Some Big Neighborhoods Take Some Big Hits
According to Dataquick, some of our most cherished neighborhoods have seen serious price erosion over the last 2 years. Perhaps one of the best measures we can easily use are, prices per square foot being paid. It's not perfect, but is certainly more informative, than just looking at median prices. Here are some prime neighborhoods, that have suffered some of the worst declines in price per square foot YOY, since March of 2008.
1) Beverly Hills 90210
(2008) $851 (2010) $516 (-39.4%) 17 sales
2) West Hollywood 90069
(2008) $1,032 (2010) $680 (-34.1%) 10 sales
3) Santa Monica 90402
(2008) $962 (2010) $724 (-24.8%) 10 sales
4) Brentwood 90049
(2008) $818 (2010) $632 (-22.8%) 17 sales
And, just for good measure:
Manhattan Beach 90266
(2008) $826 (2010) $602 (-28.1%) 26 sales
Buyers are definitely getting more house for their money. The question is, what will change, if anything, the downward trend in prices?
Posts
83 comments:
Good to see some real information demonstrating the undeniable fact that prices are down.
Given that liar loans are unavailable, and that loans for these neighborhoods require real downpayments and not 3.5%, I can't see any reason why prices won't continue a downward spiral until such time as prices match up to incomes and rents. These neighborhoods remain in bubble territory, notwithstanding the price declines. All I see now is high unemployment, businesses leaving, a state budget in trouble, the spectre of higher interest rates, a shifting demographic, etc., all of which point to continued price declines. When these factors recede, maybe prices will have a chance of discontinuing a downward sprial.
Of course, I'm sure some realtor or homeowner is going to post that "this is the bottom". Let's see some real concrete evidence in the economy to support this proposition.
I think the real question is how long this downward spiral is going to last. I think it might be several years. Many sellers just can't shake the memory of bubble prices and the conditioning that "prices always go up" or "my neighborhood is special".
I agree with the above. Prices are going to go down over the next 12 months. Do not buy now
Let's see some real concrete evidence in the economy to support this proposition.
How bout Case Shiller - up +5.3% YOY for LA. Nuff said...
...Given that liar loans are unavailable, and that loans for these neighborhoods require real downpayments and not 3.5%...
Hah! As if the area runs on 3.5% down and liar loans for transaction volume. Good comment though for the Las Vegas or Palmdale real estate blogs. Let me know when you see high weeds, broken windows, county sheriff evictions, and foreclosure notices tacked on doors in 90402.
Anon 3;35 .
If you are going to quote the Case/Shiller April 27, 2010 report, please don't cherry pick your data. and don't stop with just one report. It would do you well to read previous reports to understand it all.
In that report you will see that Nationally, prices are back to 2003 levels. Los Angeles is only back to late 2004 levels.
If you read previous reports, you will see that the trend over the longer term shows that Los Angeles' decline lags the nation by about 9 months. So, the longer term data, (taking out short term gyrations like a 5.35% move,) shows that Los Angeles should revert to 2003 levels give or take late 2010, early 2011.
This is by no means a promise or a guarantee, but it has been pretty darn accurate over the years.
Reading one single report never means anything, without having a little perspective.
There are quite a few foreclosures and bankruptcies now is 90402, and the numbers are increasing. As these homes hit the market, and more and more people walk away from underwater homes, prices will continue to decline.
"Blahblahblah said...
If you read previous reports, you will see that the trend over the longer term shows that Los Angeles' decline lags the nation by about 9 months."
Uhh - no. Heres what the longer term trend tells us
Peak
CS10 - June 06
CS20 - July 06
LA - Sept 06
Trough
CS10 - Apr 09
CS20 - Apr 09
LA - May 09
1st YOY gain
CS10 - Feb 10
CS20 - Feb 10
LA - Jan 10
Out of curiosity, do you normally make up crap before you post it?
Anon - it appears that BlahX3 made the mistake of assuming that all areas will burn down to about the same amount (i.e. around 2003 prices).
The fallacy here is that some areas simply do outperform other areas for long periods of time. Thus, as you have shown, LA is just as far along as the rest of the country, just didnt take as much of a price drop to get there.
On the flipside is Detroit. Detroit too is stabilizing/going up, but it took prices back to 1994 levels to get there.
There is no rational basis to believe all areas will get to 2003 levels. If so, you must also believe Detroit will see an upward price explosion any day now...
"Anonymous said...
There are quite a few foreclosures and bankruptcies now is 90402, and the numbers are increasing. As these homes hit the market, and more and more people walk away from underwater homes, prices will continue to decline."
Let me correct that to reality for you...
Anonymous said...
There are quite a few foreclosures and bankruptcies now is 90402, and the numbers are increasing. As has been the case for the last year, as these homes continue to be, drip drip dripped onto the market, 1 or 2 at a time prices will continue to stagnate or rise as buyers bid them up due to the lack of competition.
8:05 am. Case Shiller? Prices for the "real" upper tier of LA are down. Look at the statistics and Redfin YOY prices. Get a grip on reality.
4:39 pm. The post said that 3.5% down loans aren't available for this neighborhood. Liar loans were available. Learn how to read.
11:47 a.m. Keep praying that the bankruptcy, undewater homedebtor walkaways, and foreclosures don't hit the market to quickly. Prices are down, not stagnant or rising. That's what the statistics say. E.g., 90402 is down 24.8%.
This blog is overrun with homedebtors and real estate agents. They can't even admit the downward trend in prices, much less identify what will change to curtail the downward trend.
All I know is that I am getting outbid on POS listings in 90402....
Geez, how much exaggeration are we going to have in this thread?
We all know the facts...there has been one REO in 90402...which btw, was a lot sale that got multiple all cash bids and went well over asking. There have not been any other short sales or REOs to date otherwise. If you look through the Realtytrac data there is perhaps 4-5 more "potential" REO situations in the entire neighborhood.
