Monday, October 22, 2007

East of the 405, north of Pico

Suppose we venture east of the 405 to see what another part of the Westside has to offer? Specifically, the area north of Pico, south of Santa Monica Blvd., and west of Century City. The MLS includes it in Westwood-Century City.

The photo above is of 2357 Kelton Ave., just north of Pico and west of Westwood. It's a fixed-up 2 bed / 1 bath house now asking $999K, originally listed for $1,039K on 9/28/07.

Across the street is 2360 Kelton, also a fixed-up 2 bed / 1 bath, asking $1,099K, listed 7/26/07 for $1,149K.

The good news is a neighborhood with prices beginning below $1M, not as mansionized as parts of Santa Monica or Palisades, walking distance to local shops, architectural character from the 1920s, and big street trees. The bad news is you're sandwiched by traffic on the boulevards and freeway.

Two other recent listings appear to have sold within a week earlier this month: 2300 Manning, a fixed-up 3 bed / 1.75 bath corner Spanish house that asked $1,275K, and 2030 Kelton, a 3 bed / 1.5 bath fixer Spanish that asked $849K.

30 comments:

Mr.Mortgage said...

Off topic but worthwhile to know:
Countrywide REO goes from 13k to 195k?
http://thegreatloanblog.blogspot.com

Don said...

Also off-topic, but is it just my imagination or has dataquick pushed back dramatically the date that they release the new LATimes chart data on the web? It used to be up on the 15th of the month and it's been consistently coming out much later than that since last summer.

Anonymous said...

Westside Bubble, I'm glad you've turned your attention a little further east this time. I know these areas very well, and houses here are still selling at ridiculous prices for the time being, although you see them sitting longer in the market. However, I have to say there is a new development that has caught my eye lately. Every time I look or drive around, I find a new, nice, house offered for lease. I know the rental market well, because we rent a 2 bed condo and would like to move to a place with 3 beds if we can find something decent at a good price. Well, just in the past 3 months or so I have seen at least 4 houses offered up for rent in the 10 square blocks around my place between Santa Monica, Beverly Glen, Wilshire and Westwood. Those houses have not been occupied as of today. The asking prices for these rentals are high (upwards of $4,500 for a 3 bedroom with a backyard), but still a fraction of what you would have to pay for a mortgage on that same house. I suspect that there are many more houses up for rent if you start looking seriously with a realtor, because every time I call for one they mention that they have something else they can show me. I can't wait for this renter's market to play out...

WarChestSM said...

anon,

You might find it interesting to look up the purchase info on those houses. I bet a few would have been purchased within the last 2 years, fixed up and then now put on the market for rent (and also maybe for sale).

There are a lot of places that are both for rent and for sale right now on the westside.

Anonymous said...

Off Topic......
i have been watching a house in Pac Pal. Purchased June ‘05 for $2575.0M with about $125.0 put into it. Originally listed in May ‘07 at $2895.0M. Price was cut 4 times, bottom to $2425.0M. I had bid $2050M in July and got screamed at by listing agent. Came off the MLS and back with a new paint job and new realtor two weeks ago at $2395.0M. Agent who handled my bid called today to tell me the house had sold “over asking”. So, THAT’s how they do it!?!

Anonymous said...

You might find it interesting to look up the purchase info on those houses. I bet a few would have been purchased within the last 2 years, fixed up and then now put on the market for rent (and also maybe for sale).

Warchest, you are right. The funny thing is, I've lived in this area for a long time and I have a good idea of what houses have been on the market and when. These recently "for lease" properties that I mentioned had not been openly in the market,(I should know, since one of them is exactly on my street, next corner) but it turns out that at least a couple of them did change hands after 2005. Someone told me that before things began to crumble there was a lot of "under the radar" buying by flippers and realtors who wanted to get the houses before they went in the open market what with all the bidding wars that were going on. I guess they're stuck now, and I can't say I'm sorry.

Anonymous said...

