The Santa Monica 90402 Blog is Back!

With prices off 20-30%, I have decided to bring back our sister blog "The 90402". All recent sales from the last 6 months have been posted along with:

1) Bedroom and Bathroom Count
2) House Square Footage
3) Lot Square Footage
4) Closed Escrow Sales Date
5) Closed Sales Price
6) Price per Housing Square Footage

Anyone with additional information about these recent sales are appreciated. In addition, any new sales as they close, will help track current housing trends. You can reach this site at http://www.santamonicameltdownthe90402.blogspot.com/ , or at the link to the right in my Favorite RE/Economic Blog Section.

It's Jobs, Jobs, Jobs and No Jobs!

It's quite obvious now, it's all about jobs now. The housing recession began a couple years ago starting with unsustainable prices. Then, credit froze due as the "slice and dice" of residential mortgages into securites began souring. Not much has changed since then, other than taxpayers bailing out bad banking behavior, and many failed government attempts to revive the housing market. It is eerily reminiscent of the 1930s, when the country was mired in the Great Depression.

What has changed is, now we are in phase II of the Great Recession, job loss. Typically, unemployment is what triggers recessions. Without a job, you can't afford ANY housing payment, no matter what tricks the government tries. With the state and now local area bleeding jobs, housing prices must and will fall further. It's common sense, that if your spending 50% or or more on housing, after food, gas, insurance etc., there's not much left for discretionary spending. Without discretionary spending, local businesses fail, more people are laid off and the recession begins feeding on itself. Furthermore, the good paying jobs being eliminated aren't coming back, and the jobs that are, don't support current housing prices.

The bottom line is, there aren't enough sufficient household incomes to support prices on all the homes for sale. This will cause further erosion of housing prices until the area adjusts to the new household incomes. In addition, rents are falling as the job market changes, putting additional pressure on prices. I'm afraid we won't see 2007 bubble housing prices or credit for a long time. Living within your means is now the new reality, what a concept!

Bubble Baseline Year For The Westside

Which year should we be looking at to figure out when the bubble began on the Westside? Some will point to the repeal of the Glass-Steagall Act of 1999. Others may point to 2004, when exotic mortgages hit their stride. Depending on which camp your in determines whether or not prices have bottomed. I find myself looking at 1999 as when the mother of all real estate bubbles took off. After the last real estate boom in 1987-1991, prices began rising in 1996. Throw in a few years of cautious buying, the green light for lending in 1999, and the bubble was born. Next, we had money from the stock market crash in 2000 further fueling the real estate boom. Lastly, in 2004 the housing casino kicked into overdrive for a couple years as toxic loans became the rage, only to begin faltering by 2007.

So here we are 2 years later, with prices rolled back to around 2004 and approximately 20-30% off on the Westside. Should we take the 1999 prices and add the historical average of 3% appreciation annually? Or should we be happy with 2004 prices as the beginning of the bubble and jump back in?

Cash For Clunkers Hits The Housing Market

Since the government subsidized home credit took effect, the lower end on the Westside has come to life. Multiple offers have appeared on properties purchased with conforming FHA loans. 3% down, 5% loans and an $8000 govt credit, people are jumping at these favorable conditions. With Westside prices off by 20%-30%, it sounds like a no-brainer. Before you jump in, here are a few issues you might want to consider:

1) Having finished only the 2nd year of a typical 7 year cycle.
2) $8000 credit due to end this month.
3) FHA helping to re-inflate the real estate bubble with bad loans once again.
4) FHA quitting to be the lender of last resort due to insolvency problems.
5) Govt raising interest rates sooner or later, while prices remain inflated.
6) Over 100,000 Option Arms in CA recasting and subsequent strategic defaults.
7) 225,000 active Alt-A loans in the LA Metro area where nearly 50% are distressed.
8) Increasing rate of Prime loan defaults.
9) 22% underemployment in CA.
10) Underwater homedebtors and shadow inventory.

Just like the auto industries' temporary sales spike from "Cash for Clunkers", housing appears to have benefitted from the same type of govt stimulus. The $700-$900K starters, generally 50-70 years old and in need of substantial repairs seem to be the only houses moving. Decent houses on the Westside are still stuck, as their prices continue declining, absent any govt subsidy. That alone should tell you something.

