Other items of note

Paper Economy's S&P/Case Shiller tool shows Los Angeles continued down in June, dropping .4% from May. See my July post for more. Unfortunately this is looking two months in the rear-view mirror; expect more drama over the next three months!

Diana Olick's (CNBC today) "White House Has It all WRONG On Subprime" (be sure to watch the video).

Mr. Mortgage's (today) "FHA Plan: Bring a water gun to fight a fire". I wonder how much is political posturing, to appear to be doing something?

Tom Whipple's (Energy Bulletin / Falls Church News-Press 8/30/07) "The peak oil crisis: the quiet time".

... The oil market has been so fixated by the hurricane and credit crisis in recent weeks that little notice has been taken of a looming supply crunch. Last week’s market U.S. stockpile report had imports and crude stocks up a bit, but gasoline stocks dropping by a whopping 5 million barrels. ...

The likelihood of an imminent credit-crunch-induced recession seems far higher to OPEC officials at the minute than to Wall Street brokers. For OPEC, the credit crunch may be just an excuse to cover their inability to increase production....

Michael Kinsley's (Time magazine 8/23/07) "Your House Is Worth Less? Good".

... Since most families own their homes, the country is happier when real estate prices are going up. But it is healthier when prices are going down. Look at it this way: in the housing market, people fall into three categories. Some, mostly young folks, are trying to buy their first home. Some, at various stages of midlife, own a home but will trade up someday, or at least think about it. And some, mostly older, are trying to sell and downsize. Who is served by soaring house prices? Not the first group: rising prices make it hard for those people to get into the game. Not the second group: what it will have to pay for a bigger house is probably increasing faster than what it can get for the current one. ...

Mariel Garza's (LA Daily News 8/25/07) "Let mortgage fires burn on".

... I'm not sorry that real-estate prices are creeping down by the glut of desperate "for sale" signs all over Southern California. ...

Weekly Inventory Update

8/31 - Inventory is slightly down for the week, up for the month, and the listings are getting older (DOM increasing). More price reductions. Let's see how listings and sales do when the fall season begins after Labor Day.

8/24 - These stats have needed a graph; here is one, showing my Santa Monica (under $3M) and Palms-Mar Vista inventory on the right axis and OC Renter's LA County inventory on the left. LA is up over last year; SM is down.

Big jump in listings, 10%+/- for the week! SM is up 6 from 9 new listings; PP up 1; and MV up 11 from 13 new listings.

8/17 - Santa Monica and Palisades are pretty flat; Mar Vista is down despite new listings.

8/10 - Santa Monica is down 2, Palisades down 5, Mar Vista up 5.

See Calculated Risk for explanation of what the Federal Reserve did the last three days to add liquidity. Essentially the Fed loaned a lot of money to banks short term, with Mortage-Backed Securities as collateral. The Fed did not buy those securities.

8/3 - Westside inventory is up 2.6% from the end of July. I also seem to be seeing more price reductions and failed escrows (financing failed?) in Santa Monica, Palisades, and Mar Vista.

       LA County  Santa Monica  Pacific Palisades  Mar Vista
                <$3M New Tot DOM<$2M New Tot DOM Tot New DOM
       _________ _______________ _______________ ___________


 1/30/06  27,732 
 2/28/06  29,420 
 3/31/06  31,819
 4/21/06  33,054  35
 5/ 1/06  34,032  38  33
 6/ 2/06  37,847  56  36      38
 6/30/06  42,317  66  40      49
 8/ 4/06  45,315  70  34      50
 9/ 1/06  46,781  71  27      59
10/ 6/06  47,369  83  25  98  71
11/ 3/06  45,780  80  20  91  77
12/ 1/06  43,103  65  18  72  96  39  20
 1/ 5/07  35,646  54   4  60 117  33   6  71  66
 2/ 2/07  36,715  38  15  45 124  29  16  61  71
 3/ 2/07  41,251  42  14  51 114  26  10  68  79  53  25  76
 4/ 6/07  42,857  41  23  49 107  18   8  73 103  52  52  50
 5/ 4/07  45,918  46  28  54  92  19   6  82  79  68  37  52
 6/ 1/07  52,198  50  25  61  78  17  15  87  78  77  39  53
 6/30/07  52,769  42  18  56  81  17  11  92  77  74  33  61
 8/ 3/07  54,166  53  28  68  86  23  12  78  76  84  39  68
 8/10/07  54,802  51   8  67  90  18   3  74  87  88  13  69
 8/17/07          52  11  67  97  18   5  77  78  81  21  73
 8/24/07  56,118  58  20  72  94  19   7  77  69  92  34  73
 8/31/07  57,432  57  21  72  98  18   7  69  75  90  39  79
 9/ 7/07   

All Westside (updated 1st Fri. of mo.)

