Setting a New Floor *Update 2*

We last featured 370 22nd a little more than a month ago when it cut its price. Thanks to a reader comment, we have found out that it sold. This was a tear down on a 7,570 sq ft lot with no location discount that I can see.

Listing History: 8/27/08 - $1,750,000
Increased: 09/05/08 - to $2,000,000
Reduced: 09/22/08 - to $1,990,000

SOLD: 10/7/08 - $1,600,000



There was some discussion in the comments section from the original post on this property that it "sold in 1 day". I still don't see how that is possible if they reduced the price on 9/22.

This is the second example we have seen recently where a lot value situation sells quickly, but for well below $2M. I think it is pretty hard to refute that lot values are dropping at this point and are materially below $2M. This should be no surprise to anyone else as just about every asset class in the world has been declining over the last year with accelerating speed over the past few months.

Go ahead and make the "it wasn't on the MLS" argument - I'm sticking by the facts that we have decisively busted the $2M mark and are currently still going lower.

Bailing Developers = 2005 Rollback

Address: 819 Pier - 90405

Details: Shack on a 4,718 sq ft lot, "tentative parcel map to build 3 units"

Description: ***short sale***great opportunity for development with approved tentative parcel map to build 3 luxuries condominium on a nice size lot with great dimensions. You can get views of palos verdes from the top of the lot. There is a vintage cottage on the property which could be torn down to or fully remodeled. Investors & builders special... Price slashed for immediate sale!!!

Previous Purchase: 3/2/05 - $711,000

Listing History: 4/25/08 - $1,085,000
Reduced: 06/04/08 - to $995,000
Reduced: 07/16/08 - to $949,000
Reduced: 09/11/08 - to $895,000
Reduced: 09/19/08 - to $849,000
Reduced: 10/15/08 - to $749,000
Reduced: 10/28/08 - to $695,000

This example highlights something which I have mentioned on here before, often when talking about 90404 properties (note that this one is 90405). Many specuvestors were busy buying up all the lots which were zoned for multi-unit properties because they were planning on developing condos. This in turn made land values in mult-unit zoned areas go way up. As long as financing was cheap and easy to obtain and condo prices were going up, things made sense.

The world is a vastly different place today. Financing for spec condos is likely extremely tight and expensive (if you can get it at all), and condo prices are falling rapidly; not going up. That means that the land values in these areas are falling quickly. There simply isn't any demand because it doesn't make any sense to go out and build condos right now. To generate demand, sellers in these situations are going to have to continue to reduce prices in order to get things down low enough that a daring and deep pocketed buyer can think they might turn a profit in a couple years when the units come on line. This means that even though this is already an early 2005 rollback, it could have to reduce its price much further. Ditto for all the other "development opportunities" on the market today.

Finally, I don't wish to turn this into an investment blog, but since this property deals with potential investors, we need to take a look at something which I alluded to in my last comment on my last post. If you are an investor right now looking to put capital to work, I would suggest that there are a lot of more attractive opportunities out in the world than still overpriced SM real estate. Bank debt, high yield bonds, and investment grade bonds are all trading at record wide spreads. Convertible bonds are trading at record cheap to theoretical levels. And yes, even stocks (at least some) appear to be "cheap" as you can find a plethora of names trading through tangible book value and near cash levels that have been absolutely ravaged by forced selling, margin calls, record hedge fund redemptions, record mutual fund redemptions, etc. My point here is not to argue about other asset classes. I'm just trying to say that any smart investor should be taking a hard look at where to put their scarce capital right now. I think this property needs to come down further in price to get to levels which can compete with these other asset classes, especially given the risk in developing new condos right now (vs. senior bank debt yielding in the teens for example).

Nickels in Front of Steamrollers

Address: 733 20th - 90402

Details: 3 bed/2 bath 1,704 sq ft house, 8,940 sq ft, teardown?

Description: Original storybook 1927 Spanish home in Gillette Regent Square. Charming 1-story 3 BR, 2BA with fireplace in living room and beautiful hardwood floors. Large yard with room for a pool. Loads of upside potential. Priced to Sell!! Open Sunday, 11/2 1pm-4 pm and Open Tuesday, 11/4 11am-2pm



Previous Purchase: 9/11/08 - $1,750,000

Listing History: 10/27/08 - $2,099,000

No improvements, no attempt to do anything except essentially say "I stole this from the last seller for below market value* and I am now going to try and pick up a nickel in front of a steamroller". *Note that I don't necessarily agree

Thanks to the reader who alerted us to this situation. As many of you know, we recently featured this property here when we found out it sold for $1.75M.

