franklin 90402 if you are just a regular neurosurgeon, biglaw partner, Investment banking managing director. Don't have a fantasy that the CEOs of big companies or the founding partners of giant LBO shops will be your neighbors.
Again, do your research and look at the numbers. Franklin 90402 is much much much cheaper today relative to where it was in 1990
Agreed, the wealthier neighborhoods include Brentwood Park (dirt sells for $250/sqft vs. Franklin 90402 which is just above $200/sqft) or Palisades Riveria (also about $200/sqft but much larger lots/homes generally). I do not believe Franklin 90402 sells for much a premium vs many parts of Brentwood--a new 5ksqft home in a good part of Brentwood (not Brentwood Park where it will cost well over $5m+) will cost about the same. If you go to a lesser area of Brentwood then perhaps it will be somewhat cheaper but not by more than 5%-10%. Franklin 90402 does sell for a premium vs the rest of Santa Monica.
7:33 I agree with you in general. I would point out first that Strand in Manhattan Beach is $600 a square foot.
I am not sure about Brentwood Park. Typical teardown in Brentwood Park seems to be a flat 15 thousand square feet of land and sell for $3.0 million. So I am under the impression that vacant land or teardown in Brentwood is $200 a square foot.
Typical Franklin 90402 lot is nine thousand square feet and sells for 1.7 million or just under $200 a square foot.
I guess I would say from my experience prime Franklin 90402 is $200 a sq foot for land and prime Brentwood park is $210 a sq foot for land. Can you put a finer point on what you are saying? Any evidence that today prime Brentwood Park is more than $210
new post please.
Hard to buy non tear down/major fixer Brentwood Park for less than high $4m range. Hard to buy non tear down/major fixer Palisades Riveria for less than high 44m range as well.
$3m for 90402 Franklin is a good choice for those who want an upscale, closer in, walkable, family friendly neighborhood with the option of sending kids to public school. It's probably overvalued compared to what that money buys you in most of the US...then again there are certainly people paying $2m+ for random location mcmansions (anaheim hills, diamond bar, etc). Paying another $1m to be in perhaps a slightly smaller home on a much smaller lot but in an area that is much more desirable generally to high income/high net worth individuals doesn't seem too bad in perspective.
8:40am, I haven't seen any Brentwood Park teardowns for $3m...there's been one sale in the range/around that but my understanding is there were extenuating circumstances. I think Brentwood Park is generally in the $235-$250 range. I'm also fairly certain that typical Franklin 90402 (not on Montana or San Vicente) is trading closer to $1.9m or so. The recent REO on 20th went for $1.85m all cash / no inspection. I think it's not overly aggressive to assume that a more typical non REO sale could be in the $1.9m-$2.0m range at this point (compared to $2.4m at the peak).
Mid level entertainment industry execs do not make $500K/year. Sure, there are some producers who make $500K/year or more while their production deals are still good, but your average SVP, EVP, VP does not make that kind of money. I worked at a studio and in our group of 200 or so, there were about 40 VP's of varying levels. They started at around $200K/year and made 5-10% raise each year. Stock options existed but not at the same level you see in tech industry. These VP's were well off but could not afford $1 million houses. I also worked at a talent agency where the head of the agency would negotiate executive deals as a favor. Some studios paid nice bonuses, some were cheap. The hard part about being a studio exec is that your career is generally pretty short, 5-10 years for a lot of people. I know lots of people in recent years who will never return to the biz - Former Miramax, New Line, Fox, ABC Warners execs who can't get a job to save their lives. How can these people afford $1 mil houses?
Doctors and lawyers do OK in LA. #1 oversaturation of lawyers in LA drives down compensation. Doctors cost of doing business is very high in LA. Doubt very many of these people are making huge $$$.
90402 is not the only area in the world the wealthy want to live. Just in LA area alone you have Bev Hills, Venice, Malibu, Pac Pal, Hollywood Hills, San Marino, etc. where rich people like to live. What makes Santa Monica so special? The # of prestige areas is high in LA, some of these will take a beating.
"90402 is not the only area in the world the wealthy want to live."
All these posts come back to the same reality - a lot of folks have the resources to buy a +$1M house, and have a number of neighborhoods to consider.
