Thursday, September 13, 2007

Not selling in Sunset Park

Time for our third mid-month review of everything R-1 in Sunset Park over 30 days on the market (8/15 previous). Well-priced listings have sold within a few weeks; these, conversely, haven't. Eight listings joined the list, while five others are no longer available. Expect more next month.

1032 Maple St., 3 bed/2 bath, $1,149K LP, 8/10/07 LD new
2224 Navy St., 2/1, $1,150K, 6/5/07 (red. 8%)
1615 Marine St., 3/2, $1,150K, 8/13/07 new
2314 Pier Ave., 2/2, $1,195K, 7/9/07 (red. 4%)
2723 11th St., 2/2, $1,299K, 5/2/07 (red. 3%)
816 Wilson Pl., 3/2, $1,299K, 1/18/07 (red. 13%) back on mkt.
2005 Ashland Ave., 3/1.75, $1,399K, 8/2/07 (red. 7%) new
2407 31st St., 3/2.5, $1,425K, 7/9/07 (red. 3%)
1640 Bryn Mawr Ave., 3/2, $1,449K, 7/7/07 (red. 5%)
1101 Cedar St., 3/2, $1,475K, 4/11/07 (red. 7%)
1826 Pearl St., 4/1.75, $1,475K, 7/27/07 (red. 2%)
1327 Pacific St., 3/2, $1,600K, 7/11/07 back on mkt.
1621 Ashland Ave., 2/1.5, $1,650K, 8/13/07 (red. 1%) new
2222 Marine St., 4/4, $1,975K, 5/17/07
2343 29th St. (photo), 4/4.5, $1,975K, 8/2/07 new
2516 Cloverfield Blvd., 4/3, $2,395K, 7/15/07 (red. 8%) back on mkt.

Removed listings:
2416 21st St., 2 bed/1 bath, $1,050K, 7/13/07
2628 29th St., 4/3, $1,399K, 5/21/07
2202 Marine St., (plans for) 5/4, $1,495K, 4/8/07 (demo permit posted)
1732 Bryn Mawr Ave., 4/3, $1,795K, 6/18/07
2223 Marine St., 3/2.5, $1,999K, 5/14/07

16 comments:

Anonymous said...

Expect to see massive reductions in Sunset Park housing prices beginning in October/November. Income levels in this area in particular are completely unaligned with 2003-2006 purchase prices. These are the overextended folks who were desperate to buy into Santa Monica. The economics of this once modest but idyllic residential have been out of whack and now need to be whacked back into whack.

Anonymous said...

that sf valley contractor special on 29th st in the photo (on my block) not going anywhere for a lonnnnggg time... 40' wide lot purchased for 650-700k a couple years back.

Anonymous said...

"that sf valley contractor special on 29th st in the photo"

Not sure what you mean my sf valley contractor, because the owner of that property appears to live on 28th in SM.

Anonymous said...

"Income levels in this area in particular are completely unaligned with 2003-2006 purchase prices."

Yeah, as opposed to 90402 and the more desirable areas in SoCal where everyone makes $1MM per year. Just like people in 90405 paid 10-12x salary, so did people in 90402 et al.

Mr.Mortgage said...

A lot of the homes that are profiled in here are owned by victims of resetting ARMs. They can’t refinance because they don’t have any equity. Most of these homes are regular folks that were swept up in the housing bonanza.
http://thegreatloanblog.blogspot.com/2007/09/investors-love-reseting-arm-rates-who.html

WarChestSM said...

anons,

Sunset Park has always been the entry level single family home market. People who work for their money and don't have huge trust funds, etc seem to be the ones who have historically bought homes there. In recent times, the market took off, people rushed in to flip all the homes, and as a result the prices went up even further to levels which are no longer supported by incomes. Loose financing then helped people "reach" to get in even though they really couldn't afford it.

North of Montana homes are subject to many of the same fundamentals and rules, but I think there are some subtle differences. No, I am not bullish on 90402, but we have to admit that there really are "all cash" buyers or situations where old, family money is involved. Also, north of Montana would be seen as a "move up" market where people who are coming in from 90402 or 90403 are bringing with them huge gains on their old properties.

I think both areas get hammered, and I am not trying to say one area is better or represents better value, but at the risk of painting with broad strokes and overgeneralizing, 90405 seems to most likely be supported by "wages" whereas 90402 is more likely to be supported by those who derive their income from assets, businesses, trusts, etc.

Anonymous said...

"No, I am not bullish on 90402, but we have to admit that there really are "all cash" buyers"

Show me some in 90402. I have yet to see one.

