A Sellers' Market???

Thanks to "Full Disclosure", who tipped us off to this listing, with a description reminiscent of 2004-2006:

8535 N. West Knoll Dr #115 (90069)
$499,000
2BR / 2BA, 1171 sq ft
($426/ft)

Drastically reduced; seller needs to sell but will not negotiate below new asking price. Sunny, cheerful, newly painted, partially updated, front facing, very private, sits one floor above the street level, only one common wall, best floor plan. Strong HOA w/big reserves, well maintained bldg, great pool area, side-by-side parking. Prime WH location. Priced to sell, sellers bought another property.

Sold: 2/90 - $195,000

Listed: 11/08 - $549,000

Reduced: 4/09 - $499,000


If these sellers are the same people who bought in 1990, you'd think they wouldn't "not negotiate", although everyone has personal reasons that aren't apparent by just looking at numbers. Just the juxtaposition of "Needs to sell" and "will not negotiate" are hilarious. And "Drastically reduced"? Really? A whopping 9%? Comedy gold!

Of course, the last laugh may be on those of us having a go at this listing ... it shows "Looking for Backup Offers" as of the most recent update. Will be interesting to see if 1) it sells, and 2) if there was additional negotiation.

Ah, makes me long for the days when you'd go to an open house and the just-Botoxed, shiny-faced real estate agent would sternly remind you that offers would be due 7 minutes after the end of the open house, and bidding would start 5% ABOVE the list price. Good times!

Friday Night Fights Vol. 4 - To Re-Do or Not to Re-Do?

This week's installment of our "Friday Night Fights" feature pits two homes that are a block apart.

The difference? One is slightly larger, on a slightly larger lot, and appears to be completely re-done. The question is, for a small family looking for their first house, or to "upgrade" to a nice neighborhood in WeHo, which makes more sense - if either?

THE CHAMPION

9011 Dorrington Ave (90048)
$1,349,000
2BR / 2BA, 1446 sq ft
($933/ft)
5,074 sq ft lot

Artistic design & day-to-day functionality are combined to create this stunning 1930's Spanish style home. Features modern layout, sensational mstr ste. (w/wet room & custom-built closets), loft-style 2nd bedroom & bath, new hrdwd flrs, & sound-system thruout. Add'l living space is achieved w/a pvt., tiled & decked, outdoor living-rm & custom pool/spa area. Dream home is located on 1 of the most desirable blocks in W.Hollywood & provides close access to some of the best dining & shopping in LA

Sold: 12/99 - $437,500

Sold: 8/00 - $499,000

Sold: 6/03 - $835,000 (bubble, anyone?)

From the pictures, it looks evident that the house was completely re-done after the 2003 purchase. At first, I thought it was a scraper and the entire structure had been re-built, but it doesn't appear to be.

A couple things here - assuming not much was done to the place between 2000 and 2003, can we see the bubble in full effect here or what? And the reason for the $500k price increase since 2003? If this was a tear-down in 2003, I could see the seller trying to break even ($835k to buy the previous house, 1500 sq ft at $300/ft = $450k + landscaping etc), but really?

From the additional pictures, it does look like they did a nice job with this. The question is, who steps up with almost $350k down (yes, you'll need 25% down for a jumbo these days) and a monthly nut of around $7500/mo? An approx $300k/year annual income to support - does that feel right for this neighborhood?

THE CHALLENGER
8908 Dorrington Ave (90048)
$975,000
2BR / 1BA, 1140 sq ft
($855/ft)
4,000 sq ft lot

Lovely, charming home on prime Dorrington block. Living room with sunny double height window and wood burning fireplace. Beautiful hardwood floors. Dining room plus separate breakfast room. Utility room. Cozy interior sunporch (sq footage not included) off the master, opens to private yard and gardens. Many improvements and the possibilities are endless. No open houses.

No prior sale history found

Here we have what appears to be a livable, small house. The description seems to indicate that while some work has been done, there may be more to do. I couldn't find a prior sale on PropertyShark or Redfin, so we may have a flexible seller (low cost basis) here?