                   2/9  3/1  4/6  5/4  6/1 6/30 8/03 8/31
Bel Air-Holmby Hls. 86   86   92  100  103   99   86   99
Beverly Center-M.M. 64   57   48   53   54   65   64   67
Beverly Hills       67   70   56   46   53   49   59   61
B.H. Post Office    94   91   92   88   93   95   92   94
Beverlywood Vic.    35   36   31   39   38   41   42   46
Brentwood           67   71   73   75   72   68   86   77
Cheviot H.-R.Pk.'8' 22   20   19   22   23   22   26   20
Culver City         35   25   20   28   33   36   41   48
Malibu             178  181  192  199  206  220  224  216
Malibu Beach        42   44   51   52   56   58   54   45
Marina Del Rey      20   20   20   27   29   28   26   27
Pacific Palisades   64   68   73   82   87   92   78   69
Palms-Mar Vista     62   53   52   68   77   73   84   90
Playa Del Rey        7    8   17   20   21   20   21   24
Playa Vista          3    2    3    1    3    5    4    9
Santa Monica        50   50   49   53   61   57   68   72
Sunset Stp.-Hwd.H. 155  178  159  166  180  168  187  184
Topanga             39   41   36   43   45   54   49   54
Venice              64   64   57   68   70   72   69   68
West Hollywood Vic. 23   32   25   36   42   41   40   36
West L.A.           19   21   25   24   25   34   31   36
Westchester         53   46   47   45   53   52   62   72
Westwood-Cent.City  33   44   37   42   33   34   29   37
                  ____ ____ ____ ____ ____ ____ ____ ____
Total             1282 1308 1274 1377 1457 1483 1522 1551
Month-month incr.        2%  -3%   8%   6%   2%   3%   2%

Notes

LA County inventory via OC Renter. Santa Monica Days on Market (DOM) is for <$3M, and omits Santa Monica Canyon (in City of Los Angeles but S.M. Post Office). Pacific Palisades DOM is for <$2M and count omits mobile homes. "New" is for previous month, or month-to-date for current partial month.

Cheap north of Montana

This new 2 bed / 2 bath listing at 420 7th St. for $1.4M is interesting for being north of Montana for well under $2M. Not a tiny lot, presumed a tear-down, but on very-busy 7th St., the main road into Santa Monica Canyon. I've outlined its lot above. A recent comp is 633 7th, 3 bed / 2 bath, sold 12/6/06 for $1.41M. You could drop by the brokers open today (wonder who the "committee" is?):

"Original 1950's charmer close to Montana Avenue & the beach. Single-story with 2BD, 2BA, living room, dining & 2 garages (one attached & one detached). Bring your architect to add-on or build your dream home. Tons of opportunity! Offers subject to review of committee. Open for the first time Tuesday Aug 28, 11-2 PM"

USA Today lead

USA Today's lead article was striking (no link because I can't find it on their website; emphasis added):

The news Monday from the National Association of Realtors was bad enough: Sales of existing homes fell in July to their slowest pace in five years. The glut of homes for sale is at a 16-year high. The median price is down for a record 12th month in a row.

What's really grim, though, is this: None of the figures reflect this month's turmoil in the mortgage market. Which is why the numbers will likely be even worse in coming months. And why the NAR doesn't expect the housing market to recover until early next year. ...

Can you believe that!?! We're falling off a cliff ... until everything is wonderful again in maybe six months. Add another to NAR spin vs. reality history.

Nothing sold

Nothing sold over the weekend in Santa Monica. I always expect something to go into escrow between Friday evening and Monday evening. Nothing did in Santa Monica.

Remember 2614 2nd (above), 3 bed / 1.75 bath, at the corner of Ocean Park Blvd? It's been on the market about a year. Originally listed at $1,495K, its price has been $1,375K since March and now was finally cut to $1,250K. How many other prices of long-languishing properties will start breaking soon?

Bailouts?

Mr.Mortgage asked, "In the spirirt of democracy and a good Saturday round table discussion, what is your view on the proposed bailout plans that the presidential candidates have been discussing?"

This is important and timely, with recent posts by Mish, OC Renter, Calculated Risk, Housing Doom, and Marinite. The LA Times editorialized against it, linked on the LA Land blog. I also posted back in March on Marinite's wiki and an LA Times article on earlier bailout proposals.

My main points include: (1) How can buyers who just can't afford their mortgages be successfully bailed out? (2) How would that not also bail out undeserving speculators and irresponsible lenders? (3) Bailouts would delay the necessary fall in house prices before the market can recover at affordable price levels.

I see two levels operating: First, politicians want to appear to be doing something. The probably good news is that whatever modest amount of money committed would be little more than symbolic, with no big effect, good or bad.

But the bigger question is, I can imagine the Fed and major banks searching in uncharted territory for something to avoid major defaults. We've seen initial actions with lowering the discount rate and getting big banks to borrow there. Presuming that doesn't solve the problem, what happens next?

"Reasons Housing Will Retrace to 1997"

Great timing: on the heels of Tuesday's "Return to historic costs/income", Charles Hugh Smith wrote yesterday on "Two Irresistible Reasons Housing Will Retrace to 1997 Prices". His graph above shows what that decline looked like in Japan. He begins:

Two historically irresistible patterns suggest speculative-bubble housing values will eventually retrace back to their 1995-1997 levels:

• the symmetry of speculative rises and retraces
  
• the unbreakable links between income and housing values.

I encourage you to read his whole essay (and follow his blog, which was an inspiration to starting mine).

ARM Crash

Gotta pass this one along - watch the balance numbers spin higher with negative mortgage amortization! From Adjustable Rate Mortgage Crash. Hat tip to, and see Mr. Mortgage's additional comments at The Great Loan Blog.

This is serious. The period of neg-am, no-doc, 100%+ loans drove prices up beyond what people could prudently afford. I and others are seeking a return to prices based on a reasonable multiple of incomes.

It's not about cheering someone's downfall, it's seeking return to normalcy and affordability. Transition may be painful. But that's a result of the bubble's excesses. I watched this twice before, in the early 1980s and early 1990s.

