Tuesday, July 8, 2008

Edlen's Case-Shiller for Palisades?

Reader Josh passed this on via WarChestSM (thanks both of you!), a column by local broker Michael Edlen in the July 2008 Santa Monica Sun (emphasis added).
Rigorous Study of Home Values

Most people are aware of the shift that has happened in home values across the country and many also know that the market price changes have been far greater in some areas due to various demographic and economic factors. There seems to be a consensus that overall prices are lower by 10-40% depending on which area is being considered.

It has been my position that most Westside neighborhoods would have a significantly different experience than what clearly was impacting many other areas. For example, quarterly median Pacific Palisades sale prices have increased during five of the last seven quarters. As a matter of fact, the all-time high median sale price in Pacific Palisades reached $2,550,000 for the first quarter of this year - not what the economists and nay-sayers had predicted. For the record, the median sales price this year-to-date has dipped to $2,315,000, which is still 11% higher than for the same time period last year.

Common sense would indicate that "real prices" cannot possibly still be increasing at this time. In an effort to approach the question more accurately, one might wish to compare apples with apples. We have arduously accomplished such a comparison by identifying nearly 50 Pacific Palisades homes which have sold two or more times in recent years, with a repeat sale in 2007 or 2008. We made every reasonable effort to eliminate any homes that had been remodeled or significantly altered between the dates of their sales. We calculated the annual rate of price change. For example, a home sold in March of 2006 for $1,925,000. The same home sold in April of 2008 for $1,999,000. This is a $74,000 price increase, 3.8% over a 24 month periods. On a yearly basis this is a 1.9% rate of increase. We performed the same steps for all identified repeat sale properties in 2007 and averaged the percentage change on an annualized basis. The same procedure was performed for 2008 repeat sales. As a result, we were able to measure as accurately as possible what the actual recent price movement has been here. We found that the annualized rate for 2007 was an increase of 7.4%. Thus far, 2008 has shown an increase of 6.5%. This reinforces the overall analyses cited above, indicating that prices have not yet shown any measurable actual decrease in our community.

It should be noted that three of the recent Pacific Palisades home sales indicate an annual appreciation rate of only one percent, and these sets of sales occurred within the last 18 months. It is reasonable to expect that we finally will see some actual median price decreases as the year progresses, though it is unlikely for it to be reflected in year-to-date figures until the fourth quarter.

It echos the S&P/Case-Shiller, could be done pretty accurately by someone who knows a local market, and kudos for not just citing median prices.

But after more thought I wonder about its methodology. It appears to be assuming a straight-line annual appreciation between the earlier sale date and sale in 2007 or 2008, then averaging those, which could overstate appreciation in 2007 and 2008. How far back did they go to get "nearly 50" examples? And did higher or lower price ranges behave differently?

So his 7.4% and 6.5% may be questionable, but his conclusion seems consistent with my sense of a plateauing since latter 2005 and likely downturn ahead as inventory builds, adjacent markets spill over, and the economy falls. (updated 7/8)

43 comments:

Anonymous said...

To call Michael Edlen full of it is an understatement... let's just say he's VERY much a realtor.

He knows full well having sold many foreclosed homes in the Palisades in the 90's what's happening, he's just trying to get it to hang on for a little longer AND WILLING TO SAY ANYTHING TO DO IT. Ask Mike about the number of houses he's had to reduce the prices on or that didn't sell at all. He also doesn't mention that sales volume is down 60%+.

And his statement "eliminate any homes that had been remodeled or significantly altered" is worth about as much as any realtors word. Notice he also sites "median sales price" and no other important stats... Like the # of homes for sale is double or triple recent years.

It wouldn't be surprising if 70% or more of these houses were "flips" considering how fast they were resold. So few things are selling that simply for him to put out this article is silly at best and fraudulent at worst. Houses in the Palisades are so clearly taking longer to sell AND selling for less that it makes one wonder the effect of how his many years of realtor rhetoric has affected him.

Anonymous said...