So, what in the world are you referring to when you talk about bankruptcy, walkawayyas, foreclosures?
If anything, the forced selling that took place in 2009 because the stock market was down huge, corporate bankruptcies, etc has abate because the stock market is up huge and corporate bankruptcies have dropped. Ask any bankruptcy advisor how busy their case load is now versus early 2009. Same with REO specialists. Yes, forced selling took place in 2009 and the 90402 market corrected down 15%.
If you are really in the market you know that there is no inventory of any real choice and multiple all cash bids. If anything we are now seeing bids over asking again in 90402.
I am another person who agrees, now is a terrible time to buy in the 90402. The friends I have that are bidding are getting outbid.
Hello - the fact that things are selling for more than asking is a sign that this is a terrible time to buy - you don't want to buy when other people with deep pockets are desperate and hungry to buy. You want to buy in in times like 1995 when no one even bothers to bid and you can get things far under asking
Wait for the 1995 situation - do not get caught up in the bidding wars.
It is funny that people here keep talking about the bidding wars for 3 million dollar places but it seems that there are also bidding wars for teardowns. That i just don't understand since everyone tells me that the builders can't get construction loans
who is it buying all the tear downs in the Franklin 90402? What is going on
People are bidding for teardowns to build for themselves. The issue is that there is no attractive inventory for the $3m+ buyer...it all gets snapped up in days with multiple all cash bids...so some of the frustrated buyers are deciding to build with the rationale that the hassle of 2 yrs of hard work and carrying costs will be worth getting a brand new home exactly the way they want it.
I think one major difference between 1995 and this cycle is that in the early 90's implosion the government basically liquidated the S&Ls through the RTC whereas this time the government has instead decided to prop up the banks/markets by printing money, etc. Thus, you are seeing a lot less inventory as (1) banks are dribbling out REO inventory, etc and (2) stock market and risk assets created huge wealth reflation for a lot of the wealthy home buyers.
Also, the extreme widening of the wealth/income gap since 1995 is well documented so I think it is even more difficult to compare 1995 to 2010 for higher end $3m+ homes.
In addition, globalization is also something that wasn't something to factor in 1995. We have more Americans buying real estate overseas and have more international buyers here in the US than in 1995.
BTW, I think the 90402 valuations are insane...I don't believe in them myself generally...but what does make me start to wonder is when I look around the rest of the world...it is not that rare to see $3m+ homes in many cities/countries that you would think have a significant lower amount of wealth than LA generally. It's actually scary how much real estate out in the world is priced well beyond the average working household...I tend to think this can't be sustainable...but then I look at the models in a lot of other countries where not everyone can expect to be a homeowner and only the wealthy own real estate. This kind of model tends to occur in large cities with constrained access to buildable land...such as Santa Monica...AZ/Phoenix, not so much. But, have you looked at how easy it is to still find $3m homes in those high end communities in Scottsdale?
"8:05 am. Case Shiller? Prices for the "real" upper tier of LA are down. Look at the statistics and Redfin YOY prices. Get a grip on reality."
LOL - I love how the doomers try to whittle down the areas that are not going up - its very similar to what the pumpers did on the price crash, saying their area was immune, but now its in reverse. Doomer play book for 2010 is like this:
OK well prices may be going up, but not in CA!!!
OK, maybe they are going up in CA but not in LA!!!
OK, maybe they are goin up in LA, but not the high end!!!
High end up too? Shit. Umm, ok price may be up in the high end, but not on the westside!!!
Not in SM!!!
Not N. of Montana!!!
Not in 90402!!!
Not on my street!!!
Not in the house im looking!!!
OK,
This isn't in 90402 as it's a custom market but all of the large public homebuilders are now buying land again in CA...in fact getting into their own bidding wars and starting to build again. They are recognizing you can't predict the future based on history given the unprecedented money printing going on all over the developed world. Look at the prices for commodities compared to the bottom...look at price of gold, oil, lumber, etc. Smart wealthy buyers are saying I can't predict how this is all going to turn out but certainly inflation and currency debasement is a real possibility. Am I smart enough to predict that sitting out the market with 100% conviction is the right answer? Or do I buy something that is either reasonably new construction or build from scratch before the material costs continue to go up?
...but then I look at the models in a lot of other countries where not everyone can expect to be a homeowner and only the wealthy own real estate.
Amen, ask the ex-pats who have lived in major cities around the world - ownership in a dense desirable area is a privelege for a very few. The situation is accepted and understood; a midddle class person masquerading as a potential prime realty owner would be seen as a dreamer, fool, or worse.
For some reason different rules apply here; people think they can climb the success ladder 2-3 rungs at a time, and are bitter when prices don't go their way. The point is accept the wealth gap, and live accordingly. Knocking active buyers and those who can move up the ladder is a sad and worthless game.
A report by San Francisco’s Trulia Inc. says home prices around the United States were cut by 10 percent in April. In total, some $25 billion has been slashed from the list prices of for-sale homes.
More evidence that prices are continuing to fall. The downward trend continues.
Now is not the time to buy. The homedebtors writing the previous posts just can't admit the truth of the hard numbers and statistics. They invent facts and point to false indicators to keep up their delusions. 90402 IS DOWN 24.8% IN TWO YEARS, and there's NO reason why prices aren't going to continue to fall.
"Anon - it appears that BlahX3 made the mistake of assuming that all areas will burn down to about the same amount (i.e. around 2003 prices)."
I didn't make a mistake. the percentages of change are not the same, however, the magnitude of the changes have followed lockstep, albeit delayed, by about 9 months, for the past 3 years.
"Out of curiosity, do you normally make up crap before you post it?"
Not crap. Simply because you do not how to read data doesn't make it crap. I can only supply info, I can't help you to understand it.
Wait another 6 months, as the trend continues downward, our disagreement will work its self out.