"The good news is a neighborhood with prices beginning below $1M, not as mansionized as parts of Santa Monica or Palisades, walking distance to local shops, architectural character from the 1920s, and big street trees."

It also has a terrific public elementary school - Westwood Charter. I would bet it's a major reason the real estate is still so high there.

And for those who don't understand the attraction of the Mar Vista hill area - same reason. Mar Vista Elementary. It's why I'll be moving there soon.

Yah, I wish I could wait another year or so before buying, but the children keep growing despite our best efforts to keep them babies forever :-)

In L.A., real estate is about location, location, and schools...

Anonymous said...

I agree with the above poster.

Overland, Warner and Fairburn are also coveted Elementary schools. Just look at the scores and look at the buyers who have young children.

One of the big problems with these areas, though, is that the Junior HS and Senior HS are terrible. So it's either private school or move for most of them.

And traffic is bad, but it's worse if you work in the area but don't live there! I live in Santa Monica and I hate the traffic around here, but I'd hate coming in on the 10 and getting off at Cloverfield every morning or trying to go east on Olympic, Pico, Pearl, SM Bl, Wilshire, etc after 3:30pm.

mamsterla said...

I live in that neighborhood (bought in 2000). It is a great place to be and the traffic is not too bad (we are between Olympic and Pico and hear no traffic noise). There is a house down our street - an estate sale in "as is" condition that sold in 1 day. 10546 Lauriston Ave. Houses that have decent asking prices turn over quickly. There are a few spec houses and just overpriced houses that sit. There is the new spec house on Fox Hills Dr. behind the Ralphs. It is up for a very high $2.5M.
As for the pluses - Westwood Charter. Walking distance to Westwood Blvd. and Pico for food and errands. Easy access to freeways and arterial roads. I am in short bike commute distance to my job in Beverly Hills and to my previous job in Santa Monica.

Anonymous said...

The asking prices for these rentals are high (upwards of $4,500 for a 3 bedroom with a backyard), but still a fraction of what you would have to pay for a mortgage on that same house.

These rentals for the most part are low end corner houses in bad shape old decor or with some major flaws which would be absolute low end for buying in these areas say 1.25 mln and you can't even fix it up when renting. Or I guess you can but then the landlord will just raise your rent :-).

Not quite the fraction. Do this math. Rent or buy. Assume prices stay absolutely flat 0% for 30 years. Put 250k down - you lose say 5% interest minus 44.3% tax (marginal tax rate federal + California ) on downpayment per year 7k
Pay mortgage 1 mln at 6.5 % fixed for 30 years. 65 k per year about 36.2 k per year after deduction of 44.3%

Property tax at 1.2% and after state tax deduction about 13.6k. Assuming you are in AMT bracket and cant deduct property taxes on federal return.

13.6k+36.2k+7k = 56.8k

OK add 1 k insurance and 2k upkeep 59.8k /12

= 4980$ per month fixed for 30 years

Try to get your 4500$+ rent fixed for 30 years on a comparable house :-)
Inflation ? Hope your landlord actually spending 2 k per year in upkeep -most dont.

Add another 1-2k per year while renting for moving cost when landlord decides to kick you out for this or another reason-such as they decide to sell the house.

So you see that even assuming flat house prices for the next 30 years it still might be a very good option to buy.

Of course if you believe
prices go down for sure and you can time it, keep renting but there are many here like you (I know personally quite a few in that position saving more and more money) big competition down the line to buy these houses. You also need to make decent money for the tax deduction so it works for you. These areas are prime on the Westside and there is a lot of demand and there is few single family houses for sale. Even if prices stay flat it still may be better to buy for the long term and it is not really not more expensive. You have a peace of mind for a long time. It is worth a little extra especially when you want to raise a family etc. So do not be surprised people buy these houses at today's prices.

I might be tempted to buy soon depending if I decide to stay in LA. I don't believe the prices can go down a lot and if they do so what - they'll come back up before there is a time to sell in 20-30 years.

what? math? said...

Okay, let's quickly review your math, Anon.

