Enough of graphs and predictions, let's get back to houses. How's this for an involved story....
We'll start with the new listing for 3239 Mountain View Ave. on Mar Vista Hill. It's described as a 3 bed / 2 bath for $950K, but:
"Developer opportunity: tear-down on spacious lot with panoramic views from the Hollywood Hills to the Pacific. Also available: plans & construction contract to build a 3,900 sf, 3 bed, 3.5 bath loft-style custom home by Red Barn Prefab, developers of 3675 Wasatch, 3710 Grand View & 12122 Victoria. When complete these homes sell for over $2.1 Million on average. Buy now for an extra $875,000 before construction begins, save over $300,000 and participate in selection of finishes and fixtures...."
Let's look up those three houses ... 3675 Wasatch was listed 3/19/07 for $2,295K, reduced to $2,099K, closed 5/22 for $2,125K. The other two are side-by-side at the corner of Grand View and Victoria, listed 7/30/07 for $2,395K and $2,295K. Both reduced $200K and have not sold. Don't you love the, "these homes sell for over $2.1 Million on average"?! Yes, the average price of the ONE that sold was over $2.1M.
Both also have "For Lease" signs posted; Grand View is on the for-lease MLS asking $8,500 per month. The end of last week 12122 Victoria (photo above) left the MLS. Did someone finally buy or lease it?
So the listing that began this looks like a very leveraged developer who sold one out of four, and is trying to bail now rather than build the fourth. Not a good time to be a developer; I'll catch up with some others this week.
Saturday, November 10, 2007
Developer under pressure in Mar Vista
Friday, November 9, 2007
30% in 6 years?
Rosebud suggested using per-capita income instead of median household income for the "30-50% fall in 6-10 years?" model, and provided numbers (thanks!). Here it is. Note that I rescaled the left axis to fit the income line to the left end of the Case-Shiller index.
The big difference is that per-capita income rose more steeply from 2000 to 2005 than median household income did. Projecting per-capita income as an extension of 2000-2005 reduces the price fall, to around 30% in 6 years.
Note that per-capita income rose more steeply 1980-90, flattened 1990-2000 (recession, presumably), and, as noted, rose even more steeply 2000-05. Two possibilities ahead are a recession, perhaps severe, which would flatten the line, or accelerating inflation, which would make it steeper. Also note I've not had prices overshoot below the income line, although they did in the 1990s.
Weekly inventory update
LA County Santa Monica Pacific Palisades Mar Vista
<$3M New Tot DOM<$2M New Tot DOM Tot New DOM
_________ _______________ _______________ ___________
1/30/06 27,732
2/28/06 29,420
3/31/06 31,819
4/21/06 33,054 35
5/ 1/06 34,032 38 33
6/ 2/06 37,847 56 36 38
6/30/06 42,317 66 40 49
8/ 4/06 45,315 70 34 50
9/ 1/06 46,781 71 27 59
10/ 6/06 47,369 83 25 98 71
11/ 3/06 45,780 80 20 91 77
12/ 1/06 43,103 65 18 72 96 39 20
1/ 5/07 35,646 54 4 60 117 33 6 71 66
2/ 2/07 36,715 38 15 45 124 29 16 61 71
3/ 2/07 41,251 42 14 51 114 26 10 68 79 53 25 76
4/ 6/07 42,857 41 23 49 107 18 8 73 103 52 52 50
5/ 4/07 45,918 46 28 54 92 19 6 82 79 68 37 52
6/ 1/07 52,198 50 25 61 78 17 15 87 78 77 39 53
6/30/07 52,769 42 18 56 81 17 11 92 77 74 33 61
8/ 3/07 54,166 53 28 68 86 23 12 78 76 84 39 68
8/31/07 57,432 57 21 72 98 18 7 69 75 90 40 79
9/28/07 58,973 59 17 74 103 26 9 90 81 87 20 87
11/ 2/07 58,731 62 19 81 120 29 7 106 77 98 35 88
11/ 9/07 64 5 86 120 30 5 105 79 98 6 95
11/16/07
Wednesday, November 7, 2007
30-50% fall in 6-10 years?
Back on September 4th I began a look at housing prices and income trends, seeking an estimate of likely price fall. Then on September 29th I added Santa Monica income levels. Finaly on October 27th I found a good fit between the Los Angeles S&P/Case-Shiller index and north-of-Montana lot value prices.
Here I'll put these all together. Above is the Los Angeles S&P/Case-Shiller index, which we know has closely fit Santa Monica prices as represented by low-end north-of-Montana, combined with a linear extrapolation of Santa Monica median household income. This suggests for prices could fall 40% in 8 years to return to their historic relationship to income. Now let's push the model in both directions. 
I scaled the income line by eye to the price curve. For a worse case (above), I dropped the income line by 10% and shortened the drop duration to 6 years, resulting in a 50% fall estimate. 
Going the other direction, I raised the income line 10% and extended the duration to 10 years, more of a "soft landing" but still a 30% fall. So a likely 30-50% fall in 6-10 years, consistent with others' projections.
