Wednesday, April 25, 2007

Bad weather and other links

If you haven't already seen yesterday's news, existing home sales nationally fell 8.4% year-to-year in March, and the national median price fell 0.3% to $217,000. The NAR blamed it on bad weather and subprime loan fallout. See Calculated Risk and Housing Doom for reality.

Here are three YouTube videos of a guest lecture on the housing bubble by Dr. Christopher Thornberg at Humboldt State University last November (via Housing Panic).

It's made the bubble-blog rounds, but be sure to ride the "US Home prices adjusted for inflation plotted as a roller coaster".


Craig said...

Funny little story...

So my dad was out the other day and said someone was yelling his name and he didn't know who it was. Turned out to be a realtor that he sort of recognized but didn't really know (must have introduced himself previously at a local open house or something). This is just more evidence that the high end Santa Monica market is pretty weak as local realtors are desperate for potential buyers...

More interesting was that the realtor mentioned the 363 18th house which is asking $3.2 and I thought was way overpriced. My dad told him he thought it was way too expensive and the realtor agreed and said maybe $2.8 would be more maybe realtors do have limits to their bullishness??

Everyone is in complete denial about Santa Monica going down..."its different here, foreign rich buyers, hollywood/entertainment buyers, etc"

There were significant declines in the early 90s which was before all of the obscene financing and flipping...its going to be so much worse this time and nobody is ready for it.

Lionel said...


I think you are exactly right. There's an arrogance that runs through West LA like an electrical current. The specialness of the place means that what affects the outside world, including neraby places like the Inland Empire (wherever that might be), cannot possibly touch us here.

If you dig a little bit, however, you will find people who are not prepared for the downturn and will be underwater quickly. I was chatting with someone recently about how I was upset that a family member had bought a home up north with an I/O. The woman blurted out - there's nothing wrong with an I/O! I know she had just recently bought in Santa Monica Canyon. If you need an interest only loan to buy there, you have probably made a big booboo.

This is not an isolated story. I have a friend who overheard me blabbing about the bubble and, despite being one of the sweeter people I know, got really upset with what I was saying, going so far as to passionately defend Alan Greenspan. He'd bought a condo in the Palisades and assumed it was worth 900K or so. The Palisades is nice, but nearly a mill for what's essentially an apartment?

I won't bore you with the other similar instances, but my annoying penchant for talking about the bubble has revealed many situations where people have grossly overpaid for their properties.

dwr said...

"This is just more evidence that the high end Santa Monica market is pretty weak as local realtors are desperate for potential buyers..."

A few weeks ago I was out in my front yard and Ron Wynn walked up and asked if I was thinking about selling. Something tells me a year ago he was in his office counting his money, now he's out pounding the pavement. (for those who don't know, Ron Wynn is probably in the top 3 agents on the westside- I went to several open houses where he was the listing agent and he had other agents attending the open houses, now he's walking the streets).

sades said...

had the same thing happen in the palisades the other day, very established realtor comes to the door saying they have a family just dying to get into a house and do I know any for sale?

I go back and forth with that being true (certain areas have very little for sale, but certainly not 0) and just being just a BS marketing ploy. Since it's realtors, I landed on #2.

Lionel said...

sades, I think that guy came to my door too. Kind of a cliche of a realtor? Fake tan, fit, bleached teeth? Of course I'm probably describing many realtors.

Craig said...

Another interesting thing:

333 14th Street (SM 90402) has the following sale history:
Sale History
04/07/2005: $1,720,000

I happen to know that this tear down was purchased by some investors who have been building a large spec home on the lot. The persian palace they are building (I believe it should be almost done but have not driven by it yet) is 5,000+ (might even be 6,000) square feet. My source tells me the the "investors" need/want to get $4.8 million. There are some pretty big costs here but if they can get $4.8 then I would imagine they will make some profit (but not much).

