Saturday, February 28, 2009

King(s) Me!

A quick, observational post on a Saturday. For those readers who have asked about the new Milano at Laurel condo building, stayed tuned. Lots going on with that one - requires a little more homework, but I'll have something up before the end of the weekend.

I did a quick search on Redfin - my favorite real estate site these days - for condos and townhomes priced between $300k and $1mm in WeHo.

177 results came back.

Of those, a whopping 12% (20) were units on Kings Road, including four buildings with multiple units for sale.

I usually don't drive up Kings Road, but just know it as "condo alley" (and for Kings Road Cafe!).

Maybe someone with more insight can share their views, but this looks like something we've seen during the still-early days of the real estate market decline. It's still all about location, location, location, and something about Kings Road seems to be making it a pawn in this game (sorry - too easy!).

Friday, February 27, 2009

Safety First

As some of you intrepid readers are learning, I actively follow some other real-estate related blogs, including SM Distress Monitor and Westside Bubble. Both of them do a very good job of keeping comments and conversations on track.

Inevitably, any converstion about housing in LA starts reaching into the areas of crime and homelessness. I'm generally going to stay away from those topics on this blog, since I think it results in flame wars in the comments section.

However, I do recognize that it's a consideration when purchasing (or renting) a place.

WeHo News has frequent links to the WeHo Sheriff's crime blotter, and you can directly access a map at the WeHo Sheriff's site that shows incidents of crime.

That's about the most I'll touch on that subject. Back to properties!

Thursday, February 26, 2009

At What Price Reality?

955 N Vista St.
3BR/2.5BA, 1558 sq ft.

REDUCED! BANK OWNED COSMETIC FIXER! Great opportunity to buy this older charmer located in desirable W. Hollywood neighborhood. Close to both Santa Monica Blvd & Melrose Ave. famous shops, restaurants & businesses. Newer bathrms & some kitchen cabinets. Hardwd floors through out. Fireplace in living room, sep. dining rm, breakfast area in kitchen. Garage was converted into a game room. House has been re-arranged, buyer is to check for all permits. Needs TLC, sold "AS IS". See remarks for details

Sold: 7/98 - $288,000

Sold: 12/05 - $827,500

Sold: 11/06 - $1,200,000

Sold (Bank buyback?): 12/07 - $995,000

Listed: 8/08 - $815,900

Reduced: 1/09 - $759,900

There is so much going on with this I don't even know where to start. Maybe just listing some of the points is easier. And remember, we're talking about a small house on a typical but tiny lot in 90046, on what I think is a fairly busy street, since Vista actually merges into Gardner at Santa Monica, with a couple decent-sized condo buildings in your backyard.

1) Look at the price in 1998.
Our friends over at Westside Bubble always post some good charts from Case-Shiller and DataQuick illustrating the market cycles going back to the early 80s. You could argue that 1998 - maybe a couple years earlier - represented the low of the last cycle. Not that I think prices for a single family in a decent part of WeHo will drop below $300k, but if you take the 1998 price and add a reasonable 5% per year typical real estate appreciation, you get a number around $450k. Just sayin' ...

2) "Sold as-is", "Needs TLC", "The house has been 'rearranged'"???
Alarm bells going off all over the place here. From the pictures, it looks like there were some upgrades done - maybe the recent owner ran out of money. The problem is, how much will it cost to "fix"? Does a teardown even make sense here above a price of maybe half of listing?

3) Allegedly this place appreciated almost $400k in less than a year back in 2005-2006.
There have been a number of stories about appraisal fraud during the boom years. I would guess this falls into that category.

Back to one of the main themes on this blog ... who SHOULD be able to afford a place like this? Assuming it needs at least another $100k in improvements, not only would the buyer need $170k to put down, but the monthly cost (pre-tax) would be approximately $4700/mo, meaning somewhere between a $175-200k annual income to reasonably afford. That income level probably puts you in the top 5% of earners in the US. And you can afford this slice of heaven?

Wednesday, February 25, 2009

Some Press from a True Professional

Many thanks to my compatriate at Santa Monica Distress Monitor for making mention of the debut of WeHo Homes on his site. Be sure to check out his extremely popular blog for all things Santa Monica property-related!

Sunday, February 22, 2009

If Real Estate Was Wine & Cheese ...

8467 Willoughby Ave, 90069
3BR/2BA, 1,562 sq ft

Last Sale: 11/15/06 - $925,000
Listed: 4/11/08 - $1,030,000

Reduced: 6/11/08 - $999,000

Reduced: 9/16/08 - $969,000

Reduced: 2/4/09 - $949,000

Unfortunately, real estate does not age well.

Here we have a property that was purchased near the top of the cycle. From the listing it appears that the current owners did some upgrades, so their listing in April of last year was probably priced to get them out even or at a slight loss, figuring commissions.

In the current down cycle, I haven't been one to think a property's rotten if it's been listed for several months. During the run-up in values (I'll try hard to not go with the overused but accurate "bubble" terminology on the blog), if a property was listed for more than 2 weeks, it was a fluke. However, in normal real estate markets, properties are generally listed for 3-6 months.

