25% Off Prices, Where Do We go From Here ?
Okay, by now everyone knows the Westside is off 25% from its' 2007 peak price. The burning question is, where do we go from here? Do we drop more, stay flat, or do prices increase from here. The argument for dropping more has already been mentioned. Let's here from those who believe differently, only backed up with data. If you don't have any data to support your claim, stop wasting your time and ours. There are buyers out there waiting to buy, but are not for a myriad of reasons. And we aren't just talking about all cash buyers in 90402, that perceive they are getting a deal or looking to park cash somewhere. That represents 11/285 transactions or 4% of the market (as per Dataquick August 2011).
Some of our best neighborhoods took double digit hits in SFR median prices during August:
Some of our best neighborhoods took double digit hits in SFR median prices during August:
Beverly Hills 90210
19 sales, $2,200,000 median (-37.0%), $561 PPSQFT
Brentwood 90049
16 sales, $1,350,000 median (-27.0%), $537 PPSQFT
Rancho Park 90064
23 sales, $775,000 median (-15.4%), $524 PPSQFT
Malibu 90265
15 sales, $1,600,000 median (-37.3%), $444 PPSQFT
Pacific Palisades 90272
26 sales, $1,348,000 median (-37.3%), $695 PPSQFT
Santa Monica 90402
11 sales, $2,391,000 median (-20.7%), $967 PPSQFT
Venice 90291
22 sales, $904,000 median (-12.8%), $740 PPSQFT
West Hollywood 90069
12 sales, $950,000 median (-61.8%), $530 PPSQFT
This doesn't bode well for the high end market. Especially, since many consider the higher end tier, the only price range moving. The lower end and middle tier markets are still about dead in the water. That translates into no move-up market to supply the higher end.
This doesn't bode well for the high end market. Especially, since many consider the higher end tier, the only price range moving. The lower end and middle tier markets are still about dead in the water. That translates into no move-up market to supply the higher end.
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146 comments:
I just spent a couple of hours looking at Redfin for various westside neighborhoods. When I look at the last sale date and price it seems that this market is still out of whack with many thinking that the price of the house they bought in 2002 is worth double the price. I don't get it -- seems like dream land is still alive out there. So, I'm going to continue renting (my rent is maybe one-third of the mortgage/pptax amount, and don't get angry I got lucky). Since the economy was much better prior to the great recession I don't see how prices have anywhere to go but south, and south another 25% at least.
for top westside neighborhoods, rent is 60% of house ownership cost -- so, no deals
I agree with the above two posts. Apples to apples, rent in the franklin 90402 is about 50% of the total cost to own the same house. Renting is a better choice
Note that in our esteemed moderator's table, the 90402 had the highest price per square foot of any of the neighborhoods listed. Does anyone here know - is the 90402 actually the most expensive price per square foot of any zip code in all of California? It certainly seems that way to me - as far as I can tell it even beats such famously expensive neighborhoods like Pacific Heights, Palo Alto, Carmel, La Jolla and the Manhattan Beach sand section. However, I think that Balboa Island off Newport Beach may actually be more expensive - i am not sure.
Can anyone here let me know if the 90402 is actually at the very top or whether there is some other neighborhood that beats it
4:32...who cares?
The only positive thing I can think of about the current market is the amazingly low mortgage rates. On the other hand, many people can't qualify for a loan; more than 23% of mortgages are under water so people can't move; baby boomers are retiring and downsizing; the shadow inventory is about to explode now that banks are going to start dumping their properties again; kids are leaving college with an average $23,000 in debt; the federal and state governments are broke which will bring further cut backs and unemployment; etc. I don't see a rebound any time soon.
I can't see prices - at least in LA County doing anything but going down.
Irritatingly, most of the counties around LA have already seen prices fall off a cliff, but - of course - not LA, and especially not the Westside.
My biggest fear is a slow, decade-long price drop, much like Japan. I'm still amazed that Westside prices have managed to keep as high as they have, seeing the carnage being wreaked in other cities by the housing bubble.
I mean, I don't know if I'm prepared to wait 5 years to buy at the absolute bottom. But I also get itchy thinking about paying over half a million dollars for a place that may never be worth that again...
So, for the moment, I go to open houses, and keep on renting.
As for predictions.... I say we finally reach a bottom in LA County in 2016 or so, with the very last of the FBs digging in their heels for all they're worth. Prices will fall at least another 25% overall with more in some areas.
There will be really special areas that are immune - like beach property in Malibu - because there will always be a very small cohort of people that can afford to buy them.
But a regular SFR on the flat in someplace like Culver City for $800K? Forget about it: those that can afford it aren't going to spend that kind of money on a plain-jane house when they can get something better somewhere else for about the same money.
Now all we need is the sellers to realize this, and maybe prices will start being less delusional
speedingpullet, excellent post
I just came across this site and am slowly trying to educate myself on the market. I notice most of the stats here are on SFRs and dealing with rental vs. mortgage payment ratios. How about multi-family complexes? Any hard and fast rules on those?
Thanks.
"Speeding pullett said...Now all we need is the sellers to realize this, and maybe prices will start being less delusional"
And by "sellers" you actually mean the "buyers" who keep buying at the current prices, preventing them from dropping the other 25% you think is warranted? Thats what you meant, right?
Reuters, 9/26: "Sales and prices of new single-family U.S. homes fell in August [to 6 month lows] despite historically low mortgage rates, underscoring the difficulties policymakers face in efforts to boost the moribund housing sector."
"And by "sellers" you actually mean the "buyers" who keep buying at the current prices, preventing them from dropping the other 25% you think is warranted? Thats what you meant, right?"
+1 on that. Sellers can price wherever they want, if nobody buys then prices will fall. Currently, there are enough people still buying at these prices to give sellers hope. Old dreams die hard. Oh well... patience is a virtue right? :-)
"Speeding Pullett said...My biggest fear is a slow, decade-long price drop, much like Japan. I'm still amazed that Westside prices have managed to keep as high as they have, seeing the carnage being wreaked in other cities by the housing bubble."