Return to historic costs/income

The OC Register's Lansner on Real Estate blog is reporting (hat tip Lander):

O.C. real estate consultant John Burns [link added] is telling his clients: “For prices to return to their historical median ratio of housing costs/income, national prices would need to revert back to mid-2004 levels. This would be a 14% correction in price, assuming stable mortgage rates (an iffy assumption at this point). This is not a projection - just a calculation for your information. ...

And here’s a look at the top markets in the U.S. and what period’s price level would return these towns to Burns’ median affordability equilibrium.

(This list is ... Last time at median affordability: Region)
...
2003 Q3: Chicago, IL; Edison, NJ; Los Angeles; Minneapolis, MN; Oakland; Riverside-San Bernardino; Washington D.C.
2003 Q2: Miami, FL
2003 Q1: New York, NY; Orange County; Sacramento
2002 Q2: San Diego

So what would those numbers be? I plotted lines on the DataQuick monthly median prices, above, and sketched in what such 35-40% declines would look like if finished by the end of 2009 (a quite arbitrary choice). Although: should the line rise with income growth, not be horizontal?

Here's another view, with Los Angeles (3Q'03) and the United States (2Q'04) plotted on the most recent S&P/Case-Shiller graph.

Another Mar Vista flop

Third place in the Ancient Listings of Mar Vista, 210 days now since its 1/23/07 listing, is this 3 bed / 1 bath house at 3778 Colonial Ave., asking $785K.

Red arrow marks the house; nothing like an aerial view to set its context. You know I like showing a different perspective than the listing photos. (Click for larger Live Search image.)

"Completely turnkey Mar Vista home.Priced to sell,property just appraised for 825k!Move right in,or expand and make a very nice profit.In addition to being completely remodeled,the home has great up value potential.Homes within a few blocks have sold from 1-2 mil. ..."

Not so sure about the "Priced to sell" or the "very nice profit". It last sold 7/6/06 for $695K. Originally listed for $835K, it's been reduced three times, but only 6%. It was passed over during the busy spring selling season, and has now racked up over a year's carrying costs.

Remember that other flopper back on April 30, "Mar Vista flipper in a hurry", asking $1,299K for 12566 Woodbine? It's still available, "REDUCED AGAIN, SELLER MOTIVATED!" But a whole 5% doesn't yet seem motivated enough.

$22.5M!

While we watch the Jumbo loan market dry up (see the latest by "Mr. Mortgage"), here comes what must be the priciest listing ever in Santa Monica: $22.5M for this 6 bed / 7 bath, 10,000 sq.ft. house at 1605 San Vicente Blvd. (upper left in photo). It runs through from San Vicente (upper right) to the Riviera Country Club (lower left). (Click for larger Live Search image.) It's described as:

"Extraordinary view lot in premier location. Rare 76,000 sqft view lot with sweeping vus over the Riviera Golf Course to the mnts beyond. The impressive spacious traditional residence was custom blt in 1990 by Gordon Gibson for the present owners. Walled, gated & private this mostly all flat lot encompasses a separate guest hse, mature trees, fruit trees and vegetable garden. The custom designed pool & waterfall take advantage of the exceptional vus ..."

Showing how values have gone up since 1990, the County values it as a $4.2M house on a $3M lot. And if the sellers get their asking price, they'll owe something like $4M in capital gains taxes between the IRS and the state. Wonder where they're moving?

"Missed signs ... mortgage meltdown"

Calculated Risk did a short item, "Neutron Loans: 'Kill people, Leave Vacant Houses'", on this New York Times article, "How Missed Signs Contributed to a Mortgage Meltdown". The Times article is a good read, beginning:

All through last year, Jim Melcher saw the signs of a rapidly deteriorating American housing market — riskier mortgages, rising delinquencies and more homes falling into foreclosure. And with $100 million in assets at his hedge fund, Balestra Capital, he was in a position to do something about it.

So in October, as mortgage-backed bonds were still flying high, he bet $10 million that these bonds would plunge in value, using complex derivatives available to any institutional investor. As his gamble began to pay off in the first months of 2007, Mr. Melcher, a money manager based in New York, plowed the profits into ever bigger wagers that the mortgage crisis would worsen further, eventually risking some $60 million of the fund’s money.

“We saw the opportunity of a lifetime, and since then events have unfolded on schedule,” he said. Mr. Melcher’s flagship fund has since doubled in value ....

The extent of the turmoil has stunned much of Wall Street, but as Mr. Melcher’s case makes clear, there were ample warning signs that a financial time bomb in the form of subprime mortgages was ticking quietly for months, if not years. ...

Not selling in Ocean Park

Let's add Ocean Park to the lists of everything over 30 days on the market. That's nearly everything in Ocean Park, including many we've written about here the last few months and four originally listed in 2005-6.

They couldn't sell during the hot spring, and now face rising interest rates. Wonder when some of these sellers will finally reduce their prices?

718 Marine St., 1 bed/1 bath, $840K LP, 5/25/07 LD (red. 3%)
745 Navy St., 1/1, $849K, 5/10/07 (failed escrow in July)
724 Navy St., 2/1.5, $919K, 5/6/07 (failed escrow in June)
2724 6th St., 2/1, $999K, 9/4/06 (red. 16%)
2614 2nd St., 3/1.75, $1,375K, 8/28/06 (red. 8%)
2613 5th St., 3/2, $1,495K, 6/1/07
2912 2nd St., 2/1, $1,600K, 12/29/06 (incr. 10%!)
2327 5th St., 2/1, $1,600K, 7/13/07
716 Marine St., 4/2.75, $1,639K, 4/20/07 (red. 7%)
2404 2nd St., 2/2.75, $2,250K, 6/21/07
2219 Ocean Ave., 3/3, $3,300K, 9/20/05

Jumbo loans locked up?