False Bottom in Real Estate

Here we are now, with many claiming the bottom is in for Westside Real Estate. Offers are flying around entry level properties ranging from $700K - $900K, and the bubble is beginning to re-inflate. Not so quick. All of this represents nothing more than a False Bottom aided by government stimulus and risky mortgages to first time buyers. What is going to happen once the Home Credit ends? Not to mention, the Unemployment and Underemployment figure reaching 19.6% in California. The facts are, there aren't enough qualified buyers to buy all of the over-inflated underwater mortgages. Sure, there are some who have built up equity that can afford to price their homes realistically, but most of the inventory both shadow and listed, are nothing more than future foreclosures.

Why would anyone would risk a down payment, while paying double the rental price to buy? With a good chance of properties continuing their decline and a slim one for appreciation in the near future, you better love that house. There's a good chance it will be 10 years, before you can move.

Westside Sweet Spot ?

A number of readers have been commenting on multiple offers in Mar Vista, Culver City and West LA for houses priced in the $700,000 - $900,000 range. Above that range, sales drop off precipitously due to the lack of move-up buyers. The reason being, some may have the initial down payment, are getting the $729,000 conforming loan (which banks can sell to Uncle Sam), and are taking advantage of the $8,000 tax credit scheduled to end in November. Throw in impatient buyers, and there's your temporary sweet spot. However, what is the potential downside risk compared with the potential upside risk of your down payment? And how would your mortgage, taxes, insurance and maintenance payment compare with renting an equivalent property? Not to mention, the opportunity cost you lose, by not investing that down payment elsewhere. The housing mess still has a ways to go my friends.

Let's look at the big picture for a moment. We see a substantial decline in sales volume from 2008 to 2009. Keep in mind 2008 was hardly a banner year for real estate. Our beloved MLS published these statistics over the weekend in the LA Times:

Single-Family Homes - SALES VOLUME - % Change
(YTD) Year to Date (September) 2009 vs 2008

PLAYA VISTA
$3,954,000 (2008)
$1,340,000 (2009)
-$2,614,000 (-66.11%)

VENICE
$153,652,525 (2008)
$91,059,600 (2009)
-$62,592,925 (-40.74%)

WEST HOLLYWOOD VICINITY
$60,452,000 (2008)
$36,836,867 (2009)
$23,615,133 (-39.6%)

BEVERLY HILLS
$445,558,325 (2008)
$289,248,000 (2009)
-$156,310,325 (-35.08%)

BEL AIR - HOLMBY HILLS
$205,619,333 (2008)
$135,232,000 (2009)
-$98,289,551 (-34.23%)

WESTWOOD - CENTURY CITY
$185,236,938 (2008)
$132,475,400 (2009)
-$52,761,538 (-28.48%)

SANTA MONICA
$348,559,386 (2008)
$250,309,835 (2009)
-$98,289,551 (-28.20%)

PALMS - MAR VISTA
$169,192,186 (2008)
$122,798,275 (2009)
-$46,393,911 (-27.42%)

MALIBU BEACH
$177,203,000 (2008)
$133,293,685 (2009)
-$43,909,315 (-24.78%)

SUNSET STRIP - HOLLYWOOD HILLS WEST
$416,067,522 (2008)
$316,172,330 (2009)
$-99,895,192 (-24.01%)

MARINA DEL REY
$27,016,600 (2008)
$20,595,000 (2009)
$-6,421,600 (-23.77%)

PACIFIC PALISADES
$454,723,597 (2008)
$349,596,775 (2009)
-$105,126,822 (-23.12%)

BEVERLY CENTER - MIRACLE MILE
$123,962,900 (2008)
$97,027,824 (2009)
-$26,935,076 (-21.73%)



Definite downward trend here. Throw in more record foreclosures and this "sweet spot" looks pretty sour.

Westside Starter Houses Take a Significant Dip

Due to some fine research done by our readers and contributors, we have initial sales data showing Westside starter houses have dropped significantly. Hopefully, others will begin posting price drops in their own neighborhood, so we all know what is happening on the Westside. Many are tired of waiting for prices to drop and are jumping in, due to the $8000 home credit and low mortgage rates under the conforming $729,500 cap. Unfortunately, good paying jobs are evaporating, credit is getting tighter and prices will continue to decline. Patience will be rewarded .