First, where are you getting 6.5% on one mil? Let's say it's 7.5%. And you're certainly not getting an interest only for 30 years. (1mil x 6.5 = 65,000) This is the kind of BS that cause the price run-up, and ignorance that has all these people saying they were wronged.

1 million on a 30 year fixed at 7.5% is 7k a month. ($6992.15) And you only get to write off the interest and it's not 44% of the total number. It adjusts your taxable income... it usually works out much closer to 30%

so...

5k month after tax mortgage
(that's 60k a year, not 36k)
1k month for taxes (800ish after tax?)
2k month misc, ins, repairs, blah

That's 96k a year AFTER tax. (not 60k) On a currently depreciating asset. And remember, the person you bought it from was paying the 60k on an interest only loan that just reset. Think you can figure out what the purchase price has to be for the number to be 60k a year again?

Anonymous said...

You can get < 6.5% jumbo as we speak. Check bankrate.com. And it keeps falling.

Of course you do not write off principal but this is your money being put away.
It is not a cost.

If you belive the house is depreciating that is your belief and that is all.
I do not belive the houses will depreciate very much in these areas of LA - there is not subprime problem here. Poor areas yes. Do not be suprise if
they still appreciate a little in the next few years. Belief is not a fact.

2k per month for insurance and maintanance- wow!. I don't think you have ever owned the house. Current rate for insurance for 400k at 200$ per sqf replacement cost is close to 1.2k per year. Insurance is only for the house not for the land.

not the same Anon ... said...

different anon here.

"what? math?" What world do you live in where there is 2000 PER MONTH in insurance, maintenance,etc for a house ? That is absurd.

If you can afford a loan in this price range, you are definitely in the combined 44%+ bracket. Even after the deduction. You are also likely subject to PMI as the original anon pointed out.

I just checked on Amerisave.com and a 30-year fixed rate JUMBO of 1.0 Mil on a purchase of 1.25 Mil is available at a fixed rate of 6.375%
(APR=6.48) with a grand total of 10K in fees (~1 %).

So, I believe that the previous math was much more carefully done than you suggest.

The rent versus buy in this area, while it does favor renters, is not that out of whack.

That is unless your spouse wants to do about 2K in remodeling each month.

what? math? said...

oh, wow, the website said 6.375?

Go get that loan and tell me what you REALLY is. (try adding a pt to that... or 7.375%)

and 2k month may be high. Make it 1k a month. Or do you garden, too? clean the pool? Use heat? fix a roof? make a washer dryer?

and if you make 200k, you adjust say 40k (interest of your mortgage payment), you're paying 44% on 160k. YOU DO NOT GET 44% OFF of your mortgage payment.

Anonymous said...

You need to make over 350k (household) to have 44.3 % tax write off. There is a a bit of a phaseout at higher income but it is very small.

Above 200k until 350k it is slightly lower more like 42.3% still very good. Check with you accountant -I have checked.

Mortgage rates. I have carefully checked and verified

Believe me you can easily get 0 points < 6.5 % jumbo right now.

For example

NationsChoice Mortgage

APR 6.307
0.000/
0.000 points
6.250 rate
$5959 fee (ok add that to the price of house or negotiate when you buy)
30 day lock
$6,157 payments including principal.

Of course you need a decent credit and downpayment as it should of course be.

Anonymous said...

Use the heat, use washer dryer.

Sure we do - but is that included in your 4500+ house rent. Do the 4500 houses actually come with a pool service here- I doubt it. But maybe you find a deal-afterall. If it is a great rental deal do not be surprised to be kicked out after 1 year when the landlord decided you pay too little. Single family houses are exempt from the rental control.

Check how much landlords are spending per month on a rental house. You will be surprised how little.

Don said...

Speaking of math: estimated payment per $100 on a 6.375% mortgage is $6.24. That comes to $6,240/month on a million dollar mortgage, not $4980 (if that's even what you're saying... the argument is such a mess, I honestly can't tell).