I may actually be a homeowner before the bottom. Unfortunately, none of the four lowball bids i have put in haven't been accepted yet.
I say "yet" because none of these homes have sold. Maybe one of these guys will wake up
So if all areas end up at 2003 prices why arent you buying in Detroit where the 1994 prices we see now will soon zoom upward?
OK let me get this straight - people on this blog are telling me to buy right now in the 90402 and their logic is that every decent house is attracting a bidding frenzy. Every nice house in a nice location is getting multiple bids over 3 million.
Why is that supposed to motivate me to buy in the Franklin School district 90402? Why shouldn't I just rent and wait until this insane violent frenzy plays itself out ?
Baragains are NOT had when competition is fierce.
So bulls keep talking about the bidding wars, the desperate all cash bids.
you are only convincing me to NOT buy now.
1:13pm, the reason why multiple all cash bids matter is because there is real demand out there.
It should make all of us at least wonder if we have hit the bottom. If the economy is on it's way to recovery and the stock market holds and appreciates some more then we should expect to see home prices firm up and then appreciate.
Now, if we haven't hit the bottom in the economy and we have a double dip then home prices would resume falling again.
However, our entire system is at stake in that scenario and every government around the world has now shown that they would rather monetize the debt and print money and inflate/reflate assets rather than face the social disruption that deflation would cause.
There were no bids in early 2009...that could have been the bottom...time will tell as no one can predict the economy. However, there is no question that all markets, credit, equity, commodity reflect the fact that a recovery is the likely outcome. This cycle could be much faster than the early 90s because of the way that capital & information now move much more quickly and efficiently.
The prices right now in 90402 are no bargain. They are just better than they were at the peak. Whether they are better enough is the question. The debate between bulls and bears is always is what is the market clearing price and which way are prices headed. That is the significance of all cash multiple bids. It shows there is a lot of buying interest. In fact, more than what the current supply is. 9:27am, the homes still sitting on the market have serious flaws. The ones that don't have serious flaws move into escrow within days.
A multiple bidder works in my firm, an exec transfer from a foreign office. He has up to $500k moving allowance and mortgage assistance and keeps losing out. His plan is to buy a good floor plan and location, and do a light remodel (about $200-300k) within a year. His wife is in tears about not being able to close, and keeps flying back and forth with the kids. He said he is getting more aggressive with a bid in process to keep the peace and get settled before the Sep school year.
Forget all the mumbo-jumbo about bidding strategies and waiting it out, this guy simply needs to close on a house and re-settle his family (and run a huge part of the firm).
I think you have hit on something very important.
For people who already live in the school district that they want, there is no gun to their heads to buy right now.
I mean if I am renting a nice place for my family in the right school district, chances are I am fine with putting in low ball bids and just waiting for a property to hit.
But if I need to move my family and be settled in before school starts, I am basically forced to pay whatever the market will bear. If a house is asking 3.5 and I bid 3.4 and then my broker is shown proof that there are two all cash bids in the box at 3.7 - am I going to walk away or bid 3.8?
I would say that I am going to bid 3.8, cause my family really has no choice.
I get the sense that none of the buyers on this blog have a gun pointed at their heads. But some buyers do.
nobody "has to buy"
that is nonsense
prefer to buy over rent, sure
let's get past this someone "has to buy" garbage though, ok?
I certainly don't need to buy. Renting is fine for me.
It is those other families that feel the need to buy.
Especially the ones that move here from high priced cities. They feel like North of Montana is a bargain.
A four bedroom family home in Beacon Hill or Pacific Heights or the West Village costs $5 million. That same exact four bedroom home North of Montana is $3 million. Not only is it less money North of Montana but it comes with land and it comes with the opportunity to walk to Montana Avenue and live a pedestrian lifestyle.
So when these people move here they feel they have died and gone to heaven - they see buying at 3 million North of Montana as a godsend.
So yes, people like me who grew up here are in no rush to buy but the newcomers are in a desperate rush
let's get past this someone "has to buy" garbage though, ok?
True, but equal to the garbage every seller has to sell at a deep discount.
Buyers seem more pissed and itchy than sellers these days.
true enough -- sellers don't have to sell either -- and most haven't in this market, if they can hang on
So 6:13pm, what is the significance of newcomers buying and oldtimers like you renting?
Are you implying that long time LA residents like yourself know better? I think another interpretation could also be that the outsiders have better perspective. If people who have lived in other places perceive 90402 to be a "bargain" compared to where they are coming from then isn't that a serious point to consider? Sure, 90402 may not be the classic idea of where a wealthy person wanted to live in CA back in the 1970s...back then everyone wanted to be the big house on the hill. However, a lot has changed in CA and the US since then and now some, perhaps many, wealthy people prefer to be closer in town in a more pedestrian type area...granted, I am not saying all or most--I do not want to start the Beverly Hills vs 90402 debate, that's not the point of this blog. I am just saying that I think it's possible that your view of LA/90402 could be colored by your values having being here when it's the outsider who has better perspective on what the "wealthy" want.
I do not believe for a second that any of you renters have the of wealth or incomes where you should even really be considering 90402 and discussing what those who can afford 90402 really think & want. If you are not making north of $500k annually with liquid assets of at least a few million 90402 is just not in your strike zone, just as the Riveria in PP, Brentwood Park, and parts of BH are not in your strike zone. At $500k and a few million in the bank, you still really shouldn't even be seriously considering the 90402 and those areas--you are just day dreaming about it.
Anyone who is renting for the most part is either single and/or young and does not understand the family home owner, is here in LA on a temporary basis, just got here within the last year or so and is now seriously considering buyint it, or flat out cannot financially afford it.
The only real debate here should be whether prices are likely to go up, stabilize, or go down. That is a real debate and worth discussing.
