R & R ...

Your friendly blogger will be taking some much-needed time away for the next couple of weeks.

Look forward to returning in early November rejuvenated and ready to see if the summer "selling season" has morphed into a "back to reality" fall (and maybe leading into a "winter of continued discontent" ... sorry, couldn't resist ...)

The Condo-That's-An-Alternative

Out of curiosity, I looked in the general neighborhood of the last property we featured, which is pitched as a "condo alternative", to see if there was a condo to which it would be the alternative (if that makes sense) ...

1345 N. Hayworth Ave
$615,000
2BR + 2BA
1,013 sq ft
HOA Fees: $390/mo

Beautifully restored 2 bed, 2 bath condo in the vintage Hayworth Gardens. One of the best streets in West Hollywood. Light and bright second floor unit. Loads of Character with arched doorways, dark hardwood floors, high ceilings and a wood burning fireplace. Dining room too Tree top views from the vintage French windows. Upgraded baths. Remodeled kitchen has a butcher block counter and stainless steel appliances. Spacious floor plan has great flow.

Sold: 7/26/00 - $259,000

Sold: 11/30/04 - $501,000

Sold: 2/29/08 - $586,500

A few things here:
- Is the 2004 price before the upgrades they mentioned?
- The 2004 to 2008 appreciation seems modest for the peak of the bubble (although prices had started to dip a bit in early '08

In any case, here's a potential "alternative" to the SFR. Better location with the condo, similar sizing to the SFR, although of course, no yard.

Attractive "Condo Alternative"?

1307 N. Fairfax (90046)
$595,000
2 BR / 2BA
1,020 sq ft
Lot Size: 3,450 sq ft

AN URBAN OASIS COMPLETELY GATED, HEDGED & VERY PRIVATE. Short of a fresh coat of paint this property is totally turnkey and offers an amazing opportunity to buy a house for the price of a condo. tranquil fountain entry, High ceilings in the industrial, fully equipped kitchen w/Wolf range. Living room with fireplace. Recessed lighting and built in sound system throughout. Spiral staircase to rooftop. Garage converted to guest/art/office studio, 3 outdoor garden areas, great indoor/outdoor flow.

Sold: 1/26/01 - $355,000

An interesting property here. Cons are that you're on the busy (to put it lightly) corner of Fairfax and Fountain, and with the garage converted to a studio, parking must be on the street (permit).

On Edit: Thanks to Full Disclosure for pointing out that my quick drive-by of the address location was incorrect; it's actually one house in from the corner.

That said, you have a decent corner lot, a property seemingly set back enough from the street, and redone inside. You're also truly in WeHo, as odd addresses in this section of Fairfax are in the city boundaries.

Redfin shows that condos in the same size range in 90046, over the past 6 months, have sold for an average of approx $450/ft. That would put this place at just over $450k, but of course, you have a stand-alone house and property. So determine what that's worth to you.

I have not seen this property, but am betting that it will go fairly quickly at this price or slightly lower. Of course, I believe we'll see similarly-sized condos priced in the mid-$300s when all is said and done, which might make $600k for a slice of Fountain/Fairfax heaven seem a bit steep a year or two from now. But, with conforming loans hovering at 5% and the tax credit, it's certainly "affordable".

Stop Yelling About "Market Value"!!!

1100 Alta Loma Rd., #801 (90069)
$999,000
2BR / 2.5BA
2,252 sq ft
HOA: $1,641/mo (full-service bldg)
Days on Market: 114

THIS IS A BLOW OUT SALE! PRICE WAY BELOW MARKET VALUE. GREAT VALUE. CLASSICAL CONTEMPORARY STYLE. DESIRABLE TWO BEDROOM AND DEN FLOOR PLAN. GORGEOUS FLOORS THRU-OUT. STATE-OF-THE-ART KITCHEN. AMAZING NATURAL LIGHT. PRESTIGIOUS FULL SERVICE BUILDING WITH POOL, TENNIS COURT, CONCIERGE. VIEWS FROM EVERY ROOM. MASTER SUITE WITH GUEST BEDROOM SUITE PLUS DEN/LIBRARY. LOVELY LANDSCAPED TERRACE. MOTIVATED SELLER.

Sold: 1/14/98 - $278,000

Sold: 8/15/03 - $895,000

Sold: 8/18/05 - $1,550,000

Listed: 6/12/09 - $1,345,000

Reduced: 10/2/09 - to current price


The sales price run-ups speak for themselves here, and yes, it does look like the 2005 price was a "real" sale, although based on some quick research, the buyer is probably one who, if they want a property, don't have to care much about price.

That said, what about "market value"? In my book, the definition is "the price at which a transaction will clear the market". Of course, that definition can move around fairly quickly in uncertain times. Was the "market value" $1.5mm in 2005? Of course - that's the price someone was willing to pay. Of course, we'll be exiting the funny money times soon enough. I'd look for pricing to settle below the 2003 price eventually. Yep, that's a 50% reduction in the 90069.

Papercuts in the 90069

We last featured the new-construction condo complex "841 Westmount Townhomes" in a June post, where we wondered if a greater than 40% reduction from original bubble list pricing would be market-clearing.

These are "new" construction only in the sense that some are unsold - from the info I could find, this project started selling in early 2008.

There are 16 total units, all 2+2, 3 level townhomes ranging in size from approx 1200 to 1600 sq ft.

As of June, a real estate broker's blog was indicating that 5 units had been sold, with one pending. I show no public sale records for any units in the building - wonder if they've been leasing them?

And now, we have anther round of minor reductions on 4 of the units - to the tune of 3% or so, bringing some into the low $700 to mid $800k range.