Perhaps the biggest question for Westside real estate demand is what's happening with Jumbo loans? Over the $417K conforming limit that Fannie Mae and Freddy Mac will buy, they're necessary to consummate most sales here.

From The Great Loan Blog, "Mr. Mortgage," a Pasadena mortgage banker (thanks for the detailed answers to my questions):

The guidelines for doing a jumbo mortgage have tightened dramatically in the last few days. Lenders such as Indymac, Countrywide and WAMU have increased reserve requirements and stopped taking stated income for loans with less than 20% down. The interest rates for full doc jumbo loans in CA have risen by .50-.75% for the most prime credit worthy borrowers. A client making $200k gross income (everybody right?), with $1k monthly payments on the credit report for cars, putting 20% down qualified for an $825k purchase using standard debt to income ratios two weeks ago. You move rates to 7.75% and the client only qualifies for $777k. Jumbo mortgage rates are averaging 7.75% for this scenario for a 30Y fixed. Which everyone should have, it makes no sense to gamble with an adjustable if you are planning to live in the home more than a few years.

As the guidelines continue to tighten, and the reality of the freeze in the jumbo market sets in you will see sellers drop their prices as we move toward the credit freeze of winter. Buyers can no longer go to their mortgage lender and get the rocket fuel financing that propelled the luxury market between 650k-1.5m. Above these loan sizes clients tend to have substantial active and passive income from stocks, bonds, and small businesses to manage almost any lending squeeze. Working class vs asset class. Don't worry about the rich, they always find a way to make it.

Is stated income still ok as long as there's 20% down? Is less than 20% down ok with documented income? How much less than 20%?

Yes, going full doc a client has to come in with 5% down to get any reasonable pricing. The rates on the second mortgages are around 10% also. This is up from 8.25% for clients with perfect FICO and excellent income.

Stated income is OK with at least 10% down required. The rates are in the 8-9% range on the first. Very few clients go this direction as the rates are very high since the jumbo market freeze.

How have these ratios changed recently, and do you expect further tightening?

The debt to income ratios have gotten tighter in the last two weeks. I would expect all banks to move down to more responsible levels over the next days. Remember as a mortgage investor, which loans would you want to buy from the mortgage bank: 35% DTI or 50% DTI. At the end of the day, it's the risk level the market will stand for a given loan scenario.

From Paper Money:

The availability of “Jumbo” mortgages, i.e. mortgages that exceeded the current OFHEO limit for Freddie Mac and Fannie Mae conforming loan status (currently $417,000 for a single family home), have essentially ground to a halt.

I say essentially because you can still get a Jumbo loan provided you give full documentation of your income (tax returns, pay stubs etc.), put down 20% on the purchase and are willing and able to finance the remaining principle at an over 7% interest rate.

Use Bankrate.com now and see for yourself… fixed rate, ARM, Interest Only… it doesn’t matter they are virtually all over 7% and almost non-existent if you’re not putting down 20%. ...

The availability of cheap Jumbo’s is absolutely necessary for these areas to maintain any volume and fluidity of home sales, now they are gone and the first signs of the impact should be seen in the home sales statistics compiled during the next several months. ...

Be sure to read this update from Paper Money on why this matters so much.

Zip code sales data

Anon had a good comment: "What I'd do is take average number of sales in each zip over some long period of time, and use that to weight things." Here's the raw Melissa data, back to the beginning of 2002, for anyone to work with. Copy it into Excel, convert to columns using (space) as the delimiter, and see where it takes you.

Notes on the columns: Even though the date is the first of the month, the data is throughout that month. The columns for each zip code are # of sales and average sales price (not median).

Month   90402   90405  90066
______ ______ _______ ______
7/1/07 6 2188 23 1073 37 882
6/1/07 8 1774 22 1104 36 876
5/1/07 13 2505 17 1020 34 824
4/1/07 10 2516 19 1210 39 908
3/1/07 6 1704 21 944 33 787
2/1/07 1 2350 12 913 21 723
1/1/07 1 1785 13 969 35 670
12/1/06 8 3357 19 909 34 679
11/1/06 4 1866 9 1055 37 800
10/1/06 4 1820 17 990 34 794
9/1/06 8 1415 23 983 36 833
8/1/06 6 1516 17 1140 44 800
7/1/06 3 1748 17 896 32 797
6/1/06 15 2338 26 1005 32 892
5/1/06 10 2149 26 1178 49 782
4/1/06 12 2156 19 1023 35 785
3/1/06 8 2145 24 849 27 882
2/1/06 5 1531 13 933 14 761
1/1/06 6 2232 14 936 22 753
12/1/05 9 2766 18 1101 46 754
11/1/05 14 2051 34 812 35 927
10/1/05 3 1953 19 800 33 788
9/1/05 15 2106 33 967 37 746
8/1/05 26 2165 39 892 64 892
7/1/05 13 1764 35 1051 50 818
6/1/05 19 1799 30 952 43 777
5/1/05 15 2248 33 837 48 676
4/1/05 11 2351 22 1098 42 706
3/1/05 16 1802 23 834 40 747
2/1/05 4 1978 9 729 38 705
1/1/05 9 2081 18 816 32 934
12/1/04 9 1623 27 757 37 693
11/1/04 13 1555 26 791 53 735
10/1/04 5 1611 21 785 58 653
9/1/04 12 1617 19 848 34 597
8/1/04 13 2203 33 695 57 647
7/1/04 12 2124 25 806 38 685
6/1/04 18 1588 52 775 58 610
5/1/04 11 2067 23 766 31 572
4/1/04 9 1630 20 796 33 591
3/1/04 14 2159 30 806 43 815
2/1/04 8 1167 16 678 29 575
1/1/04 9 1791 15 795 38 634
12/1/03 11 1566 21 657 36 618
11/1/03 13 1207 29 1377 39 571
10/1/03 8 1148 24 551 36 553
9/1/03 14 2038 34 736 47 560
8/1/03 16 1680 33 685 54 542
7/1/03 17 1690 35 694 36 575
6/1/03 11 1286 24 535 51 556
5/1/03 15 1477 27 574 40 486
4/1/03 19 1480 35 640 46 525
3/1/03 9 977 29 575 34 480
2/1/03 8 1059 15 537 29 475
1/1/03 9 1146 22 468 30 481
12/1/02 16 1279 41 594 49 496
11/1/02 10 1309 28 542 53 511
10/1/02 14 1491 30 553 45 425
9/1/02 12 1153 28 486 49 497
8/1/02 15 1634 24 548 47 504
7/1/02 14 1188 46 458 57 420
6/1/02 10 1234 32 517 44 454
5/1/02 10 1223 27 554 39 475
4/1/02 14 1113 52 488 73 386
3/1/02 14 1170 39 469 48 442
2/1/02 5 1025 24 444 40 534
1/1/02 7 1165 28 420 49 407