We all know that there is very little inventory in 90402 and there are a lot of multiple all cash bid situations for desirable properties.
We all also know there is very little true foreclosure activity or even possibilities in 90402.
We all also know that 90402 is very desirable for certain wealthy buyers.
So the question really becomes what would tip the market either up, down, or stay flat?
I believe that a second economic downturn would be the primary driver of prices going down. I believe that the government would respond through stimulus and more money printing. It is clear that the Fed considers deflation to be a must avoid at any cost scenario. Deflation would basically kill the country and the world as we know it given the large amount of private and public debt outstanding in the developed world. So the question really becomes, does the federal government have the ability to print money or would the capital markets respond in such a way to prevent it?
I believe that an economic recovery or inflation would be the primary driver of prices going up.
I think 90402 is very unique. This is what you pay for.....
It has a year round temperate climate in which you can walk to coffee, yoga, specialty food shops, all that Montana Ave has to offer and the B'wood country mart if you are the east side of 90402, or the bluffs if you are on the West side of the 90402, Promenade on the South side of 90402.
Name another area like that.
South Bay? Not leafy pedestrian enough, no good restaurants, or shopping really unless you are a major beach-o-phile.
Malibu? Nope.
Culver City? maybe.
Santa Monica 90405? Maybe if you are west of Lincoln. More walkable and good restaurants and shopping.
Venice. Mmmm, not unless you are 1 block off of Abbott Kinney and those streets are still too unsafe to walk at night. Shitty schools and crack houses still abound.
Pac. Palisades, not really that walkable unless you are close into the village, and kind of sub par everything, from shops to restaurants.
Where else has this weather, this lifestyle, this access to world class restaurants, farmer's markets, good public schools, shopping, close to all freeways, and the beach??????
Thats why its worth every penny you are not willing to spend....but a lot of other people are....for these reasons.
"Why is that supposed to motivate me to buy in the Franklin School district 90402? Why shouldn't I just rent and wait until this insane violent frenzy plays itself out ?"
Because it might have "played itself out" back in early 09 when there was no frenzy going on and its very possible we missed it.
Back in 1996, as activity started picking up, im sure some people said "well, I'll just wait til the frenzy dies down again". Sadly, for them, that date was 2009 and prices far far above those they passed on in 1996.
This used to be an interesting blog about *westside* RE. Sadly, all the people who got shut out of SM Distress Monitor by the registration requirement have appeared here. Now, all that is discussed is *one* zip code. 90402. Boring... Can we please get back to discussing the bigger picture. You know, something other than a 10 square block neighborhood that's not even part in L.A. :-/
Someone above me posted
"....outsiders have better perspective. If people who have lived in other places perceive 90402 to be a "bargain" compared to where they are coming from then isn't that a serious point to consider..."
I think that this needs to be clarified. It depends on where people are moving from. Yes the people from many nice cities expect that a four bedroom home within easy walking distance of nice cafes and coffe places and shops should cost $5 million or more. It is certainly the case that in Seoul, or Shanghai, or Moscow, or Paris or Beacon Hill or Pacific Heights such a family home costs $5 million or more. So newcomers from these places find the 9002 to be a screaming bargain.
But if you live in the Cityplace development in West Palm Beach you have the same pedestrian environment with shops and restaurants that you get in the 90402 and a four bedroom costs one quarter of what it costs in 90402.
And if you live in Southlake Texas right near the lake and community green you have the same pedestrian environment as the 90402 for one fifth the price. The point is that the 90402 is a bargain to some outsiders and not a bargain to other outsiders
Some people who move here jump in and are excited to buy for $3 to $4 million and others feel the prices in the 90402 are too high.
It is NOT just people who grew up here that feel that Franklin 90402 is too expensive
11:42AM, I agree some feel 90402 is too expensive and some feel it is a bargain. However, I believe most people who can really and comfortably afford 90402 find it to be a bargain whereas those who cannot are the ones who feel it is too expensive.
11:40AM,
The reason why 90402 is the focus is that is the most desirable community for many although certainly not all. Regardless, the 90402 debate can be extended to the westside generally and especially many of the more desirable areas.
It is total BS that renters can't buy. I will give you an example. One person I go to church with who has 2 kids sold his Brentwood home for a little over $5 million according to Refin and owned free and clear. They are now renting and waiting. He started a company young and sold it and now runs a large family company with his brothers. They are totally beyond solvent, high net worth and renting. We have owned and rented in the past depending on where we lived and the rent vs buying costs. We are not anything like single, nor are we unable to buy, just unwilling. We are not in the 90402 wealth bracket, but above median for West LA and looking at various less expensive neighborhoods. We will rent as long as necessary.
I suggest that anyone who thinks that all people with wealth show it read Millionaire Next Door. In my experience is is a very accurate depiction of how higher net worth people live. A family I know who live in 90402 really are veyr high net worth and in their bracket their GRS home is modest.
365 24Th Street - 90402 asking $5,700,000
this is on a larger than normal lot, But when it sells it will give us a very good benchmark for the high end of Montana to San Vicente.
People on this blog forget that there is a section of the Franklin 90402 above San Vicente- it is la mesa.
Houses on La Mesa are in the Franklin district. Half the houses overlook the golf course and trade hands at an average of 8 million each.
The other half have no views of the golf course and back up to busy san vicente. These houses trade hands at an average of 5 million.
3 million price difference just for crossing the street.
Anyway, prices on La Mesa are different than in the normal franklin 90402
I agree with 1:44.
1:44 said
It is total BS that renters can't buy
I would ammend that to say
IT IT TOTAL BS THAT ALL RENTERS CAN'T BUY
The reason I say that is on some blogs there are people who post saying they are primary care doctors in families where just one spouse works and think that they should be able to buy and that they will rent until they can buy. Because when they went to medical school they just expected to be able to afford to buy. These people will never be able to buy in the 90402 - at least not in the Franklin district. Primary care doctors make under $300,000 and after taxes that doesn't leave nearly enough to afford the 90402. So when doctors say that they will rent until they can afford to buy, the truth is that they will never buy.
