Monday, February 25, 2008
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Tracking the real estate bubble on the Westside of Los Angeles, especially in Santa Monica ... available housing inventory, highlights/lowlights, and the larger economy.
Obligatory Disclaimer: I do my best to accurately report publicly-available data, but take no responsibility for what you do with it!
Contact westsidebubble {at} gmail {dot} com .
Blog Archive
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2008
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February
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- Monthly Inventory update
- LA Weekly - "Density Hawks"
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- Greatest Real Estate Agent in the World
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- Outrageous builder bailout
- "Secluded"?! in West LA
- New north of Montana
- Weekly inventory update
- Low-end Sunset Park
- January DataQuick
- "Now Fully Permitted!"
- "Baby boomer bubble"
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February
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Bubble Links
- Bill Fleckenstein
- Bubble Markets Inventory Tracking
- bubbleinfo.com (Jim the Realtor in north San Diego Co.)
- Burbed - S.F. Bay Area
- Calculated Risk
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- Countrywide Foreclosures
- Curbed LA
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- Mish's Global Economic Trend Analysis
- Nouriel Roubini's Global Economics Blog
- Original LA Land
- Paper Economy
- Paul B. Farrell - Marketwatch
- Paul Krugman - NY Times blog
- Real Estate Comments
- Sacramento Land(ing)
- Santa Monica Distress Monitor
- Soot and Ashes
- South Bay Beach Cities Real Estate Bubble
- Sudden Debt
- The Big Picture
- The Great Loan Blog
- The Housing Bubble (Ben Jones)
- WeHo Homes
- Westside RE meltdown
- Westside Shadow Buyer
20 comments:
Can anyone tell me if the below two murders in Santa Monica were solved or are the murderers still out there
Michael Nagel the manager of Super Crown Bookstore 2800 Wilshire Blvd. Santa Monica was shot and killed during the course of a robbery. The Santa Monica Police Department is seeking the public's assistance in identifying the suspect responsible for committing this murder.
The body of the 37-year-old man was found yesterday at 8 a.m. in the =
1500 block of Palisades Park, said Lt. Alex Padilla of the Santa Monica =
Police Department.
Anonymous said...
How far will prices fall?
It seems to me it depends on who the buyers in SM are, and I can't get a good feel for the answer.
Assuming most buyers return to sensible 30-year fixed rate loans, which they probably will have to due to the banks shying away from ARMs, what monthly payment can the average SM buyer afford? $2,000? $4,000? $8,000?
My husband and I are regular ol' middle-class professionals, and determined we could handle up to $3,000/month, so we bought our small junker in Sunset Park in 1999 for $329K (when prices were sane!).
Based on the high-end cars, the personalized license plates that spell out "animator" or "director" or whatever, and the handful of neighbors we've talked to, these are not regular ol' middle-class professionals anymore. There seem to be a lot of Hollywood people.
Now, I know very little about Hollywood jobs, but I'm assuming these jobs pay way more than ours do, so maybe this new clientele can easily afford $6,000-$8,000/month. If that's the case, then prices may not fall much.
On the other hand, if there are still some regular ol' middle-class professionals in the mix, then I don't see how house prices can stay even close to where they are now, because there's no way people like us can do $6,000-$8,000/month.
A lot of people on this board say there are enough Hollywood VIPs and foreign investors to buoy SM. Is this true or hyperbole? How can you tell? Is there a census or other barometer of the average income of homeowners (not renters) in SM? This might give us the answer we're looking for.
February 19, 2008 9:38 AM
The answer is that today, the 90402 is filled with thousands of people that could not possibly afford to buy their homes today.
So 90402 is filled with regular people like you
does that mean that prices will fall? Well for prices to fall, some of the people in 90402 have to want to move out and there need to be a shortage of buyers who are excited to pay $4 million for a house
let me put a stake in the ground - if EVERYONE in the 90402 put their houses on the market at the same time there is no way there are enough buyers at 4 million and the prices would fall hard
however, if only a dozen people in the 90402 put their houses on the market, only a dozen buyers have to be found and the prices will stay up.
the key issue issue is how many people are going to choose to move out of the 90402?
The jury is still out, although no one i know in the 90402 is willing to sell no matter how much they are offered
The real problem with all this Santa Monica talk is that it ignores that this same problem is being played out in every semi-desirable neighborhood in LA. I'm partial to Santa Monica, but not by much, as I'm a lawyer working downtown, and so would be happy to take a good deal on a condo pretty much anywhere on the west side, or Pasadena, or downtown, or the beach cities, or Los Feliz or Silverlake, etc...