No offense, but you people should be counting your lucky stars you even saw 25% down. I live in DC and was interested in Arlington (called "immunington" by the bulls). After a 130% run up, it saw nothing but a FUC*ING 10% PRICE DROP!!! Even worse, that was 3 years ago and now prices are at or back above peak.
So sorry as I share no sympathy for you boys. I have been eating crow for 5 years now, and not buying 10 years ago was probably the biggest financial mistake I could ever make. 25% off peak prices sounds like a far flung, never to happen dream for me!
12:20, prices are down 25% already, and you are a jackass.
6:52. Can't you hear that great sucking sound from DC? All the country's cash is going there. The rest of the country is cratering and so are the home prices. Or were you too blind to see the read in the original post?
"Home prices rose for a fourth straight month in most major U.S. cities in July, buoyed by the peak buying season. The Standard & Poor's/Case-Shiller index showed Tuesday that home prices increased in July from June in 17 of the 20 cities tracked."
latesummer,
Why would you delete a post about your recommendation that people buy gold and silver?
"12:20, prices are down 25% already, and you are a jackass."
Thats fine...so noted. Just remember, the reason prices have not fallen the other 25% speedingpullett thinks is required is not because of sellers but the buyers.
Sorry this makes you angry...oh so angry...
6:52
I hear what you are saying. I am from DC, my family still lives there. Prices there are tied to all the gov jobs. I think this reinforces the concept that housing prices are based on employment. However, with all the talk of deficit reduction and the 4 trillion dollar cut on the way, i am not sure how well DC will hold up in the future. Especially if the Republicans take back the White House and Senate.
I'm not angry. It's just when I see someone's acting like a jerk I'm not afraid to say so.
Also, your comment is one of the stupidest I've seen. Why not go post on some realtor website where your comments will be welcomed?
"Why not go post on some realtor website where your comments will be welcomed?"
Because part of me likes to troll and I take immense delight in seeing you feel absolutely compelled to respond - and not on the merits - no, your basic response was "oh yeah, your a jackass".
Thank you for entertaining me so.
Care to discuss the merits of whether its the buyers or sellers fault as to why we havent seen the other 25% price drop speedingpullett thinks is appropriate, or do you instead want to entertain me?
"Also, your comment is one of the stupidest I've seen."
Actually, if you go back and read his comment again, you didn't understand it the first time.
Anon 8.49 said
Just remember, the reason prices have not fallen the other 25% speedingpullett thinks is required is not because of sellers but the buyers.
Hey, you know what? If you're going to take my name in vain, could you at least spell it correctly? There's only one 't' in Pullet....
But, you have a point: there's someone always willing to catch a falling knife. The house next door to me sold for a couple of thousand under the asking price - at $990k - in 30 days. And mangled comps in the area accordingly... Bets were placed for at least 90 DOM and about $800k at most, but there you are 0_o
The 80 year old guy across the alley from me couldn't believe I paid $550K for my house in 2001.
"Home prices rose for a fourth straight month in most major U.S. cities in July, buoyed by the peak buying season. The Standard & Poor's/Case-Shiller index showed Tuesday that home prices increased in July from June in 17 of the 20 cities tracked."
You forgot to add the rest of the quote..
“While we have now seen four consecutive months of generally increasing prices, we do know that we are still far from a sustained recovery. Eighteen of the 20 cities and both Composites are showing that home prices are still below where they were a year ago. The 10-City Composite is down 3.7% and the 20-City is down 4.1% compared to July 2010.
The thing is there isn't always someone out there to catch a falling knife. If there were then prices wouldn't keep continuing to decline. It's when there isn't that knife catcher out there that sellers are forced to reduce prices. If you look at Redfin for virtually any area code nowadays you can see price reductions are the rule and not the exception. So, obviously, the current flock of buyers are not supporting prices. This is all basic economics. See the 4.1% decline in the 20 CS index?
"See the 4.1% decline in the 20 CS index?"
How do east LA, South Central, etc. apply to the westside? I thought we were talking about westside real estate? Show me a sale on the westside that is 4% lower than a comp from a year ago.
latesummer 2005,
were you recommending that gold and silver are "safe havens" just a few weeks ago?
"If you look at Redfin for virtually any area code nowadays you can see price reductions are the rule and not the exception. So, obviously, the current flock of buyers are not supporting prices."
Some sellers reduced their asking prices, and that means prices are falling? Maybe it means some sellers still think it's 2009.
Why all the resistence to recognizing prices are falling on the Westside and will obviously continue to fall for the myriad of reasons previously mentioned on this blog many times?
Regarding how much and when, I'd say 25-40% is a pretty safe bet for many Westside zip codes, and the time period the next 5 years or so years (prices fall like feathers). Why would anybody buy now when they can rent for 60% of the cost of ownership? Maybe it's because Suzanne is telling them they "can do this"(:
National Association of Realtors: "Most economists say home prices will keep falling, by at least 5 percent, through the rest of the year. Many forecasts don't anticipate a rebound in prices until at least 2013. The median sales price dropped roughly to $168,300 in August from July. A key reason was the rise in foreclosures and short sales -- when a lender accepts less than what is owed on the mortgage. Those homes sell at an average discount of 20 percent."
Anon 2:42 Gold and silver are ways to protect yourself from the collapse of a fiat currency (currency based only on the confidence of the government backing it). Nothing fundamentally has changed over the last couple weeks. If anything, more risk has been exposed in the paper asset classes. The recent selloff in precious metals had more to do with raising cash to cover margin calls in the stock market and the suppression of precious metals by the large banks. I do still advocate some physical gold and physical silver in your portfolio. Physical silver is especially attractive right now. IMO, precious metals are a much better investment now, compared to Westside real estate.
Last November 28th, I advocated buying precious metals with a 20% real estate down payment, as opposed to buying Westside real estate. We will revisit that topic again on November 28th this year and see the results.
Re. Anon 6:17 post - You know if the National Association of Realtors is saying prices are falling and there won't be a rebound until at least 2013, then it must be bad. The NAR are the cheerleaders for real estate agents and the real estate business. They always put a positive spin on everything. Not this time.
speaking of Case Shiller, here are a few facts:
LA once hit a value of 159. This was in May 2009.
It is now 26 months later. 26 months of your life, as well as (what another 50K in rent??) down the toilet.