Even if he's 100% correct it would signal to me that now is not the time to buy in the Palisades. If it's held up so far then it's probably about to take its licks.

As a favor for my absurdely rich boss I have been monitoring the Palisades for good deals. I keep seeing some price drops, huge amounts of supply, and more weakness than surrounding areas. So, what I really think is that Palisades is already dropping and that this douche cherrypicked his comps. Regardless, the place is still pricey for what you get.

Anonymous said...

Well it defies the imagination, and confounds all expectations. With conforming loans limits, how are people funding these purchases. It would be interesting to see mortgage data, and whether there are Alt-A, and Option ARMs involved here. But getting back to fundamentals, I cannot understand why anyone would want to pay so much for these homes, in this area, unless it is out of a real sense of desperation for good schools, fresher air, or cache seekers.

Anonymous said...

Most of LA is pretty crummy - crime - traffic - pollution -

PP is like its own sheltered little universe - none of the problems of the city are evident when you walk the streets and go to the cute stores

ever spend time at the village community center and playground? it is like an idealized version of the world - everyone is polite, kids are well behaved.

My bottom line is as follows - if you have $4 million sitting around and you want glitz you can buy something in beverly hills or holmby hills - but if you want a return to a simpler more friendly and down to earth time you can't beat PP - especially the neighborhoods that let you walk to the park in a few blocks and walk to the downtown in a few blocks.

yes it is expensive, but if you have $4 million, you feel you have to buy, and you have small kids, i can't think of a better place

by the way if you don't feel compelled to buy then of course put your money in the bank and rent in PP - renting is a better option than buying if you think prices will go down -

but LIVING in pp is a no brainer if you have the dough

mamsterla said...

My wife and I have thought about PP in the past - we have small kids. We do not have $4M burning a hole in our pocket.
The one big strike about PP to us is the access question. It is hard to get to - Sunset sucks and so does PCH. We have had friends who live there. If you have a Nanny who does not drive, it will be a problem to get to most houses. The other descriptions sound nice, but the access issue has always bothered me.

Anonymous said...

PP is like its own sheltered little universe - none of the problems of the city are evident when you walk the streets and go to the cute stores

ever spend time at the village community center and playground? it is like an idealized version of the world - everyone is polite, kids are well behaved.


Maybe it was like this 30 years ago. From sm distress blog feb 2008: The Palisadian Post site is a good place to read about PP.
There you can read about the two kids who threw a homemade bomb in to Village Books last year, the man who drove a dead body to the Mobil station just over a week ago, the recent rash of vehicle burglaries, etc.

PP also has a problem with taggers, many of whom are bored local kids whose parents probably both work and are more interested in their careers than good parenting.

Anonymous said...

Even the good folks in PP are having financial problems. Foreclosure.com shows about 138 homes in foreclosure and majority are for not paying property taxes.

I would venture to say that the missed property taxes are probably less than the mortgage payments for these properties. Tax lien foreclosures take longer than debt foreclosure so I suspect the tipping point for PP is upon us.

Anonymous said...

Access is why I don't live in Jackson Hole, WY. So I understand your sentiment.

Anonymous said...

PP ain't perfect but there is no other neighborhood in LA that even comes close in terms of lifestyle for families with young children.

nothing is comparable -

Anonymous said...

Ask our buddy Michael Edlen about the home he is selling at 958 Embury St.
original LP at $2.9 million, now in escrow with a reduced LP of $2.6 million. IF the buyer paid list....who does that today...the net is $2463. Best part of the story is that Michael himself has been involved in the last 3 buy/sells....June 15 2005 sold at $2390.0....then again 12/29 2006 for $2510. Michael, you little cherry pickin' realtor you.....Self pro claimed #1 in the palisades!!!!!!!

Anonymous said...

from my friends in the biz in PP....what is selling are tear downs and new construction. anything else is a struggle...check out the home on albright that was listed by mary lu tuthill...original LP at $3.3M. eventually, after the third drop, at $2.6, which then sold for, I am told, $2.2....less commission a net of $2.030. That home is less than 6 years old.