On the other hand, the example cited of the person who sold his house in Brentwood for 5 million and banked the entire 5 million, he will be able to pull the trigger on a house when ever he wants
the key thing is, some of the renters who post here will never be able to buy due to their career and others will be able to buy due to their selection of a different career combined with hard work and luck.
What is clear is that there are many more people that want to move in to the 90402 than there are houses that are put up for sale each year, and the supply has to be rationed some how.
If we were living under communism perhaps the highest ranking party members would get the house, but due to our system, any scarce good is not rationed it is auctioned. Even Harvard auctions off a few spots each year to wealthy people whose kids can't otherwise get in. $5 million is the going rate.
Everything is for sale, that is the system - why shouldn't those willing to pay $3.5 million for houses in the 90402 get to have them at the expense of people only willing to pay $2.9
Wow, 90402 is down 24.8% in two years! I wonder what it will be like next year this time. Maybe 35% down? Any votes for 40% over a 4 year period?
7:06pm, your comment is just inane and inflammatory. Let's try to keep the discourse here a little more intelligent...I know it's LA though.
If 90402 real estate is down 40% over 4yrs then the US and probably world economy has completely fallen off a cliff and we will have completely anarchy. Before the governments of the world allow that to happen they will print money to the cows come home and/or declare martial law.
"Wow, 90402 is down 24.8% in two years! I wonder what it will be like next year this time. Maybe 35% down? Any votes for 40% over a 4 year period?"
The amazing story is after 3 years of huge volatility - deep recession, high unemployment, bailouts, a near-collapse of financial markets - 90402 is chugging along. 90402 (and other blue chip areas) are like Jake LaMotta in Raging Bull - bloodied, but not knocked down. Other regions are knocked-out cold, down 50%; some hard-hit areas may never recover.
Bears got a case, but perma and super-bears are going to have to suck it up. There was no 90402 collapse of biblical proportions, and next year and the year after will be more of the boring same. Show is over folks, go perma-bear in Detroit, Sacramento, Palmdale, etc.
"Bears got a case, but perma and super-bears are going to have to suck it up. There was no 90402 collapse of biblical proportions, and next year and the year after will be more of the boring same. Show is over folks, go perma-bear in Detroit, Sacramento, Palmdale, etc."
Agree. Which makes me wonder about our fearless leader LS2009. Is he a bear or a permabear? Right now, I go permabear, but it remains to be seen.
Late Summer has done us all a great service by running this blog. We all owe him a debt of gratitude.
That being said, Late Summer is like everyone that grew up in Santa Monica 30 or more years ago - he associates Santa Monica as being a little more rough around the edges, a little more low key, and a little more affordable than Bel Air and Beverly Hills.
This meme is so deeply imprinted on him that it is very hard or perhaps impossible for him to believe that land prices in the 90402 will be permanently higher than the prices for prime land in Beverly Hills and Bel Air.
I don't blame our leader for this, many of us anchor on certain things in our youth and can't get past them.
The Manhattan Beach "West of Highland" neighborhood is very similar to the Santa Monica "North of Montana" neighborhood.
30 years ago west of highland was filled with surfer dudes who shared houses, surfed all day and smoke weed all night. Also filled with the youngest and newest stewardesses, who wanted a hedonistic, party central environment to enjoy in between flights in to and out of LAX. The walk streets west of Highland had a keg every few houses and there was sort of a pedestrianized outdoor party scene.
Fast forward to 2010 - those same streets are now filled with young families, and small pieces of land sell for a price equivalent to $21 million dollars an acre to young families headed by surgeons, software moguls, and private equity partners.
So if you can imagine the cognitive disonance felt by our leader, imagine what is felt by his counterpart in Manhattan Beach.
The point is, neighborhoods change, and some times people that grew up here anchor on the past not the future
I think 40% in 4 years is pretty conservative. The decline could be 45%-50%.
A little OT but I gotta post this. This bizarre story about a guy who is so frugal & so competitive about his net worth, he keeps track of everything. A few choice sections:
Joey Kincer is the kind of guy who likes to keep records. Kincer is a 32-year-old Web developer who lives in San Juan Capistrano, southeast of Los Angeles, and among the things he tracks on his personal home page at kinless.com are his collection of action figures based on the Mega Man video games ("Not for sale," the site warns sternly), the piano awards he received as a child ("My mom kept track of them all," he says) and a photo gallery of female celebrity crushes that he refers to as his Dream Team.
His highest achievement in record gathering, however, is contained in a Quicken file, where he has tracked his personal finances for 16 years, ever since he was in 11th grade. On a recent Wednesday evening, Kincer punched a few buttons on a keyboard and projected his entire financial history onto a giant screen hanging from the ceiling of his bedroom for me to see. There was the $3.38 he spent on chips and dip on March 16, 1996. A birthday card for a friend a few weeks later cost $3.18...
He earns about $65,000 a year largely as a Web developer but is determined to save enough money for a substantial down payment on a detached house, not merely a condo or a town home. And he wants to live in a particular area of central Orange County, where housing prices, while lower than they once were, are still a bit beyond his means.
And so he lives with his parents, paying $700 a month and sleeping in his childhood bedroom. There is a Garfield clock on the wall, and above a twin bed is a photo gallery of the Dream Team, including photos of Daisy Fuentes and Hilary Duff in their younger days. He recently put much of his Mega Man memorabilia in storage. "I'm trying to make my room look less like a 10-year-old's," he said. It is perhaps not an ideal arrangement for a young, single man. But by living at home, he is able to save $1,500 to $2,000 each month, which allows his net worth to grow at a steeper trajectory than it would otherwise...
http://finance.yahoo.com/banking-budgeting/article/109545/net-worth-obsession?mod=bb-debtmanagement
Wow, this is both fascinating and sad at the same time. Substitute "central OC" for Santa Monica and I think this would describe a sizeable minority of posters on this blog to a T!!!!