Here are the first entry level house reports for some of our Westside areas:

Westwood
10669 Wellworth 90024
3+2, 1778 sqft
YB 1937
SOLD on 6/24/09 for $725,000

Cheviot Hills
10572 Putney Rd. 90064
2+2, 1451 sqft, 7003 sqft Lot
YB 1946,
SOLD on 8/14/09 for $750,000

Bel Air
2257 Roscomare Rd. 90077
2+2, 1469 sqft, 6900 sqft Lot
YB 1952
SOLD on 5/8/09 for $740,000

Brentwood
12055 Goshen Ave. 90049
2+2, 1364 sqft, 8100 sqft Lot
YB 1954
SOLD on 5/1/09 for $850,000

Westside Village
3214 Military Ave. 90034
2+2, 1230 sqft, 6400 sqft Lot
YB 1947
SOLD on 4/10/09 for $645,000

West Hollywood
513 Norwich
2+1, 903 sqft, 5200 sqft Lot
YB 1939
SOLD on 5/15/09 for $760,000

Venice
1215 Appleton Way 90291
3+1, 1612 sqft, 10,962 sqft Lot
YB 1947
SOLD on 7/15/09 for $600,000

Beverly Hills
1471 Robmar 90210
3+1, 1526 sqft, 6500 sqft Lot
YB 1941
SOLD on 9/4/09 for $750,000

Marina del Rey
2911 Thatcher 90292
2+1, 876 sqft, 4240 sqft Lot
YB 1951
SOLD on 9/3/09 for $508,000

Mar Vista
4210 Michael Ave. 90066
3+2, 1809 sqft, 5460 sqft Lot
YB 1951
SOLD on 7/31/09 for $501,000

Pacific Palisades
16751 W. Sunset Blvd. 90272
3+2, 1809 sqft, 5530 sqft Lot
YB 1947
SOLD on 5/28/09 for $650,000

Malibu
2844 Searidge St. 90265
2+1, 1200 sqft, Lot ???
YB ????
SOLD on 10/1/09 for $506,000

Santa Monica
740 Navy St. 90405
2+1, 1264 sqft, 2292 sqft Lot
YB 1920
SOLD on 9/4/09 for $656,500K

West LA
1707 S. Bundy Ave. 90025
3+2, 1414 sqft, 6969 sqft Lot
YB 1941
SOLD on 7/24/09 for $640,000

Culver City
4462 Berryman 90230
3+1, 1709 sqft, 7875 sqft Lot
YB 1957
SOLD on 9/24/09 for $430,500

Westchester
7828 Midfield 90045
2+1, 1154 sqft, 6550 sqft Lot
YB 1950
Sold on 8/21/09 for $449,000

Playa del Rey
240 Sunridge St. 90293
2+2, 1285 sqft, 5850 sqft Lot
YB 1941
SOLD on 9/29/09 for $620,000


Keep in mind these are entry level houses for some of the Westside areas. We still need starter house sales for the following areas:

Sunset Strip
Miracle Mile
Hollywood Hills
Ladera Heights

Post sales on these and any other Westside area.

Westside Neighborhood Pecking Order

Their is an old saying "Always buy the cheapest house in the best neighborhood you can afford". This will be true, once the Westside market stabilizes. In order to compare neighborhoods, lets look at an original 2br or 3br + 1ba house, on a standard sized lot. The difference in neighborhoods is more about the the land value, than the house. For matters of comparison, the less improvements the better.

The Westside Neighborhood Pecking Order is as follows:

1) Malibu
2) Beverly Hills
3) Brentwood
4) Pacific Palisades
5) Bel Air
6) Sunset Strip
7) Westwood
8) Cheviot Hills
9) West Hollywood
10) Hollywood Hills
11) Marina del Rey
12) Santa Monica
13) Venice
14) Beverlywood
15) West LA
16) Culver City
17) Miracle Mile
18) Mar Vista
19) Westchester
20) Ladera Heights
21) Palms


Keep in mind, we are only looking only at starter houses. If anyone has recent sales information on starter house sales for these areas, please post the details.

