Friday, July 6, 2007

How Not to Price in Palisades

Well-priced houses have sold pretty fast in Pacific Palisades this spring. This 3 bed / 2 bath house at 461 Puerto del Mar, however, is an entertaining lesson in How Not to Price. There's more to this house than the photo shows, two stories on the back, looking out on the canyon.

Originally listed 1/10/07 for $1,699K, it's slowly nibbled the price down every couple of weeks, to $1,649K and $1,599.5K in February; $1,525K, $1,499K, and $1,449K in March; $1,429K and $1,399K in April; $1,379K in May; and now $1,359K at the end of June.

It's now third oldest of the Ancient Listings of Pacific Palisades (<$2M). Stay tuned for the top two.

17 comments:

war chest said...

Love the pricing...similar to how I invest sometimes in that I will be a chicken and just buy small amounts every few weeks when I think it would be easier to just bite the bullet and take down larger positions in fewer increments (especially when the stock market just keeps going up with few breaks).

Anyways, do people here use zip realty or redfin? I have used both but I am looking for opinions on which people prefer (or if there is another way of getting MLS listings that would be great as well). Thanks.

Westside Bubble said...

I've been using the MLS via an agent's public portal that shows both Active and Looking for Backup status (which mls.com and Zip Realty don't), then Zip Realty to get listing dates (which seem to post a day or so later). Kind of a pain, but the best combination I've found.

war chest said...

westside,

You are sure dedicated to the cause. Thanks for your hard work.

Anonymous said...

"similar to how I invest sometimes in that I will be a chicken and just buy small amounts every few weeks when I think it would be easier to just bite the bullet and take down larger positions in fewer increments"

You're 22 (so you can't have been investing for long), you believe the housing market is going to violently burst (which means major recession), you want to buy real estate in the not-too-distant future (when a 20% DP will be a must), and you're investing in the stock market? You might want to rethink that one.

Anonymous said...

FYI - Looks like a flip, probably owner occupied - or so they'd say to the IRS - due to the resell date just past two years:
Assessor's Id. Number 4414-007-006
Site Address 461 PUERTO DEL MAR
LOS ANGELES CA 90272

Recording Date 10/06/2004
Land $959,820
Improvements $243,780

war chest said...

anon,

I think that most people would agree that sitting 100% cash is never (or very rarely) a good idea. My current asset allocation is very defensive considering the fact that I am young. Most models would say that someone in their early 20s should have 90% or more of assets in stocks (but I have a problem with this because most young people should be thinking about saving cash for a down payment as you mentioned or at least having a cash emergency fund).

I learned about the stock market at an early age and have been invested (small dollar amounts obviously) since I was in high school. Low cost index funds.

Its not really a belief that the housing bubble will violently burst. It already has...its just that some areas are holding up better than others (SM is very very strong considering the statewide and national housing weakness). This is not an opinion. Take a look at all the data that keeps coming out. Nationally, this is already the worst housing market since the depression in terms of many different metrics. I do not think SM will suffer as much as other areas (duh), but I do believe there will be a significant correction. This could cause a recession and the market could tank but I still think that it is pretty easy to argue in favor of diversification of assets and long term time horizons. I don't plan on selling...instead I plan on directing new earnings towards cash as it looks like I am getting closer to a situation where I should be buying real estate.

I do not know when I want to buy real estate. I am planning on working for 2 or 3 years and then probably going to business school. If it looks like business school is where I will end up, it doesn't make sense to buy something until AFTER...which means 5 or more years from now. Again, it doesn't make sense for me to sit in 100% cash for 5 or more years.

And yes, I know that I am not normal. Most 22 year olds are busy thinking about Coors Light while wallowing in credit card debt. Look out, the SM snob inside me is coming out!

Anonymous said...

"Again, it doesn't make sense for me to sit in 100% cash for 5 or more years."

We shall see.

dlp said...

Just a note for anyone with a bit of memory. Yes, I was lucky to have bought in 99 (and pure luck it was) but we moved out of state what seemed to be permanently two years ago, sold last year and then employment brought us back. We've decided to rent for awhile and having now participated in two booms and busts, I remember in 89 when everyone was saying the westside would hold its value. It didn't. We bought our house from someone who waited TEN YEARS for it to be worth $40,000 LESS than they paid for it in 89. Secondly, the market was already getting very hot and competitive in 99 BUT San Diego and Santa Barbara were experiencing their booms BEFORE the westside of L.A. I believe that the only reason we haven't seen quite the tank on the westside is because we started the boom a bit later. I get westside MLS listings everyday and have seen some short sales, a couple of foreclosures but dropping prices EVERY DAY. Places have sold but I really think there is going to be some bitter aftertaste left in a lot of mouths. It always amazes me when people think the westside is different (I argued that it wasn't back in 89 too.) But the thing I find scariest about this boondoggle is the way the crazy financing has been sliced and diced and spread to the average investor. I guess the feds (ie our tax dollars) bailed out the S&L's. Can we do it now? We didn't have an ugly and expensive war to contend with at the time...

Anonymous said...

Anyone who thinks the more desirable areas are immune should check out today's Real Estate section of the LA Times. Check out the median prices in Montecito over the years:

Residential resales for ZIP Code 93108:

Year...Median Price

1990...$837,500

1995...$525,000

war chest said...

dlp,

It is good to hear another firsthand account of how things turned out during the last cycle. My folks bought here in the mid/early 80s.

The house they bought and the one next door were both bank owned foreclosures.

My dad also kept a record of what he thought the house was worth (based on comps, etc) and he updated that record once a year. He showed it to me a while ago and I remember seeing the value shoot up during the rest of the 80s and then decline by a pretty decent amount in the early 90s. He also kept track of interest rates. Seeing double digit rates blew my mind since I have seen nothing but historically low rates as I have gotten interested in housing.

I will post the values if I can get my hands on the records.

dlp said...

I'd love to see the list, war. Sounds like you come from a very financially organized family. These things never follow the previous bust exactly but there is usually enough resemblance to make one scratch one's head and wonder how we got into such a mess in the first place when we should have seen it coming.

And I can say I personally know high-enders getting hit. A friend who just bought another house in Hancock Park is having trouble selling her piece of paradise in Laurel Canyon, a very beautiful home. Price reductions imminent.

At one point, we considered buying a Cape Cod house as a rental investment and what the real estate agents told me (the market was getting very depressed there) was "it was just like seeing a door close." The boom had ended in a way that felt like overnight.

I think I feel the breeze of the door shutting in Los Angeles...

war chest said...

dlp,

Westside has the data and I think some of it should be posted shortly

price Stout said...

And I can say I personally know high-enders getting hit.

sadly, the high enders ain't getting hit yet in LA. check out 457 s arden in hancock park, since you mentioned that neighborhood. bought in '99 for $1.1M. no structural changes made. Sold last month for I kid you not $3.4M. yowza.

Westside Bubble said...

See my new post of War Chest's data.

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