Not selling north of Montana

Here's the update to the north-of-Montana sequel to Not selling in Sunset Park, everything north of Montana over 30 days on the market. Six joined the list, while two were removed (aparently sold, passing through "Backup offer" status). Slowing market or just high-end buyers away for summer vacation?

439 22nd St., 3 bed/3 bath, $2,398K LP, 6/25/07 LD new
242 25th St., 2/1.5, $2,500K, 7/7/07 new
1020 San Vicente Blvd., 5/3, $2,695K, 7/9/07 (red. 10%) new
710 23rd St., 4/3, $3,298K, 7/13/07 new
446 23rd St., 5/4, $3,498K, 6/22/07 new
202 14th St. (photo), 6/4, $3,529K, 5/24/07 (in and out of escrow)
713 22nd St., 6/5.5, $3,750K, 6/7/07 (red. 6%)
557 12th St., 6/5.5, $3,995K, 6/4/07
239 14th St., 5/5.5, $4,325K, 5/29/07 (red. 4%)
230 21st Pl., 6/6.5, $4,380K, 3/22/07 (red. 6%)
333 14th St., 5/6, $4,888K, 6/29/07 new
421 23rd St., 6/6.5, $5,000K, 5/24/07
506 Palisades Ave., 4/4, $7,950K, 3/23/07

Removed listings:
416 18th St., 5/5.5, $3,895K, 5/11/07
1221 Georgina Ave., 5/6.5, $5,895K, 6/6/07

Not selling in Sunset Park

Here's an update on the 7/14 post of everything in Sunset Park over 30 days on the market. Four listings joined the list, while five others are no longer available.

2416 21st St., 2 bed/1 bath, $1,050K LP, 7/13/07 LD new
2224 Navy St., 2/1, $1,250K, 6/5/07
2314 Pier Ave., 2/2, $1,250K, 7/9/07 new
2723 11th St., 2/2, $1,299K, 5/2/07 (new 3% red.)
2628 29th St., 4/3, $1,399K, 5/21/07
1640 Bryn Mawr Ave., 3/2, $1,499K, 7/7/07 new (5% red.)
1101 Cedar St., 3/2, $1,475K (7%, red. again)
2407 31st St., 3/2.5, $1,475K, new
2202 Marine St. (photo), (plans for) 5/4, $1,495K, 4/8/07
1732 Bryn Mawr Ave., 4/3, $1,795K, 6/18/07 (new 5% red.)
2222 Marine St., 4/4, $1,975K, 5/17/07
2223 Marine St., 3/2.5, $1,999K, 5/14/07

Removed listings:
2128 Navy St., 3/1, $1,259K, 6/4/07
816 Wilson Pl., 3/2, $1,349K, 1/18/07 (10% red.)
711 Pine St., 3/2, $1,549K, 4/11/07 (9%, red. again)
2415 33rd St., 4/3.5, $1,685K, 5/14/07 (6%)
1352 Cedar St., 4/3.5, $1,999K, 4/27/07 (5%)

July numbers

I updated for July my graph of DataQuick # Sales and Median Price for Los Angeles County, with the second quarter highlighted in yellow. Notice how weak 2Q07 sales (red line) were, much less of a bump than the previous years, and July was nearly as low as the February low point.

For comparison, I used Melissa Data numbers for Santa Monica zip codes 90402 and 90405, and Mar Vista 90066, to create a Westside composite of # Sales and Weighted Average Price. Months with more sales in 90402 spiked the average price, as seen for April-May 2007. But it dropped in June-July, and I think will drop more. I'll continue this series.

"The Village"

The Santa Monica City Council will talk tomorrow (Agenda item 8-A) about designs for "The Village", 325 units of Luxury condos (center, looking east from Ocean Ave.), facing a future park in front of City Hall, and affordable apartments subsidized by the condos (right), on the old RAND property between Main and Ocean.

Wonder how much the condos would sell for? And calling it "The Village" brings back the old 1968 TV series, "The Prisoner", starring Patrick McGoohan. Its titles memorably said:

Where am I?
In The Village.
What do you want?
Information.
Whose side are you on?
That would be telling. We want information. ...