So, as someone looking for a small house in this neighborhood, what's more appealing - a completely re-done property that may be on the uppoer end of pricing for the area, or a smaller home that may be expanded at a lower cost?

"Rollback" gone mainstream

999 N. Doheny Dr. #1112
$599,000
1BR/1BA, 974 sq ft ($615/ft)
HOA: $740/mo

Description: This is a 2005 roll back price for a short time only. This is the largest one bedroom in the building with a 37 ft,.+ balcony to entertain and enjoy breathtaking panoramic views over Beverly Hills to the Ocean; the Getty Museum and beyond! Lots of closet space. Open area could be den, or formal dining room? New carpet. EZ to show. Rare offering of an upper floor. unit. Last unit of this size sold a short time ago for over $750K. and was gutted!

Sold: 9/89 - $220k

Sold: 10/97 - $182k (8 years, -17%)

Listed: 1/09 - $699k

Reduced: 2/09 - $679k

Reduced: 3/09 - $649k

Reduced: 4/09 - $599k

This is the first time I've seen the term "rollback" used by those in the RE biz - they must be catching on to the blogosphere ...

Obviously, "rollback" in this case must reference pricing of other units sold in 2005, since as we see from this unit's history, the last sale was in 1997, at a price which represented a nominal 17% decrease from its prior sale in 1989. Yes, Virginia, this is what happens when bubbles deflate/pop.

Another classic listing tactic - comparing this unit to one that sold "a short time ago" ... wonder if they mean unit #612, a same-sized unit which sold back in March of last year for $735k (OK, not "over $750k", but nice try). As we know, the world has changed since early last year, which was the very beginning of the RE market decline.

And, a recent sale of unit #303, a 1,010 sq ft 2BR/2BA in the same building (granted, not a high floor) took place last month for $425k, or $420/ft.

Rough monthly cost at this price (pre-tax)? $4100.

Friday Night Fights Vol 3. - Condo Renting vs. Owning

In this edition of our "Friday Night Fights" - OK, I know it's Saturday, cut some slack (!) - instead of looking at properties, let's pit renting against owning in the current environment, specifically looking at small to mid-size condos and their brethren, the apartment, since I'd argue these tend to be the types of units one compares when making the decision to rent vs. buy.

By "current environment", we mean one that has certainly seen real estate prices drop (although as we've seen, it could be argued that nicer LA neighborhoods still have further to fall), but have also seen rents contract given the economic climate.

Remember one of our themes here is the rental price vs. cost of ownership comparison/discrepancy. How do those numbers look these days?

THE CHAMPION
Renting

We'll call renting the "champion" because those who rented over the past few years are probably feeling pretty good about themselves (some would say smug) for not having stepped up to purchase a property in the 2006-2007 timeframe.

A very quick and unscientific check of Craigslist (which, of course, has its own drawbacks) yields the following general rental prices in the WeHo area:

1BRs - two distinct types of listings here. Your "basic" 1BRs seem to be renting in the $1400-1700/mo range. There are some listings for "high-end" 1BRs in the $2800-3500/mo range.

2BRs - tend to cluster in the $1800 - 2500/mo range, with a few higher-end listings around $3500-4000/mo.


THE CHALLENGER
Owning

Data from Redfin reveals the following:

1BRs - Average price for 1BRs on the market = $459,000

2BRs - Average price = $750,000

Instead of guessing as to current lending parameters, I headed over to Bankrate.com for a check on the current market.

With 20% down, you'd be looking at a rate of approximately 5.50%. Assuming $300 in HOA dues/mo, monthly pre-tax payments (PITI) look something like this:

1BR: $2800/mo
2BR: $4500/mo

Of course, post-tax numbers will be less and vary depending on situation, but you have to also factor in the opportunity cost of between $92,000 and $150,000 in down payment, in an environment where I'd argue the probability of the return on that money, in the capital markets, will be higher than 5.5%.

Depending on your view, the rent/own cost ratio is either slightly or significantly out of whack currently.

Hancock-ed

We featured the Hancock Loft project in our "Loft-y Expectations" post a couple weeks back. At the time, the project seemed to be nearing completion with the only pricing listed seeming to be a holdover from the initial sales effort ("starting in the $900s").