Tuesday, November 6, 2007
Heavy week
This is starting as a very heavy week. If even some of this continues to devolve, I can't believe Westside prices could hold. And really, you should be thinking about more than housing prices ahead, and focus on your financial security in hard times. I encourage you to read the whole original posts. Two more added at the bottom.
The Independent's (via Housing Panic) "Markets fear banks have $1 trillion in toxic debt":
A new phase in the credit crunch, one of "$1 trillion losses" seems to be dawning.
Charles Hugh Smith's "Empire of Debt I: The Great Unraveling Begins":
I sense the Great Unraveling of the Empire of Debt is finally upon us, and breathtaking losses could be revealed any day now.
You cannot properly anticipate the coming wealth destruction unless you understand that the entire model rests on financial instruments (derivatives) which mask and distort risk.
Market Ticker's "Mirage Monday":
In short, the entire "Real Estate boom" that "powered our economy" over the last five years is one giant ball of fraud.
A ball of fraud that turns out to have a nuclear core, and it is now starting to "rapidly disassemble."
LA Times's "Record U.S. price for diesel fuel hits trucking companies hard":
"Diesel is 30% of our operating costs, and we don't have any options," she said. "We can't share trucks. The freight has to move, and we have to pass as much of the increase as we can on to our customers."
James Howard Kunstler's "Ignoring the Obvious":
Many Americans will have to start choosing whether to pay their mortgage, fill the tank of the Chevy Suburban, buy that brick of Velveeta, or pay the heating oil guy. It looks like China will be spending more of its accumulated dollars bidding up the price of oil (or making favorable contracts with foreign suppliers) instead of buying Freddie Mac bonds. The USA could not find itself in a less favorable position among all these forces roiling the scene. It certainly can't afford to continue its pathetic pose of cluelessness.
Paul B. Farrell's "What will World War IV cost?":
So what will WWIV cost you and me personally? This is crucial, folks, because every dollar spent on expanding our global "wars on terror" will be one less dollar for your retirement nest egg, your health care, your kids education, your grandkids lifestyle -- all of which are being outsourced to a free market system that's forcing you to take personal responsibility rather than get benefits from government or Corporate America.
LA Times's "Writers work picket lines as TV shows shut down" (not like TV people live in Santa Monica or anything):
the last WGA strike in 1988 lasted 22 weeks and cost the industry an estimated $500 million
LA Times's "Schwarzenegger orders plan for 10% budget cuts" (when most recent new jobs have seemed to be in the government):
Gov. Arnold Schwarzenegger on Monday ordered all state departments to draft plans for deep spending cuts after receiving word that California's budget is plunging further into the red -- largely because of the troubled housing market.
State officials have warned the governor that the likely deficit for next year has jumped from a few billion dollars to as much as $10 billion, threatening to wipe out the progress Schwarzenegger has claimed in getting the state's accounts in order.
Sunday, November 4, 2007
High-end financing?
Updated with loan info - thanks, Phillip. From all of our recent conversation about the upper end of 90402, here's a question: Following is a list of all ten properties in 90402 that sold for over $4M so far in 2007, according to the Assessor. They generally sold pretty fast and only one had a price reduction. Sale price varied above and below asking.
My question is, how were they financed (did we touch on this before?)? Were jumbos central, or did they just write checks? For someone with access to loan records, could you post how much was financed, and, if available, what loan type? (For privacy, no owner names, please.)
1221 Georgina, 5 bed/6.5 bath, SP=$5.6M, SD=8/10/07, LP=$5.895M, 70% fixed loan
522 21st Place, 6/5.5, $5.2M, 3/21/07, $4.995M, 48% var.
333 20th, 5/6.5, $5.1M, 6/5/07, $5.095M, 69% var.
524 19th, 5/4.5, $5.058M, 6/29/07, $4.895M, 79% fixed
645 Adelaide, 5/6, $5.0M, 8/14/07, $5.895M, 60% var.
1228 San Vicente, 5/5.5, $4.989M, 5/11/07, $4.989M, 50% var.
235 Georgina, 5/6, $4.95M, 6/12/07, $4.995M (red. from $5.395M), 30% var.
635 20th, 4/5.5, $4.6M, 3/29/07, $4.795M, 65% var.
1107 Carlyle, 7/7, $4.5M, 7/26/07, $4.688M, 75% var.
210 23rd, 6/5.5, $4.35M, 3/21/07, $4.575M, 80% var.
So neither all-cash deals nor zero-down, and mostly variable rates. This says even the high end will be sensitive to loan rates and availability. (Although if pushed, perhaps they could have put in more cash?)
Saturday, November 3, 2007
Monthly inventory update
11/2 - SM inventory <$3M is down 2% for the week, but up 5% for the month; PP <$2M is up 16% for the week and up 12% for the month, and MV is down 2% for the week but up 13% for the month. Total Westside inventory is up 3.6% to 1,731, highest this year. This constrasts to last year, when inventory had begun its end-of-year decline in October.