I think what makes this move all the more ballsy (and maybe not smart) is that this property isn't in an ideal location. How much of a discount you want to give it is up to you...but 20th street has a light and is a more heavily traversed thoroughfare. Additionally, this house is only a few houses north of Montana (and the light at the intersection). I am sticking with my original analysis. Lot value here is below $2M. That means this seller is starting at least $100K too high. I have no idea if they will make money here or not, but I think it will ultimately be a close call.

I think they bought it cheap enough that they won't run into a 1018 Yale situation, but who knows. The world has changed quite a bit since 9/11/08. Good luck.

Ashland Lot Value

I realize that we haven't had a lot of 90405 properties up here lately but I will try and find some good stuff to look at this week.

For now, we are going to feature 1645 Ashland which recently sold.

Listing History: 7/28/08 - $995,000

Sold: 10/23/08 - $975,000

I figured this would be a good property to feature because this should work well as a "lot value" comp. The lot size was 7,050 and seems to be in a nice location with a small park across the street (would this even potentially generate a premium?). Those of you who know this area better can correct me if I'm wrong, but the location here seems good. The house was less than 1,100 sq ft and was sold "as is".

So for those of you looking in this area (or those of you trying to sell), hopefully this data point is helpful.

More Shadow Inventory Emerges

We last featured 823 Yale in October 2007. It is a 4,500 sq ft spec house just south of Montana which we believe was rented out after failing to sell last time it was listed. It is now back on the market with the same delusional price as last time.

Listing History: 3/28/07 - $3.8M
Reduced at some point to $3.6M

Re-listed: 10/4/07 - $3,295,000

2008 Listing History: 10/20/08 - $3,295,000


MLS site - Property Listing Site

The trend of shadow inventory emerging is something which we have been following this year; especially with respect to spec houses. Another good example of this trend which we have featured somewhat recently this year was 230 21st Place which we featured here.

I believe that the developer is going to have to reduce the price dramatically from current levels. If they couldn't get $3.3M back in October 2007, they have no chance of getting anything close to that now. I would suggest they discount this by at least 10% to show that they at least are aware of the fact that the market has weakened substantially over the past year. I'm sure that over the past year they have learned that having a negative cash flow rental isn't that fun...maybe this time around they will be ready to accept reality and price this thing to sell. So far it isn't looking like it though as this listing price is an insult to any buyers who are paying even a smidgen of attention.

Sorry for the rant, but some (most?) of these sellers are stunningly delusional. Seeing all these examples makes me that much more confident that we are nowhere near any sort of bottom when it comes to SM real estate.

"Green on 19" *Update 2*

We recently discussed these units here.

Looks like the developers really don't want to have negative cash flow units on their hands as rentals.

I still think this price is too high, but we have an attitude shift possibly taking place.

Listing (unit 5): 2/20/08 - $1,360,000
Reduced: 07/30/08 - to $1,339,000
Reduced: 08/21/08 - to $1,299,000
Reduced: 10/22/08 - to $1,165,000


Description now reads: "Close out! Slashed price for last townhome!"

I am still skeptical that all the other units have actually sold. It would be helpful if we could get some type of verification on this. Either way, your $900K bid doesn't look so obscene now.

Rollback Apples in 90402

*Note* This house was previously featured here back in July. I'm doing another detailed post on it here despite the fact that the price has not changed because I think this example shows us a lot about the market right now.

Address: 628 24th - 90402

Details: 5 bed/6.5 bath 5,250 sq ft house, 8,700 sq ft lot, 2002 construction

Description: Enter this stunning mediterranean built in 2002 w/5bd, 6.5ba thru gated courtyard. Prime north of montana location. Boasts step-down lr w/fp. Cook's kitchen w/wine fridge, granite counters, viking range, sub-zero & breakfast area. Spacious fr w/french doors opens to patio & grassy backyard. Perfect for entertaining. Basement w/great maid's or playroom. Exquisite master suite w/sitting room & walk-in. Features hwd floors, recessed lighting & custom details thruout. Open tuesday 7/22/08, 11-2 pm.

Previous Purchase: 9/9/05 - $4,200,000

Listing History: 7/21/08 - $4,295,000

This post is pretty much just a repeat of the last post we did on 324 Euclid. This is a good apples to apples comparison in the mid/upper 90402 price range which is going to have to be a true rollback in order to sell. This appears to be a high quality house on a good street and on a good lot. The only problem is that there is now a decent amount of competition in this price space and we have a bunch of comps for equal or better houses around and below the $4M mark.

