[Blogger's note: will try to actually follow-through on my plans to post more frequently :-P]
Anecdotally, there just seems to be a deluge of new construction out there. I'll have time to do more actual research this week to put some real numbers around the supply.
Some buildings have cropped up more recently, but today and tomorrow we'll look at two on opposite sides of WeHo that are getting that "old man smell".
Today, representing WeHo West ...
(8833 CYNTHIA STREET)
Listed: May 2009
# Units in Building: 5
# Units Sold: 0
Unit Types: 3BR / 2.5BA townhomes
Unit Sizes: 1500 - 2400 sq ft
Original List Prices: $995,000 - $1,995,000
Price Reductions?: Yes, lower-end units
Description: * * * BUILDER'S SPECIAL/SELLER WILL CARRY FIRST * * * 201- $1,145,000 / 202 - $889,500 / 203 - $889,500 / 204 - $1,145,000. PRIME WEST HOLLYWOOD NEW CONSTRUCTION SELLER FINANCING AVAILABLE 3 BR, 2.5 BATH Luxury Town home features Modern Gourmet Kitchen w/ top of the line stainless steel appliances, 3 zone A/C per unit, tile and wood floors throughout, spacious, private balconies, sumptuous baths w/ glass tiles, huge walk-in closets, custom designer finishes. Bldg has rooftop deck. OPEN SUN2-5 tues12-2
These units have been on since May of last year, with the only price reductions being on the two lower-priced units ($100k reductions) last summer and fall. Of course, these were done as a series of modest reductions at the time.
They look like nicely appointed units, but then again, so does most new construction. I think the addition of the new Pavilions on SMB/Robertson help this area a bit, but it was certainly "desirable" before that. Clearly, though, these units are not moving.
Not that we should let numbers get in the way of owning a home, but let's look at our two favorite metrics: "rent vs. own" and "who can afford these"?
RENT VS. OWN: Some very quick math on the lowest-priced units (assume 20% down so you hit conforming, 5% rate, HOA of $350 which may be understated) gets you to a pre-tax number of approx $5k/month. Tax-affect that and you're probably in the $4k range.
A quick look at Craigslist shows upper-end units in WeHo renting in the low to mid $3k range, so one could argue that this isn't far off. However, I'd suggest that the condos being rented on Craigslist, for example, are people trying to bail themselves out from purchases and breaking even on their mortgage, so those rent price asking numbers are artificially high. But let's give benefit of the doubt and say that it's close to a wash.
"WHO CAN AFFORD THESE"?: Again, some back-of-the-envelope math would suggest (30% DTI) that income to support these would be around $200k. Are there people (or couples) making $200k? Absolutely. Would they want to live here? Possibly. You could make this argument fairly easily.
HERE'S THE PROBLEM ... (full disclosure that I have not yet seen these units)
Do many people making $200k have $170k to thrown down for the down payment needed to get these under conforming status? Possibly, although I'd argue that if they did, it would severely cut into their savings (if they care). We always tend to hear about the extremes, and yes, I know there are people both making and saving a lot of money - although in LA, I'd argue it's more of the former, less of the latter. I saw a survey recently that suggested that the average total savings for individuals making over $125k/yr is approximately $40k. Consumer nation, anyone?
But I digress ... on to some other "problems" ...
These are the LOWEST-priced units in the building. As you start to look at the others, priced at $1.15mm or more, the numbers go up significantly. Plus, unless you throw down a chunk of change (see above) you won't hit conforming and rates go up significantly. Again, yes, there are people making $300k+ in WeHo. I know this. Would they choose to live here? Maybe.
The bigger issue ... there's a lot of inventory out there, as we'll see in subsequent posts, and although the next couple will remain focused on the new construction condo market, we'll then compare these to the SFRs on the market.