But even with the recent downturn, the prices are horrible everywhere. I make more than $200,000 a year, and I can't afford a two bedroom! I really don't care what people want to do in the 90402; for the bulls to be right, there must be exceptionally high numbers of people who will 1) never leave any area in LA and 2) make a lot more than even a big firm lawyer.
I don't see it. If I'm wrong, you better believe I'll leave LA.
Go talk to the people on the Westside buying today
Many of them make enough to afford to pay today's prices for houses
Just get to know them and see what kind of money they have to spend
______
$363M is average pay for top hedge fund managers
Posted 5/26/2006 12:21 AM ET E-mail | Save | Print | Reprints & Permissions |
By Adam Shell, USA TODAY
NEW YORK — James Simons, a mathematician turned money manager who prefers hiring Ph.D.s over MBAs, inched out oil tycoon T. Boone Pickens Jr. as the world's best-paid hedge fund manager in 2005, collecting an estimated $1.5 billion, according to rankings released today by Institutional Investor's Alpha magazine.
In rising to the top of what amounts to a who's who list of the secretive hedge fund world, Simons, of Renaissance Technologies, unseated 2004's top earner and first-ever billion-dollar man, Edward Lampert of ESL Investments, who is best known for buying Kmart and masterminding the blockbuster deal to buy Sears. Lampert's earnings dipped to an estimated $425 million last year, down from $1.0 billion in 2004.
"These are staggering numbers," said Alpha editor Michael Peltz in announcing its fifth-annual list of Top 25 earners. "It took $130 million to make the list."
Pickens also topped $1 billion, earning an estimated $1.4 billion. The average pay of the 26 (there was a tie for 25th place) on the list was $363 million, up 45% from $251 million in 2004.
Other big-name managers with big-time reputations in the top 10 included: financier George Soros, who was named "the man who broke the Bank of England" in 1992 after a winning bet against the British pound netted him more than $1 billion; Steven Cohen of SAC Capital Advisors, whom BusinessWeek called "the most powerful trader on Wall Street you've never heard of" in a July 2003 cover story; and legendary trader Paul Tudor Jones II. "These top earners are the best of the best, the real superstars," says Ryan Pearson, senior vice president at hedge fund consultancy Greenwich-Van Advisors.
The surge in pay comes amid an explosive growth in the industry, which now has roughly 8,000 funds and $1.2 trillion in assets. A lucrative business model for hedge fund managers, which, on average, entitles them to 2% of assets under management and 20% of the profit, makes these large paydays possible, Peltz says. A $10 billion fund would earn $200 million from the 2% management fee alone. Super-successful managers charge even more. Simons, the No. 1 earner last year, charges a 5% management fee and 44% of profits, Alpha's Peltz says.
Simons, whose firm, Peltz quips, has enough "rocket scientists to run their own space program," makes its money trading "often and frequently" with the help of computers, trying to capture small price movements. Pickens profited from the boom in energy prices.
The managers didn't just line their own pockets. "I suspect they have made more money for their clients than themselves," says Charles Davidson, hedge fund director at Standard & Poor's.
Anon 7:06, what's your point? There is one (1) PE firm of that caliber in Southern California: Oaktree. Private equity is almost non-existant in LA and very small where you do find it. This isn't Greenwich.
Well, I can speak ancedotally about the number of private equity firms and hedge funds in Los Angeles. I got an MBA from Stanford not so long ago and lots of my classmates went into hedge funds and private equity firms here in LA (and throughout SoCal). Oaktree Capital is one of the largest but there are many, many more. 100 Wilshire houses dozens of hedge funds. Now, having said all of that, I will also tell you that private equity and hedge funds do not employ many people that make the huge dough. They have maybe 5 partners in a fund (more or less) in order to spread the 2% fee plus the 20% kicker around to fewer people. All of the rest of the staff are making wages that as a starter analyst type maybe in the $175K range. They are earning closer to what our friend, the anon 6:42 lawyer above is earning. I know four of the top-earning local pe guys and zero of them live in NOMO. They live in Brentwood Park (3) and one in the Riviera.
I will tell you that the adult CHILDREN of these top earning pe folks live in NOMO. When Mommy and Daddy can make your downpayment for you and help you with some of your mortgage payments, a $3M house is not a huge stretch.
Obviously, this is all anecodotal, small "n" kind of information. My conclusion: I wouldn't count on the hedge fund partners to bail out housing prices AND I wouldn't also rely completely on normal economic relationships between mortgage payments and income when there are so many (and I mean A LOT) of wealthy people funding their 30-something kids' lifestyles in West LA.
I agree 100%
if the owners north of montana decide to dump their houses en masse on to the market as they did in the early 90's there are just not enough buyers to absorb them.