The listing agents on this house are veterans and know this area very well. They should also be very much aware that their seller needs to cut their price by a good amount in order to generate a sale. *Side note* I mean no disrespect to these agents -- I am simply mentioning them because they have seen cycles before and clearly must know how bad things are and how badly all the unrealistic sellers (even some of theirs) need to cut prices more aggressively to get sales done. Already sitting at 94 days on market without a cut isn't showing us that this seller is being realistic.

A similar comp which just happened to be represented by at least one of these agents was 316 25th which can be found on this post we did here. Similar bed/bath numbers, interior square footage, exact same lot size, pretty similar location, slightly older construction (1998). Here was the history of it once again:

Previous Purchase: 10/4/02 - $2,475,455 (80% financing)

Old Listing History: 2/6/08 - $4,695,000
Reduced: 2/28/08 - to $4,395,000
Reduced: 3/24/08 - to $4,195,000

New Listing History: 4/23/08 - $3,995,000

SOLD: 8/15/08 - $3,810,000

So I once again must resort to pounding on the table and ask, why would anyone pony up anything close to $4.3M for 628 24th when there are cheaper alternatives on the market, multiple comps have closed somewhat recently for substantially less, and the market has gotten dramatically worse over just the last few months? I don't think it is crazy to suggest that this house likely needs to get its price down below $4M to generate a sale; let alone attract serious interest from potential buyers.

"The 90402" - Part 3 *Update 1*

We previously featured 324 Euclid back in December 2007 as part of our "The 90402" series.

To refresh, this is a 4,385 sq ft house built in 2002 on a 7,500 sq ft lot.

Previous Purchase: 4/14/06 - $3,895,000

Listing History: 12/1/07 - $4,250,000

Re-Listed: 10/16/08 - $3,998,000


When we last featured this house, I said the following:

...it seems like it might be hard to get an asking price of $4.25M for something that is "used" and on a small lot (7,500 sq ft). For example, 239 14th was a recently featured new spec house here which had to cut its price all the way down to $4.0M and then entered escrow for less (update to come later). So it seems hard to justify a premium for this place...we will watch for the first price cut.

Well...239 14th sold for $3.742M

Also, 333 14th which was also a nicely done new spec house sold for $3.975M

Another new spec house was 230 21st Place which was last asking $4.38M and didn't sell.

If brand new houses on equal sized or larger lots couldn't get above $4M over the past 10 months, this house here doesn't stand a chance as it is used (2002) construction and the market has gotten much worse over the course of 2008.

If I had to guess, I would say that to get this thing to sell it will most certainly have to end up as a true rollback...which means we need at least another $100K in price cuts (and likely a lot more) for any serious interest to perk up. This house is a good example to use because it is a basic apples to apples comparison on a high end house. No remodeling BS to screw up the analysis. I think that this upper middle tier of housing has gotten hit and is in for more pain...its just that we haven't had a ton of good apples to apples examples so far.

"Green on 19" *Update 1*

We last featured two units from "Green on 19" back in August.

As was the case back then, these units are still wildly overpriced despite a few small price cuts.

Listing (unit 4): 5/7/08 - $1,380,000
Reduced: 07/30/08 - to $1,359,000
Reduced: 08/21/08 - to $1,319,000

Listing (unit 5): 2/20/08 - $1,360,000
Reduced: 07/30/08 - to $1,339,000
Reduced: 08/21/08 - to $1,299,000


Our update today comes thanks to a reader who forwarded me an e-mail from the "Green on 19" PR machine. The e-mail appears to have been sent out to many parties (i.e. those who signed in at open houses, etc). It thanks everyone for their support and goes on to say:

"...given current adverse market conditions, if the homes are not in escrow by the end of October, we will be wrapping up sales marketing and will have the two unsold townhomes available for lease. Our preference is to sell and, given the current market, our position is necessarily very flexible in terms of pricing. In other words, we would be most pleased to receive a reasonable offer."

Read that a few times and think about the situation. If there was ever any doubt remaining about how the "high end" townhouse market is doing (even in 90403), this should show you how rough things are. These units have been on the market for a really long time and there just hasn't been interest anywhere near these prices.

It has been clear for quite some time that these units, while unique and potentially very appealing to some buyers, are overpriced. After sitting on the market for many months, one would think that the seller/developer would thus LOWER prices significantly down to a true market clearing level. This obviously did not happen -- and I don't believe they will get these sold in the next two weeks unless they have a major change of heart and accept a much lower bid. Add these to all the "stealth inventory" when they don't sell.

Finally, if I were a buyer potentially interested in these units, my bid would be substantially below list price. Read their statement again -- they are practically begging for any bid.