The intention of this blog is to talk about the FACTS driving the real estate market. I have no preference of one city over another. Different strokes for different folks. My aim is to post current data and let the facts speak for themselves. As of today, there are sizable losses in price per square foot in many of the most affluent areas in Los Angeles. I don't care if you can spend $3 or 3 Million dollars for a house. What you decide to do with your money doesn't really matter. We are here to look at the trends and to try and decipher where the market is headed.
In the last 2-3 years, areas that were thought to be untouchable are suffering big drops in value. Where the market goes in the next 2-3 years, is anybody's guess. However, if we are looking at trends YOY, it is definitely downward and at a significant clip.
For all those citing all cash multiple offers on property, that doesn't mean squat. Anyone can write up an all cash offer and still find a way out of the deal (contingency). And, if you have 2 lowball offers that's a multiple. Don't be fooled by realtors who omit vital information. They are just salespeople, and that's what they do, sell. Personally, I believe we are only half way through the downturn on the Westside. Those who bought in 2005 - 2008 are already underwater and the boat keeps taking on more water with each sale. 2004, 2003, 2002 etc...
Let's discuss facts instead of trying to justify our own interest. Whether your a Bear or Bull doesn't matter, just back up your take with some numbers
I agree. Let's keep it to the facts.
Fact - prices are down YOY.
I am a bear and think prices are falling.
I do think it is notable that the cost per square foot in 90402 always used to be lower than in 90210. For 70 years 90402 was a more expensive area. Today, the worm has turned and 90402 is the more expensive area. Perception has lagged reality - 99% of prole america has never heard of 90402 but has heard of 90210.
That is why so many outsiders can't believe that 90402 is costlier than 90210. the perception gap
I think prices are at this point tied to the economy. The supply/demand has balanced out again and is moving in favor of demand. However, the continued demand will depend on whether the economy continues to slowly heal or if we have a second shock (perhaps driven by Europe or China). If the economy continues to heal I am 100% confident that we have seen the bottom on 90402. However, I am very uncertain on the economy so thus I think it is very difficult to say which way housing prices will go. At this point the key to the economy is employment and consumer spending. Capital investment has picked up (other than real estate) and real estate construction will lag rather than lead. The other thing I am very confident about is that the demographics of CA and continued constrained land result in a long term upwards bias for real estate here but of course we do go through cycles.
3:20pm why would people write up all cash offers with no intention of buying? Yes, the contingency period gives more time to consider, etc but why even spend the time if you aren't at least seriously interested in buying? Isn't serious interest in buying meaningful? Saying it doesn't mean squat seems like a real overstatement and erodes your credibility.
If you want numbers look at the amount of inventory in 90402 compared to last year at this time? Look at the amount of real buying activity (closed sales, homes in escrow) that occurred once it became clear the economy was no longer in free fall and that prices had adjusted down 15% or from the peak.
I'm actually unsure which way housing prices go but I'm not sure there are a lot of facts today to back up the idea that prices will continue to fall...especially by the amounts people are wishing for (the 40% drop types). What would make 90402 drop 40%? An implosion in the US/global economy. Could that happen? Yes, it is more imaginable now that it was in 2007 for sure. Are you super bears willing to bet your life, family, net worth that an implosion is going to happen? I know people who have moved out of the big cities to bunker type living arrangements, stocked up on can foods, trained themselves to wield firearms, moved most of their networth into precious metals, etc.--I feel super/perma bears that expect 40% down are just a few steps removed from that kind of mentality.
The facts are that activity has picked up tremendously since the middle of 2009 after our global economy stared down the barrel of a real possible implosion. It now looks increasingly likely (especially compared to the end of 2008) that the economy has at least stablized from the precipice. Real buyers have come back (e.g. the ones that don't need financing or much financing) even without access to very good jumbo financing (I think the max a lot of banks will lend is perhaps $2m so to buy $3m+ you need serious cash). Meanwhile, most sellers don't think this is a good time to sell. That, my friends, is what creates pricing pressure on an upwards trend--not a downwards trend. Now certainly the US/world is still in a fragile state and things can happen to change that.
Demographics can help and they can also hurt.
It all depends on what sort of representatives Californians send to Sacramento.
On the one hand, if we had New Hampshire's voter base we could elect representatives that voted for low spending and low taxes.
Today, 75% of Californians receive more from the government than they pay in taxes. As a result, spending is popular.
If taxes are raised very very dramatically, the type of people that can afford the 90402 will exit the state. If taxes stay where they are today, I think more people who can afford the 90402 will rush in to the state.
So to me it all depends on what demographic changes you predict - are we getting a citizenry that is increasingly poor and demanding of government services, or an electorate that is non poor and demanding no tax increases?
300,000 foreclosures a month, falling rents, government agencies furloughing and cutting, gold prices skyrocketing, increasing bankruptcies, rising taxes, high gas prices, etc., yet, there are commentators that believe that house prices are justified at current prices.
I predict by 2015 you can fetch a Culver City house for $350K.
There is no way I would sell my humble house in Santa Monica right now. Sure, it may never get back to 2006-2207 pricing, but I moved out, now renting it out at a loss (writing it off on taxes) and I am waiting...because I can..
I would be a little okay selling it for 15-18% off peak pricing, not 25-40%
And most of my neighbors who have deeper pockets than me are doing the same. Waiting for the lending market to ease up, then looking at larger trade up properties. That is what has stalled the recovery. No lending at fair rates for jumbo loans.
So until you see confidence in the banking loans returning, you are not going to see too much going on...
How high will income taxes have to go before you exit the state and give up on the 90402.