WarChestSM said...

anon, I will defer to you. I have not seen any 100% cash purchases personally. Maybe a better description of "all cash" would be buying with 50%+ down?

At a minimum, it probably makes sense to take a loan of $1.0 million as that is the limit for interest deduction.

Also, with financing being so cheap during the near record low interest rate environment of the last few years, maybe taking a big loan was smart for those who run businesses or are involved in other forms of investing...if you can lock your rate at 6-7% and find returns higher in other areas, then you are a winner, regardless of the fact that you can't deduct interest over your $1.0 million loan amount.

Or maybe everything is a big lie up in 90402...Almost everyone that I know who lives up there purchased their homes 15+ years ago. I know of a couple of people who live in 90402 that purchased within the past 6 years or so and both of them have very high paying professions/businesses. Then again, people could still be stretching significantly even with huge incomes because of the $40K tax bills, live in maids, gardeners, pool boys, etc...

Anonymous said...

"anon, I will defer to you. I have not seen any 100% cash purchases personally. Maybe a better description of "all cash" would be buying with 50%+ down?

At a minimum, it probably makes sense to take a loan of $1.0 million as that is the limit for interest deduction."

Many of the recent buyers of the $4MM + homes in 90402 bought something 6-7 years ago for approx. $1MM, sold for approx. $2.5MM, and take out $2.5-3MM in loans for the new place.

WarChestSM said...

anon, that is interesting and I agree on the move up buyers rolling their big gains into new purchases. Do you think you could even get a $2-$3 million loan right now? If so, would it have a really high interest rate?

The monthly nut on something like that would be HUGE. $16.6K payment on a $2.5 million loan at 7% for a 30 year fixed...and I really don't think you could get 7% anymore on a super jumbo.

Anonymous said...

Here's an example, 210 23rd which sold for $4.35MM. The buyer bought in Malibu around 2000 at around 1.2MM and now has these mortgages on 210 23rd:

Lender: WELLS FARGO BANK NA

Type of Mortgage: ADJUSTABLE RATE

Loan Amount: $ 2,600,000

Rate: 5.75 %

Term: 4/1/2037

Mortgage Type: NON-PURCHASE MONEY

Lender: WELLS FARGO BANK NA

Lender Type: BANK

Loan Amount: $ 880,000

Loan Type: CREDIT LINE (REVOLVING)

Due Date: 3/15/2047

So much for 50% down on that one.

WarChestSM said...

anon,

Great example. Those loans are huge...and whats with the 40 year term on the HELOC? I haven't seen that before.

I would be very interested to see more examples of recently closed transactions for $4+ million homes. The spec that closed on 20th and Alta for $4.6 earlier this year would be interesting...

dwr said...

Ask and you shall receive (FYI, you and Westside Bubble should get together and get a subscription to Lexis, it is far and away the best tool I use):

Mortgage Type: PURCHASE MONEY

Lender: COUNTRYWIDE BANK FSB

Lender Type: BANK

Loan Amount: $ 3,000,000

Loan Type: NEW CONVENTIONAL

Type of Financing: FIXED RATE

Interest Rate: 6.87 %

Due Date: 4/1/2037


Mortgage Type: NON-PURCHASE MONEY

Lender: COUNTRYWIDE BANK FSB

Lender Type: BANK

Loan Amount: $ 680,000

Loan Type: CREDIT LINE (REVOLVING)

Type of Financing: VARIABLE RATE

Rate Change: MONTHLY

WarChestSM said...

dwr, you rock.

Someone claiming the "LA is a world city, rich foreigner" stuff on the most recent thread...

Maybe your data shows otherwise?

WarChestSM said...

Oh and yes, Nexis is great. I can't speak for westside but you know I'm too cheap to spend any money on a subscription...besides, then you wouldn't be able to clean up after the mess that I make after I assume things that aren't always true.

Also, how do most of the spec builders finance their purchases of tear downs and the subsequent construction? Mostly loans or do they put down a wad of cash? I'm assuming you will say loans at this point...

dwr said...

"Also, how do most of the spec builders finance their purchases of tear downs and the subsequent construction? Mostly loans or do they put down a wad of cash?"

I don't track 90402 closely enough to know which properties were torn down, please give me some addresses and I'll check them out (but I can say this, most of the sales I've checked out have had loan details like the two I posted; typical profile: 30% down max, the buyers bought something for around $1 million around 2000 (so they had well under $1 million in debt in 2000), sold it for $2.5, bought for $3.5-4.5 million, and now have $3.0-3.5 million in debt. Sure they might make double what they did in 2000 (lawyer made partner, doctor made partner, etc) but still most people have gone from 800K in debt to 2.5MM+ in debt in 6-7 years.