Once again, If you aren't embarrassed by your offer, it isn't low enough.

10% Off Sale Is/Was Bogus

We recently featured 2470 Hill and were stunned to see that they had the nerve to recently increase their price by 10% ($200K).

We have also had a few people discussing the grand 10% off sale that a certain real estate brokerage firm has been having.

I did not put 2 and 2 together but an alert reader did.

Here is an ad for this house which just happens to be participating in the 10% off sale!!


Hmmm...so when you can't sell your overpriced house after almost 6 months, raising the price 10% so that you can then "reduce" it by 10% for the sale will certainly fool a lot of buyers and get the job done. Yeah right.

This type of spin and blatantly misleading marketing is exactly what buyers are sick of and what has given the real estate industry and many of its players a bad name. It really is time to end this nonsense and get back to reality. Here's to hoping it happens sooner rather than later.

90403 Condo Gap Down

Address: 852 21st Street #F - 90403

Details: 2 bed/2 bath 1,052 sq ft condo, $280/month HOA, REO

Description: Spacious santa monica condo just south of montana on great tree lined and quiet street. Rear upper unit in small building. Very private and quiet with only one shared wall. Nicely updated. Beautiful stone in kitchen and bathroom. Unit has air conditioning and central heating. Awesome enclosed patio/deck. Low hod's. A great unit for your montana buyer's. Short walk to montana ave. Shops and restaurants. This is priced to sell and is not a short sale!

Previous Purchase: 5/11/06 - $690,000

Bank "Buyback": 9/2/08 - $508,500

Listing History*: 10/14/08 - $439,900 (36.2% rollback)

*Note that for some reason I don't see this on the guest MLS site...I only see it on Zip Realty.

Looking at Property Shark, this appears to be a foreclosure. Citi bought it back at the Trustee sale for $508,500 and the total amount of "unpaid debt" was $572,357.

Another very interesting thing about this unit is that we previously featured unit #D back in September 2007. It was also a 2 bedroom unit but was slightly larger and had a large outdoor patio. They were originally asking $1,059,000 but ended up getting $940,000 when we featured it again earlier this year.

Clearly, unit #D is superior to unit #F...but jeeze, I don't think an outdoor patio is worth nearly $500,000. The market has clearly deteriorated much further since early this year (and for good reason).

Finally, this unit sold for $320,000 on 11/14/03. I don't really see why it couldn't roll back to near that level over the next few years.

A "Real Home of Genius"

Address: 2376 Dewey - 90405

Details: 3 bed/2 bath 1,319 sq ft house, 6,120 sq ft lot, REO

Description: Bank owned foreclosure. 3bed/2bath home! Fp in lr! Hw & tile floors. Bathtub with jets! Tile shower. Attached garage. Great area. Light & bright! **buyers bring your best offers!** info herein is not verified by agent. All offers must be submitted on car form w/pre-approval (not pre-qual), copy of earnest money check +proof of funds (if cash offer) & agency disclosure. For a guarantee receipt of your offer please check our prvt. Remarks for fax cover & faxing instructions.

Previous Purchase: 11/22/06 - $1,100,000

Bank "Buyback": 5/15/08 - $677,844

Listing History: 709,900 (35.5% rollback so far)

Thank you to the readers who alerted me to this property. Also, see more details and commentary about this property on Dr. Housing Bubble (scroll down a bit).

The location here is absolute crap, but I figured this was worth a post since a few people alerted me to it, Dr. Housing Bubble was talking about our fine city of SM, and it is a good example of how completely nuts this bubble was.

I still think this property is grossly overvalued at $709K. The rush hour traffic that goes through this area is horrible.

Bad Photo *Update 1*

While we are on the subject of crappy houses (or shacks) in 90404, I thought I would do a quick update on 2901 Kansas.

It was previously on the market asking $699,000 when we featured it back in June.

It re-listed on 8/14/08 for $499,000 and ended up selling quickly on 10/1/08 for $550,000.

This just goes to show that if you price aggressively enough, you can still get a bid quickly. It looked like this was a long time owner, so surely they had a ton of equity and would be able to sell easily (unlike the 2004+ buyers who put little down).

...or maybe the sale got done because of the opening line from the listing description: "Just buy it already"

90404 - Short Sale/2005 Rollback/Tax Default

Address: 3218 Arizona - 90404

Details: 1 bed/1 bath 432 sq ft house, 1,400 sq ft lot, "totally remodeled"

Description: Price reduced! Lowest priced expandable house in santa monica. Light and bright 1924 santa monica cottage totally remodeled and in turn key condition. Located one block s of wilshire. Why live in a one bedroom condo when you can have a sweet home with a fenced yard and off street parking? Spacious kitchen with granite counters and stainless steel appliances. W/d hookup. Wd flrs in living room and master. Sq footage larger than reflected in tax rolls. Short sale. Submit all offers.