The Westside Wildcard

Loan Recasts are indeed, the Westside Wildcard. Exactly how many people that purchased homes in 2002-2007, were a result of Interest Only or Option Arms that recast in 5-7 years? I have a feeling, the most popular product was the 5/1 Option Adjustable Rate Mortgage, that had a minimum payment and was negatively amortized. This means, people could have gotten into a property with very little down and a minimum monthly payment. Their hope was they could re-finance before 5 years. No such luck, when your loan is worth more than the value of your house. Unfortunately, after the initial 5-7 years of "teaser" payments, they jump to what it should have been all along. Those monthly payments can double, while the property continues to lose value.

The key questions are: How many Westsiders are in this precarious loan position? and What %, will just walk away? The beginning of this next foreclosure wave is headed for the mid to high level tiers and is believed to begin this December or January. If anyone has access to this type of loan information, it is as good as gold.

No Real Estate Recovery on The Westside

Well, the spinmeisters are out in full force, calling yet another bottom in real estate. Where that may be true, in the Inland Empire & Antelope Valley, the Westside has a long time, before we see any appreciation. The numbers being touted in the MSM are for Southern California, encompassing a huge area, from Indio to Lancaster. With most of the foreclosures in outlying areas now snapped up and the banks still holding their cards (Foreclosures), sales will begin to dry up unless, mid to high end areas start cutting their prices substantially. I would venture to say that 2/3 of the active listings on the Westside are now Zombies. In other words, they can't sell at the market price, because they are upside down and sinking fast.
But, the real story is unemployment in California. Hitting 12.2% last month and estimated to be as high as 23% when you include those working part-time instead of full-time and people who have given up looking for work. Those are Depression numbers, I'm afraid. Moody's even came out recently and said California may not recover until 2030!
If you have any lingering doubts about California's economy getting worse, I highly recommend reading Dr. Housing Bubble's Sept 19th post "California's Financial Depression" You will find the link in my Favorite RE/ECONOMIC Blogs section, on the right.

Condo Equation Doesn't Add Up

If you are in the market for a condo on the Westside, you may want to think again. A good rule of thumb is :

Monthly Rent x 12 x 15 = Sales Price

Let's do an example for Santa Monica. If we take a 2br 2ba condo, North of Wilshire, built in the 90s, renting for $2300/month, and listed for sale at $800,000, we come up with:

$2300 x 12 x 15 = $414,000

or to purchase:

$160,000 down
$640,000 mortgage at 6 percent
$8,000 in yearly property tax
$4,000 for yearly insurance
$4,000 for HOA

To purchase this condo we get:

$3,837 mortgage/month
$666 property tax / month
$333 insurance /month
$333 HOA / month
_____
$5169 / month, while putting $160,000 at risk of evaporating, just to "Own" a place. Sure you would get a tax break, but it doesn't add up, unless you spend 10 - 20 years there.

Your better off renting at less than 1/2 the price, with no worries. Plus, you can move when ever you want as opposed to being trapped inside your purchase, or damaging your credit to get out. In addition, you are losing the opportunity to invest that $160,000 for 10 -20 years in something else. Finally, rents are dropping on the Westside, so the equation changes even more to your favor.

Regardless, the condo equation of buying instead of renting just doesn't add up!

Westside Area Sales Drop 93% from it's August 2005 Peak

Bel Air, where the "Prince" lives, has dropped a jaw-dropping 93.3% in sales volume from August of 2005. Other areas such as Beverly Hills, Santa Monica (North of Montana), (Ocean Park/Sunset Park) and Brentwood are all off at least 80.0%. It seems the "housing market recovery" isn't here, as the high end is getting worse.
According to Melissa Data, here are the August numbers ranked by biggest Sales Volume declines, from their 2005 peaks.

1) Bel Air 90077
(2005) 29 sales, $2,435K avg = $70,615K
(2008) 7 sales, $1,779K avg = $12,453K (-82.4%)
(2009) 3 sales, $1,587K avg = $4,761K (-93.3%)

2) Beverly Hills 90210
(2005) 54 sales, $2,315K avg = $125,010K
(2008) 8 sales, $1,627K avg = $13,016K (-89.6%)
(2009) 9 sales $1,802K avg = $16,218K (87.1%)

3) Santa Monica 90402 (North of Montana)
(2005) 26 sales, $2165K avg = $56,290K
(2008) 13 sales, $2,344K avg = $30,472K (-45.9%)
(2009) 4 sales, $2,056K avg = $8,224K (-85.4%)

