Thursday, January 8, 2009

2009

Here's my view ahead to 2009 real estate on the Westside.

On the supply side, we've seen the growing glut of high-end listings. And this week new listings and previously expired or withdrawn listings have already started coming back to market after the year-end low point.

Some sellers have been holding firm on prices and just sit unsold. But others do reduce prices, needing to sell, and create new, lower comps. We've already seen low-end north of Montana sales tip below $2 million and mainstream low-end Sunset Park tip below $1 million.

The demand side, even for upper-end houses, is even weaker:

1. Income to people in Los Angeles' recently top-earning industries, especially finance and entertainment, is falling. For example, the LA Times lead article last Friday was "A Bleak Picture for Big Studios". Not to mention hedge funds and mortgage lenders' bonuses.

2. Huge losses in the stock market in 2008 and/or equity losses in previous houses sold to move up restrict cash available for purchases.

3. Jumbo interest rates have not fallen like conforming rates have, and qualifying standards are up, including higher down payments just as buyers have fewer assets.

4. High-end glut will end much of the demand for tear-downs, just as it did in 1990.

5. I don't expect federal stimulus to change this much, let alone counter the larger impacts of local and state budget cuts.

It took limited supply and all of these demand factors to inflate the bubble to its peak levels. It must deflate without them, as we've (finally) begun to see. I'll make an attempt at how much and how fast in a future post.

24 comments:

Anonymous said...

The amazing thing is the clearance prices for the highest high end. Check out the most recent sales. Mind boggling.

GDR said...

I hope you're right. I started looking for a house in 2002 and called the bubble in 2003. (The real estate agents thought I was crazy when I complained that 10% appreciation per year was not sustainable and that the Great Crash was coming. So I was four years early!) I've rented my whole life, and I'm hoping I can finally buy around 2010. I have been disappointed that Westside houses haven't fallen to 2001-02 levels, so here's to hoping!

Dusty said...

In my highly uneducated opinion, I see Westside housing falling to 2002 levels just like it should (or has already done) in other areas. This would be approximately 2000 pricing with normal increases for inflation.

Westside, do you have any data on average selling prices in the area around 2002? That should give people an idea of what we should be waiting for.

Anonymous said...

The amazing thing is the clearance prices for the highest high end

_

agreed . houses n of montana have moved at 5 mil recently

Anonymous said...

What's important is how many have moved. As in, not many at all.

Westside Bubble said...

Dusty, start with the indicator sales in the North of Montana Index post last November for low-end north of Montana. I also have some for Sunset Park, but not a broader Santa Monica average.

Anonymous said...

So far high end 90402 is rock hard

Anonymous said...

Hopefully any new stimulus will not be focused on house, but rather shoring up, rebuilding, or extending our countries infrastructure.

Anonymous said...

GDR, if you had called the bubble in 2003 you should have immediately became a flipper and when prices started to stall you cut your last home's price by 10% and get the F out. I called the bubble in '03 as well while working at KB HOME and I just started using it as a money making device. I never even remodeled homes, just bought hidden gems with tons of leverage and held for six months. I feel a little guilty, yes, but it was a weird time. That said, I have never actually lived in anything but a rental. Strange.

Anonymous said...

Kind of a fascinating zeitgeist manifest on this blog.

On the one hand, the blog is filled with people who expect unemployment to continue to go up and house prices to go down so that they can jump in and buy in Santa Monica at the bottom.

On the other hand, these same people calling for higher unemployment are the first to deny that the violent gangbangers will respond to that unemployment with a riot just like the last one.

Hmm - so the unemployment will drive down the price of that dream home in Santa Monica but it won't result in the gangbangers murdering you after you move in during their frequent burglaries and riots.

dwr said...

"Hmm - so the unemployment will drive down the price of that dream home in Santa Monica but it won't result in the gangbangers murdering you after you move in during their frequent burglaries and riots."

Kindly remind us which parts of Santa Monica were ransacked during the last riot, and also how many people were murdered in Santa Monica that year. Thanks.

GDR said...

Anon 7:59, I'm so risk averse that I could never be a flipper. In retrospet, of course it would have been best to buy in 03 and sell in 06. Who doesn' like to make a cool half mil? But I'm not one for timing things; I'm just grateful I never got in and so don't have to deal with a leveraged assert declining in value. (It amazes me, actually, that people treat houses differently that stocks bought on margin.) Both are very, very, very risky, and should be handled with caution.

Anonymous said...

OK - just remember that with the no money down loans, you were taking no risk - if you buy a house with no money down, then sell it for a $100,000 profit, that profit comes at no financial risk to you.