Previous Purchase: 9/23/05 - $490,000

Listing History: 6/20/08 - $639,000
Increased: 06/24/08 - to $659,000
Reduced: 07/18/08 - to $629,000
Reduced: 08/06/08 - to $599,000
Reduced: 08/21/08 - to $575,000
Reduced: 09/04/08 - to $525,000
Reduced: 09/18/08 - to $499,000

I have a hard time believing that a short sale actually goes through here...one of the reasons is because I have a hard time thinking that anyone in their right mind would pay $500K for this absolutely tiny lot and even smaller shack on top of it. This property is poorly located and the seller wasted money buying about 2 feet worth of granite and stainless steel during their "upgrade" adventure. The funniest thing was when they not only thought they could get over $600K for it earlier this year, but they actually had the nerve to RAISE the price!!! I have no sympathy for these delusional sellers...

I mean, they couldn't even get it together to pay their property taxes...no wonder state and city finances are suffering and my CA muni money market is yielding so much:

Defaulted Tax Roll

Last updated Monday October 06, 2008

---

AIN Number	4267-014-018	5-Pay Account Number
Default Year	2007	5-Pay Status
Redemption Amount	$17,371.69	5-Pay Installment Amount Due
Monthly Penalty Amount	$206.09	5-Pay Due Date
Amount Paid	$0.00	5-Pay Installment Paid
Last Payment Date

---

Tax Status: TAX DEFAULTED

Spec House on Lincoln - SOLD

Address: 411 Lincoln - 90402

Details: 6 bed/8 bath 6,700 sq ft house, 7,500 sq ft lot, new construction

Description: Quality new construction N of Montana. 6BD w/6 & 2 ½BA. Hi ceilings in grand formal entry way. Lg kit w/eat-in area, granite countertops & Viking appls. Kit opens to FR that leads to beautiful landscaped yd. Oak hwd flrs run thruout the home. Full basement w/spac media rm, rec rm & gst qrtrs. Mstr ste has his/hers walk-in closets & an exquisite master bathroom. FPs are located in master BD & BA, FR & LR. The home is equipped w/an elevator that access all levels.

Listing History: 5/29/08 - $5,795,000
A few cuts later: - $4,495,000

Sold: 10/9/08 - $4,100,000

Back in June when this property was being discussed in the comments section on this blog I said the following:

411 Lincoln (the house you are talking about) is completely delusional with their starting price. They have already cut down to $5.5 after just a few weeks. I have a hard time believing they can get over $5 for this so I expect a few more price cuts at a minimum.

There had been some discussion a while back on Westside Bubble about the quality of the construction on this house (or lack thereof according to some). I had not seen this house in person so I have no opinion on it. But not matter how you cut it, spec houses are falling in price along with everything else. Finally, anyone want to speculate whether this developer could have made any money on this?

Delusional on Hill

Address: 2470 Hill - 90405

Details: 4 bed/3 bath 3,668 sq ft house, 7,000 sq ft lot, heavily remodeled/rebuilt

Description: Newly staged! Stunning newly built - all but 1 wall & studs! 3 bd + bonus rm. Gorgeous wood flrs! French doors everywhere! Grmet kit w/ granite & cntr island! Step down into the fam room w/ wall of french doors which opns to sparkling pl & grassy yard. Dual zoned hvac (1 up & 1 down); master suite includes alcove/office, large mster bath, w/ large walk-in closet. Wired for speaker systm & cat 6. Laundry rm w/ sink. Great corner-lot across from clover park.

Previous Purchase: 1/2/04 - $929,000

Listing History: 4/24/08 - $2,288,000
Reduced: 09/05/08 - to $1,999,999
Increased: 10/01/08 - to $2,200,000

We have spent a lot of time on this blog repeatedly stressing the idea that you need to "know your seller". Going along with this theme, if you are a buyer, you want to be buying from a seller who is being realistic with their pricing and who is willing to acknowledge that the market has declined significantly and is currently very weak.

When I look at the listing history for this property I am thus completely awe struck at either the complete delusion or the complete arrogance of this seller. Having had the property on the market for a massive 168 days so far, they have shown us that they are not the type of seller we want to deal with. Not only did it take them over four months to make the first price cut, they were somehow delusional enough to increase the price by 10% in the face of a completely terrible real estate market, a global credit crisis, and a global stock market crash. BRILLIANT!!

