Saturday, October 27, 2007

SM vs. Case-Shiller, revisited

Remember last month I tried fitting the LA Case-Shiller index to low-end north-of-Montana prices, specifically 9th, 10th, 12th, and Euclid? (As I noted before, I scaled the Case-Shiller curve to fit the north-of-Montana data, which doesn't matter in terms of percentage changes. Updated with for August, released 10/30.)

I found more sales data from 1989-92 (the last peak) and 2002-4, which I've added to refine a new graph (above). There were lower prices than my recollection of the last peak being over $900K. The lowest recorded prices appear to be:

$295K - 550 10th - 3/85?
$316K - 527 Euclid - 12/85
$450K - 545 12th - 11/86
$470K - 347 12th - 9/87
$605K - 348 12th - 1/88
$725K - 615 Euclid - 7/88
$712K - 560 9th - 8/89
$725K - 323 10th - 2/90 - Up ~150% from 1985
$735K - 326 9th - 11/90
$690K - 628 12th - 2/91
$600K - 438 12th - 11/92
$541K - 627 Euclid - 5/96 - Down ~25% from 2000

There appears a divergence this year, where north-of-Montana tear-down prices took one more jump up. Although $2,050K for 307 Euclid in 6/07 is pretty consistent (up ~275% from 1996), as is the apparent sale last week of tear-down 704 15th, last listing price $1,990K (not on graph).

I tried this again (graph above) with Sunset Park, specifically Hill and Ashland east of 11th. (Also see recent Hill St. sales from last April.)

This one's harder, perhaps because Sunset Park has less clear "tear-down" activity than north of Montana. In the last year there were two really low-end sales (the low points on the graph), $896K for 1408 Hill in 2/07, now demolished, and $928K for 1616 Hill, now rehabbed, but the rest were a step up in price and livability.


WarChestSM said...

Nice work. Markets go through cycles, and there is no better way to say this than looking at these graphs.

LA Times also had a front page article on how weakness is spreading to the westside and how the westside has lagged in terms of declines just as it did during the last down cycle.

But of course, we don't need the LA Times to tell us...thats what these blogs are for!

Anonymous said...

Thank you for this work. Let me make sure i am drawing the right conclusion

first, let's assume we are talking about very low end houses, houses only suitable for teardown.

North of Montana, these houses were 300k in 1995, reached a peak of around 750 around 1990, then fell to around 550 at the bottom around 1996. In early 2007 these houses reached 2.3 million. Today, late 2007 these houses are selling for below 2.0 million but we don't really know exactly where.

Is the above set of statements 100% in agreement with the evidence you gathered?

Newbie said...

I am reading this blog for the first time. The thing that jumps out at me most is the number of realtors and people who bought in the last five years who are posting to convince themselves that it's all going to be okay.

This was the greatest period of speculation in housing in the history of the United States, and L.A. is one of its ground zeros.

Do you people not read a newspaper? Do you not own a TV or radio? Do you not see what's been going on with... Merrill Lynch, Citibank, J.P. Morgan, Countrywide?

Some people are posting that this is only a subprime problem and that the Westside is not a subprime area. HA! Subprimes are re-setting first. I looked to buy two years ago in the area of the Kelton Street home describe in an earlier blog entry here.

The realtor --happily -- told me that more than 75 percent of the homes she was selling were being purchased with no money down, IO or similar. You people seem to think the area will be fine since only rich people can buy there and they're not affected by subprime crisis. WRONG! The people who are genuinely wealthy were buying in the Palisades or in Beverly Hills, not here.

Try and picture a house of cards. Now picture the lowest level of it as being the subprime market. If you knock that lowest level down, it will only be a matter of time before the top level falls. You people do not even understand what a MARKET is. It's mind-blowing.

Westside Bubble said...

Correct, Anon, except to be consistent I'd use just over $2M ($2.05M) as the 2007 peak of the low-end, and we don't yet have a data point back below $2M.

Thanks, Newbie, for "The realtor --happily -- told me that more than 75 percent of the homes she was selling were being purchased with no money down, IO or similar." Very important evidence.

Anonymous said...

Does anyone have the address of the house that is heading for foreclosure auction in 90402?

and what is the outstanding balance on the mortgage?

thanks for letting us know

Anonymous said...

one really nice thing about buying a home at the foreclosure auction is that you don't have to pay a broker's fee

Price_Stout said...

Does anyone have the address of the house that is heading for foreclosure auction in 90402?

No reason to buy a house at FC auction. Buy it from the bank as REO. They will do some minimum repairs and bring the taxes current.

The bank is likely to bid the full note amount at auction, which is (except in the rare case) a crazy amount for you to overbid. If it were worth more than the note, it wouldn't be in FC.

The only way to make money buying at auction is to do it in BULK. Then the dogs and the gems can balance themselves out and you can get a decent return. Buying one house at FC is really rolling the dice.

Westside - again, another great analysis, thx!

Anonymous said...

A couple of condos selling for less than the price paid in Santa Monica.

It is a start!
$555K on 4/10/07 -- listed for $510K
$559K on 10/3/05 -- listed for $535K

Anonymous said...

Links were wrong in my previous post.

Here they are again:
$555K on 4/10/07 -- listed for $510K
$559K on 10/3/05 -- listed for $535K

WarChestSM said...


Not to push my blog too much here, but I have featured both of those properties already in addition to many more.

You can search by zip code and find both of these properties.

Condos have shown the most weakness so far and these two that you have highlighted are good examples. From what I have seen, we are at somewhere around mid 2005 pricing on condos right now.

Anonymous said...

How can condos be at 2005 pricing right now? Everyone knows real estate only goes up!