Well, thanks thanks to a tip from Bubblewatcher, our friends over at CurbedLA give us a pricing update, which puts these units starting in the "high $800s". Doesn't seem to be much of a market adjustment here.

And, of course, that's the "starting price" - which may get you, what, a view of the car wash?

The only unit I see listed thus far is #310, which has 2BR/2.5BA in 1532 sq ft, listed for $1,328,244 (really?) for a $867/ft pricing level.

So, let's do the math, kids ...

$265k down (at least)

$8500 (pre-tax)/mo with reasonable interest rate and HOA assumptions, meaning an approx $300k/year income to support.

I need some help here, preferably from those who might have seen these units - who exactly are they appealing to?

Another example that will be interesting to monitor - is "unique design" and high-end touches enough to bring in buyers with this kind of income?

"Recognizing Reality" Awards

Despite our themes on this blog suggesting that WeHo property values still have a ways to fall to reach "market clearing" prices, which will only happen when sellers embrace, or are forced to embrace, the reality of today's market, we don't mean to come across as completely negative.

This post was meant to feature some properties who seem to "get it" in terms of quickly cutting list prices during the initial listing period in recognition of the demand, or lack thereof, at higher prices.

But, guess what? As expected, there were VERY FEW properties that met the criteria. The banks holding REO properties are among the worst offenders, with either stale listings, or the slow downward death march of reducing prices ever so slightly while still being behind the curve.

However, here are three properties that deserve some kudos for relatively quick price "adjustments", as they say in the biz these days, and starting to get in touch with reality (although we think these are still overpriced).

They'll all receive some lovely parting gifts and the Homes in WeHo home game ...


8933 Ashcroft Ave (90048)
$1,395,000
3BR / 3.5BA
2,539 sq ft ($549/ft)

PRICE REDUCED AGAIN to SELL THIS WEEK! Hurry make appointment today! House with legal guest house (duplex) and pool!

Listed: 1/31/09 - $1,595,000

Reduced: 3/22/09 - $1,489,000

Reduced: 4/3/09 - $1,395,000 (-12.5% after 62 DOM)



1424 N. Crescent Hts. #40 (90046)
$795,000
2BR / 2BA
1,553 sq ft ($512/ft)

Opportunity to live in the Historic Granville Towers. 24 hr guarded, 1930's architecturally significant (by Leland Bryant), landmarked building just a few feet to spas, gyms, theater, restaurants, grocery stores and lots of nightlife! Wonderful views abound from this corner unit, light and bright and recently updated. Nine foot ceilings, hardwood floors and very open floorplan. Fantastic gardens with period fountains, fruit trees, roses, wisteria and sun decks.

Listed: 1/24/09 - $995,000

Reduced: 4/9/09 - $795,000 (-20% after 75 DOM)



964 Larrabee St. #201 (90069)
$299,000
1BR / 1BA
584 sq ft ($512/ft)

Charming gated front upper corner unit in prime location of West Hollywood. Recently updated kitchen with granite counter tops, stainless steel appliances, new cabinets and new floors. Recently renovated bathroom with spa tub and new tile floors with recently installed double paned glass. Complex features gated entry and parking, pool, spa and clubhouse. Nearby restaurants, hotels and West Hollywood nightlife. Tenant occupied until August 2009.

Listed: 1/27/09 - $349,000

Reduced: 3/5/09 - $329,000

Reduced: 3/25/09 - $319,000

Reduced: 3/31/09 - $299,000 (-14% after 63 DOM)

Green With Envy - UPDATE

We first profiled 825 N. Kings Rd in our "Green With Envy" post, where we speculated about the pricing of this relatively new construction, as well as the fact that it looked like there might be shadow inventory in the building.