Now maybe I'm crazy but the fact that the house is now "Newly staged!" sure as hell doesn't mean it gets the ability to command a 10% premium from the level where it was previously overpriced already.

Now for the actual house -- looks nice enough. But from comments previously left on Westside Bubble, we see the location might not be perfect for one of the priciest houses in 90405:

"Go drive by the house on 25th and Hill and you'll see that it just lacks any privacy. The eastern (northeastern) facade is all doors and access to street that fronts Clover Park. I can see why it might lower value. I'd like to be close to a nice park, but not right on top of a busy one. Plus, it's kinda sketchy at night at that park. Also, it's one house from the fire department, which comes with it's own impacts."

"25th and Hill is also close to the SM Airport runway, around where planes become airborn."

Townhouse Update

As a result of comments made on a recent post, I have been trying to focus more on SFRs.

However, I have not forgotten those of you who are still interested in condos and townhouses. So I wanted to take a few moments to focus on this segment of the market (townhouses in particular, but my comments will be applicable to condos as well).


I am doing a broad based update because as I started looking at many of the higher end townhouses in 90403, I noticed a trend. See if you can spot it:

944 5th Street #105
Purchased: 3/30/06 - $1,279,000
Current List: 124 DOM - $1,299,000

1008 9th Street #C
Purchased: 10/12/05 - $985,000
Current List: 120 DOM - $1,014,000

847 17th Street #4
Purchased: 9/15/05 - $914,000
Current List: 30 DOM - $968,000

1013 10th Street #6
Purchased: 1/6/06 - $905,000
Current List: 34 DOM - $949,000

Here we have some examples of properties which were all purchased in late 05 or early 06. Notice how everyone has their current list prices at just a touch above where they purchased their properties? The emotional desire to avoid a "loss" is strong.

I do not believe this is a coincidence, nor do I believe that it is justified (i.e. the market is lower than these levels). If these were appropriate levels, we wouldn't see the first two examples still sitting on the market after 120 days. Secondly, as we have seen even with SFRs, almost all sales that actually get done happen at a materially lower price than the last listing price.

I am relatively comfortable saying that it will likely take at least an early/mid 2005 rollback price to get a sale on even higher end townhouses in 90403 now...and I believe we will see additional declines for a good while longer.

I could go on and on about the macro environment, etc but that is best left to other blogs. Let me briefly address it though. Things are really tough right now and markets are dislocated to an unprecedented degree. Even if you want to ignore the macro (I don't believe this would be wise), we can still see some very direct effects of what is going on today: Tighter lending standards and higher interest rates (especially for the jumbos you would need to buy these properties with).

Finally, a note on new construction condos and townhouses. As a buyer, you need to know that the developers sitting on inventory right now are absolutely terrified. I don't think this overstating things. One quick example to look at would be "Green on 19" which I featured in August. From what I've heard, they didn't even put some of the units on the market, and the ones on the market have sat there since the first quarter of this year!! Then there are examples like the high end units on the corner of Idaho and 20th where the developer just gives up and pulls them from the market.

So in conclusion, I would say that buyers have a responsibility to themselves and their families to do their homework and be acutely aware of the fact that there are still many delusional sellers out there hoping to "break even". The condo/townhouse market is clearly nowhere near any sort of bottom when there are still people holding out like this. My advice is the same that I have been giving for quite a while. Keep waiting before buying anything (I don't think there will be any stabilization in prices for a good chunk of time and it will likely be at least several years before any material increases take place again), but if you must buy, find a seller who is in touch with where the market is and who is willing to be realistic. The best example would be a seller with a good chunk of equity who didn't play the cash out game on the way up.

90402 Lot Value Myth Busted

Part of what makes this blog so great (yes, allow me to toot my own horn) is that we have readers who often provide valuable facts and insight via the comments section as well as via e-mail.

Thanks to a recent reader tip-off, we learned that 733 20th just sold on 9/11/08 for $1,750,000. The date makes this photo to the left all the more...appropriate. Actually, I'm just poking fun at the "Mission Accomplished" idea because for a long time we have been looking for solid examples which show lot value in 90402 going below $2.0M. I have always maintained that lot values would slowly creep below the $2M mark and that this should come as no surprise to anyone.

A few other items regarding 733 20th. We heard that it may have been purchased by a neighbor, the lot size is 8,940 sq ft, and we even had someone provide the following comment:

"It was shown by an agent. I saw the house and passed. $1.75MM- was on the market for 1 week."

