Tuesday, March 13, 2012

Buying During An Election Year

With the presidential election less than than eight months away, the perception is the economy may have turned the corner and is on the upswing. Now that the Dow Jones is hitting 13,000, some are venturing into the housing market this Spring. You might want to ask yourself whether or not, this is a good time to buy. Obviously, that is a very personal decision based on your individual situation, but don't underestimate the government manipulation of numbers. The economy being the top concern of the presidential election, it is easy to put lipstick on a pig. Perhaps the most important question you might ask is "will prices shoot up in another year?" Is it worth the risk to jump in now? Even if we are at the bottom (which I don't believe), historically the bottoms drags on for years. No matter who is elected, there's a good chance they will sacrifice taxpayers for the good of the "economy" by eventually raising interest rates. It's no secret the government has artificially propped the housing market by keeping interest low and not forcing banks to foreclose on expensive properties.

If you find the house you have always wanted, can afford the payments, have a secure job and don't plan on moving for long while, dive in. But if you fear losing your 20% down payment, you might want to wait at least until after the election. The Fed could throw housing under the bus by rasing interest rates to spur foreign investment.

Here are a few recent sales in Venice that demonstrate some roll back prices.

 "Caveat Emptor" (Buyer Beware).


819 Commonwealth Ave. 90291
2+2, 1271 sqft
YB 1928, 4200 sqft Lot
SOLD on 9/3/207 for $755,000
SOLD on 2/16/12 for $550,000, $433/sqft (-28.2%)
(2004 Price) C

532 Rialto Ave. 90291
2+2, 1134 sqft
YB 1923, 2552 sqft Lot
SOLD on 10/19/06 for $1,400,000
SOLD on 3/9/12 for $919,000, $810/sqft (-34.4%)
(2003 Price) C

523 Rialto Ave. 90291
5+3, 2645 sqft
YB 1910, 2615 sqft Lot
SOLD on 2/23/12 for $1,107,000, $419/sqft
(2002 Price) B


If you have more information of these, please post it.

26 comments:

Anonymous said...

Latesummer
i agree with you - i just saw someone mention that the spec house at 22nd and Montana (the cape cod) just sold for 9.1 million. Can you check this one out - is it true - seems crazy to me

Latesummer2009 said...

The property is located at the corner of Georgina & 22nd. As far as I can see it is brand new construction and listed for sale for $9,100,000. It is grossly overbuilt. for the lot in my opinion. No front yard and a very small back yard as the lot has been maximized. Pushing the envelope for the neighborhood. Haven't seen the inside yet but, don't think it fetches any price with an 8 or 9 at the front. Maybe a 6 or a 7.

Anonymous said...

Latesummer thanks
Anyone else have a sense for what the speccie on the corner of 22nd and Georgina will go for? Someone else built a huge cape cod / resort hotel style single family home on a triple lot on the Strand in Manhattan Beach recently - At least if they are going to build that big it is nice to know that they are using a more traditional architectural style rather than a disruptive glass and steel edifice which sticks out

Anonymous said...

Late Summer - did you read Matt Yglesias's argument that cities like Santa Monica should re zone for super high density - really tall condo buildings?

Interested in your comment. Yglesias is a smart guy

Also did you drive by the spec house at 22nd and Georgina?

13 thousand sq foot lot - raw land worth about 3 million today (and purchased for 3 million in 2008)

the builder probably spent 2.0 million all in when it comes to hard and soft costs so if he sells it for under 5 million he is taking a massive loss

Anonymous said...

corner of 22nd and GEORGINA

Interesting - that is a 13 thousand sq foot lot

Today the normal nine thousand sq foot lots sell for 2.0 million
so this lot if 44% bigger

1.44 times 2.0 million means a 2.89 million dollar land value today.

So all in all, probably the value of the land hasn't moved since the developer bought it

If he bought land for 3.0 and this closes escrow at 8.0 million, how much is the developer's profit after paying the hard and soft costs and the broker's vig?

Anonymous said...

Why is Rialto a desirable street? Other than proximity to AK...?

Anonymous said...

Latesummer -
could you check out the house that just sold at 22nd and Georgina

I just saw this on the web

"The big news this week is the Pence Hathorn Silver sale of 2202 Georgina. Construction began in 2010 on this magnificent apx. 11,000 sq. ft. home. It has 3 levels, 6 bedrooms (den/ office can be 7th bedroom), 8 bathrooms and after nearly 2 years was sold to a local resident"


Latesummer, on the same street are a number of double lots. For Example, just North of Georgina is the house of the US Ambassador to France. he bought the house next door and tore it down ino order to have a large side yard. The large side yard is clearly visible from the sidewalk

Would be best to have more discussion of specific houses that are on the market - to augment macro

Anonymous said...

Latesummer -
could you check out the house that just sold at 22nd and Georgina

I just saw this on the web

"The big news this week is the Pence Hathorn Silver sale of 2202 Georgina. Construction began in 2010 on this magnificent apx. 11,000 sq. ft. home. It has 3 levels, 6 bedrooms (den/ office can be 7th bedroom), 8 bathrooms and after nearly 2 years was sold to a local resident"


Latesummer, on the same street are a number of double lots. For Example, just North of Georgina is the house of the US Ambassador to France. he bought the house next door and tore it down ino order to have a large side yard. The large side yard is clearly visible from the sidewalk

Would be best to have more discussion of specific houses that are on the market - to augment macro

Anonymous said...

What is the opinion of houses in Brentwood in the 900K to 1.2M range. Are there any decent ones? What is the best area of Brentwood for this price?

Anonymous said...