Now, a couple updates:

After the first post, some commenters mentioned having seen the building and being impressed. Indeed, your friendly blogger missed this NY Times article from Jan 2008 praising the concept and architecture. Some very glowing reviews of the building, and this excerpt is telling - although we were talking about different times even in early 2008:

Mr. O’Herlihy and Mr. Loring were clearly right in gauging the pent-up demand: Most of the condos, which range from 1,270 to 1,900 square feet and average $1.1 million, sold during the two years of construction, largely on the basis of architect’s renderings posted online and on visits to the unfinished units. The penthouses have sold for $900 to $1,00 a square foot, according to Mr. Loring, among the highest prices ever paid for condominiums in West Hollywood.

“The prices probably wouldn’t comp out,” said Grant Leavitt, 27, a real estate developer and another member of the new generation who has bought an apartment at Habitat 825, for just under a million dollars: a bridge-like space, supported by oddly canted poles, that links two parts of the cement-board wing. “But that’s O.K.,” he continued. “There’s really nothing like this out there.”

So, have many of these types of buyers gone away given the changed economic climate? The residents profiled seemed to fit the celebrity/well-to-do young & hip clients that would fit this building. Any distress in that demographic?

And our second update, from the MLS recently ... Unit #11 was put up for sale at $995,000. This was one of the units that we suspected might be in the "shadow inventory", but after some digging and putting the pieces together, it looks like this unit last sold for $925,000 in pre-construction. Again, much different market now, but an increase over the price paid?

Will be interesting to see if unique buildings like this can hold onto their value as we see others, particularly new construction, continuing to track downward.

Friday Night Fights - Vol. 2 (High-end Condo edition)

Continuing our new Friday tradition of posting two WeHo properties that are very similar and "duking it out" for buyer attention in the marketplace, we present the following match up:

THE CHAMPION
616 Huntley Dr. #3 (90069)
$1,849,000
3BR/4BA
2,549 sq ft ($725/ft)
On Market: 43 days

Hip location ! Spectacular & unique European-style penthouse in exlusive 3-unit Bldg. Private elevator access to entry foyer. Great room w/ 2-sty ceiling.. Kitch w/ top of the line appliances. Dinning rm with extensive hillside vus. Balconies on both levels w/ awnings Master w/ walk-in closet/sitt area/FP/ marble bath. Upper level area has access to a massive resort -style roof top deck w/ full kitchen, BBQ area & panaromic vus. Dramatic and exelarating!! Walking distance to shops & restaurant

Sold: 7/04 - $1,165,000

There are prior sale records (1989 and 1996), but given the price levels and the newish construction look, I'm assuming those were for whatever structure was on the property before being demo'ed. The listing doesn't indicate that this unit has been updated since the prior purchase, so does this seller really think he/she is going to be $700k above 2004 pricing when we've already seen early 2005/late 2004 rollbacks in many areas? Am I missing something here?

THE CHALLENGER
8703 W. Knoll Dr. #401
$1,695,000
3BR/3BA
2,943 sq ft. ($576/ft)
New Construction

One of a kind. Panoramic city view is offered in this new architectural 3 bedroom + Den townhome with direct key controlled access from elevator. The light & bright living/dining/kitchen area opens to private view sundeck. Unit features pewter stained brushed oak floors, Meile kitchen appliances & stone kitchen. Master suite has oversized custom walk-in closet, stone shower, duravit bathing tub and double sinks. State of the art finishes! Open Sat & Sun 2-5pm. March 28/29. Tuesday 24th 11-2pm.

There has been some recent discussion over at SMDM regarding the benefits/drawbacks of buying a house vs. a townhome/condo. Your friendly blogger tends to be more of a condo/townhome person, given lifestyle, no kids/worry about school district, etc.

Having said that, the "house" people are generally right in that all you're getting with a condo/townhouse is technically four walls and air (ok, generalizing a bit).

These two properties clearly have the size of a stand-alone house, and appear to be finished very nicely. The question is, at these price points, to whom, exactly, are they appealing? The just-divorced studio exec looking for a new bachelor pad? The DINKs lawyer crowd who want to stay within walking distance of Urth and Le Pain Quotidien?

Remember our two themes: 1) who "should" be able to afford properties, and 2) what's the comparable rent?

At these prices, you're talking at least $350-400k down and then being left with a monthly nut of approx $10-12k, depending on assumptions for HOA, rates etc. That translates into an approx $500k annual income to support.