My credit union (OCTFCU), which has great rates on loans and savings currently has the cheapest jumbo rate at 6.625%, btw, and that's with 1.5 points. Of course they underwrite their own paper and only lend to members with good credit. I would be suspicious of any claims about "fixed" mortgages at rates lower than theirs.

I've run numbers on some of the duplexes for sale just a few miles east, and there's no way that the math works out for buying them at their current prices to make any sense at all. You're better off renting and putting the down payment into savings at 5%. And that's only considering mortgage and tax costs, not insurance.

not the same Anon said...

"and if you make 200k, you adjust say 40k (interest of your mortgage payment), you're paying 44% on 160k. YOU DO NOT GET 44% OFF of your mortgage payment."

True, but you pay 44% less to the Fed than otherwise.

Let's illustrate by example:

Case 1 - Renter that makes 220K and has 20K in itemized deductions and exemptions.

Taxable income = 200K

Federal Tax paid = $39,148.75 plus 33% of the amount over 160,850

This would be = 52,068 in federal taxes

Case 2- F'd buyer that makes 220K and has 20K in itemized deductions and exemptions, plus mortgage interest of 65K (assuming 6.5% loan)

Taxable income = 135,000

Federal Tax Paid = $15,698.75 plus 28% of the amount over 77,100

This would be = 31910 in federal taxes.

SO, the F'd buyer pays about 20K less in federal taxes in this example. Equivalent to about 30% of their income.

In both cases the taxpayer is in the marginal 9.3% CA state tax bracket. Therefore the difference in state taxes paid is $6045.

Net differences in taxes = 26,203.
That's 40.3% of the 65K in mortgage interest.

You are right it's not 44.3%, but it's pretty darn close at 40.3%

True you are not paying 40% less for the mortgage (and Angelo Mozilo's pension). But you are sending 26K fewer dollars to Arnold and George Bush.

not the same Anon said...

OOPS minor corrections here ...
"and if you make 200k, you adjust say 40k (interest of your mortgage payment), you're paying 44% on 160k. YOU DO NOT GET 44% OFF of your mortgage payment."

True, but you pay 40% less to the Fed than otherwise.

Let's illustrate by example:

Case 1 - Renter that makes 220K and has 20K in itemized deductions and exemptions.

Taxable income = 200K

Federal Tax paid = $39,148.75 plus 33% of the amount over 160,850

This would be = 52,068 in federal taxes

Case 2- F'd buyer that makes 220K and has 20K in itemized deductions and exemptions, plus mortgage interest of 65K (assuming 6.5% loan)

Taxable income = 135,000

Federal Tax Paid = $15,698.75 plus 28% of the amount over 77,100

This would be = 31910 in federal taxes.

SO, the F'd buyer pays about 20K less in federal taxes in this example. Equivalent to about 30% of their mortgage interst.

In both cases the taxpayer is in the marginal 9.3% CA state tax bracket. Therefore the difference in state taxes paid is $6045.

Net differences in taxes = 26,203.
That's 40.3% of the 65K in mortgage interest.

You are right it's not 44.3%, but it's pretty darn close at 40.3%

True you are not paying 40% less for the mortgage (and Angelo Mozilo's pension). But you are sending 26K fewer dollars to Arnold and George Bush.

Anonymous said...

Regarding taxation. I have considered higher adjusted incomes to get 42.3%-44.3% ranges.

At lower income and lower tax brackets it is lower but then AMT becomes less of a problem and you may perhaps begin to write off property taxes from the federal income -increasing the tax write-off benefit.

The best is to run the #s with your accountant with and without mortgage and taxes for your income level and see the final difference in taxes. Then oyu know the true # - this is what I did.

nonni said...

And what if in a few years real estate values begin to increase after this dip?
Wouldn't it also be swell to exclude up to $250K (or $500k if married) from capital gains?

Anonymous said...

The bigger problem -- who the hell wants to buy these fixers? North of SM Blvd, they are NOT being offered at $1.25mm. Even if you bought one at $1.25mm, you would have $150,000 of work to do, at least.

I would WAIT this one out, until a NICE house that has be redone already costs $999,000.

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