4) Brentwood 90049
(2005) 69 sales, $1,434K avg = $98,946K
(2008) 26 sales, $1,419K avg = $36,894K (-62.7%)
(2009) 17 sales, $1,154K avg = $19,618K (-80.2%)

5) Santa Monica 90405 (Ocean /Sunset Park)
(2005) 39 sales, $892K avg = $34,788K
(2008) 11 sales, $812K avg = $8,932K (-74.4%)
(2009) 9 sales, $776K avg = $6,984K (-80.0%)

6) West Hollywood 90048
(2005) 33 sales, $1,120K avg = $36,960K
(2008) 14 sales, $1,061K avg = $14,854K (-59.8%)
(2009) 8 sales, $941K avg = $7,528K (-79.6%)

7) Century City 90067
(2005) 11 sales, $1,167K avg = $12,837K
(2008) 3 sales, $1,010K avg = $3,030K (-76.4%)
(2009) 3 sales, $918K avg = $2,754K (-78.5%)

8) Culver City 90232 (Carlson Park)
(2005) 25 sales, $765K avg = $16,830K
(2008) 2 sales, $847K avg = $1,694K (-89.9%)
(2009) 5 sales, $788K avg = $3,940K (-76.6%)

9) Santa Monica 90403 (North of Wilshire)
(2005) 46 sales, $938K avg = $43,148K
(2008) 12 sales, $1,041K avg = $12,492K (-71.1%)
(2009) 13 sales, $782K avg = $10,166K (-76.4%)

10) Malibu 90265
(2005) 45 sales, $1,521K avg = $68,445K
(2008) 9 sales, $1,032K avg = $9,288K (-85.4%)
(2009) 13 sales, $1,352K avg = $17,576K (-74.4%)

11) Venice 90291
(2005) 37 sales, $1,184K avg = $43,808K
(2008) 12 sales, $1,167K avg = $14,004K (-68.1%)
(2009) 13 sales, $882K avg = $11,466K (-73.9%)

12) West LA 90025
(2005) 64 sales, $885K avg = $56,640K
(2008) 20 sales, $775K avg = $15,500K (-72.2%)
(2009) 24 sales, $658K avg = $15,792K (-71.1%) Tie

12) Westwood 90024
(2005) 42 sales, $1,127K avg = $47,334K
(2008) 15 sales, $764K avg = $11,460K (-75.8%)
(2009) 19 sales, $720K avg = $13,680K (-71.1%) Tie

14) Beverlywood 90034
(2005) 53 sales, $781K avg = $41,393K
(2008) 14 sales, $699K avg = $9,786K (-76.4%)
(2009) 22 sales, $601K avg = $13,222K (-68.1%)

15) Marina del Rey 90292
(2005) 41 sales, $1,027K avg = $42,107K
(2008) 8 sales, $866K avg = $6,928K (-85.6%)
(2009) 21 sales, $659K avg = $13,839K (-67.2%)

16) Pacific Palisades 90272
(2005) 46 sales, $1,640K = $75,440K
(2008) 16 sales, $1,342K = $21,472K (-71.6%)
(2009) 16 sales, $1,840K avg = $29,440K (-61.0%)

17) Culver City 90230
(2005) 65 sales, $533K avg = $34,645K
(2008) 25 sales, $528K avg = $13,200K (-61.9%)
(2009) 38 sales, $442K avg = $16,796K (-51.6%)

18) Mar Vista 90066
(2005) 44 sales, $800K avg = $35,200K
(2008) 24 sales, $784K avg = $18,816K (-46.6%)
(2009) 26 sales, $693K avg = $18,018K (-48.8%)

19) West LA 90064 (Rancho Pk/Cheviot Hills)
(2005) 27 sales, $1,049K avg = $28,323K
(2008) 21 sales, $769K avg = $16,149K (-43.0%)
(2009) 21 sales, $902K avg = $18,942K (-32.2%)


In most cases, sales volume is dropping along with average sales prices. Keep in mind, the price per square foot is dropping as well. Even when the average selling price and/or sales volume went up from 2008, houses are selling for less per sqft. Those who bought from 2005 - 2007, while home prices were still increasing, are most likely underwater now.

Realtors are also under pressure, as their commissions have been cut drastically.

