"Westside housing goes south" - LA Times

Of course we have to comment on yesterday's Los Angeles Times cover story, "Westside housing goes south"! First, Peter Hong wrote a strong article about Westside fundamentals that will help move the necessary price correction (good word) forward. And second, we can put together more pieces about its featured sale. He begins,

The Southern California real estate crash has finally reached the high-end areas of the Westside.

Home prices in Beverly Hills, Santa Monica and Malibu -- which continued to soar well into 2008 -- finally tanked at the end of the year, losing between 26% and 30% of their value in just a few months, the latest data show.

Based on DataQuick median price data in the accompanying table, Santa Monica prices were down 27.4% from the peak quarter to the 4th quarter of 2008. Beverly Hills's drop was even more, 30.0%. Greatest was Cheviot Hills-Rancho Park 90064 at 32.5%.

This article must make people shudder who have their houses on the market right now, and embolden current buyers. The drop is real, even if median prices may overstate the change a bit. Mirroring what we know, it cites:

"The market is absolutely correcting," said Richard Stearns, who lives in Santa Monica and sells real estate in Brentwood. "Prices are softening, houses are taking longer to sell, the number of transactions is down."

The downward trend is no surprise to economist Christopher Thornberg, principal of the Los Angeles consulting firm Beacon Economics, who for years angered many real estate agents by repeatedly saying the Westside would eventually see price declines just like the rest of Southern California.

"It was never a function of if," Thornberg said. "It was always when."

When people in entry-level homes can't sell their properties to move up, there is less demand in the middle tier and eventually at the high end, he said.

"It takes a while, but the markets are all linked," Thornberg said.

The numbers were bound to go down, he and others said, for the same reasons they did in less wealthy neighborhoods -- prices rose beyond what incomes could reasonably support.

Wealthy areas can stave off market woes for a while, in part because well-off homeowners usually have the resources to sustain high mortgage payments and weather downturns longer than people with less money. In many cases, the affluent can afford to hold on to a house longer while waiting for a better price.

But eventually the market catches up, and those who want to sell their expensive houses have to cut prices.

It goes on to note a 35% price drop in the 1990s, and that sellers temporarily renting are pushing rents down now.

So what about Shelley Conn's featured house? She

put her Santa Monica house on the market last spring.

She and her husband, Bill, had been offered $2.4 million for the three-bedroom just months before, so she listed the house for $2.3 million, figuring that would make up for the lousy real estate climate. But it didn't sell until November, after the couple dropped the price to $1.9 million.

That looks to be 460 Lincoln Blvd. (photo above), originally listed 4/14/08 for $2,395K, withdrawn in June, relisted 8/20/08 for $2,195K, not reduced further but into escrow 9/29 and closed 11/21 for $1,900K. They must have been very motivated sellers, already having bought their new house for "$3.9 million". WarChestSM's post further confirms this is the property, citing as did the article its previous purchase on 1/13/97 for $825K.