Monday, January 5, 2009

SM 2008 listings, sales, withdrawn/expired

Higher-priced Santa Monica listings are up over previous years, adding to the glut of high-end houses. I expect this to collapse builders' demand for tear-down houses, a replay of the early 1990s.

Santa Monica sales are well down compared with the last two years.

The large number of withdrawn and expired listings later in 2008 even exceeds sales. I expect a number of these to come back to market this spring, adding to the existing glut of higher-end listings.


dwr said...

"I expect this to collapse builders' demand for tear-down houses, a replay of the early 1990s."

That raises an interesting question: if tear-down lots were selling for $2MM+ when spec homes were selling for $4.5MM, and those same spec homes only sell for $3.5MM in the not-too-distant future, do prices for tear-down lots drop $1MM, since the vast majority of the demand was from builders?

Anonymous said...

similar question -- what is the value of a teardown now (7500 sq. ft lot in SM 90402 or in Little Holmby, or best areas of Brentwood), and what will it be in October 2009? Might be time to buy and build....

Anonymous said...

If a 7500 square foot empty lot hit the market right now between montana and san vicente it would set for between 1.5 million and 2.0 million -

the BULLS would pick a number at the high end of that range and the BEARS would pick a number at the low end

no vacant lots (or true teardowns) have sold in last 30 days so no one knows for sure

I am VERY interested in little holmby and i request that someone else with knowledge post about that neighborhood

Wooster said...

DWR - in theory, yes, about the pricing. There may end up being a floor for lot value where these so-called "teardowns" retain more value than a simple residual calculation would suggest. That's probably because most 90402 "teardowns" are actually quite livable.

However, I don't agree with such your declarative statement: "the vast majority of demand was from builders".

Anonymous said...

DWR i also have to politely disagree w you - (good to have you here tho)

Many of the teardown quality homes were purchased by a family that was willing to squeeze in to a small place, live a modest life for a while while they saved up money that would hopefully allow them to tear it down and build in the future

you see plenty of really small houses that sold for 2 million that have families living in them now -

Anonymous said...

Is it possible to get a total number of withdrawn / expired listing for the year net of any listings that were withdrawn / expired during one of the months and then relisted and sold at some point later in the year?

Westside Bubble said...

withdrawn / expired listing for the year net of any listings that were withdrawn / expired during one of the months and then relisted and sold at some point later in the year

The count in the graph is that net figure. I reduced it for listings that came back on the market in 2008 (either sold or still available).

latesummer2009 said...

WB, I just set up a new blog specializing in 90402. Take a look and if you like it, perhaps you can link it.

The best to you, in 2009.

dwr said...

wooster and anon-
I never said all of the homes sold to builders. But based on the number of homes completely torn down over the last couple years, it seems pretty likely that multiple builders were bidding on most of the small homes NOM around the $2MM level. Take those builders away and IMO you take away a lot of the demand.

Wooster said...

I really don't think you take away a lot of the demand if you take away the builders. You take away the highest paying buyers, that's all.

Wooster said...

Accidentally sent that before I finished my thought.

Basically, there are only a small handful of 90402 spec builders while there are hundreds of potential buyers who would live in a home without changing it or perhaps endeavour to improve the property. That might be a small remodel or they might tear it down. When I lived in Manhattan Beach it was the same thing, the builders often won the bidding process because they had dreams of maximum square footage and lowest costs and could underwrite a number that users could not. They could also manipulate the realtor with promises of the outgoing listing when the new home is complete. With them gone it might help push prices down, but I don't think it really changes demand. It's a one-house-in-one-house-out formula with the builder just jumping in the middle and pushing that one house into a higher value level.

Anonymous said...

That is a very interesting point - basically the builders in a neighborhood are selling the same number of houses as they are buying

I would guess that the presence of builders means more demand for teardown quality houses and more supply of finished maxed out houses

So all else equal if you remove the builders there is less demand for the teardowns than their otherwise would be and less supply of finished maxed out houses.

probably the exit of the builders is good news for someone that wants to buy and live in a teardown quality house and bad news for someone that wants to live in a maxed out finished house