However, there are more than a few large spec homes on the market in this area with prices below $4.8 million. Also, there was an obscenely large spec on 20th ( a couple blocks north of Montana)that was listed at $5 million about 4-6 months ago and zillow has it as being sold a couple months ago for $4.6 million. By the way, I heard this house on 20th had the realtor firm Pence, Hawthorn and Silver as investors in the flip.

So given that the market has gotten softer, more inventory of large spec homes is present and a comprable property "only" got $4.6, it will be interesting to watch this one. Will they have to cut the price and chase the market down while taking a big loss, or will some price insentive rich foreigner (i.e. persian) save the day?

If I had the choice, I would go buy the persian palace on 25th which is a block and a half south of montana...its in great shape and is 5,000 square feet but its "only" $ you could save $2.0 million...but "rich foreigners are buying with cash, and they aren't making any more land" so who cares?

Craig said...

BTW, I heard that the investors of the spec house on 14th are getting very nervous as they know the market is weak.

Anonymous said...

I am interested in SM Sunset Park real estate values. I just got some flyers in mail (one of many from RE agents). The useless ones typically report several "listing prices" rather than the selling price. Right now I have a flyer in hand for It's 3+2.5; offered at $!,279.
The slide show suggests to me another carefully staged presentation. No mention of lot size or the flight path either. I know it's not that far from the staged 17th Street property that finally sold for $1.6 (a lot more than this one). What do you think? Is this a high price, the right price or are the sellers hoping for a bidding war ?

Anonymous said...

One more question- do you know anything about the recent sale of It's also not too far from 3021 17th. Asking price for this one was $1.328. I wonder at what price they sold? Is it possible to learn the terms of sale, like if the seller carried a note?
! was told this house had not been on the market in over 40 years.

Westside Bubble said...

I have 3021 Glenn (3 bed 2.5 bath) originally listed about 7/17/06 for $1,499K, reduced to $1,399K 8/06, off the market 1/30/07-3/23/07, back at the current asking of $1,279K, in escrow for a week early this month, now available again.

This says to me it was overpriced, now is closer to current market, but may still be too high. Two 2-bedroom houses on Linda Lane nearby are asking $989K and $1,150K, both listed last fall and not selling so far.

Use the Parcel Viewer link to the L.A. County Assessor's office for sales within the last two years. Put in this address, then select sales within a radius.

I'd call Hill Street a better location (did you see my post on it?). The corner house at 1655 sold for $1,302K according to Zillow, in two weeks, had asked $1,328K.

Anonymous said...

Maybe some of these Santa Monica dreamers (I mean sellers) should go to and take a look at all the properties being foreclosed. I hope these folks don't have too much debt to cover. They may have to bring there check books to the closing, if they can find a buyer. I wouldn't count on foreign money saving them, because foreign investors no America better than Americans and they see the news of a housing bubble just like we do.

Westside Bubble said...

Craig, $4.8M sounds high for busy 14th St. There are just a few houses sold over $4M, and their location has to be special. A north-of-Montana agent says there are buyers for top-end houses, but they want everything perfect, location, plan, amenities.

latesummer2008 said...

Santa Monica will be hit HARD! This includes North of Montana, South of Montana, Ocean Park, Sunset Park or Santa Monica Canyon. IT WON'T MATTER WHERE! The last bust in 1989 will be meek compared to this one. This summer, sellers will realize the reality of the situation. Paper profits will evaporate, as panic sets in. Sellers without a choice, will rush for the exits starting a cascade of price declines. The last straw is when the "Talking Heads" and MSM smell blood in the water, propelling the downward slide.

IMHO, I believe we are in for a fast and furious decline, quite different from what many are now predicting. We have been on the downside of the biggest Real Estate Bubble in history, since late summer of 2005. I predict Southern California to be GROUND ZERO for the "Bust" starting this summer. All the signs are there. Grossly overpriced properties, bloated inventories, bad loans, credit crunch, wilting dollar and slowing economy.

I am sticking with "Late Summer of 2008" as the first great buying opportunity for distressed properties here.

Get your financial house in order NOW....