Would these rent for anywhere near $10-12k/mo? I know someone who recently rented a Hollywood Hills house, at least as big as these, with yard, pool, roofdeck, etc for somewhere in the $6-7k range. So does being "walking distance to shops and restaurants" get you another $3-5k/mo?

Side Note: If any readers have suggestions for types of properties they'd like to see on the "Friday Night Fights" (price range, SFR vs. condo, specific location), please comment.

The Psychology of Losing

Property posts to return soon but your friendly blogger has been on the road.

In the meantime, some food for thought ... I was searching for some behavioral finance articles and came across this blog from the Huffington Post discussing loss aversion and its relationship to the housing market. The post is from August if 2008, so somewhat dated, and of course we have the benefit of hindsight. Political leanings of the content provider aside, I was struck by the "real estate executive's" comments:

"Some areas of the country have such limited demand right now that there is no point to sellers lowering prices. By doing so, they communicate to the buyer community that prices are dropping which in turn reinforces buyer's beliefs that prices will continue to drop. Until there is some acknowledgement among the media or the buyer community that prices have hit bottom, there is no point to a seller dropping his or her asking price."

I am a fan of behavioral finance and do believe that psychology has a lot to do with how people react as it relates to gaining/losing money, but this circular argument just doesn't pass the smell test. So, if sellers get together and decide to not drop their prices, then they've created an artificial bottom? And where's the "limited demand?". Again, the article's from 9 months ago and maybe the writing wasn't as clearly on the wall.

At some point, you just can't fight the power of supply and demand, particularly when the demand is constrained by tighter lending limits, reduced wealth and lower income.

The Walking Dead

Full credit to Arti, a commenter over at SM Distress Monitor, who came up with a great term, with regards to this post, for listings where the seller (individual or bank) is holding on for a "greater fool" to appear, and where it's only a matter of time before the other shoe drops.

Since I don't know Arti, and don't have his permission, I didn't use the specific term, but you can guess it from the post title, or just meander over to our friends at SMDM. These listings are really in no-mans land.

Along those lines, we proudly present ...

8616 Sherwood Dr. (90069)
$849,900
2br/2BA, 1,440 sq ft
Lot Size: 3,127 sq ft

BANK OWNED. REO. JUST REDUCED. Beautiful contemporary home features two Bedroom suites, one with private balcony. Gourmet kitchen is gorgeous and designer sharp with top of the line appliances and beautiful high end cabinets. Gleaming wood floors and recently painted. Ready to move into. Terrific location close to the best restaurants and cafes. SUBMIT ALL OFFERS REO VERY MOTIVATED

Sold: 10/08 - $782k (bank buy-back?)

Listed: 11/08 - $1,049,900

Reduced: 12/08 - $979,900k

Reduced: 1/09 - $949,900

Reduced: 2/09 - $909,900

Relisted: 2/09 - $909,900

Reduced: 3/09 - $874,900

Reduced: 3/09 - $849,900

Wow. Just wow. So much going on here, where to start.

First off, obviously, this is a bank-owned property. It's difficult to tell, but it looks like the previous owners bought a tear-down and built this place. Maybe they ran out of money, and we're assuming the $782k number is what was owed the bank.

If that's the case, dear Mr. Banker, why oh why the pricing games? An initial listing over $1mm? OK, a little greedy if you're only owed $782k, but in November the world was in the early stages of falling apart, so we'll play along. And, if they had been aggressive about cutting the price at that point, say to the low $900s, maybe they would have found a "greater fool". But now, this thing's in free-fall, and they are so behind the curve, it's laughable.

Seeing the "gas-station" pricing (why not just round to the nearest thousand?) makes us think that there's a 22 year old at the bank who's been given a list of REO properties and specific marching orders on when and by how much to reduce the prices. At the beginning, the reductions were coming every month like clockwork.

And, of course, no blog-worthy listing would be complete without the mandatory "re-list" - at the same price as when it was taken off ...