Additionally, another sub $2M house on the market in 90402 that we recently featured was 370 22nd. Since it was not featured on the MLS, I do not know the status of it currently. Anyone know anything?

Finally, there was the "rushed sale" of 219 23rd which we featured when it sold for $1.88M.

Numerous other livable/semi-livable houses have recently sold or are still on market for just a touch over $2M, suggesting that pure lot value (especially for 7,500 sq ft lots) is most certainly below $2M.

90402 - Kingman Ave - NOD *Update 3 *

We first featured 710 Kingman back in September 2007 when it had recently received a notice of default (NOD) and was on the market asking $3.2M (then reduced down to $3.0M).

We had our first update in February 2008 when the property was being advertised as "going to auction".

Our second update came in August when we learned that what appears to be the lender took the property back at auction for the amount owed on it ($2,209,214).

At the time of our last update, I said "So next up, REO listing?"

Well, looks about right. Here we see the property is now back on market and although there is no mention of the word "foreclosure" in the description, we know the history of this house and our story is backed up by interior pictures show that the house is vacant. Looks like a REO to me.

Listing History: 10/3/08 - $2,395,000

The very best part of all this is that when this house was first listed (before being foreclosed on), the listing description said the following: "Must be sold immediately. Priced under market for immediate sale"

They had the nerve to put in this type of BS when they were asking $3.2M (then reduced down to $3.0M). Well, we are now down to an asking price of $2.4M....this is why we have a slogan on this blog that says "if you aren't embarrassed by your offer, it isn't low enough". Maybe it would have been embarrassing to offer $2.4M a year ago, but you would have been right on the money.

I bet it could go even lower now...the canyon is definitely under pressure.

Uh Oh....A 2004 Rollback In The Canyon (90402) *Update 1*

We last featured 236 W Channel Road back in March.

Thanks to a reader tip off, we now know how much it ended up selling for.

Total Previous Purchase History:
4/3/06 - $2,300,000
10/15/04 - $1,960,000
8/1/01 - $1,180,000



Listing History: 10/22/07 - $2,399,000
Reduced: 01/19/08 - to $2,299,000
Reduced: 02/29/08 - to $2,125,000
Reduced: 03/11/08 - to $1,999,000
Reduced: ??????? - to $1,750,000

SOLD: 9/26/08 - $1,600,000 (30.4% rollback)

The canyon is under pressure.

Preforeclosure on Chelsea

There have been three active houses on Chelsea (all next door to each other) over the past year or so.

The first is the northernmost house at 1020 Chelsea (photo credit: Westside Bubble). This house was on the market in the middle of 2007 asking $1.399M. It is an 1,100 sq ft tear down on a 6,100 sq ft lot.

It subsequently sold for over asking price on 8/24/07. They somehow managed to find a sucker willing to pay $1,478,000!!!


The second house we will talk about is the southernmost of this trio located at 1030 Chelsea (photo on the right). We first featured it in August 2008 when it was asking $1.4M. It is very similar to 1020 Chelsea as it is a 1,300 sq ft tear down quality bungalow on a 6,100 sq ft lot.

We did an update post in September when it cut its price by $100K and it is still currently on the market asking $1.3M.



Finally, we come to the house located between 1020 Chelsea and 1030 Chelsea. Thanks to a comment recently left on this blog, we found out that 1024 Chelsea (no photo available) has something interesting going on with it. A Craigslist ad speaks of a $700K foreclosure opportunity. Well, here is the scoop:

A notice of default has been filed on a second lien which currently has roughly $685K outstanding on it. The first lien has roughly $550K outstanding and is current (i.e. there has been no default). The trustee sale is scheduled for sometime in January on the defaulted note -- I'm not an expert on how a shark would play this situation, but my guess is that you could either come in and assume all the debt (total of $1.235M) or you could pay off the delinquent note and assume the first mortgage as well. Either way, you would be into the property for roughly $1.235M.

Looking at the details on 1024 Chelsea, we see yet another old, tear down type bungalow on a 6,100 sq ft lot. Except 1024 is slightly larger at almost 1,800 sq ft and has a permitted 1/1 unit in the back. However, none of this really matters as the lot size and location are what matter here. All three of these old bungalows are basically in the exact location on exactly the same size lots. We couldn't ask for a better "apples to apples" type situation if we tried.

A thinking man would then say, "wait a minute, if I can essentially buy 1024 Chelsea for $1.235M, why would anyone want to pay $1.3M for the currently on market 1030 Chelsea?". I would imagine that since 1030 Chelsea hasn't sold even at a reduced asking price of $1.3M, it will need to end up accepting a lower offer if it is to sell.