Today, LA has a value of over 170.
You could have bought at 159. You didnt. Now, values are at 170. Sorry you missed it....
Better $50k of rent than your $200k downpayment.
>You could have bought at 159. You didnt. Now, values are at 170. Sorry you missed it....
What a tool. Cherry-picked the EXACT low point since July 2003. He neglected to say that in May 2010, 12 months later, the index was 174, and therefore higher than today. Or that today's index is the same as late 2003.
This must be the same conman that stated there were 'thousands' of pediatricians that want to move to SM. The desperation from this anonymous person is obvious.
Agreed. What a troll.
Obviously a troll. Comments will be deleted. Just ignore the idiot who has nothing better to do.
Keep your eyes on the prize.
"Better $50k of rent than your $200k downpayment."
Maybe, if prices go low enough in the future. If prices do not go substantially below the April 2009 bottom, the question will be who is better off:
(A) the 2009 buyer who spent 200K on a downpayment
or
(B) the 2011 buyer who spend 50K on rent AND THEN 200K on a downpayment.
I am glad people are catching the falling knife. In fact, I think all the "prices won't fall much" crowd to go out and buy. Oh wait, they can't cause they are trying to sell their house.
BTW what was that bit about high conforming being $100k lower.
seriously latesummer, post some data that prices are down year over year on the westside.
I think the disconnect on this blog stems from the fact that some of us are looking to take advantage of the price declines on the Westside and buy a nice, well located fixed up house.
Unfortunately, those houses are not in the down 20-30% range. As far as I can tell, the deals are for crap, not bad horrible crap...but not what you waited 5-7 years for, dutifully banking your hard earned money for...
Its always a shock to see how little your money gets you in the Westside housing market. That million dollar house still is a POS in most areas of the country..
Hard to get super excited about buying...esp. since its not the house of your dreams....
I think they are down 20-30% since 2007. The question is how much more over what time period. My view for the westside generally is 25-40% over the next 5 years or so.
You see a nice Westside house in a good neighborhood. It's going for $500,000. It has an accepted offer the very same day it appears on the MLS. The 20 percent you stored away for a down payment CANNOT compete with the all cash guys and gals who know a deal when they see it. The $500,000 house sells close to asking price and miraculously reappears within weeks for $750,000.
This scenario and others like it have played out for me and several friends this past year. Even if you squirreled away your nuts for a down payment and met credit criteria, your all cash competition will get the house. Such is life on the Westside.
...and if the all cash folks were to evaporate and the $500,000 house were indeed available, won't there be many squirrels and out-of-hibernation bears with down payments scurrying around trying to buy fewer and fewer nice Westside houses, ultimately driving up prices again?
I don't want to tear things up and create a row, but I'm an all cash buyer and I wouldn't buy in this market. Many that bought in 2009 are now sorry. Better to wait until the market returns to normal, and I agree that might be 5 years.
Many that bought in 2009 are now sorry.
I dont know about many. After all LA CS hit 159 in 2009 and now it is at 170. Thus I would say that "many" are quite content.
Im sure there are "some" who bought in 2009 and who are now sorry in 2011, but it is not the majority.
CS Shiller LA is a very large area compared to the Westside doushbag Listen to the aLl cash buyer. They are the market now.
No, it is the majority who are sorry. If you bought for a million on the westside in 2009 you have no doubt lost at least $100k.
Looks like the troll has returned.
"CS Shiller LA is a very large area compared to the Westside doushbag Listen to the aLl cash buyer."
Are you actually insinuating that the rest of LA is doing better than the westside since 2009? Who exactly is the "doushbag", douchebag?
That is obvious troll. Some outlying areas have bottomed but not the WestsideM DuHhhh......
"Some outlying areas have bottomed but not the WestsideM"
And there it is...THATS what I was looking for. Back in 07, when things were going down, I used to laugh at the bulls who thought their area was "special/different/immune". I would point out what the overall trend was that we had peaked and were headed down, to which they would respond "not in the Westside".
Fast forward 5 years later and it is now the permabears using the same line. How delicious!!!
"Are you actually insinuating that the rest of LA is doing better than the westside since 2009?"
Of course troll. The poorer neighborhoods have corrected, or are correcting, much quicker than the westside. The westside (and upper end neighborhoods) is now correcting, and the future percentage slide will be greater there than in the poorer neighborhoods.
So the price of a 2009 house in a poor neighborhood may not have decreased much since then, but the westside and upper end have significantly decreased since 2009 and will continue to decrease for quite a while. This is all so simple except for the simple minded, realtors, and home debtors.
Sell now while you still have some equity!
Don't forget to bear in mind the many macro-economic factors that are going to continue to exert downward pressure on real estate: no job creation; the state of California and the Federal governments are broke and slashing budgets; 23% of homeowners are under-water; baby boomers are retiring and down-sizing; the average college graduate enters the workforce (if they can get a job) with $23,000 average debt; the banks are starting to move their massive shadow inventory of foreclosed homes; and at the same time, the banks are making it harder and harder to qualify for a loan. Which was is real estate going? You tell me.
Not to mention conforming loan limits will be reduced from $729,000 to $625,000 on October 1st. MIght as well knock $100,000 of entry level homes on the Westside. Those $875,000 homes just took a price hit to $750,000. Glad, I didn't buy one. What's next, $525,000 than eventually back to the original $417,000? Good luck financing a home in this market, or worse yet trying to sell one.
The only positive factor in the current market is rock bottom mortgage rates. But what good is that if your income is falling, your current mortgage is under water, the bank won't give you a loan, and you have 5-figure (6-figure?) personal debt?
The RE market won't stabilize until people can afford a 20% down and a PITI that is not more than 30% (or 40% for the thrill seekers) of their income. Other than a few niche areas in some zip codes, that just won't be happening on the Westside for a while.
Some neighborhoods in LA will converge on 4x neighborhood income and others will converge on 10x
It all depends on the neighborhood.
I wish I could predict the future - but I can't
I just read in the Los Angeles Times that personal income actually fell last month. That's like taking $11 billion out of the economy (according to the article). How are real estate prices going to rise when people are making less money?