This is a new construction house, which has some appeal, although by the looks of the pictures, the interior's been done to a certain taste (not "neutral") which probably limits the buying audience. A typically tiny lot in a decent area in the 90069. Add it all up, and we still have a ways to go on this one. The stubborness of the bank here is clearly fascinating. Even if they were owed more than the $782k we're assuming, the time to cut and run on this may have already passed.

Friday Night Fights - Vol. I

OK, so it's technically Saturday morning, but I thought I'd "spice" the blog up a little with the newly-instituted "Friday Night Fights", to be posted on (or around) every Friday.

The "Fights" will showcase similar properties for sale - sometimes condos in the same building, sometimes homes with the same specs in the same neighborhood, who are duking it out for buyers.

And, as always, we'll find out some interesting facts about these properties that continue to expose the madness of 2+ years ago and opine on if/how delusional the sellers really are.

We'll be following up on these later to see which property raised its hand in victory and which hit the canvas.

So, without further ado, Let's Get Ready To [remainder redacted for copyright reasons] ...


"THE CHAMPION"
522 Norwich Drive (90048)
$975,000 ($803/ft)

2BR/2BA
1,214 sq ft
4,851 sq ft lot


On Market: 190 Days

Sold: 8/90 - $325k

Sold: 10/96 - $285k

Listed: 9/08 - $1.25mm

Reduced: 1/09 - $1.099mm

Reduced: 3/09 - $975k

We last featured 522 Norwich here, where we wondered about the viability of the "million dollar listings" (sorry agents who had your own reality show) for tiny houses as we descend to some level of reality.

Well, the price has been reduced again, although we're still in our favorite "death by a thousand papercuts" (yes, I will come up with a new analogy soon) mode here. This property was already behind the curve on price reductions, and continues to be so. Granted, the most recent price reduction was more than $100k, but as we non-followers of the "nominal headlines" know, $100k on a $1mm property isn't fooling many people any longer. To qualify for a high-limit conventional loan here requires approx $270k down and the property remains "affordable" to those with a $200k+ annual income. For a 1200 sq ft house.

And, not to keep beating a dead horse (but it's fun), look at the selling prices between 1990 and 1996. Yes, Virginia, you can lose money in the real estate market.

Assuming this seller didn't use the property as an ATM and/or doesn't have any peronal issues happening that warrant this pricing technique, it would seem like they have room to move lower. The listing description describes our favorite "upgrades", which we all just know are worth several thousand dollars (granite, stainless appliances).

"THE CHALLENGER"

554 Westbourne Dr. (90048)
$995,000 ($721/ft)
2BR/2BA
1,380 sq ft
3,831 sq ft lot


On Market: 4 Days

Sold: 3/89 - $240k

Sold: 3/98 - $285.5k

Sold: 10/98 - $310k

Sold: 4/99 - $385k

Sold: 5/02 - $599k

Sold: 12/03 - $755k (90% financing)

Just a couple blocks down from 522 Norwich in the same "WeHo West" neighborhood is this newly-listed property. As we can see, at least from the numbers, the specs are relatively similar. Westbourne is a slightly bigger property on a smaller lot. (For any readers who have seen either or both properties, please chime in on the merits/detractions.)

This property's listing history tells an all-too-familiar-by-now tale: little to no appreciation following the late 80s/early 90s bubble for almost 10 years, and the start of the bubble activity in the late 90s, culminating with large price jumps in the mid-2000s. As expected, this property appears to have been updated along the way, although it's difficult to tell when.

As compared to 522 Norwich, these sellers have started at the sub-$1mm level, but have seemingly less room to come down, given the high-$700k previous purchase.

Interestingly, both of these properties transacted for the high-$200k level in the 1996-98 timeframe. Just for fun, let's assume $275k was a "fair" price in 1997. Now 12 years later, and assuming 5% appreciation brings you to a "current" value of approx $500k. To be clear, I'm not suggesting that these places will drop to $500k in order to be sold, but given the pricing cycles we saw after the early 90s, would it be stretch to see them sell now in the $800k range and remain at that nominal value for the next 10 years (which is the value you get with 5% appreciation from 1997 to 2019)?