Sunday, February 22, 2009

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?
and
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?

5 comments:

Anonymous said...

How do you figure a monthly nut of $4500/month for a $1mm property? Even with 20% down at, $800,000 at 6 percent interest results in mortgage + property taxes of $5,630. No clue what HOAs are but I would guess $500. Is the $1500 difference all tax deductions?

Anonymous said...

I'm curious about what will become of these newer developments, too. My particular fascination is with the Milano, over on Laurel south of Fountain. While a recent Steve Martin editorial in the WeHo news implies that at least one unit has been purchased:
http://wehonews.com/z/wehonews/archive/page.php?articleID=2980
it sure doesn't look that way to me, and I walk my dog past this faux-Tuscan (or is it some variation of French?) hulk quite often, and have yet to see evidence of any occupants. Initially, units were priced nort of a million apiece, now the lowest priced ones are at $689K, according to their (latest) website:
http://themilanoatlaurel.com/description.html


Considering the political upheaval this development created while the city council debated the demolition permit (and the displacement of the renters at the previous building, which truly was kind of lovely) and its aftermath, this has got to be the "poster child" for WeHo overdevelopment, IMHO.

WeHo Homes said...

To Anon at 8:29 ...

Fair enough, the monthly nut is probably somewhere between $4500 and $5000 on a tax-adjusted basis. I was guessing $350/mo for HOAs given that the building doesn't seem to have a lot of common amenities. And depending on the % down, you might qualify for a lower rate. Either way, certainly higher than fair market rent.

Anon at 9:27 ... thanks, I will do a post on the Milano shortly.

Anonymous said...

Looking forward to more news about the so far relatively empty Milano fiasco on Laurel. More than one of the 16 units appears to be occupied, with one having sold for around $640,000 or so.

WeHo Homes said...

I'll try to do a drive-by on the Milano this weekend followed by some additional homework and a posting. Stay tuned.