Anonymous said...

new construction isn't selling. Low end is moving S.L.O.W.L.Y. Just about everything is reduced to ~ 2004 pricing.

Anonymous said...

Where is a listing of sold homes in PP? Not trulia, etc... but compiled by a local realtor?

Thanks.

Anonymous said...

Best for families is PP? I would prefer to live in PP, but Manhattan Beach is way better for families, hands down. Plus, you get their schools, which are great and are free. PP's public schools kinda suck. There's way more activity for kids in MB too. Don't kids get eaten by coyotes in PP?

Anonymous said...

agreed - Manhattan Beach is the best for families. PP has a daily large influx of kids from the inner city.

According to the Pali High web site (http://www.palihigh.org/faq.jsp), over 50% of the student body is from outside the local area.

What is the geographic composition of the student body?
Neighborhood students = 1344
Traveling students = 1393


Where do the traveling students come from?
The high school communities of Belmont, Crenshaw, Dorsey, Fairfax, Fremont, Hamilton, Hollywood, Jefferson, Los Angeles, Manual Arts, Van Nuys, and Washington. However, students can come from anywhere in the county of Los Angeles outside of Pacific Palisades and be considered a traveling student. Only minorities from the above mentioned high school areas receive PWT transportation.

Anonymous said...

Anon 3:26. New construction is indeed selling.

Westside Bubble said...

Where is a listing of sold homes in PP? Not trulia, etc... but compiled by a local realtor?

You can make a list of sales within the last two years within a radius of an address using the County Assessor's Parcel Viewer.

tbgpalisades said...

Right, Michael.

I'd love to see the real stats...his self-chosen population likely uses houses that first sold 6 - 10 years ago, using the average to hide the current 24 months' losses.

Will we see the detail behind the methodology - never.

When can these guys get arrested for their fraud?

Anonymous said...

manhattan beach is very nice

but kids that are not good at sports get beaten up and abused in mb - mb is very "jock" focused

if you are more the intellectual type pp is a better place to live

Anonymous said...

I'm increasingly of the opinion that we have a regular poster who is nuttier than squirrel shit.

Jocks versus nerds? We're taking real estate advice from an eight year old.

Westside Real Estate Wztcher said...

Michal Edlen is about is about as obvious as his key word farm at the bottom of his site. What I don't understand is how he can spout his rhetoric knowing full well that people are going to call him out.

Anonymous said...

look the main reason people move to PP is to get away from the homeless in Santa Monica

the bigger the homeless problem in Santa Monica the more PP prices will go up.

just spend some freakin time visiting stores in PP - no homeless around - then try visiting the 3rd street promenade or downtown SM

if you have no kids sm is great but the first time a homeless person attacks your kids you will move to PP i guarantee it

Anonymous said...

Homeless people attacking you? I haven't heard of that problem....they just smell and wander around mumbling, no?

Do homeless people hurt RE values? I really don't think so. I think it adds character and its a weird but real part of urban life.

Anonymous said...

if you have no kids sm is great but the first time a homeless person attacks your kids you will move to PP i guarantee it

Really?

Of all of the places on the globe I could live, having my daughter "attacked" by a homeless person (we won't refight that bit of idiocy, we understand that you're coming from a different world on this one) is going to make me move to Pacific Palisades?

Really?

You guarentee this?

Good lord.

Anonymous said...

absolutely - if you work in the water garden or on wilshire, Santa Monica is the place to live - with the shortest commute - until you have kids - then the slightly longer drive from the PP looks better

again, just spend some time on a weekend in PP -

MUCH more family oriented than SM

Anonymous said...

But you see, I don't work in the Water Garden, or on Wilshire. I don't ever work on the Westside.

I live here because I LOVE living here. I had the option of buying anywhere I wanted, and I decided that this is where I wanted to live.

I own my house. I bought pre-bubble. All of my payments have been made. If my property loses 50% of it's current value, I'm still in the black (even adjusted for 1999 dollars). I could cash-out seven figures, even in this market, and live wherever I wanted to.