Venice Drops 38% in a Year

The LA Times today reported the median sales price of a Venice house dropped 38% measured YOY during the month of July to $760,000. In addition the price per sqft is now at $766. This is quite different from not long ago when the median sales price was well over $1,000,000 and the price per square foot over $1,000. With 19 sales during the month, the sample size is adequate. Here are the results:

Venice 90291
19 sales, $760,000 median sales price, $766/sqft

Could this trendy section of LA be cracking?

Pacific Palisades House drops 47% in 2 years

It appears that even Pacific Palisades has started to crumble. According to Redfin, we have a serious comparable showing a $650,000 or 47% drop in just over 2 years. Appraisers may find this sale troubling, and it would definitely affect the neighborhood values. Here are the details:

17050 Livorno Dr., Pacific Palisades CA 90272
3+2, 1748 sqft, Lot size 6969 sqft
YB 1950

SOLD on 6/5/07 for $1,395,000
SOLD on 6/29/09 for $745,100 (-47%)

If anyone has any particular information about this house, please let us know.


Lastly, take the poll to the right and guess what you think a starter house in Pacific Palisades will be at the bottom.

Find Foreclosures Free With Google Maps

If you haven't found this tool, it is a must for locating foreclosures in your neighborhood. You can ccess the Google Maps website from the Real Estate TOOLS/DATA sites link on the right side of this blog. it's very simple to use:

1) Type in your city and zip code
2) Hit the "search options" link
3) Scroll down where it says "All Results"
4) Select "Real Estate" from the type of maps
5) Hit search
6) Check the Foreclosure Box and POOF!

All of the listed Notice of Defaults (NODs), Trust Deed Sales (TDSs), and Bank Real Estate Owned (REOs) are right there for you. It will give you the address and the amount due on each property. This is an excellent way to monitor your neighborhood, as Alt-A and Prime loans default, accelerating foreclosures . It will be interesting to see if the banks begin releasing some of their shadow inventory, before taking on more foreclosures.

Regardless, you can see the Westside is no longer immune to the foreclosure problem.

Malibu Real Estate Business off over 90% since 2005

That's right. According to Melissa Data, looking at the month of July (YOY), sales volume has dropped a whopping 92% since 2005. Needless to say, this Westside area is getting hit the hardest. Let's take a look at the numbers:

Malibu 90265

(July 2005) 44 sales @ $1,903K avg price = $83,732K
(July 2006) 10 sales @ $2,343K avg price = $23,430K (-73%)
(July 2007) 20 sales @ $2,033K avg price = $40,660K (-52%)
(July 2008) 16 sales @ $1,509K avg price = $24,144K (-72%)
(July 2009) 9 sales @ $797K avg price = $7,083K (-92%)

Not only has Malibu been crushed in sales volume, but the average priced sale dropped 48% from last year. Perhaps the $797K average price is a result of comforming loans in California being up to 729K. Lenders are especially worried about taking back anymore high end properties. Another disturbing fact is, the amount of inventory listed. Redfin shows 428 properties for sale right now in Malibu. With a sales rate of 9 per month, that works out to almost 4 years of inventory. Not to mention, any shadow inventory the banks may hold.


Here are a few sales in Malibu that demonstrate some significant declines:

2847 Sea Ridge, Malibu 90265
3+3, 968 sqft, Lot Size 5506 sqft
Built in 1950

SOLD for $595K on 6/25/o2
SOLD fo $1,000K on 7/14/06
SOLD for $585K on 3/20/09 (-41.5%)

That's back to 2002 pricing.


Next we have what appears to be two side by side CONDOs, that are identical in size:

6474 Cavalleri, Malibu 90265
2+2, 1056 sqft CONDO
Built in 1975

SOLD for $335K on 8/18/03
SOLD for $580K on 6/21/07

And

6476 Cavalleri, Malibu 90265
2+2, 1056 sqft CONDO

SOLD for $205K on 5/26/00
SOLD for $225K on 7/31/01
SOLD for $340K on 2/27/09

That's a drop of $240,000K or (-41%) in 20 months, back to 2003 pricing. Do we go back further to 2001 or 2000?


Lastly, by filling out the reader's poll to the right, tell us what you think a starter home (house) in Malibu will eventually bottom out at.