The bigger Q is if these folks want to buy real estate, or prefer to rent in a downmarket and invest elsewhere. Being a homeowner and moving up the real estate chain used to have a lot of cache, now homeownership is a 'meh' unless it is a driving passion and has 'bought at the bottom' or 'steal' back-story.
Debating the local economy and qualifications of buyers is a worthless exercise,. The real debate is if renting is the new buying, and at what point prices fall to make buying attractive again.
If you are really rich, you don't care about whether the house may go down 15%. You buy in a good area, a well built quality home and thats it. My dad is like that and he just wants to live where his friends are...no matter the price. Indian Wells, La Jolla, Rancho Santa Fe, Carmel, Newport Beach, Nob Hill....They live where they want....
If you are really rich, you don't care about whether the house may go down 15%.
Agreed, but not a lot of 'really rich' looking at < $3M 3,000 sf houses on 7,500 sf lots in SM. Maybe the really rich will snag +$4M listings on La Mesa, the beach, top-end GRS, etc. to live on the down-low. The 'really rich' are hard to pin down and characterize, by definition they have more options and can afford to be real estate capricious (and lose whatever % in the process). Don't build expectations around this group, or expect them to be a steady buyers in SM.
The mega rich don't buy in Franklin 90402--they buy in Palisades Riveria, Brentwood Park, Beverly Hills just north of Sunset and Bel Air around the country club.
However, you can be a surgeon married to a lawyer, a partner at a major law firm, or a portfolio manager at an investment firm and afford to buy in 90402. If your income or combined income is near $1m annually, and believe me there are more than enough, 90402 appeals to some of them. There aren't really all that many homes in 90402 so the inventory of homes available for sale is always relatively low. Especially right now, there can't be more than 5-6 liveable, non-fixer, 4 bd homes on the market in 90402. So if you are making combined income close to $1m annually, have a family of four, work on the westside and like being in more of an urban environment where you can walk to shops & restaurants, want to have the option of sending your young kids to public school, want to live in an upscale community, etc there aren't a lot of choices. That is why the inventory in 90402 continues to move at a reasonable pace. That's why 209 Euclid just closed for $3.7m+ adjusted for brokers fees, 526 19th just closed for $3.269m, and a few other $3m+ homes are in escrow. I'm not saying the prices/valuations are justified or that they make sense based on investment/economic principals. I'm just saying the supply/demand is what it is and that is why the market is what it is...like it or not. The only thing that will cause 90402 prices to start falling again is a major economic shock/double dip which is certainly possible. Otherwise, many of the forced sellers have already sold so you would need a pick up in forced selling (more like the depths of early 2009) from such a double dip coupled with a decrease in confidence from buyers. Meanwhile buyer confidence has picked up along with stock market, asset inflation generally, signs that things aren't getting worse and in fact signs things could be getting better. And a lot of buyers did sit out the market the last couple years and at some point have to buy because they want to get on with life, raise a family, etc.
Many "really rich" want to live in fancier areas than 90402 but there are a few "really rich" that do want to live there. Not enough to really impact the market generally but at times of especially low inventory (such as when people who do not have to sell their homes don't want to sell because they feel prices will eventually recover such as now) it doesn't take many of them to at least have a partial impact.
I agree. The Franklin 90402 offers a pedestrianized lifestyle. For those with 3 to 4 mil to spend, the Franklin 90402 is more appealing than the other neighborhoods.
Houses in the Franklin 90402 over 3 mil sell faster than similar houses at similar prices in other neighborhoods
Remember how hard it is to get your kids in to harvard west lake.
Franklin offers a great backup plan for kids rejected by best private schools
I am a pessimist and hope prices come down. But this is why I want to buy in Franklin 90402
And, if you're making $1M plus a year you don't live there either. Why would you, with all the scum so close by?
Well, you're never that far from "scum" in LA. True, the Palisades is a little more isolated but being more isolated has it's trade offs. Franklin 90402 is at least somewhat removed from the areas where a lot of the homeless concentrate (i.e. 3rd Street)--not that they don't wander up to Montana now and then. However, I find the majority of the homeless in Santa Monica are just down on their luck and not really people you need to be worried about. To take it to the extreme, would you want to live in a gated community like Bel Air Crest or Mountaingate where you have to drive 15-20 min to get anywhere? Some of us would prefer not to...it's a trade off.