I don't. The "homeless situation" doesn't remotely concern me. I understand why there here, and up to a point I sympathize. The public schools are absolutely fantastic. The "family atmosphere" here couldn't be more ideal.

I just plain love living here.

Every time you post, I wonder why somebody who is as fearful, hateful, and angry about the status quo, would be remotely interested in Santa Monica (or the Westside more broadly). It seems like you're totally out of step with the pace and quality of life here, and that you're determined to convince other people that they should be too.

But we aren't. Nearly all of us WANT to live here. We LOVE the city the way that it is. If we're working for change, it is in the interest of helping one another, not in the interest of eliminating specific minority groups from the local landscape.

Santa Monica is where we want to live. Please, if you hate it so much, go live elsewhere.

Anonymous said...

The other day I was eating at Cora's on Ocean and a homeless man strolled onto the patio, I looked up at him, and he made a motion like he had a gun (using the two fingers to my head) and said that he owns this place and will kill anyone who fucks with him or something like that. I proceeded to thrash him a bit in front of Cora's and everyone got mad at me. I was fucking pissed off that people who clearly saw his psychotic act of aggression were angry with me about grabbing him by the throat and escorting him off the premises. I never thought that residents wanted homeless in SM, but it was ludicrous that I was the bad guy in this situation.

Anonymous said...

Maybe I can shed some light, having worked in law enforcement (forensics). You took a pretty big chance here, because while the homeless guy was behaving in a potentially illegal way, you definately broke the law.

Depending on who had been called in, you probably would have been booked for assault.

The other day I was eating at Cora's on Ocean and a homeless man strolled onto the patio, I looked up at him, and he made a motion like he had a gun (using the two fingers to my head) and said that he owns this place and will kill anyone who fucks with him or something like that.

Ok, if he worded it as a specific threat, directed at you, you've got a case. It's your word against his, and you'll probably lose in court, but you're right, if the threat was a concrete threat of personal violence to you, then you've got a case.

Of course, if he's "not in his right mind," you actually don't. Especially if the judge were to determine that he wasn't aware of the menace implicit in his own behavior.

And, if nobody else heard him say it ... Then you're screwed.

I proceeded to thrash him a bit in front of Cora's and everyone got mad at me.

This is plain and simple assault. It may be deemed to be justified by the court, but in the mean time you'd probably spend the night in jail. It'd be up to the booking officer, but working by the book, you'd be cuffed, booked, charged, and held overnight.

Generally, the assumption made in cases like this is that you're probably under the influence... because no sober, sane person "thrashes" a stranger in front of a local dining establishment.

I was fucking pissed off that people who clearly saw his psychotic act of aggression were angry with me about grabbing him by the throat and escorting him off the premises.

I think it was more a matter of not being able to identify the psychotic. What you have in this situation is two people behaving in an anti-social fashion. If the proprieter of the establishment called, you'd both be guilty of criminal behavior.

I never thought that residents wanted homeless in SM, but it was ludicrous that I was the bad guy in this situation.

You were both bad guys. What you've posted is tantamount to an anonymous confession of criminal behavior.

Anonymous said...

Thanks to everyone for the endless and pointless discussion of homelessness.

Anonymous said...

Now, this is a policy that would encourage the homeless:

http://www.breitbart.com/article.php?id=080709123400.cvf3ndli&show_article=1

Anonymous said...

The guy with the homeless altercation here - the bum pushed his fingers to temple and pushed my head and told me he was going to kill me. All I did was stand up, grab him by the throat and the collar and toss him off the patio. Your background in forensics makes you capable of determining what is assault? Nonsense. I could have actually punched him in the face and then called the cops on his ass and had him hauled off to waste more taxpayer money. What he did was assault, crazy or not. I never do stuff like that, but after doing it I remeasured my johnson and, yes, it was bigger. I suggest more dudes quit being so passive and stand up for your neighborhood.

Anonymous said...

"after doing it I remeasured my johnson and, yes, it was bigger."

You said it. Nothing else needs to be said.