10/26 - SM inventory <$3M is down 5% and PP <$2M is down 4%, due to few new listings, but MV is up another 3%. "Freeway Close" dropped its price another $60K.
10/19 - SM inventory <$3M is down 4%, PP <$2M is down 13%, but MV is up 9%. No longer listed include 611 14th ($2.049M), 2158 La Mesa ($5.5M), and 1020 Palisades Beach Road ($10.55M) in SM, and 3653 Mountain View ($3.395M) in MV.
10/12 - SM inventory <$3M is up 5% for the week, PP <$2M is up 11% and MV is up 2%, with more price reductions. (Corrected - thanks, Dan; pesky Excel formula didn't survive inserting columns.)
10/5 - SM inventory <$3M is up 10% for the week, and the highest this year; PP <$2M is up 4%; MV is down 1%.
LA County Santa Monica Pacific Palisades Mar Vista
<$3M New Tot DOM<$2M New Tot DOM Tot New DOM
_________ _______________ _______________ ___________
1/30/06 27,732
2/28/06 29,420
3/31/06 31,819
4/21/06 33,054 35
5/ 1/06 34,032 38 33
6/ 2/06 37,847 56 36 38
6/30/06 42,317 66 40 49
8/ 4/06 45,315 70 34 50
9/ 1/06 46,781 71 27 59
10/ 6/06 47,369 83 25 98 71
11/ 3/06 45,780 80 20 91 77
12/ 1/06 43,103 65 18 72 96 39 20
1/ 5/07 35,646 54 4 60 117 33 6 71 66
2/ 2/07 36,715 38 15 45 124 29 16 61 71
3/ 2/07 41,251 42 14 51 114 26 10 68 79 53 25 76
4/ 6/07 42,857 41 23 49 107 18 8 73 103 52 52 50
5/ 4/07 45,918 46 28 54 92 19 6 82 79 68 37 52
6/ 1/07 52,198 50 25 61 78 17 15 87 78 77 39 53
6/30/07 52,769 42 18 56 81 17 11 92 77 74 33 61
8/ 3/07 54,166 53 28 68 86 23 12 78 76 84 39 68
8/31/07 57,432 57 21 72 98 18 7 69 75 90 40 79
9/28/07 59 17 74 103 26 9 90 81 87 20 87
10/ 5/07 58,973 65 8 81 98 27 2 95 85 86 6 87
10/12/07 58,918 69 13 85 102 30 5 103 64 88 13 87
10/19/07 59,029 66 16 81 105 26 6 96 70 96 21 87
10/26/07 63 18 80 105 25 6 97 76 100 29 87
11/ 2/07 58,731 62 19 81 120 29 7 106 77 98 35 88
11/ 9/07
All Westside 2/9 4/6 6/1 8/3 9/28
3/1 5/4 6/30 8/31 11/2
Bel Air-H.Hls. 86 86 92 100 103 99 86 99 104 104
Bev.Ctr.-M.M. 64 57 48 53 54 65 64 67 75 75
Beverly Hills 67 70 56 46 53 49 59 61 62 58
B.H. P.O. 94 91 92 88 93 95 92 94 90 93
B'wood Vic. 35 36 31 39 38 41 42 46 50 59
Brentwood 67 71 73 75 72 68 86 77 89 96
Chev.-R.Pk.'8' 22 20 19 22 23 22 26 20 28 23
Culver City 35 25 20 28 33 36 41 48 49 46
Malibu 178 181 192 199 206 220 224 216 216 209
Malibu Beach 42 44 51 52 56 58 54 45 43 45
Marina Del Rey 20 20 20 27 29 28 26 27 26 22
Pac.Palisades 64 68 73 82 87 92 78 69 90 106
Palms-M.Vista 62 53 52 68 77 73 84 90 87 98
Playa Del Rey 7 8 17 20 21 20 21 24 29 27
Playa Vista 3 2 3 1 3 5 4 9 8 10
Santa Monica 50 50 49 53 61 57 68 72 74 81
Sunset-Hwd.H. 155 178 159 166 180 168 187 184 215 226
Topanga 39 41 36 43 45 54 49 54 55 52
Venice 64 64 57 68 70 72 69 68 68 84
W.H'wood Vic. 23 32 25 36 42 41 40 36 49 52
West L.A. 19 21 25 24 25 34 31 36 40 37
Westchester 53 46 47 45 53 52 62 72 82 78
W'wood-C.City 33 44 37 42 33 34 29 37 42 50
____ ___ ___ ___ ___ ___ ___ ___ ___ ___
Total 1282 1274 1457 1522 1671
1308 1377 1483 1551 1731
Month-month incr. 2% -3% 8% 6% 2% 3% 2% 8% 4%
Notes
LA County inventory via OC Renter. Santa Monica Days on Market (DOM) is for <$3M, and omits Santa Monica Canyon (in City of Los Angeles but S.M. Post Office). Pacific Palisades DOM is for <$2M and count omits mobile homes. "New" is for previous month, or month-to-date for current partial month.