LA Times front page

When the front page of the Sunday Los Angeles Times features, "Foreclosures may spur price drops", you know it's unraveling. Like last time. It begins with the scenario many of us remember (the whole article is worth a read):

Major lenders are repossessing homes in Southern California much faster than they can sell them, a development that could set off a downward spiral of price cuts and more foreclosures.

At some point -- maybe this fall, maybe in 2008 -- the lenders' inventories will grow so large that they will have no choice but to start aggressively cutting prices, many agents and analysts predict.

That, in turn, will put more pressure on individual sellers, who will have to reduce their own prices if they want to find a buyer.

As values fall, more people could lose their homes, which would swell the lenders' inventories anew. ...

But the problem is most acute in Riverside and San Bernardino counties, where the market has been enlarged by a building boom. Many recent buyers are first-time owners who made small down payments and have little equity in their homes. ...

The pace is glacial. While it normally takes a few weeks or even months to prepare a foreclosed house for resale, agents say homes are remaining in foreclosure longer than they would otherwise because their prices are too high and lenders have been unwilling to reduce them.

In Apple Valley, according to the First American data, lenders foreclosed on 95 homes in the second quarter but only sold eight. In Palmdale, they repossessed 228 and sold 31. Pomona had 66 foreclosures but only 10 sales. ...

A wild card in this gloomy scenario is the liquidity worries that are gripping Wall Street.

When money becomes scarce, it gets more expensive. Interest rates on so-called jumbo mortgage loans -- those of more than $417,000 -- have risen steeply in recent weeks. At all levels, marginal buyers are being eliminated.

It's got to get worse before it gets better, said Michael Davin, executive vice president of Catalist Homes in Hermosa Beach, echoing the new mantra of the real estate business.

"We need a shakeout to stabilize the market," he said. "Lenders are going to have to start cutting prices big time."

Muskingum lot value?

This new 2 bed / 1 bath listing at 719 Muskingum Ave., Pacific Palisades, is asking $1.8M. "Approx 10,561 property w/amazing potential for expansion. Fabulous opportunity to build your dream home or remodel existing one. Charming ranch style with original oak floors. Updated kitchen w/granite counters opens to deck. FDR, Living room w/fp, separate brick patio, huge backyard, copper plumbing, recessed lighting & more. Don't let this rare opportunity pass your clients by...."

But this 1951 house has only 1,100 sq.ft., and it's the sixth lot south of Sunset Blvd. (red arrow on left of photo above), much closer to apartment buildings than the canyon that Muskingum houses overlook farther south. Are they claiming $1.8M is lot value? Nearby sales with three bedrooms such as 741 El Medio (3/2, $1.44M, 2/2/07) and 16050 Aiglon (3/1.5, $1.445M, 2/22/07) suggest it's not. And 16056 Aiglon (corner of Muskingum, 3/1.5) just reduced its price again, to $1.575M.

Our tiny Sunset Park house at 2416 21st St. is rather like this one, with upgrades but mostly valued for its lot. It just dropped its price again last week, $49K to $1.05M.

Low-priced sales fall most

Bubble bloggers argue that median price statistics understate price drops, due to fewer lower-priced properties selling. Now this graph from San Diego real estate agent Bob Casagrand (via OC Renter) vividly illustrates that for San Diego. (Click for larger original.)

He notes, "Also, take note of the dramatic reduction in sales at the low end of the sizes." I added the red lines, showing how sales of houses < 1,000 sq.ft. fell in half while > 3,100 sq.ft. fell little [corrected units].

Update: See Bob Casagrand's comment for more detail. (Thanks, Bob!)

SM condo inventory

I haven't maintained a regular condo inventory, but do have these data points from last year to compare with current Santa Monica. Although lower inventory than last year, condos as a multiple of houses have risen.

Date      7/30/06  9/15/06  8/04/07

All SM        184      188      166
2+ bedrooms   128      138      121
All 90403*     52       63       48
Houses <$3M    71       75       53
Condo mult.   2.6      2.5      3.1

(*between Wilshire & Montana)

See also Falling condo prices in 90403 (June 6th, map above) for recent same-address condo sales.

Low-end north of Montana

Remember the surge of low-end (as if $2-2.5M is "low end"!) listings north of Montana this spring? They sold pretty fast, as cited in North of Montana buying spree (June 5th). We finally have some sales reported (and shame on Zillow for being behind the County):

369 22nd, 2 bed/2 bath, LP=$2,150K, SP=$2,250K, closed 4/6/07
517 Euclid, 5/2, $2,175K, $2,250K, 6/7/07
307 Euclid, 3/2.5, $2,195K, $2,050K, 6/13/07
225 22nd, 4/2, $2,249K, $2,230K, 5/3/07
727 12th, 5/3, $2,295K, $2,200K, 5/22/07
427 17th, 4/2, $2,295K, $2,425K, 5/23/07
716 11th, 3/3, $2,295K, $2,300K, 5/8/07
363 21st Pl., 4/3.75, $2,398K, $2,578K (?!), 6/5/07

But things have seemed to have slowed more recently, per Not selling north of Montana (July 16th). Here are two recent listings that are unsold:

439 22nd, 3 bed/3 bath, LD=6/25/07, LP=$2,398K (photo)
242 25th, 2/1.5, 7/7/07, $2,500K

Westside Bubble comments?

War Chest wrote in yesterday's comments,

... one thing I find myself still wanting is more conversation. Sometimes I make snotty, elitist, Santa Monica remarks just to see if a bit more lively discussion will ensue.

