Setting the Stage

Ah, it's good to be back, and thanks to all of you for the encouraging words. Lots to get caught up on, so let's get right to it ...

To set the stage for our 2010 discussions, there are four macro items that I think bear watching, with enough debate about each to fill more than a few pages of the blog.

I welcome your comments, but won't spend too much time on them here, other than to mention that each should have some impact on market activity going forward. Of course, at some level, they are all inter-related.

1) GOVERNMENT SUPPORT (aka "stabilization" or, if you're cynical, "lack of capital market understanding")

I somewhat agree with a prior comment that the "paltry" tax credit on a new home purchase probably isn't making loads of people rush out to buy who otherwise would have waited, but I do think there's some psychology around it, and you know that REAL-tors are pushing it, so I'm assuming that it's influenced at least a decent percentage of any recent purchases.

With the current "incentives" set to expire in the spring, I think we'll see another price reset as any demand fueled by the tax credits, no mater how small, dries up. I also think sellers (encouraged by REAL-tors) are still holding prices higher based on the hope that tax credits will stimulate additional demand.

At the end of the day, unless we are all going to be wearing brown shirts in a couple of years, supply and demand will still dictate market prices.


2) THE ECONOMY, STUPID

This one's easy ... in any real estate market, there are always buyers, sometimes a lot, sometimes few. I have to believe that there are some "normal course" (expanding family, job relocation, trading up, etc) buyers out there who are waiting to see how 2010 plays out - will they still have their job, will they get a new job, a bonus, raise, etc. With the stock market up significantly from last spring's lows, it seems as though some positive vibes have returned (despite still being significantly below the asset values of a couple years ago), so by mid-year, people may start feeling more comfortable.

And yes, I know, just as with any market cycle, there have been smart and/or lucky people who have made a ton of money recently in outperforming asset classes (gold, etc), but in general, I'm thinking about the masses with their retirement funds, etc in a broad stock market proxy.

3) PASSAGE OF TIME IN PRICE COMPARISONS

A straight behavioral psychology exercise here ... remember in 2007 when you couldn't touch a 2BR shack of a SFR for less than $1.5mm? Then prices dipped and six months later, "holy cow, I can now get that place for $1mm". Seemed like a deal, right? Well, if not now, certainly by mid-year, we'll be a couple years removed from peak pricing, and hopefully all the REAL-tors will stop saying things in their listings like "unit across the hall sold for $100k more 6 months ago!!!", and enough time has passed where buyers are focused not on where the price compares to a year or two ago, but "real" stats, like DTI ratios, rent vs. own figures, etc.


4) OPTION-ARM RESETS

In fairness, I haven't looked at this data recently, although if memory serves, a large chunk of Alt-As are up for reset starting in 2010 through 2012. Point #2 above will certainly have some bearing here, but I think we'll continue to see short sales/foreclosures. The question is, will lenders, if they continue taking on inventory, have to start "dumping" due to some of these other factors?


Obviously, there are additional factors (let me know what I'm missing), but with that as a backdrop, property posts to start this weekend ... stay tuned.

The Wait is (Almost) Over ...

Thanks to everyone for their motivating comments on my last post. Nice to hear that people are reading and enjoying the blog, and as always, I'm open to suggestions.

I'll be starting up again this weekend, and should have a few posts to get things going - lots of new stuff going on out there.

To answer a few questions / respond to some comments from the last post:

1) E-mail address for property/focus suggestions (or other comments) is wehohomes@gmail.com. I thought that showed up on the blog but if not, I'll make sure it's visible.

2) In terms of focus, I plan on keeping it narrow, to WeHo and some WeHo adjacent. That was always my original focus, and it's a bit too time-consuming to look at other areas - although if I see something really interesting, I might stray a little.

3) In terms of "analytical" posting, I do try to provide stats on the properties, but my style is to be more anecdotal in the analysis. I'm a big believer in behavioral finance and the psychology around purchase/sales of assets. I think we're in such an interesting time that things like "market value", "comparable sales", etc may or may not be as relevant. If you'd like to see specific analysis, drop me a line or post a comment.

Keep your eyes open for fresh postings this weekend. As a reminder, as with any blog, you can sign up for RSS feed to stay current on postings.

Thanks again for your support and back to you in a few!

Decisions, Decisions ...

It's been a long time since my last post. A vacation, new job and some personal stuff thrown in the mix. Plenty of excuses!

Will be evaluating my time available to continue the blog. Based on the lack of comments from the most recent posts, seems as though interest in the WeHo real estate market has cooled. If you are still out there and interested, let me know what you'd like to see more of in 2010.

It will be interesting to see the effects of the removal of government "subsidies" currently in place as we move through 2010. I definitely think that these programs are keeping things artificially inflated - how could they not? We're still out of whack on a rent/own cost basis.

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.