Going further, one might see that since 1020 Chelsea sold last year for $1.478M, it has clearly declined in value by at least $178K if we use the current asking price of 1030 Chelsea. If we think values are now lower (because of the preforeclosure at 1024 Chelsea), 1020 Chelsea has then declined by roughly $250K. That would represent a decline of roughly 17% in a little more than a year.

This is what this whole blog is all about. One of the major reasons that I started this blog is because I wanted to cut through the typical bullish BS and all too common real estate agent lies. I wanted to warn people that material declines were imminent in Santa Monica...even in single family homes, even north of Wilshire, etc. I sincerely hope that I have helped some readers avoid making a premature purchase which would have cost them many 10's or 100's of thousands of dollars.

My one piece of advice to those who bought too early -- go out and have your property re-appraised by the tax man so that your property taxes can be lowered. There should be enough evidence by now to save yourself a good chunk of change.

Property Tax Research

In case you didn't see my previous post "Doing Your Own Homework", I believe readers who want to do some digging on their own should be aware of the Los Angeles county "parcel viewer" website. This website will allow you to view the status of property tax payments for any property. Simply put in the address, click the button for annual taxes and put in the assessor ID number (found on the first page).

I'm bringing up property taxes for several reasons. First is that the parcel viewer website was temporarily out of service for a while as a result of updating property tax rolls. There was a notice that service would resume after 9/30/08. Service is now restored and you can view the property tax status of properties once again. Second, there have been rumblings coming out of Sacramento about budget/funding issues. It is a bit off topic to go into it all here, but the California finance picture reminded me about the property tax issue. Finally, there is a SFR in 90403 (north of Washington) which I have reason to believe might be under some form of distress. I have seen some indications in the past and decided to double check it once again. Below are my results.

Note that I do not wish to get into an argument or debate here. Certainly this is just one example and could be an outlier -- but monitoring the property tax payment status on a property can be a valuable tool in the potential purchasers arsenal. OC Renter has done a lot of posts about property taxes at his great blog. Late and/or defaulted property taxes are a good gauge of potential distress and are often less of a priority to pay on time for a distressed property holder because it can take a very long time for a tax lien to go through and get to the point where an owner would be forced out. Paying the mortgage is the first priority for distressed owners.

Defaulted Tax Roll

Last updated Monday September 29, 2008

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AIN Number	xxxx-xxx-xxx	5-Pay Account Number
Default Year	2007	5-Pay Status
Redemption Amount	$36,156.52	5-Pay Installment Amount Due
Monthly Penalty Amount	$450.10	5-Pay Due Date
Amount Paid	$0.00	5-Pay Installment Paid
Last Payment Date

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Message:
State law requires that we apply payments to costs, penalties and the balance to taxes. If you have questions, please call us toll-free at (888) 807-2111.

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Tax Status: TAX DEFAULTED

Overpriced on Princeton

Address: 1024 Princeton - 90403

Details: 2 bed/1.5 bath 1,342 sq ft house, 8,000 sq ft lot, teardown or heavy fixer, tenant occupied

Description: Excellent opportunity north of wilshire. Charming traditional on large lot. 2 bedrooms + 1.5 baths, hardwood floors and large windows. Light & bright! Private yard full of fruit trees! Move-in and update or build your dream home. Franklin school district. Do not disturb tenant. Showings only on saturdays between 1-2 pm. Please call to set up an appointment


Previous Purchase: 1/30/04 - $1,020,000

Listing History: 8/13/08 - $1,499,000

After looking at Property Shark, it appears that this house may be subject to rent control. I am not an expert on rent control policies but I found it odd that a SFR would potentially be subject to rent control. Can anyone help clear this up for this house?

The owner is listed as a valley based LLC so I'm not quite sure what is going on. Some LLC bought this as an investment potentially with the intent to do a spec/heavy remodel but then bailed and has been renting it out for a long time? Something doesn't make sense here. Who knows...kind hard to put the pieces together without knowing more.

Looking at valuation, I am going to argue that this property is likely asking at least $100K too much. While it has a good 8,000 sq ft lot, it appears to be a tear down type situation. This would be similar to 1018 Yale which recently sold for $1.337M. Same lot size, same teardown type situation, almost same address. Thus, I think it would be prudent for these sellers to cut $100K and see what happens from there. They have the room to move down in price and they are now bumping up against that point in the listing history where they need to make a big cut to show they are serious about selling.

*Update* Thanks to the reader who e-mailed me about the following website. Looks like some type of daycare center was or is being operated at this property. Anyone know anything about this?