I agree with 3pm--hopefully prices come down, it's hard to say whether they will or will not. At this point, rational people can make arguments for both whereas certainly by late 2007 it was obvious prices had to come down. Having good public schools, nice homes, and the choice to walk to restaurants & cafes is a big attraction.
Food for thought:
http://www.doctorhousingbubble.com/santa-monica-housing-rent-buy-price-metrics-valuing-real-estate-in-westside-los-angeles/
I am not one of the people around here obsessed with Santa Monica, so I don't know much about neighborhood specifics, but I thought this was interesting.
Can you tiny URL that link. I can't use it the way it is
The all cash buyers are back. 209 Euclid just cleared escrow. 3.7. All cash
Still think 90402 is crashing?
Still think 90402 is crashing?
The big thud (and groans) you hear is from stretch buyers looking to snag a deep 90402 discount. Time to quit dreaming and torturing yourselves, start looking in other zips.
One sale does not a market make. Of course 90402 is crashing. Just look at Redfin. Or, keep praying and denying reality. If you're smart you'll sell now while you have a little equity left.
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What are the bears saying? That hoses aren't selling for over 3.0? Can we have some reports from people bidding n of Montana?
Houses over 1.0M aren't selling well. In 2009, there were only 18,621 homes in CA that sold for over $1 million. Yet, in LA county alone, the MLS has 3,349 for sale, and there are another 2,205 in some stage of foreclosure. So yes, the outlook for homes in that price range is pretty bleak.
Take a look at foreclosures to go for what's up in 90402 for shadow inventory and bankruptcies. It is substantial and material. With unemployment not abating and as industry continues to leave LA and CA, prices have nowhere to go but down. Of course, if you've got money to burn just get what you want and don't worry about it.
I think many of the people that post on this blog assume that just because someone has the cash to spend $3 million on a house that she automatically wants to send her kids to private school
There are those with the money for the house that want public schools.
And it doesn't get discussed much but there are some parents that just can't get their 4 year old accepted in to one of the best private schools - people in this category have to accept the public schools.
The private school rejection letters just went in to the mail a few weeks ago. Who knows how many people realize right now that their 4 year old can't get in to the best private school and is thus considering Franklin?
To me, when other people are doing X the best thing to do is do the opposite. The bidding today on $3 million dollar homes in the Franklin district simply means that the smart buyer should pull back, let the frenzy pass, and start making bids on these homes when there is less competition for them.
Again, too many people see a lot of other people jumping in and want to jump in. But people jumping in to the Franklin North of Montana is NOT a reason for you to jump in. Be a contrarian and hold back
(by the way the house on Euclid is not relevant to this discussion since that house wasn't in franklin)
Anyway, let others bid on the houses in Franklin - do not let the frenzy pull you in
I think people who want to pay $3m+ for a home in Franklin 90402 are the kind that don't necessarily want to send their kids to private school and would rather send them to public school. The private schools have issues too (celebrity kids, too much bling, etc.) and it depends what kind of values you want your kids to grow up with (diversity, etc.). Even though NoM has a lot of McMansions, it is a lot lower key than, for instance, Beverly Hills mansions. I think some people with money value the diverse, lower key, pedestrian neighborhood that NoM represents but still want to have a nice, large house in an upscale community. Not all rich people are alike.
11:33AM, the issue with waiting is that you may have seen most of the forced sales take place and human psyschology is such that most people won't want to sell at a loss if they don't have to. You may not catch the bottom right now but you may have a better choice of location/inventory. For whatever it's worth, I've noticed that homes that are move-in and in favor (traditional/capecod) have started to sell at premiums with multiple bids in all-cash.
The $64k question is are we starting to recover or are we going to double dip. It is too difficult to say. And if there is a double dip will it occur with a shock (like Lehman) that creates a lot of fear or will it be a slowdown like early 07-early 08 where. I think it is too hard to sit here and try to predict the housing market from a fundamental basis. However, you can look at the technicals and the technicals are little supply for the amount of demand.
Help me out. What percent of the people buying houses right now in franklin plan to use Franklin school and what pct plan to use privates?