West LA 90064 Starter Home Drops Almost 40%

Here is yet another area on the Westside that is experiencing a significant decline. This entry level home in West LA has dropped 38.7% or $261,000 in under 3 years. That's a decrease of over $90,000 per year. At this rate, you would lose your 20% down payment in less than a year. Not to mention, what could happen with the Alt-As and Prime recasts on the horizon. Here are the details for 90064:


11817 Gateway Blvd., LA 90064
2+1, 1151 sqft, Lot Size 2744 sqft
Built in 1947

SOLD on 6/20/06 for $675,000
SOLD on 4/30/09 for $414,000 (-38.7%)

Fill out the survey to the right and guess what this home sells for at the bottom.

Lately I have been hearing stories about multiple offers on some "low priced" homes. My question is, what kind of offers are they and do they close escrow? Sure they're a handful of buyers that feel they have to move during summer. And someone with weak hands will ultimately overpay for a home. What happens once summer is over and we head into the Fall? Throw in lost equity, loan reset/recasts, more layoffs and the big squeeze could be on.

Mar Vista Meltdown Back to 2002 Prices

Mar Vista which lies in the 90066 zip code, has a wide variety of homes ranging from high end oceanview properties in the North, to entry level homes in the South. Let's see what's happening to the entry level homes in this Westside market. The home we'll look at is:


112460 Aneta Street, 90066
3+2, 1413 sqft, Lot size 5800 sqft
Built in 1953
SOLD on 12/23/ 2003 for $550,000
SOLD on 7/16/ 2009 for $450,000


Thats a steep drop (-44%) from it's peak pricing of $800,000 in 2006 and puts us into 2002 pricing territory. Granted, this is the low end of Mar Vista, yet these are the types of transactions occurring now. Not having to get Jumbo financing is a huge advantage. Rolling back to 1999, when the housing bubble really started taking off, this house drops even more, to $200,000. If we consider that we are halfway through this cycle, by adding another 3 years of declines to 2012, this property still has a ways to go.

What implications could this have for the high end on Mar Vista Hill?

Venice, The Bigger They Are, The Harder They Fall

It's no secret that Venice has had some of the greatest appreciation of any area on the Westside. But now that we are on the downside, how will it fair? IMHO, I believe it will suffer one of the worst price declines, once we reach bottom of this real estate cycle. My reasoning has to do with intrinsic "Value" as opposed to perceived "Price". Now that the era of easy credit has come to an end, the prices that will be financed will be based on fundamental value as opposed to the highest bidder. This adjustment has already started with the area having dropped in price by 15-20% over the last 2 years. According to Dr. Housing Bubble's "The Elusive California Housing Bottom", if history repeats itself, this should continue until we bottom out around 2012 - 2013. Although first to the party and last to leave, Venice will suffer more than the others. Here is why:

1) Small lots
2) Limited if any parking
3) Decreased Los Angeles City Services
4) Increased Crime due to faltering economy
5) Exceedingly difficult financing on overpriced homes

To get a picture of this in the future, lets look at a home that recently sold in May of 2009. I am particularly choosing a home that I believe is an original condition without significant improvements, in order to look at land values for comparison.

931 Nowita Place, Venice CA 90291
2+1, 816 sqft, Lot Size 3400 sqft
Built in 1923
SOLD on 5/14/2009 for $675,000

We will look at the current price today, as opposed to the peak price in 2007, which was probably closer to $800,000+. Since this house is probably a fixer/teardown, we can figure it is very close to land value only. Looking at land values that equates to about $200/sqft of land at today's price ($675,000). During the last real estate boom in 1987-1990, this house was "valued" about $170,000 at the beginning of 1987 or $50/sqft of land. If history repeats itself we will untimately revert back to the norm where homes usually appreciate about 2.5 - 3% a year or at the rate of average inflation. According to history, the "value" of this house is really around $275,000, or 60% less than it's current "price" . If we look at the drop from peak "pricing" in 2007 to the eventual bottom around 2012-2013 it is 66%. This coincides with the Case/Shiller Index that shows the market peaking around 300 in 2007 from a baseline of 100 as the historical mean.

Now some will untimately say that Venice is a "niche" market that is full of Hollywood Entertainers or people flush with cash. Generally people that fit this profile are flush with cash for a reason or have a manager that helps them with their finances. They will be the first to head for the exits, once the final stages of denial are left in the dust.