... its more of a request for more folks to comment. Or maybe adopting a similar format to piggington where there are multiple open threads going at a time and where people can start new ones whenever?

... focusing pretty much exclusively on the westside is what makes this blog more interesting ...

I don't know if you or anyone else shares this sentiment but I thought I would throw it out there.

I've long appreciated your comments, War Chest, and thought these would be a good start for wider discussion. This blog began with my local inventory statistics, an extension of watching the market for the right time and place to buy. I write about what strikes my fancy: highlight and lowlight properties for sale I happen upon, and the larger narrative of the slowly-bursting bubble.

I figure I'll leave the more general economics to folks like Calculated Risk who do it so well, although note here news that particularly affects our local market. Like hikes in Jumbo interest rates, because about everything on the Westside is Jumbo.

We've grown to over 400 daily visitors, which seems a lot for a new and local site! I appreciate your continued readership, that you must like what I've found interesting to write about.

With that, I'd like to throw it open to you for comments. What do you like? Not like so much? Additions of interest? Would some of you like to contribute guest posts (email to westsidebubble(at)gmail(dot)com)? Do you favor open discussion threads, or continuing to use current posts for that? Other suggestions?

(What is that image?? Soap bubbles in the sun, contrast and hue changed in Photoshop.)

Another attempted flip

Nothing in Sunset Park has sold for over $1.8M this year, and as far as I know, only one has two have ever sold for over $1.99M: 2325 25th St, 4 bed / 3 bath, closed 11/29/06 for $2.1M, and 1011 Pine, 4 bed / 4 bath, closed 6/10/05 for $2.306M (see comments).

So what's really special about this new 4 bed / 4.5 bath listing at 2343 29th St. to justify its asking price of $1,995K? Certainly not its narrow 40-foot lot, stucco-and-double-garage facade, or largely-concrete front yard. Not the common "Viking kitchen, granite counters ... hardwood floors ... cathedral ceilings" its listing describes. Nor the interior shown in its listing photos. And how does a 3,200 sq.ft. house on a 40 x 150 lot leave a "large yard"?

According to eppraisal.com it last sold on 5/16/05 for $810K. Let's see: if they built 3,200 sq.ft. plus 400 sq.ft. garage at a cheap $200/sq.ft. they've spent $1.53M so far. At $250 they're in $1.71M. That's $7,650-8,550 per month carrying cost at 6% interest, or $92K-103K/year. I'm not holding my breath.

SM Mystery House

One of local agent Kate Bransfield's "Feature Homes" is unusual: "Exquisite Gated Property This listing will not be in the MLS. This stunning property boasts an elegant home which combines the best of the old and the best of the new. Just under 17,000 square foot lot with a pool that is right out of a tropical paradise. This property is gated and very private. Please, only Buyers (or their agents) who can provide their verification of ability to close should inquire." Its address is only given as "North of Montana / West of 7th Street". It has 5 bedrooms / 5.5 baths, asking $7.9M.

Some mysteries: Where is it? Why the big deal about not being in the MLS, when much more expensive houses are? Is it a big lot to justify the price? How does it compare with 506 Palisades, 4 bed / 4 bath on a 50-foot lot, asking $7,950K, still unsold?

One answer: Armed with the photos from her website, I went driving ... and couldn't find it! I then looked on Zillow for a lot size there just under 17,000 sq.ft. Turns out it's an unusual size, smaller than the original 100-foot-wide lots (22,000 sq.ft. and up), but larger than split 50-foot lots.

Voila! It's at 537 Alta, on a 75-foot lot, verified with MS Live Search aerial photos and a walk by (above), showing it rather hidden behind a hedge, with no sign.

Weekly Inventory Update

8/3 - Westside inventory is up 2.6% from the end of July. I also seem to be seeing more price reductions and failed escrows (financing failed?) in Santa Monica, Palisades, and Mar Vista.

7/27 - Santa Monica is down (only 2 new listings for the week). Palisades is up. Mar Vista is flat. Oh, and the Dow was down another 208 points today, 4.2% for the week.

7/20 - Inventory is down a bit, from fewer new listings. Properties featured here that are no longer active include 3208 Urban, 1020 Chelsea, 2820 2nd, 1221 Georgina, and 461 Puerto del Mar (guess they finally found their price after 10 reductions). Wonder if being featured here helped them sell? Already a $200K reduction for 2516 Cloverfield.

7/13 - Really big inventory jump in SM, up 10 from last week, from 21 new listings in July, more than the 18 for all of June (<$3M). Palisades is slightly down, and Mar Vista is flat.

7/6 - Big inventory rebound this week: SM up 5, from 7 new listings <$3M; PP up 5, from 5 new listings <$2M; MV up 6, from 9 new listings. But at 48, SM inventory <$3M is still well below the 67 of a year ago.