But if just a few dozen houses north of montana come on the market, the kids in their 30's whose parents want to buy them houses there will absorb the houses. There is a crazy ammt of money built up by 50 and 60 somethings and they are looking to pass it on to their kids so that their kids can buy houses and live near them.
Bottom line, if you are 60 and live in LA, there is no way your kid can typically afford to live in LA
you don't want your kid having to move to phoenix or vegas so if you have the dough you give your kids the money to live in 90402
as to how many of those 60 somethings have the dough to buy their kids a home in 90402, just go talk to anyone you know that got their MBA from Harvard, Stanford etc - there are plenty of them here and they know the 60 somethings with the dough.
Is there one group that will descend on the 90402 and buy everything? no but little pockets of wealth all over are enough
just post more questions for the Stanford guy if you need more detail
I have a server with a few well-established domains that are hit daily by all the search engines. Added a link "Greatest Real Estate Agent in the World" to housing panic to all of them today :P
There is no question that wealth inequalities in this country are horrible, and maybe there are plenty of billionaires buying homes for their extended families. Still, I'm in the top 2% of income in this country, and I can't afford a home. Are we really saying that things are so out of joint that the only people buying homes are hedge fund managers making eight figures and up? Do they own the whole country now? Does that seem remotely sustainable?
They don't own the whole country, just a very very very small number of cool parts of cool cities
Just try looking outside the cities that they like
plenty of homes in Dayton, Buffalo, Memphis, Flint that you can buy on your salary
buddy you CHOOSE to compete head on with those folks by living in West side of LA
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"Are we really saying that things are so out of joint that the only people buying homes are hedge fund managers making eight figures and up? Do they own the whole country now? Does that seem remotely sustainable?"
Some of us are saying that we've just experienced the biggest housing bubble of all time and that it will take a couple/few years to return to sanity. Others (real estate agents mostly) are talking about all the well-off people moving to Dayton to buy houses (but those people should be ignored at all costs).
I can't believe some people are so bullish they can't even see sarcasm. If Wikipedia can be trusted, there are only 1.7 million households in the entire country with an income over $250,000. Today, in LA, that's what you need to buy a starter home.
I have no idea how many homes there are in LA County, but I'm betting it approaches one million. I sure hope we've got a pretty hefty chunk of those 1.7 million people.
For me, personally, I'm one year out of Harvard making 200k plus. I won't be starting a hedge fund, but I think I'll be alright. I also think it's sheer idiocy to pretend there are enough big incomes to absorb all the housing that will come in the market over the next few years, especially as we've really only seen the beginning of the ARM resets...
" I also think it's sheer idiocy to pretend there are enough big incomes to absorb all the housing"
That's because your beliefs are based on facts, not on anecdotes and blind hope. Here's a summation of our current economic situation I ran across...
"ABX crashing. CMBX spreads widening. CRE crashing. Residental Forclosures skyrocketing. Residential prices crashing. Corporate Spreads widening. Municipal ARS basically shut down. FDIC preparing for bank failurs. Inflation at 25 year highs. Consumer confidence at multiyear lows. States reporting negative sales tax receipts. Layoff notices increasing from both government and private sector. Dollar falling. 10 year rates rising. Bankruptcies increasing. And all of the above on the BIGGEST mound of DEBT in human history......can anyone say counterparty risk, moral hazard, and systematic breakdown?"
*This* is what's really going on. These are facts. If some people want to pretend that the west side of LA will magically be unaffected by the fallout from all this, well, god bless 'em. The moron who says "plenty of homes in Dayton, Buffalo, Memphis, Flint that you can buy on your salary" is just that. A moron. Fact is, this isn't going to end well.
Oh, as for all the option-rich Googleaires, stock is at 463, down from 747 at the end of 07. That's gotta hurt.
This foreclosure listing shows that the good folks in 90402 don't have the money to pay property taxes. You would think these folks with all that money could at least help LA County out by paying their property taxes. This is not a good sign.
http://tinyurl.com/2gxncz
Your friend needs to do his part, just linking to him is not enough :)
Can i ask you to simply go to North Santa Monica and interview a few of the people moving in
Talk to them listen to them
you will see that the people moving in today are not leveraged they can afford what they are buying
Many many are buying with all cash, gifts from the parents
just listen and learn the truth.
Anon 7:37, back in November we did a survey of how the ten houses that sold north of Montana for over $4M in 2007 were financed. Answer: they all financed, ranging from 48% to 80%, 8 of 10 at variable rates.
Maybe not all had to, but they all did.
Speaking of property taxes, Anon 4:04, 1.2% x $4M = $48K/year. Whew!
Regarding all those Hollywood types now working in SM--sure they make big $$ once or twice. Then, on average--zero. Only a tiny percentage have any staying power and the jobs turn like musical chairs. This is not a population who will prop SM prices up over time.
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