Latesummer - the NY times has an article today about parents buying for their kids and how that is propping up the market in only a small number of neighborhoods - only certain neighborhoods in Los Angeles benefit from this
__
FOR some parents, an engraved pen set just won’t cut it as a graduation present. It seems so insubstantial, so unoriginal. Anyway, the kid will just lose it. So how about a New York apartment?
Damon Winter/The New York Times
Marina Santos had at first asked her parents for help with the rent; they decided buying was more practical.
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Real estate brokers say that in the last year, they have seen more parents shopping for apartments for their grown children, hoping to take advantage of low mortgage rates and apartment prices that are still about 20 percent down from the market’s peak.
in santa monica the north of montna / south of montana price gap is getting wider and wider
looking apples to apples, same school district you see south of montana slipping faster than north
check out830 Harvard - 90403
Details: 4 bed/5.5 bath 3,846 sq ft house on a 7,900 sq ft lot.
Contemporary, Cape Cod, custom designed single family built in 1989. This home features 4 bedrooms and 5.5 baths of very generous size. Great natural lighting throughout in a normal, family style layout. 3 bedrooms upstairs, 1 down. Den/Library can be converted to a 5th bedroom, if needed. It has an open kitchen with large family room and breakfast area facing the backyard. Large formal dining room. Tons of built-ins. Large walk in closets. 2 car garage in the back alley. Heated lap pool. Franklin School District.
SOLD: 9/29/11 - $2,128,000
Massive discount to the same house north of montana
"Latesummer - the NY times has an article today about parents buying for their kids and how that is propping up the market in only a small number of neighborhoods - only certain neighborhoods in Los Angeles benefit from this"
Are you suggesting that baby boomer parents are going to prop up the westside market? If yes, you are in dreamland. This type of wishful thinking is so tiring.
For the commenter above about north and south of Montana, who cares? Why don't you post on the SM real estate blog?
anon September 30, 2011 3:02 PM
Do you seriously think that a family can afford a PITI that is 10x their income, year over year? That is just unsustainable. Unless they're shopping at Goodwill for their clothes, dining in the finest soup kitchens and eating Fancy Feast during the week... for 30 years.
@ anon 9/29 8:23
yup all that and then some!
take into account local UE of 12% as well as factors affecting the local industries. Entertainment industry is learning to get by on fewer workers and lower salaries, aerospace is gone, large businesses are leaving, small businesses struggling. What's left in LA except for shady, dubious enterprises, waiting tables and tons of lawyers. How can this support $850K houses in each and every neighborhood?
I am not sure how to respond. Certain cities seem to sustain housing at a very large multiple of income and certain ones don't
the city in the world that is most similar to Los Angeles is Sydney.
Sydney housing is at 7x income.
Go to any of the blogs, people complain about it just like they complain here.
But the reaction is that in Australia, young men treat living in Sydney as a tournament, young men go to Sydney and if they can't make it really big they react by throwing in the towel and moving to an inexpensive place to live in the interior of Australia.
Already you see signs of this here in Los Angeles - a group of young men get out of college and move to Los Angeles - the ones that succeed massively in their careers stay in Los Angeles and the ones that fail to make the big bucks move out of state.
Living in a single family house in Los Angeles, like Sydney, may just not be affordable for those that don't win the tournament
"I am not sure how to respond. Certain cities seem to sustain housing at a very large multiple of income and certain ones don't"
Yep. NY has been at 20X income for 3 decades now. Anyone who in 1981 was deciding to "wait til it hit 3X income" before they bought in New york might as just go ahead and kill themselves now. 3X income just aint happening.
Anon 5:48, big jobs in big cities pay more than elsewhere, which supports higher SFR prices in cities like Los Angeles and Sydney. However, when jobs are disappearing (even well-paying ones), and wages are shrinking (even high wages), and mortgages are under water, and personal debt is skyrocketing, and the government is broke, and baby-boomers are retiring and downsizing, and the banks are making it hard to get a loan without a 20% down-payment and spotless credit -- home prices are going to fall, even for people who win the trournament.
Everyone on my street in the past 2 years has bought with money other than income generated. 4 homes have been purchased with family $.
9:09 you are the most honest person on this blog. Can you tell us a little about what neighborhood you are in and how much the four homes sold for?
Whenever someone brings up family money, it seems that there is a lot of class envy that comes out. But the people who are getting the benefit of family money are not usually fat cats.
Typical is for a young woman to pursue a career helping others - such as teacher at private school - and be able to move in to a single family house that is a gift from her parents.
My point is that "family money" doesn't mean jet setters living it up in a decadent lifestyle, it simply means that family money allows someone with a "middle class" job to live in a "middle class" house
People who don't come from family money are having an increasingly hard time buying homes because their incomes don't allow for them to save enough money for a down-payment, or they are in debt from college, or they've accumulated enormous personal debt. Ultimately this narrows the market. The days of a healthy middle class are going, going, gone, which is a sad reality.
The days of a healthy middle class are still here. The healthy middle class lives on in certain cities, just as it has died out in other cities
Years ago a college educated couple could afford to buy a single family house in Aspen. Those days are gone, but that same college educated couple can afford a house in Pueblo. Pueblo is within driving distance of such cool spots as Boulder and the average house is only $197,037
Middle class has to give up on the Aspen dream and move to Pueblo.
In the same way, the middle class needs to give up on single family home ownership on the West Side. It is over. But don't despair since there are plenty of middle class cities like Pueblo for the displaced westsiders to settle in
The days of a healthy middle class are still here. The healthy middle class lives on in certain cities, just as it has died out in other cities
Agreed. I was shocked to find out that as late as the 1940s, the Hamptons outside of NYC was a middleclass haven for engineers. Now its nothing but banksters and hedgefund managers. The engineers were priced out decades ago, having to go live in Staten Island, and the like.
I feel sorry for the last engineers who stubbornly refused to face reality, claiming, the Hamptons will once again be affordable for middle class types. I wonder after how many decades of renting they finally gave up...
I live in what was one of the cheapest single family home area in Santa Monica. Sunset Park, South of OPB. It was developed around the SM airport, largely for its wartime workforce who worked in airplane manufacturing plants at Cover Park and SMO.