I know you deal with mainly the westside but what is your take on Ventura County (Oak Park, Agoura, Westlake Village, Thousand Oaks), do you think it is time to buy there? Thanks in advance!

Anonymous said...

Public schools are much much better in Ventura County. But the commute from Ventura county to a job in Santa Monica is very painful

Anonymous said...

Since it is clear that people on this board are still most interested in the premium neighborhoods and not so much interested in Ventura

Could you comment pls on the evidence I found that we are NOT yet at rental parity

standard three thousand square foot homes in the Franklin 90402 today sell for between 2.2 and 2.7 million dollars

these exact same homes today rent for between 8 thousand a month and 12 thousand a month

Putting it even more simply, a house that sells today for 2.4 will rent for ten thousand a month

Far from rental parity

latesummer2009 said...

Unfortunately I'm not real familiar with prices in Ventura County. Any place that has approached 50% off of 2007 pricing is worth a serious consideration.

Santa Monica SFRs in 90402 and 90403 are not even close to that. And the cost of buying is definitely not equal to renting there, no matter what anyone says.

Anonymous said...

Our esteemed moderator is correct

Renting for ten thousand a month beats buying for 2.4

Even if you ignore the transaction costs

latesummer2009 said...

Not to mention factoring in the risk of losing some or all of your down payment.

Anonymous said...

The government would have NOTHING to gain by "throwing housing under the bus"?

"Spurring foreign investment?!" How would bankrupting and foreclosing on Americans, so Asian and Indian buyers buy up property and rent to Americans help our economy?!?

If anything, I think after the election the government will take more extreme measures to PROP up housing. This will enable people to be less afraid to upgrade their homes and pump some money into the economy. Instead of staying in on Friday and Saturday evenings watching the leaky faucet drip.

Anonymous said...

You will be waiting 10-20 years and our society will be in shambles before million dollar homes in Santa Monica reach "median incomes".

Median income in Santa Monica is like $67K... Median income in Porter Ranch, CA is $121K. By your logic... Housing should be far cheaper in Santa Monica than in Porter Ranch, CA.

Median income is a false barometer for home prices.

Anonymous said...

I agree that median income is a false barometer

Let me give you a good example, my son and his wife live in the meat packing district of NYC

Median income is very low, the jobs in the meat packing district pay very little money - but the average condo in that district is 1400 a square foot

the buyers of condos don't earn an income in the district

simple as that

anyway, in a more family friendly neighborhood of manhattan near zabars condos cost less

Anyway, a family sized condo for a husband wife and two kids is 1900 square feet
The average condo of this size near zabars on the upper west side costs around 2.1 million (much less than meat packing district)

The same exact 1900 square foot condo in Franklin South of Montana is one million dollars

So first of all you pay 2.1 on upper west side of manhattan vs 1.0 for franklin. Then of course there are no good public schools on the upper west side of manhattan so you are paying $70,000 a year for private school for your two kids in manhattan vs the franklin school which is free

When you add up the housing cost difference and the school cost difference you see that the basics of life cost ONE THIRD as much in Santa Monica all in vs upper west side of manhattan

having kids is much more affordable in Franklin santa monica than in upper west side of manhattan

this is the reason why so so many couples in manhattan in their 40s have no children while you will find very few couples in their 40s in north santa monica with no children.

Google :affordable family formation - santa monica beats manhattan hands down and affordable family formation is what drives family sizes in the usa

Anonymous said...

Most people that live in The Upper West Side of Manhattan are not going to want to live in whitebread 90402. Sorry, try again.

Anonymous said...

6:41 is correct - Franklin school district is not a perfect substitute for the Upper w Side. That being said, Franklin school district is a lot less money.

First of all, your primary residence costs less for same square footage in Franklin, second of all you get free public schools. Third of all, no one who lives in Franklin has to own a second summer home in the Hamptons but many people on Upper w side feel they must own in the hamptons

so add it up. NYC living means spending for the hamptons house, the primary residence and the private schools.

In santa monica, pay one price for one residence . no extra hamptons cost and no extra private school cost.

Anonymous said...

Latesummer, have you looked at the price moevements in the past ?


I remember back in 1983 the teardowns on my block (90402) sold for $300k. Then in 1989 they sold for $900k

So the people that bought in 1983 for all cash made 3x their money in six years.

Of course no one bought for all cash, they typically put $100k down and borrowed $200k

So on that $100k they put down they made a profit of $600k.

So the typical person who bought in 1983 made a six bagger on their capital at risk. Six bagger in six years.


then of course from 1989 to 2005 the price of tear downs fell from 900k to 600k

people who bought in 1989 and sold in 2005 lost their ENTIRE down payment over six years. True disaster.

NO one can predict the cycles

latesummer2009 said...

It's interesting to see the 6 year cycles. Although, this time we had a monster bubble like no other. As far as prices go, history usually repeats itself. It will be longer than 6 years though, in my book. I don't see prices rising anytime soon and with a 20,000,000 home overhang in the U.S, it will take some time to work through all of those.

Anonymous said...

This just in:

Santa Monica Distress Monitor Blogger Buys House
Cites Rental Parity, Low Inventory

Hmm...

Anonymous said...

Needless to say, I guess he will be changing the name of his blog :-)

Anonymous said...

Yes, a name change may be in order. Further checking shows that real estate bubble bloggers in New Jersey, Portland, Seattle, and San Diego have also purchased homes. Now, Santa Monica. Is this some kind of trend?

Latesummer 2009 said...

Just saw a 2+1 in Venice on a 5000 ft lot listed for $369,000! It will be interesting to see what it goes for.First house in that area on a good sized lot in the $300,000s. It's an auction someone is trying to dump it.