Will this be enough? Next door at 843 Westmount, looks like the "summer selling season" was moderately successful for the "Westmount Oasis", with a 2+3, 1500 sq ft unit selling for $800k in July, and a similarly-sized unit selling for $775k in early Sept.

Anyone seen either or both properties?

I Got Your Pride of Ownership Right Here ...

8709 Sherwood Dr. (90069)
$572,300 - bank owned
2BR / 1 BA
765 sq ft
Lot Size: 2300 sq ft

Great find in a highly desirable area. This 2 BR/1 BA home is ready for your touches. Bath has been redone. Close to trendy shopping & dining! lInformation herein is not verified by agent. Buyer to verify all information & rely on their findings. Offers must be submitted on CAR form w/pre-approval (NOT pre-qual), copy of earnest money check, proof of funds (if cash offer) & agency disclosure. For guarantee receipt of your offer please check private remarks for fax cover & faxing instructions.

Bank Buyback: 1/13/09 - $588,720

We'll go ahead and make the informed assumption that this is an REO, given the wording in the description. Cause, you know, we wouldn't want to disclose that, or anything ...

In fairness, there was no ubiquitous "pride of ownership" reference in the description. I just always find that phrase hilarious, in a "what-you-mean-to-say is buyers for properties at this level are too poor to afford a real house" kind of way.

Almost $600k. For a 765 sq ft property. With a lot size maybe allowing you to a little more than double the footprint while still having some semblance of a yard (someone can enlighten me on the restrictions on building vertically).

Let's say you doubled the size, at approx $300k/ft construction costs. That's just over $200k, plus permitting, other misc costs, overruns, landscaping, etc. So call it $300k, or around $900k at the current list price.

For comparable purposes, the REO at 8616 Sherwood, a 1400 sq ft new construction, sold for $810k in early June, although it may have had some of the "it was originally listed for over $1mm, it must be a deal" psychology.

Also, 8625 Rugby, just up the street, a 1+1, 884 sq ft SFR, sold for just over $600k in early August.

Get the Picture?

I'm feeling a little anal-ytical today, so indulge me - there will be a point, I promise ...

We spend a decent amount of time using words like "bubble", and "rollback", and "funny money" to talk about what happened over the past 7-10 years in the real estate market, and to try and paint some picture of what "normal" price levels should and/or will look like.

Of course, this is anyone's guess, not only based on whether you fall on the bullish or bearish side of things, but also based on nuances like what home affordability should be vs. income or rental levels, when the "bubble" really started, where interest rates will go, etc.

One thing's clear to this blogger ... when you look at examples that illustrate 1) how frothy the market of the 2000-2007 time frame was, 2) how easy the money was during that time period, and 3) what history might dictate, you conclude that we have a ways to go in terms of declines. And no, it's not different this time.

So with that, here's a picture of all three. And yeah, it's a condo, and no one should ever buy a condo, blah, blah blah.

637 N. West Knoll Dr #202 (90069)
$560,000
2BR / 2BA
1,156 sq ft

Super clean split bedroom style centrally located in WeHo literally steps to Urth Caffe, Le Pain & the fashion district on Melrose. Located on the 2nd flr w/N facing balcony & views of the Hollywood Hills. A generous size kitchen opens to din & liv areas. Bedrooms are suites w/walk-in closets. Plenty of add'l closets as well. Gated prkg with tandem spots, extra storage in garage. Bldg has been extensively remodeled w/new railings & dbl-pain windows. Not a short-sale or foreclosure

Sold: 4/22/05 - $505,000 (95% financing)

Sold: 12/14/04 - $400,300 (4 months, 25% increase)

Sold: 4/88 - $157,000

Clean-looking, OK-sized condo, good stretch of WeHo. "Not a short sale or foreclosure". So it's got that going for it.

In the words of Jules from Pulp Fiction, "allow me to retort":

1. You're trying to get the agent's commission plus a little back off of a 2005 sale, where we're already seeing 2005 rollbacks. And that price was 25% above the price from merely 4 months prior

2. 95% financing on a half-million dollar property. Sounds like a good title for a case study from a finance textbook 10 years from now. Or, the name of one of Angelo Mozilo's boats.

3. At the $560k offer price, the 3x income rule of thumb means someone earning just under $200k "can" afford this. Really? We ain't in 2006 anymore, kids. Despite what the "but the entertainment crowd", "but the SLS Hotel lobby is crowded", etc etc crowd would have you believe, $200k is still a decent amount of money. Ask a laid-off attorney. And oh yeah, it gets you just under 1200 sq ft.

Also pencils out to somewhere in the $2700/mo after-tax ($3300 before) range. Check Craigslist - bet you can find a comparable rental for around $2,000.

4. $157k in 1988 was near-peak pricing for that time, but let's say, for the sake of argument, it was a "normal" level. Here's where today's pricing "should" be with the following annual inflation/appreciation assumptions from 1988:

3% - $290k
4% - $360k
5% - $440k

Draw your own conclusions.

With all that said, let me step back and say that I am, most certainly, a capitalist. I have no issue with sellers listing their properties at a level they think the market will bear, regardless of how delusional I think it may be. Opinions make markets, and if there's a buyer willing to pay a certain price, then that's what the property's worth, damn what I say.

However, recognizing a market that's moved away from you (vs. denial of that) is another important aspect of capitalism - the whole supply and demand thing.

So, if there are no takers at this level, how long will it take the sellers to lower the price? That's of more interest. This isn't a short sale or REO - yet ...

But, who knows, maybe "cash for clunker homes" - above the tax credits, etc - will be the next program. First my car, then my washing machine, now my condo!