Home are modest, it was never fancy like NoMo (which ALWAYS was seen as a premier neighborhood). Homes are typically 2 bedrooms/1 bath or expanded to 3/2.
Homes here are $750 - 1M entry level. I have been here for 17 years, so have seen the rise in parents buying homes for their kids....
Last well known kid was Miles Davis's son Aaron who now lives on 17th and Ashland
2:57 is spot on. Thank you 2:57
Your neighborhood used to be for the hard working members of the working class. it used to be that few people with college degrees worked there - it was for blue collar workers etc.
Right now a beautiful six bedroom house in a second tier city like Indianapolis sells for $750k. But all over america, young people would rather have mom and dad pay 750k to own a two bedroom in your neighborhood instead of a six bedroom in Indianapolis
The changing preferences are real, and to those who say that Sunset park is over valued, the right answer is to rent. So long as they are sure prices in ocean park will come back down, what is wrong with renting.
make your own decision, don't rush to buy
Same thing is happening in Europe - prices in some second tier places collapsing while best of the best are going up in value
Does anyone have a report on the shadow inventory in some of these desirable westside neighborhoods? My understanding is that what we see on the MLS is a fraction of the real story, that the banks are doing a good job of hiding the notices of default and foreclosed properties. If that is the case, it would point to sharply falling prices in the future.
"If that is the case, it would point to sharply falling prices in the future."
If, and only if, they release them in one huge snog, causing an imbalance between supply and demand, driving down prices.
Dont get me wrong, I have little doubt that such inventory exists. Except after hearing unfounded report after unfounded report about how the banks are NOW going to unleash the shadow inventory, I have quit believing it will happen.
Instead, I believe the banks will dispose of the shadow inventory the exact same way they have been doing it for the past 3.5 years, drip drip drip back on the market, keeping prices stable.
If they can keep doing it for 3.5 years with no signs of stoppage, and given that MTM will not even be considered until 2016 (at the earliest), whose to say the banks cant keep doing this forever?
Okay, but why do you say prices are stable? All of the indexes that I've seen show that prices are down from one year ago and for the last consecutive 7 months. Prices seem to be falling, like a drip, drip, drip.
I see prices very soft, especially for original, non-updated SFRs in the 90405.
750K is the new (former) 800-900K entry level price.
However, nicely located,updated/renovated, slightly larger homes (2K sq ft and up) with modern amenities sell fairly quickly in the 1m and up range. A house on Ashland Ave(between 17th and 18th) sold for 1.3m last month....nicely redone was the key.
I can't believe all the denial. Your homes are going down in value folks. Quit pretending the westside is special. The only question is how long it's going to take for prices to crater another 20-40%.
keep hope alive, renter.
Let's keep this civil.
We all know that renters are hungry to see prices come down hard, and that owners are hungry to see prices go up.
Everyone has an agenda. Let's stick to the facts
The facts are, prices are dropping (Case Schiller, NAR).
More facts:
LA case shiller is falling
LA case shiller is above the 2009 bottom
LA case shiller is higher now than it was at the 2009 bottom.
It may or may not go back below the 2009 bottom in the future.
http://guests.themls.com/Details/CA/SANTA-MONICA/2011-ASHLAND-AVE/90405/11-538863.aspx#&&PageIdx=4
1800 sq. ft. house in Sunset Park - 3 beds/2 baths
Listed for $1,375,000, sold the first 2 weeks for $1,350,000.
$750/square foot
http://guests.themls.com/Details/CA/SANTA-MONICA/1417-HILL-ST/90405/11-525787.aspx
This house had 5 offers the first week.
2648 square foot house in Sunset Park 3 beds/2.5 baths
Listed at $1,485,000
Sold $1,585,000 on 7/21/11
$598/sq. ft
Well located, renovated homes sell quickly in Santa Monica...end of story.
I personally think the Hill St. house had a weird floor plan (upstairs all Master...), but it was a hot listing
http://guests.themls.com/Details/CA/Santa-Monica/1248-Pearl-St/90405/P772206SC.aspx
Renovated 3/2, 1708 sq. ft.
I personally don't like Pearl St., but this one sold quickly over asking
Listed for $1,295,00
Sold $1,330,000 on 5/4/11
$778/sq. ft.
This one didn't sell at 1.3M, so now they're working on 1.2M, and they'll be lucky to get that.
http://www.zillow.com/homedetails/1048-3rd-St-UNIT-105-Santa-Monica-CA-90403/60296003_zpid/#{scid=hdp-site-map-bubble-address}
Realism is setting in for some folks.
Anon. 1:39
The reason this isn't selling has everything to do with it being purchased at the top of the marker in '06 and their unrealistic price today.
I would like everyone to clear their memory of bubble pricing. 2004-2007 are years thats should be wiped out of sellers memories.
It has no relation to today's market. Prices should not be based on previous sales in this time period.
If you are interested in a house last purchased in this time period....do yourself a favor....walk away
"Anon said...Okay, but why do you say prices are stable? All of the indexes that I've seen show that prices are down from one year ago and for the last consecutive 7 months."
Agreed, but I am looking longer term in comparison to 2009. While prices are down this year, we havent broken below the early 2009 levels. Likewise, I wouldnt have said prices were "up" in 2010, nor are they really "down" in 2011. When compared to 2009, they are stagnant.
"Anon said...Prices seem to be falling, like a drip, drip, drip."
Perhaps, and had you said this in the first instance, i would not have responded. Instead, you said..."If that is the case, it would point to sharply falling prices in the future"
Clearly, you can agree that falling "sharply" is not the same as a very slow drip drip drip. Thus, I wanted to counter the notion that anything is going to happen "sharply".
I only bring this all up because there seems to be a breathless segment of our posters here who still think that some sort of foreclosure TSUUUUUUNAMI will soon be "unleashed" upon our market, and drive prices back to the stone age. They seem incapable of realizing that if the banks continue to manipulate the shadow inventory, they can also manipulate prices. Dr. housing bubble especially seems to suffer from this outlook.