50%
for those parents that want public school and a real community feeling in a pedestrian neighborhood, Franklin 90402 is the best. Beverly hills south of Sunset used to match this description but is now mostly a neighborhood for middle easterners. Go to the primary schools in Beverly hills and compare them to franklin
Here are the facts for the 90402 market:
In the last month 4 homes have closed over $3m
4 are currently in escrow over $3m
There are only 5 on the market over $3m...all of which have issues (including 1 which is on San Vicente, a very busy street, 1 which is a architectual which is listed at a premium, etc).
The evidence is that liveable family homes in 90402 that are priced for the current market sell and sell very quickly...within weeks and usually with multiple bidders. In addition, given the difficulty of getting financing most of these homes are presumably being bought with significant down payments (think 50%+).
Bottom line, home prices are a function of supply + demand. There are factors which may cause home prices to fall from here...there are factors which may cause home prices to rise. In today's market, there is very limited supply and more than sufficient demand.
"But people jumping in to the Franklin North of Montana is NOT a reason for you to jump in. Be a contrarian and hold back"
WHY??? Dont mean to be a dick, but I can guarantee you, at the bottom (be it now or 10 years from now), this is exactly what we will see. At the real bottom (as well as dead cat bounces) we will see people "rush" back in to fill the void. Eventually, (at the real bottom, whenever that may be) prices will rise causing the frenzy to slow down.
So (if this is the real bottom) why would we wait til prices bump up and the frenzy dies down? Why not buy at the bottom?
Dont get me wrong, im not saying this is the bottom (it could be, it could not be) but I can guarantee you the real bottom will be marked with a frenzy that will not abate til prices rise sufficiently.
Real bottoms don't see a frenzy. The real bottom was 1995 and there was no frenzy.
Yes people are desperate and hungry for Franklin 90402. But in 1994 land in 90402 cost 600k per lot. And there was no frenzy
I understand everyone who dreams of the 90402 but the crazed frenzy we have now is not reason to buy
No bell will be ringing to announce the bottom.....
CAN WE HAVE A NEW POST PLLLEEEAASSSSEEEEE??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
I think 90402 is overrated. Can get the same house at 30-40% less in a potentially better setting in parts of Pacific Palisades, Brentwood or Bel Air.
Well I agree. But there are four houses in escrow In 90402 now. Four over 3 mil
All four were 30 pct more than comps in pp.
Why do u think people are eager to pay a premium for 90402
Because:
A. PP is out of the way to the West if you want to be clos(er) to work; and
B. PP is out of the way if you like to do things in town; and
C. Maybe the schools (this one I have no idea about, since LA Public schools in PP may be fine...)
Some bloggers have 'Franklin' on the brain as an obsession. About half of buyers don't have grade school kids to begin with, and don't care about he district. A portion of the other half plans to use private schools and skip the district altogether.
Parents I talk to in my 90402 'hood flat-out say Franklin to Lincoln to SAMOHI is not going to work, and start private ASAP. I'm not saying Adams or Franklin are bad, but a lot of folks see them as a practical matter until private kicks in.
Franklin 90402 is NOT more expensive than comparable parts of PP & Brentwood. It is ONLY less expensive than the less desirable parts of PP & Brentwood. Compare to the Huntington Palisades, the Riveria in Palisades, or Brentwood Park. Brentwood Park land sells for a premium to Franklin 90402. Now, of course, if you want to compare to Crestwood Hills, Mandeville Canyon, condo-land just north of Wilshire in Brentwood...or the Highlands, El Medio Bluffs, Marquez Knolls, in the Palisades you can find better comps. That's like taking Sunset Park in SM and comparing.
8:53am, you are missing the point. Yes, a lot do not have grade school kids, but many do. And while I agree few would think of sending their kids to Lincoln and even fewer to Samohi, many people would like the option of sending their kids to Franklin for elementary school. It is not a money issue...anyone who can buy a $3m home can afford private school tuition. The issue is some prefer the elite private schools but others prefer the more diverse public school student body--and avoiding too much exposure to the super rich or super celeb heavy private schools and the values it can teach children potentially. If you have ever seen Gossip Girl or that NYC prep school reality show you know what I mean...those are obviously TV shows/over dramatized but there is some truth to how the private schools are portrayed.
The private schools are filled with young Paris Hiltons and young Casey Johnsons.
The Franklin school has fewer of them.
Choose wisely.
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