Just keep doing it over and over, putting multiple checks for $100,000 in to T bills (the only safe investment) and keep doing it until the market turns down. When the market turns down mail the keys to the bank and forget it.

Of course your credit rating is shot, but why do you need a credit rating when you have hundreds of thousands in T bills?

The point is that the market offered a heads you win, tails you break even proposition.

Anonymous said...

Check Wikipedia for good coverage of the riots.

see the below paragraph

Widespread looting, assault, arson, and murder occurred, and property damages totaled one billion dollars. Many of the crimes were racially motivated or perpetrated. In all, 53 people died during the riots


____
it is a myth to say that the rioters stayed in their own neighborhood - news reports of the time clearly show them driving up and down the length of the 110 freeway taking exits in other neighborhoods.

The rioters last time did not take the 10 West to Santa Monica

Why not have a reasonable rational discussion of what happens to Santa Monica in the next set of riots - with no rancor or malice

Wooster said...

Anon 11:29-

Who is calling for more unemployment? Most on here are just witnessing what's happening in the market. Most would like to see housing come down more in cost. Does unemployment have an impact? Sure, but housing would probably tank with or without rises unemployment as the surge in housing costs was driven by other factors, not low unemployment.

Anonymous said...

The bears on this board talk all the time about unemployment going up.

Anonymous said...

What I appreciate about Westside-Bubble's tone is that it is civil & reasonable. I am glad he is the Blogger. I won't claim he is right or wrong. He claims neither. He has a Larry Mantle approach in his rational, collected management of this issue. And so, thank you. Thank you for your leadership of a quality blog.

____
(And please excuse me as I mount the high horse for a minute.)___

And for the new 2009 --

Folks, out of respect for our civil minded blog leader, I urge us to follow his example. We are discussing the future. No single person can guarantee being right or wrong about that. Therefore, I figure there's no reason for us to get anxious about who is right or wrong. Share your perspectives. Please hold back on the incendiary comments.

___
(And, humbly & respectfully, & as always, verbosely & anonymously, off the horse.)____

Anonymous said...

I agree 100%
do not flame the people you don't agree with

just respectfully consider their perspective.

Some on this board call for prices to go up, some call for them to go down a little and some call for them to go down a lot

Let's be direct and civil

Anonymous said...

Which neighborhood in Santa Monica is safer from the rioters? Do I want to be North of the 10 or South of the 10?

Anonymous said...

People in finance are hurting big time - lot of the biuyers in santa monica are ibanking, private equity, hedge fund, law firm type white yuppies who want to escape the increasingly persian/middle-easternized west LA (calling it like i see it - not meant in an offensive way, btw i am from middle east / south asia myself). i work in finance myself (along side those people) and hence am seeing it first hand. didnt believe that prices would go down until last summer but now this industry is really hurting - at the mid-manager level which is the profile of ppl buying 2-4M range homes in these areas and in the south beach cities.

Anonymous said...

Back to the buyer affordability issue NOMA and elsewhere - yes credit is tight, downpayments are higher, but there are folks making adjustments to make up for it. I know several couples that are getting their wives back to work (law firms, big four accounting) and cutting off stuff like money-losing boutique ownership on Montana Ave. The new reality is both spouses work (or at least 1 does not have a deep pockets hobby)to make their housing choices happen. I'm not sure how much lower prime SFR's are going to drop, but I sure see young couples making adjustments. The dream of a professional wife quitting her lucrative job to be stay-at-home mom will be on hold. Looks like the popular Montana Ave "Mommy and Me" yoga class during the workday will have more openings.

Anonymous said...

Right -

people will give up their free time before they give up their housing

Anonymous said...

To the anon praising Westside, I too like his/her even-handed manner, I only take issue when as a few months ago the discussion turned a little too "real" and Westside started deleting posts or stifling conversation as it was getting going, just because someone mentioned that Beverly Hills and Brentwood are supposedly "Iranian" and others complained about the City of Santa Monica's encouragement of the homeless.

Agree or disagree, it's not off-topic as it directly impacts housing prices in the Westside generally as peoples' perceptions, right or wrong, affect their moves. If you don't like what someone is saying or think it's factually incorrect, great: say so right here. But don't go running to the blogger asking that discussion be curtailed.

All this said, I completely agree that the homeless are given free reign in Santa Monica and more should be done, and yes it affects my decision on neighborhoods to live in as I want to be as far from Wilshire and the Veterans' Center in Westwood as possible. If you think this is too "real", delete away.

Anonymous said...

what's up with "solds" such as these?

http://www.redfin.com/CA/Pacific-Palisades/700-Almar-Ave-90272/home/6842241

I see some that I just don't get all over L.A. county.