That said, given your reasonable response, you likely are not of this ilk. I too think that drip drip drip falling prices may be in our future, but I think even you agree that "sharply falling" prices will not happen absent a tsunami style dumping of the shadow inventory.
"I would like everyone to clear their memory of bubble pricing. 2004-2007 are years thats should be wiped out of sellers memories.
It has no relation to today's market. Prices should not be based on previous sales in this time period."
Someone posted three examples of houses selling for 1.3 to almost 1.6 million. Can you point to one example of a house in 90405 selling for 1.3 or higher before 2004?
Anon 2:14, thanks for your response. You are raising a question about whether prices will fall slowly because the banks will control the release of the massive shadow inventory, or whether they will fall fast. I'm not sure myself. But I do believe that, with all the negative macro-economic factors at the moment, prices look like they will fall. That is the current trajectory according to the leading indexes.
Anon 3:08 pm and everyone else:
Oh, yes, may I offer up (per Redfin):
In the 90405 but in the Ocean Park neighborhood that's west of Lincoln toward the Pacific
2619 3rd St., 4/2, 2,622 sqft, sold 7/25/01 for $1,301K
139 Fraser Ave., 3/1, 1,337 sqft, sold 12/28/01 for $1,390K
And in the 90405 Sunset Park neighborhood east of Lincoln, we have to go back to 11/13/97 for the sale of 3108 18th for $1,304K
There may be other examples...
Do want to share though with all readers that a small student-piloted plane recently crashed into a house at 21st and Navy in 90405 Sunset Park.
Let's discuss: What's the location discount nowadays for all those Santa Monica Airport flyover streets in 90405 Sunset Park (Ashland, Hill, Marine, Navy, etc. and the numbered streets that cross them)?
Ocean park sells for much higher prices than sunset park. Ocean park is an easy walk to the ocean
Sunset park is not as good a spot as ocean park. in order to get to the ocean you have to cross busy dangerous lincoln
also you are in the path of planes in sunset park
that being said, sunset park is up a lot in the past 20 years. over the past 2o years the promised land is only up 100% but Sunset park is up 200%. Look it up
Good question about Sunset Park prices pre bubble (2002-ish)
I don't recall too many high end (1.2-1.5m) sales during those years....the run up in prices was due to cheap money lending in order to fix up/build homes (2002-2007) during thise years....the historic inventory in 90405 is older homes that had dated renovations.
I bought my Sunset Park home in 1993 for $350K. 3/2 SFR on a great street.
Now worth about $1.2-1.3m
And my interest rate was like....9%!!!! Geez...
I wish homes were cheaper still...with these low interest rates, it would be way better than watching my stocks fluctuate every damn day!!!!
I know people are nervous about buying a home today...i was too. We bought a foreclosed home from a foreclosed upon bank! The local economy was bad, and about 100 homes were on the market in Sunset Park alone....
But you can see, you have to have to buy when others are not....or you will get an over valued property.
Isn't it a good time to buy now?
It is not.
Why buy now when there are so many downward forces on prices?
When we reach bottom, do you think there will be a bunch of "upward forces" just sitting there, plain for all to see?
"I don't recall too many high end (1.2-1.5m) sales during those years..."
I don't recall any, and I was out looking. Even "fixed up" nice homes were selling right around $1 million. And to the person who posted some homes in Ocean Park, anyone who thinks those homes within a block of the ocean are comps to the recent sales in Sunset Park fits in well on this blog with the permabears.
And if you really believe that 3108 18th sold for $1.3 in 1997, well then you need help.
"the run up in prices was due to cheap money lending in order to fix up/build homes (2002-2007) during thise years"
Right, there were no fixed up homes in Sunset Park before 2004. Got it.
"When we reach bottom, do you think there will be a bunch of "upward forces" just sitting there, plain for all to see?"
Well, you might not be able to see them, but I am confident that latesummer will.
Here is the property tax information for 3108 18th:
Property Tax
Taxable Value
Land $361,432
Additions $86,652
Total $448,084
Tax (2010) $5,525
The false information on this blog is amazing, but then y'all take after your leader I guess.
"When we reach bottom, do you think there will be a bunch of "upward forces" just sitting there, plain for all to see?"
Yes, I do. Right now there is not one thing that indicates house prices are on the upswing, but there are about 15 things that indicate house prices are on the downswing. Listing them again would be tiring so I won't. So when there are several good indicators and several bad indicators it will be time to start to think more seriously about buying. Right now, forget about it.
Prices in the upper end of the market have a long, long, way yet to fall. Given the coming demographic shift they may continue to fall well past 2020.
And yes, right now I'm renting. I rent a 4 bedroom house in a great neighborhood for about 50% of the monthly cost of buying. So I'm saving everymonth on my housing, and I'm not watching a downpayment whither away like autumn leaves.
We will know when the market is turning. It will be when we stop hearing the bad news about SFR price drops, job losses, mortgage defaults, etc.
Another POSSIBLE data point for Sunset Park 90405:
2348 29th Street, 3/1, 1,461 sqft house/6,007 sqft lot.
Apparently sold on 9/15/11 for $700,000 according to some sources, but then what sources can one believe nowadays? For instance, Redfin stopped its agent "Scouting Reports" feature recently because of incomplete and inaccurate original posting of data on the official MLS. If the MLS can't get it right, then who can?
Looks like a nice price and the house on drive-by looks OK too. I'm sure someone is very happy now in this $1.0 - 1.3 million neighborhood.
"Yes, I do."
Really? Would you mind sharing those things you so clearly "saw" on March 6, 2009 when you decided to get back into the stock market?
"Given the coming demographic shift they may continue to fall well past 2020."
Are you really going to rent for another decade?
"Right now there is not one thing that indicates house prices are on the upswing"
How is the inventory in 90405, 90403, 90402, etc? You permabears go on and on about college debt, unemployment, etc., but how about the most prescient metric for housing, months of supply?
Sorry 12:42, didn't lose any money in the stock market. Frankly, you don't have to be a genius to see when things don't make economic sense. And when they don't make sense, don't play. I guess I'm just a lot smarter than the average bear.
And sure I'll rent for another decade if it makes economic sense, and it makes a lot of sense now. Being a renter has many advantages, including not watching a downpayment whither away like autumn leaves, and the freedom to move around. Plus I rent the house for half the cost of renting the money.