Enjoy your johnson.

Anonymous said...

So, I wrote Michael Edlen yesterday, copied Westside on the letter, hopng he would come on the site and answer some of your comments or defend his "research".
i have not heard back and don't see anything of the sort here.
Too bad, it would be interesting to hear more from him to see how accurate his info is, especially since his credibility has been called into such question.

Anonymous said...

Seriously, I am still not convinced why anyone would pay $2m or $4m to live in either SM or PP. I have been to both, and while I agree the air and temperature is better than inland, neither place has much charm, character, or natural beauty. It seems to me that soCal is so lacking in nice areas that people fight over square footage like it was evaporating into thin air. It's desperation! Sorry folks, but that is the reality. Best solution is move away in my view. $4m will go a lot further elsewhere.

Anonymous said...

i am sure you are right

but the people on this blog are people who want to live on the west side

so we have already made the decision that we will live on the west side

the only question in our mind is when to buy, whether to buy , whether to rent, and which neighborhood on the west side

we are a diverse crowd. there are people who have the scratch and are bidding in the 90402 and people with zero money and low incomes hoping that SM will subsidize housing for people like them

what unites us is desire to live on w side

Anonymous said...

Sure, I understand that. If you have no choice but to live here for work, or family then you might as well find the best place you can, because that is your life. But having no kids, being retired, and having lived in other countries, I have a different perspective. I can't understand why anyone wants to pay rip off prices when forest fires rage all around, earthquakes are an ever present danger, violent gangs, and a mud slides, dry desert, featureless landscape and a cold dirty ocean. It beggars belief, and is completely irrational. It's like everyone has their heads buried in the sand.

Anonymous said...

Wrong blog. This one is for people who want to live on the westside but are trying to time the market.

Anonymous said...

the point is though...since we have to live on the westside...what is one willing to pay...if one thinks the westside is basically a dump relative to the nice parts of the bay area, orange county, south bay, san diego, etc. then wait for the price to fall further when people wake up and understand the poor relative value...i.e. the emperor has no clothes

Anonymous said...

Anonymous said:

"So, I wrote Michael Edlen yesterday, copied Westside on the letter, hopng he would come on the site and answer some of your comments or defend his "research"."

Good luck, but it's really not worth the effort.

I don't know this realtor, Edlen, but based on what he's publishing, he's engaged in fraud. How does this continue? There are only a handful, (at most) of true, reliable and statistically accurate real estate indexes, Case-Shiller being the primary. But, I doubt if many of the realtors have ever heard of it.

Westside Bubble said...

Seriously, I am still not convinced why anyone would pay $2m or $4m to live in either SM or PP. ... Best solution is move away in my view.

I wonder the same thing. But where would you move to?

Yes this blog is mostly about people waiting to buy on the Westside, but other choices are still relevant.

Anonymous said...

i would move to any of the other nice communities in northern or southern california...in my opinion the westside is, by far, the single worst relative value in the entire state when you factor in the: terrible public schools--i.e. everyone is paying a premium based on prestige/ego rather than quality schools, for the most part terrible housing stock/lots, and lack of any real towns/villages of any real charm. i wonder sometimes whether it is because the percentage of well educated people is lower on the westside than, for instance, many nicer areas of the bay area that the prices here don't reflect reality. anyway, i am a small business owner and am considering relocating my business to a more desirable area than the westside.

Anonymous said...

"terrible public schools"

Are we back to this? They're actually some of the best shcools in the state, and I say that as a teacher/administrator in another school district.

"lack of any real towns/villages of any real charm"

Depends on what you consider charming. I've lived the the Bay Area... I certainly find Santa Monica more charming.

"i wonder sometimes whether it is because the percentage of well educated people is lower on the westside than, for instance, many nicer areas of the bay area"

You do realize that this is simply untrue. There are very few communities, even in "nicer areas of the bay area," with a higher rate of highly educated professionals than the greater Santa Monica area.

I don't point these things out because I'm a booster for local real estate. Just because I think that your points of analysis are misguided and just plain wrong.

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