The problem with the current market, and languishing listings, is that sellers are either 1) delusional about the state of the market, 2) opting for a "death by a thousand papercuts" strategy in reducing the list price little by little, or 3) both 1 and 2.

Here we have a case of #3. A whopping 8% price cut in over 10 months in a rapidly (downward) moving real estate market is not going to get it done. Actually, I don't even find fault with the first set of reductions. It's the lack of price adjustment in the period between Sept and Feb that really hurts here. In fairness to the owners, there may not be much more room to move as they are certainly taking a decent loss at the current price.

Lesson to sellers: get over the psychology of selling at a loss and price realistically.

Not Feeling Fine in the "69"?

Address: 718 N. Croft Ave, 90069

Description: Only 5 Left! To experience Croft Villas @ Melrose Place is to experience the ultimate in urban L.A. lifestyle. 15 brand new luxury condos, high-end designer finishes, 3bd & 2ba, wd flrs, custom cabinets, Subzero & Bertazzoni appliances, washer/dryer hkps, FP, patios & views! Utilizing sophisticated style, elegance & quality at an exception & coveted location. Croft Villas is a collection of luxurious residences for people who appreciate convenience & demand the very best!

Here's something we're seeing a lot of recently - a building finished near or just after the top of the cycle, with two conflicting dynamics:
1) a number of owners who bought in early, and
2) a developer who is slashing prices

These look like large (1700-1800 sq ft), nicely-appointed condos in a good area of the 90069 - just off Melrose Place.

As the description states, there are 5 units remaining ... which have been on the market over a year at this point.

I couldn't find sale records on all 10 of the other units, so we may have a case here of "shadow" inventory as my counterparts over at Santa Monica Distress Monitor have correctly termed it, with developers holding back some units so as not to flood the market.

It looks like a few of these units sold in early to mid 2008, with prices ranging from approx $900k up to $1.4mm, or $650-750/sq ft.

Now the developer is (finally) cutting prices, in some cases up to $300k off the original price, bringing the price/sq ft to $550-650, depending on the unit.

Back to our conflicting market forces: Buyers who were in early are at least out their downpayment, if not more, at this point. It will be interesting to see if there is "foreclosure creep" in the building in the near future. As for the developers? They seem to be getting the message, but are they still behind the curve on price cuts?

Remember, here at WeHo-Ho, we like to ask two questions:
1) what would these units rent for?
2) who (meaning what income level) should live here?

With some reasonable assumptions for interest rates, tax deductions, and home owners' fees, the monthly nut for a $1mm place (average price of the remaining units) is around $4500/mo. Draw your own conclusions as to what these would rent for (I say $3500-4000) and what kind of income level supports that payment (probably around $250k/yr).

The larger issue in these newer buildings is - will the earlier units foreclose, and what does that mean to the homeowners reserves and therefore, the building upkeep?

A Disclaimer: Blogs do NOT Equal "Full Due Diligence"

Just when I think I'm technologically savvy, I get foiled by Blogger ... or maybe I'm just being lazy.

In any case, until I get a "Disclaimer" header up on WeHo-Ho, let this serve as notice, in case there was any question:

I don't believe blogs should be a place for libel, slander and all kinds of other unseemly activity. That said, the information and opinions presented on here are for discussion and conversation, and should not be taken as gospel.

In other words: DO YOUR OWN HOMEWORK
(But thanks for using WeHo-Ho as a reference point!)

Now that's out of the way, let's get on with it already ...

If a Blog Appears on the Internet ...

Timing, as they say, is everything.

Or nothing, depending on your perspective.

One thing's for sure - hindsight's at least 20-20, if not LASIK-enhanced 20-15.

Given where we are in the real estate cycle - although, that's the question, isn't it? - it probably would have been "cooler" if I had started this blog a year ago, which in retrospect looks like the top of the real estate market in most parts of L.A. for the foreseeable future. Heck, it would have been better if I started it in 1990, when things were falling apart in the real estate market during the last cycle. But, then again, Al Gore hadn't yet invented the Internet, which would have made blogging difficult.

I'm an avid watcher of markets in general, and in particular, the psychology associated with them, most notably the "fear and greed" cycles that inevitably occur.

Without much further ado, this blog will - a surprise, given the title, I know - focus on residential property in West Hollywood, or the area loosely in and around West Hollywood.

This blog will be shaped by my beliefs, which are generally:

- We've not yet reached the bottom for real estate (way to go out on a limb, I know)

- The cost of rent vs. cost of ownership metric must come back into balance

- A good real-world check on the price of a property is the question "Who SHOULD be able to afford it?" (more on that in later posts)

- Foreclosed properties are, by and large, no bargain yet

- We'll look back in 5-7 years and realize the "bottom" was reached sometime during that period, but who knows when

Mostly, I'll focus on highlighting properties in the area. Feel free to email me with suggestions, and I'll do my best to oblige.

And, of course, back to the title of this post, here's hoping this blog doesn't fall without making a sound!