And 1:43, but sorry, your inventory comment just shows you must be a realtor or homedebtor. There's a lot more inventory out there than what you see on the MLS. I'll tell you a secret: it's called "shadow inventory".
"And 1:43, but sorry, your inventory comment just shows you must be a realtor or homedebtor. There's a lot more inventory out there than what you see on the MLS. I'll tell you a secret: it's called "shadow inventory"."
List some of the foreclosures in SM that the banks are sitting on.
"Plus I rent the house for half the cost of renting the money."
Give some particulars- what is your rent and what is the house worth?
Switching from SM's 90405 Sunset Park to BH's 90211 south of Olympic neighborhood, this just in:
426 S. La Peer, sold 10/4/11 for $830,000, 1,200/4,800 sqft, 2/1, livable but improveable, and you get Beverly Hills schools, cops, and amenities.
Remember well when comparable 2/1 houses were fetching upwards of $1.3 million during the fizz.
Some stats:
329 S. Clark, sold 05/22/07, $1,325,000
268 S. Clark, sold 10/16/07, $1,375,000
467 S. Swall, sold 01/10/08, $1,170,000
222 S. Hamel, sold 11/04/09, $1,103,000
151 N. Wetherly, sold 505/19/11, $1,050,000
And now 426 S. La Peer sold for $830,000
Looks like prices are still going down on the desired westside, don't you think?
Why does anyone insist on looking at bubble prices of homes sold as an indicator of where the prices should be today????
'This home last sold for $1 million in 2007'...great....but that means it sold during the biggest run up in home prices (by %) that Calif. has ever seen...
Why is that a comp anyone serious about buying should use today????
Warren Buffet buys when people are not buying.....
Click over to today's new york times for an article that shows why santa monica is such a bargain by world standards.
Lime green two thousand square foot house in the suburbs of Geneva cost more than six million dollars. This is in a suburb without the amenities of santa monica.
House is so expensive that two families have to share it (yes two families sharing two thousand square feet)
http://www.nytimes.com/2011/10/06/greathomesanddestinations/in-geneva-twin-houses-under-one-roof-on-location.html?src=recg
It's hard to know what the shadow inventory is because the banks do such a good job hiding it. I know that in certain zip codes in Beverly Hills it is more than 10-to-1 bigger than what is shown on the MLS.
Warren buffet has lived in the same house for 50 years. Do you see him buying westside real estate?
Troll or just plain stupid.
House well over a million. Rent $2,750. See what patience gets you? Now it's time to be patient on the buy side. And yes, it will be all cash.
This real estate market is like a ladder. First the lowest rung breaks, and then the next, and then the next, and so on. Now we're hitting the upper part of the middle tier but the breakage isn't going to stop until we reach the top. Get it? Be patient and you will be rewarded.
"This real estate market is like a ladder. First the lowest rung breaks, and then the next, and then the next, and so on. Now we're hitting the upper part of the middle tier but the breakage isn't going to stop until we reach the top. Get it? Be patient and you will be rewarded."
Spoken by a permabear in 2011, as it was similarly spoken by a permabear in 1997. I wonder if that 1997 permabear after 14 years of renting, thinks he will be "rewarded"?
6:12 AM
You know the phrase, "past performance is not an indication of future returns."
All these back and forth are just opinions. Let's put our money where our mouth is. I am betting on buying 5 years from now, maybe longer. Why don't you buy now and in 5 years we can see who was better off. That is unless you can't buy because you have to sell your house first.
Thanks but I bought back in 1999. At that time, there were (a few) of the doomer veterans from the 1992 bubble who told me not to buy because of this or that parade of horrors. Yet for me, 7 years of renting was enough.
I know a few others who had been renting as long as I did, who thought I was going to lose my shirt. As far as I know, they are still renting today, a full 19 years later.
Come to think of it, you sound awfully reminiscent of some of the guys I heard on the early days of the AOL chats on "LA housing market"...You havent been renting since 1992 have you?
6:12 AM
If you bought at the height of tech bubble, are you better off now 10 years after the fact? Is the NASDAQ back to 5000 yet? If you bought at the height of housing bubble will you be better off 10 years from today? Your argument that missing the 1997 housing bottom should guide your hand in the current housing downturn is flawed.
"House well over a million. Rent $2,750. See what patience gets you? Now it's time to be patient on the buy side. And yes, it will be all cash."
I call BS. Any house worth "well over a million" today would easily command $5k in rent. Easily.
"I know that in certain zip codes in Beverly Hills it is more than 10-to-1 bigger than what is shown on the MLS."
Ever heard of backing up your allegations with some actual proof?
"If you bought at the height of tech bubble, are you better off now 10 years after the fact? Is the NASDAQ back to 5000 yet? If you bought at the height of housing bubble will you be better off 10 years from today? Your argument that missing the 1997 housing bottom should guide your hand in the current housing downturn is flawed."
Not really. You see, this thing you pay called "rent" is eternal. If you do not buy, you will pay rent til the day you die, be it now or 55 years from now.
On the contrary, I only have 16 more years to go til I pay nothing more than taxes, ins & maintenance (i.e. a small fraction of what I pay now).
Thats why I dont get this "Ill rent for 10 more years" mentality. That makes sense, if and only if, the latter cost of buying the house, offsets the interim rent payments...a serious specualtive gamble.
After all, the guys who were balking at paying 300K back in 1997
have paid (bare minimum) 250K in rent over the last 14 years, and to add insult to injury, the same homes are now well over 600K.
Still, suppose that houses did not explode in price over the last 14 years and stayed at 300K, which would you have rather done:
(A) pay 300K for a house,
or
(B) pay 250K in rent over 14 years AND THEN pay 300K for a house
The answer is pretty simple really.
Now granted, if things were still in "meltdown mode" the way they were in 2007-2009 I would be sitting on the sidelines too. However, as we have been in "wretchedly awful, not recovering, yet non crashing" mode for over 2 years now, these "im gonna rent for 10 more years" arguments sound an awful lot like what I heard back in 1997, and look how that turned out...