12%? 18% ?
Aren't they higher than that now? Total state, local and fed?
When state
Inc tax hits 19 pct I am out.
Will high ca income tax cause house price declines
Banksters won't loan on Jumbos, because they know the market is still declining. With many of their loans in default, REOs or underwater, they can't take anymore.
Plain and simple....
"I predict by 2015 you can fetch a Culver City house for $350K."
Maybe. What we will see going forward is very predictable, based on the last 2-3 busts. Blue chip areas will stagnate, with few transactions (and some good deals here and there) and the 'up and coming' areas like CC, OP, SP, East of Lincoln Venice will get hammered down to where they came from.
Gotta shake your head at SP houses under the flight path going for $2M at peak. I passed on buying there for $300k 20 years ago (before all the jets), and considered the area sub-par due to Pico, Lincoln, and the noise.
I am in 90402 and can't figure out how it went from upper middle class (mostly professionals) to what people think it is today. I am in the 'industry' and go to real blue-chip areas for social events, friends, etc. and always remark on the way home how I can't afford to live there. I am talking big lot estates in Brentwood Park, Hollywood Hills view houses, Bel Air and Palisades view estates, Malibu beach house, etc. My 'prime' 90402 Spanish is at best a guest house (or garage) compared to these places. Set-up a band and fully catered and designed event in my 9,000 sf lot backyard for 200 people? Yeah right, more likely a BBQ for 12 with self-parking a block away.
The whole discussion about "franklin 90402' as a big deal is a complete myth and joke at best. This is just a nice neighborhood for well-earning folks, that will maintain appearances and hold some measure of value irrespective of economic winds. I hope the posters who play the area up as the 'holy grail' are tongue in cheek. If not, I suggest you get out more (beyond 90402) and see how the better half really lives.
6:00pm, I agree most of the really big money wants to be in Brentwood Park, Palisades Riveria, BH flats, Bel Air, etc. However, there are some very wealthy people that do want to be in 90402 even though it doesn't seem that fancy at all...they want a pedestrian neighborhood that is more diverse. No question the neighborhood is not a ritzy $10m+ kind of place but there are also certainly people worth $25m+ who prefer to live in 90402 than in a $7m home in one of those neighborhoods. Now, if you are worth $500m+ you definitely won't be in 90402
"No question the neighborhood is not a ritzy $10m+ kind of place but there are also certainly people worth $25m+ who prefer to live in 90402 than in a $7m home in one of those neighborhoods."
6:00 pm here..
Huh? You don't live in the area / know your neighbors. $10's of millions of net worth describes a very small handful of 90402.
"Latesummer2009 said...
Banksters won't loan on Jumbos, because they know the market is still declining. With many of their loans in default, REOs or underwater, they can't take anymore.
Plain and simple...."
Wow, can you imagine how much more activity there will be when they do start loaning again. Those multiple bids we see now will be remembered as the "good old days"!
I agree that few of my neighbors in Franklin 90402 live like they have 25 million in the bank. It is not the neighborhood for that kind of lifestyle. If you want that please try beverly park. Not 90402
The big driver between residential 90402 and estate ** elsewhere is household management. Most people can manage a 9,000 sf lot 4,000 sf house with a gardener, P/T housekeeper, and a handyman every few months. Few 90402 households have live-in help, except for a housekeeper or nanny here and there. I am glad when my 2x weekly housekeeper leaves for the day, and I get my privacy back. FYI, my wife would not stand for managing a platoon of service people and full-time staff while I am at work; she just hands me the punchlist that I can handle myself or with a few calls.
The estate areas mentioned above need a small army to maintain (aka Jeff Lewis's crew on Flipping Out). Look at support petitions in divorce proceedings to get an eye popping view of the monthly nut. Full-time PA's, housemen, nannies, and housekeepers; monthly services from gardeners, arborists, koi pond specialists, aquarium and pool cleaners, etc.
It is safe to call 90402 owners more DIY (and maybe private), keeping overhead low versus estate areas. That is the lifestyle difference people buy into to.
There are enough people with $25m+ in 90402. It is not the norm but it is neither unheard of. Most people in Beverly Park would certainly want to have $200m+. I would guess many in 90402...not the majority but certainly most buying the $3m+ homes have at least $5m+ and probably $10m+...that's just my experience.
The difference between 90402 and the flats of Beverly Hills is mostly in the propensity to show bling, not in the wealth in the bank.
If you look at the typical person today paying 3.5 for a house in the Franklin 90402 and compare him to the person paying 3.5 for a house in the flats of beverly hills you won't see much of a difference in wealth, but you will sure see it it atitude.
Like the person who posted here recently who drove his luxury sports car around the Franklin 90402 and got scowls. men with the freshly detailed sports cars and the girfriends half their age fit in well in beverly hills but not so well in the 90402.
Again, there are plenty of places where you can drop 3.5 million all cash in order to get in on the bling lifestyle. Franklin 90402 is just a sleepy humble salt of the earth family focused neighborhood
I've got to say that most of the people on this blog hating on the 90402 don't belong here anyway. Your complaints are all valid. Go elsewhere.
We're already off 25% from peak.... I can't believe people just won't face facts. I agree with the person above -- the facts indicate a continued drop of at least 20% if not more. All I can point to is increased taxes, businesses running away, super high unemployment, few move up buyers, the spectre of higher interest rates, foreclosures and bankruptcites for the neighborhoods in question on the rise, the absence of liar loans, etc. I agree at least 40% off peak in 4 years, maybe more. Where are there any signs that things are even stablizing in the neighboorhoods in question? Face it, there aren't any. The real question is how low prices are going to go and how long will the declination continue.
Yes - prices are going to go down really hard from here. So stop bidding on houses, just rent for the next year and then see what happens.