       LA County  Santa Monica  Pacific Palisades  Mar Vista
                <$3M New Tot DOM<$2M New Tot DOM Tot New DOM
       _________ _______________ _______________ ___________


 1/30/06  27,732 
 2/28/06  29,420 
 3/31/06  31,819
 4/21/06  33,054  35
 5/ 1/06  34,032  38  33
 6/ 2/06  37,847  56  36      38
 6/30/06  42,317  66  40      49
 8/ 4/06  45,315  70  34      50
 9/ 1/06  46,781  71  27      59
10/ 6/06  47,369  83  25  98  71
11/ 3/06  45,780  80  20  91  77
12/ 1/06  43,103  65  18  72  96  39  20
 1/ 5/07  35,646  54   4  60 117  33   6  71  66
 2/ 2/07  36,715  38  15  45 124  29  16  61  71
 3/ 2/07  41,251  42  14  51 114  26  10  68  79  53  25  76
 4/ 6/07  42,857  41  23  49 107  18   8  73 103  52  52  50
 5/ 4/07  45,918  46  28  54  92  19   6  82  79  68  37  52
 6/ 1/07  52,198  50  25  61  78  17  15  87  78  77  39  53
 6/30/07  52,769  42  18  56  81  17  11  92  77  74  33  61
 7/ 6/07          47   7  61  76  21   5  90  68  80   9  60
 7/13/07  52,517  57  21  73  64  20   5  84  77  80  16  62
 7/20/07          53  25  67  71  17   6  81  74  78  23  67
 7/27/07  53,505  46  27  60  79  21  11  85  71  78  34  69
 8/ 3/07  54,166  53  28  68  86  23  12  78  76  84  38  68
 8/10/07     

All Westside (updated 1st Fri. of mo.)

                   2/9  3/1  4/6  5/4  6/1 6/30 8/03
Bel Air-Holmby Hls. 86   86   92  100  103   99   86
Beverly Center-M.M. 64   57   48   53   54   65   64
Beverly Hills       67   70   56   46   53   49   59
B.H. Post Office    94   91   92   88   93   95   92
Beverlywood Vic.    35   36   31   39   38   41   42
Brentwood           67   71   73   75   72   68   86
Cheviot Hills-R.Pk. 22   20   19   22   23   22   26
Culver City         35   25   20   28   33   36   41
Malibu             178  181  192  199  206  220  224
Malibu Beach        42   44   51   52   56   58   54
Marina Del Rey      20   20   20   27   29   28   26
Pacific Palisades   64   68   73   82   87   92   78
Palms-Mar Vista     62   53   52   68   77   73   84
Playa Del Rey        7    8   17   20   21   20   21
Playa Vista          3    2    3    1    3    5    4
Santa Monica        50   50   49   53   61   57   68
Sunset Stp.-Hwd.H. 155  178  159  166  180  168  187
Topanga             39   41   36   43   45   54   49
Venice              64   64   57   68   70   72   69
West Hollywood Vic. 23   32   25   36   42   41   40
West L.A.           19   21   25   24   25   34   31
Westchester         53   46   47   45   53   52   62
Westwood-Cent.City  33   44   37   42   33   34   29
                  ____ ____ ____ ____ ____ ____ ____
Total             1282 1308 1274 1377 1457 1483 1522
Month-month incr.        2%  -3%   8%   6%   2%   3%

Notes

LA County inventory via OC Renter. Santa Monica Days on Market (DOM) is for <$3M, and omits Santa Monica Canyon (in City of Los Angeles but S.M. Post Office). Pacific Palisades DOM is for <$2M and count omits mobile homes. "New" is for previous month, or month-to-date for current partial month.

Mar Vista Hill

Mar Vista Hill (south of National, east of Centinela) is the priciest part of Mar Vista. New mansions have been sprouting for $2 million give-or-take. For that you get views and ocean breezes for a couple million less than a similar house north of Montana.

I wonder if it has stalled, though. The last to sell (3675 Wasatch) entered escrow back in April, and seven others are now on the market, including 3653 Mountain View. The oldest is at 3413 Inglewood (above), listed back in March. It has 4 bedrooms / 5 baths, asking $1,899K.

"Seller Says Bring Offer Fantastic top of the hill location! Incredible city views! Spacious and upgraded home over 3500 sqft! 4 bedroom suites + family room + powder room + two balconies + oversized garage + tons of storage +++! Perfect floor plan has two story step down living room, formal dining, cook’s kitchen with granite and stainless appliances opens to family room. Newer landscaping inc. grass yard, entertaining patio, fountain, rock wall & spa!!... "

Buyer Says Reduce Price More! They have three times so far, from its original $1,989K, but keep going. Especially since views will be blocked by new construction beginning on the other side of the street. (Are those crenellations above the garage door?)

"Crenellated fortresses"

A great McMansion description by Bill McKibben: "The average size of new U.S. homes has more than doubled over the past couple of generations, even as the number of people residing in them has shrunk by nearly a full person. The last glory days of the now-fading construction boom were the most insane of all: Outer rings of crenellated and turreted fortresses were sprouting near virtually every U.S. city, each dwelling looking as if it had been designed for an entry-level monarch. The really rich, meanwhile, amused themselves by building above every ski hill and beach ranks of second homes that looked like nothing so much as modernist junior high schools. The environmental costs are myriad, of course--more materials used in construction (making cement for foundations alone is a prime contributor to global warming) and more energy used to heat and power all the resulting square footage. You can turn the thermostat down a degree or two, but if the furnace is warming 4,500 square feet, it's a token gesture."

2nd quarter sales

LA Times L.A. Land blogger Peter Viles, citing a Santa Monica realtor, wrote today about "the complexity of the market and the statistics that attempt to capture it. Example: new statistics indicate the second quarter was stronger than the first for Westside real estate."

This brought comments like, "More sales in Q2 than Q1? I'm shocked to find out that summer still follows spring, which follows winter."

This graph of DataQuick statistics for Los Angeles County illustrates that. I've shaded the 2nd quarters yellow, consistently the peak sales quarter of the year. But the 2nd quarter of 2007 was 29% lower than 2006 (31,232 vs. 22,231 sales), and while previous Junes beat Aprils, 2007's was limp.