Foreclosure Radar has 66 homes listed in Manhattan Beach in foreclosure for over 1 year with only 2 on MLS. We can do this for all the westside zip codes, but I won't waste my time. You can look it up yourself. All the information you need is at your finder tips. For those who refuse to see are either so old that they don't know how to access this data, or refuse to see the truth.
Anon 2:29
I am no housing advocate, but I do like your argument about renting v. buying.
I bought when my rent was getting dangerously close to a mortgage payment. This is apples to apples , a small house to another (slightly) larger house.
This was 17 years ago.
I feel bad for young families now. It seems like even a small house is a fortune to buy in this market.
The economy is not good and people are scared, of losing jobs, stock market losses, etc.
The confidence factor is not there to buy if you will freak out when your house may lose value.
Thats why there are 3 things in my neighborhood:
1. All cash (developer??)
2. Parent $$$$ getting young families in
3. Long term outlook buyers (can weather some ups/downs in value)
"I call BS. Any house worth "well over a million" today would easily command $5k in rent. Easily."
I'm the one with this rent, and you're wrong. Probably rent FMV is more like $4k, but I got lucky. My balance sheet is extremely strong and my landlord is looking for someone with a long term rental view and so was willing to give me a great deal. If you're paying $5k then you didn't shop around appropriately.
I agree with the ladder analogy. The upper end of the middle of the ladder is breaking now. That's exactly what Latesummer's original post factually documents.
"The upper end of the middle of the ladder is breaking now. That's exactly what Latesummer's original post factually documents."
Ive heard its "breaking now" for a while now. The reasons for why have been "factually documented" for years as well.
Yet, every month or so, when prices still havent budged, he comes back and says its breaking..............now!!!!
Until a month later, when it still hasent broken and the answer is OK.........................................now!!!
It just seems like a never ending cycle of lather, rinse, repeat, the crushing meltdown always just around the next corner...
Sooooo, how many more false starts of "breaking now" before you conclude if it doesnt break "this time" it never will?
3 months?
6 months?
2 years?
10 years?
A lifetime????
For some the doom is always just over the horizon...
i have always like the mandeville canyon area of brentwood... seemed like some of the lowest priced homes for brentwood could be found there, especially in the upper reaches, and i've noticed the prices keep dropping. the 1.2 or 1.3 listing of a few years ago is down to 1 million or even in the 900s now. do the bears think these homes will actually sell for 700 [or less?!] in the next few years? just seems extremely unlikely... every neighborhood is different and even with the reduced conforming loan of 625... when you add the standard 20% down payment... there seems to be a bit of a floor set.
"Sorry 12:42, didn't lose any money in the stock market. Frankly, you don't have to be a genius to see when things don't make economic sense. And when they don't make sense, don't play. I guess I'm just a lot smarter than the average bear."
Im sure you didnt. Because there must have been clear "downward forces" you saw, causing you to time the stock market impeccably and get out in 2007. Good for you.
Likewise, you said there will be clear "upward forces plain for all to see" when the market turns.
Thus, my question is, what were the "upward forces, plain for all to see" you saw that caused you to re-enter the stockmarket on March 6, 2009, thereby capturing one of the largest gains in history?
There is nothing on the horizon that suggests real estate prices will rebound any time soon. Job creation is stuck, baby boomers are retiring, the federal and state governments are broke and cutting back, college grads are entering the work force (when they can get a job) with record debt, 23% of homes have mortgages that are underwater, jumbo loans were just lowered by $100K, banks are making it harder than ever to qualify for a mortgage, etc. The only positive factor at the moment is low interest rates. What good is that if you can't qualify for a loan? Where is the good news?
Exactly. When we do start to see some good news it will be time to start thinking about buying. Right now forget about it.
It was called Qe2. Completely artificial reason for a run up in the stock market. Am I the only one that sees this market manipulation? And isn't it obvious that housing prices in the upper end here in LA are still over inflated? I really don't think I'm that smart, but I'm not stupid. Can't you see that westside prices are going to continue to decline? Please stop trying to mislead people that now is a good time to buy. It isn't. Let's just address the question of how much more prices are going to decline and over what time period. Thanks.
"Can't you see that westside prices are going to continue to decline? Please stop trying to mislead people that now is a good time to buy. It isn't."
Uttered by a permabear in 2011, as it was uttered by a permabear in 1997.
The more things change, the more they same the same.
Anon 7:54, are you a real estate professional? The evidence seems quite clear that downward pressures will continue to erode house prices. What desperate hopes are you clinging to that keeps you in such denial?
Anon 7:54 is obviously in denial. just ignore him, and he eventually will go away, once he doesn't get any reaction to his "permabear" remarks. Obvious a loser with nothing else better to do. I will delete hime as much as possible. Don't let one idiot sidetrack the conversation here.
Latesummer2009, can I ask a favour? Could you disable the 'anon' label for posting?
I love coming here and reading the comments, but after a while the endless seas of 'anons' gets confusing and irritating.
I'm speedingpullet. I've always been speedingpullet. I'm not ashamed to use my normal inter-web handle here. Niether should anyone else.
Make one up if you have to, but it makes it really hard to follow arguments when it appears to all come from the same person.
If more people would register I would. I don't want to go the way of Santa Monica Distress Monitor, where they only have 2 posters and 3 comments.
What is so interesting is how long this mess has stretched out. I wouldn't be surprised if prices continue to decline on the westside for another 10 years, perhaps longer with the babyboomer downsizing. If the govt would have kept the price support at 417k, kept mark to market accounting for the banks, and not lowered interest rates so much, we'd be much closer to the bottom now. Say "hi" to Japan! This is going to be a long, long trip to reaching rational prices.
in response to Anonymous 10/7 @ 2:29: you are wrong wrong wrong. People were not AT ALL discouraged to buy back in 1997. I, along with every one of my friends (all with good jobs or profitable businesses and we were not in the minority), bought homes thoughout LA, OC, Bay area, Seattle, Reno, you name it--because it was affordable. My particular case was Manhattan Beach for around 350K, and I still firmly believe I overpaid by 20-30K. I have since long sold for anyone that may be (rightly) envious.
Basically, you do not know what you are talking about.
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