No more bidding
"Yes - prices are going to go down really hard from here. So stop bidding on houses, just rent for the next year and then see what happens. No more bidding"
Sure, just rent and see what happens, the blog has spoken. How many offers do you think are going out this week? Were you at the open houses today? Slow traffic, but I bet the ratio of lookey loo's to potential bidders is almost 1:1. Love it or hate it, commerce goes on, and bids are happening.
2:04pm and 3:06pm,
Thank you for your not so intelligent perma bear dribble with the classic "pick a number out of thin air" prediction. Your comments add nothing to the discussion and only reflect the fact you are concerned you are wrong and therefore you want to try to co-opt others into your thinking.
The only way houses drop from here is a major external shock to the US economy--perhaps driven by events in Europe or China impacting our economy given global ties.
Otherwise, if you haven't noticed housing is on it's way back up. The shadow inventory is being dribbled out and the real economy has stablized and started to perk up (jobs, factory orders, retail purchases, etc.). The government is printing money and keeping rates low and floating the housing market.
I am thrilled to hear that the gold chain wearing "luxury sportscar" driving hair plugged crowd has taken a pass on the 90402.
The 90402 is and will remain a neighborhood for people who want to spend their time with children and grandchildren and stroll the sidewalks not a neighborhood for hollywood hills types.
Did anyone read the article in the New York times this weekend about the explosive number of new homes being built in Las Vegas?
Can someone help me understand what the price gap is right now. By that I mean, if I pick a neighborhood I like and in one subdivision I see a ten year old foreclosed 3000 sq foot house in good condition, and in the neighboring subdivision there is a brand new never occupied 3000 sq foot house, how big is the price gap?
I mean logically with so many houses vacant, the market clearing price of vacant houses should be low enough to persuade no one to build new
So how big is the gap and why are people building new
Ask your Vegas real estate agent...
I hear a lot of agent types talking nonsense on this site...blah blah blah, multiple offer. Here are two nice hard comp for 90402. This came from SMdistress:
234 22nd - 90402? 1993 construction.
4 bed/5 bath house sold for $2.3 asking was $2.47.
627 Euclid - 90402
2 bed/ 2 bath previously bought for $2.3, listed at $1.85 sold for $1.75
Where are these multiple offer over bids that I keep on hearing about? None of that I heard a friend who's friend bid on something and lost to a higher bid. How about some actual sales and numbers?
All you bear out there, don't be discouraged, in today's environment, you have to go make the good deals happen, it won't fall on your lap. Negotiate hard and do your homework. Know everything you can you about the house the loan, the owners, and the realtor. Patience is a virtue and you will be rewarded.
a good house is hard to find....
Uh - a skanky teardown that isn't even in the franklin school district (627 Euclid) sells for 1.75 million - how does that prove the bears right?
"90402 is just a sleepy humble 'salt of the earth' family focused neighborhood"
What a joke. Yeah, all those expensive boutique shops are just like your typical Norman Rockwell scene. Doggy apparel...no problem, a whole store for it! I like Flair Cleaners, but MSNBC is always the station of choice. Etc., etc.
For reference, last weekend I saw this total douche wearing full race leathers sipping coffee at Peet's with his exotic sportbike nearby. Of course, there wasn't a single scratch on his knee sliders.
While no uniform stereotype applies, there are plenty of poseurs throughout the 90402. Ever wonder why so many of the aforementioned boutiques are now closed and have For Lease signs? Ever wonder why First Federal blew up?
[And for the haters...yes I can afford it; I just grew up in a real 'salt of the earth' Midwestern town]
90402 is salt of the earth compared to Beverly Hills or Holmby. People are down to earth and friendly in 90402 compared to Beverly Hills / Holmby.
It is all relative. If you want to drop 3.5 million and have nice neighbors this is the place to do it
234 22nd was a major major fixer.
11:46am, you may have never been through it but the floor plan had some fundamental flaws that just could not be fixed without serious money that made no sense to invest given the price point.
It's a classic 'tweener. Too expensive to be a tear down but not nice enough for someone spending over $2m.
"The only way houses drop from here is a major external shock to the US economy--perhaps driven by events in Europe or China impacting our economy given global ties."
What a bunch of drivel and speculation. The trend is downward, and there's nothing you can point to that the trend won't continue. On the other hand, there are about 20 indicators pointing to continued declines, starting with record high unemployment and ending with no liar loans. And no one believes the the case-shiller BS where the upper end starts at $500k. Yes, 40% is 4 years is likely and appropriate given rents and incomes. It will probably be more of a decline than that, however, as markets typically overshoot on the bottom.
"2:04pm and 3:06pm,
Thank you for your not so intelligent perma bear dribble with the classic "pick a number out of thin air" prediction. Your comments add nothing to the discussion and only reflect the fact you are concerned you are wrong and therefore you want to try to co-opt others into your thinking."
No shit. Its that sort of hamfisted "analysis" that will keep people priced out forever.
2:04 could have just as easily been re-written as follows:
"We were at one point off 25% from peak.... I can't believe people just won't face facts. I agree with the person above -- the facts indicate a continued increase of at least 10-15% a year, if not more. All I can point to is increased wealth desparity, increasing demand, incredibly low unemployment among the wealthy, plenty of move up buyers, the spectre of higher interest rates (which history shows, increases nominal prices), foreclosure moratoriums and diminishing short sales for the neighborhoods in question, all of which leads to a stranglehold of inventory. The amazing thing is things have stabilized with the absence of liar loans, & funny money of days past. I agree at least 40% higher in the next 4 years, maybe more. Where are there any signs that things are even close to falling apart in the neighboorhoods in question? Face it, there aren't any. The real question is how high prices are going to go and how long will the increases continue before the pearmabears realize they have been priced out forever"
There see how easy that was. And to think my screed is no more true than the permabear who wrote his first one.
I really don't know what will happen with prices. The bulls sound persuasive and so do the bears.
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