Archive for May, 2008
May 27, 2008
In mid-March, I wrote a post about the state of home and condo sales in West Hollywood. At that time, there were 69 single-family homes for sale in WeHo, with another 65 homes sold in the last three months, so the pace of sales was pretty decent. Condos, though, were a different story: There were 230 condos on the market, but only 82 sales in the past three months.
How has the picture changed since then? Here’s how it looks today. (March figures are in parentheses.)
Single-Family Homes
For sale: 76 (69)
Average listing price: $1,399,000 ($1,395,000)
Average price/sq. foot: $861 ($739)
Average days on market: 109 ($103)
Sold since 2/25/08: 33 (65)
Average sold price: $1,100,000 ($1,130,000)
Average price/sq. foot: $584 ($722)
Notes: The number of homes for sale and average listing price have remained virtually unchanged since March. But the number of homes sold has dropped by half. And the disparity between listing price and sold price has widened: In March, the average sold price per square foot was only $17 less than the asking price per square foot. Today, those numbers are nearly $300 apart, which shows that buyers want and expect lower prices.
Condos
For sale: 282 (230)
Average listing price: $749,000 ($717,000)
Average price/sq. foot: $662 ($620)
Average days on market: 77 (70)
Sold since 2/25/08: 63 (82)
Average sold price: $555,000 ($528,000)
Average price/sq. foot: $567 ($507)
Notes: In March, there were nearly three times more condos on the market than had sold in the past three months; today, there are nearly five times more. Part of that might be due to the cluelessness of the sellers: Listing prices have actually risen in the last two months. People, if you want to get your place sold, lower the price!
So it looks like we’re seeing the housing slump start to slowly creep into the more-desirable areas. We’ll do another report in two months.
May 27, 2008
“Now Is a Good Time to Buy”
This perennial Realtor rallying cry persists regardless of economic or housing market conditions. No doubt most Redfin readers take it with a shovelful of salt already. But like a garden weed, it has to be constantly, vigorously challenged and uprooted - especially now, in a rapidly falling market. Over the long term, there have been plenty of good years to buy a home and benefit from the very modest, gradual appreciation (historically, on average, barely above the rate of inflation). But the mindless “Now is a good time to buy” chorus is like a broken clock - it’s right twice a day, by accident. Now is probably not one of those times.
“Foreclosures Are Always a Good Deal”
Foreclosures are a good starting point to look for discounted real estate, and may be a good deal. But they have to be evaluated independently on their own merits like any other property. Like conventional listings, they often aren’t priced aggressively when they first come to market and are subject to further price cuts the longer they linger. The risks in buying a property “as-is,” a common condition of foreclosure sales, may be greater than any price advantage. For most buyers, the best thing about foreclosures is the downward pressure on prices they put on the rest of the market.
“It’s Better to Own Than to Rent”
It probably feels better to own than to rent, to most people. But as legions of skeptical bubble bloggers like to remind us, few homeowners are really more than “loan-owners,” and are only as secure as their next mortgage payment - no different from renters. Do I need to even point out that there are millions of upside-down buyers since 2005 who now wish they had remained renters? For the rest of this myth-buster, see “A House is a Good Investment” below.
“You Can’t Time the Market”
This is one assertion that I sharply disagree with most observers on, so I feel obligated to issue a warning to readers: do your own research and thinking on this one. For what it’s worth, here is my view: with regard to major housing cycles, I agree it’s impossible to pinpoint the exact top or bottom of a cycle at the time it is reached. We can only recognize those points some time after the fact. But broad real estate cycles take place over a very long timeline, and a buyer or seller can easily come within, say, 10% of the top or bottom of the market. You don’t have to buy or sell precisely at the top or bottom to profit, you just have to be reasonably close. Because stubborn sellers make prices so “sticky,” price declines occur relatively slowly, on a scale of years, not months. So do price increases. If you bought a house in Los Angeles in 1990, when the housing market began a long downturn, you would have had to wait a decade for your home’s value to return to what you paid. That’s a glacially slow-moving target.
“A House is a Good Investment”
Even in ”normal” times, few economists would argue this proposition, which is really just the flip side of the “It’s Better to Own than to Rent” argument. The economist Robert Shiller (of the famous Case-Shiller home price index) has concluded that between 1890 and 2004 real returns on houses would have been zero except for two brief periods, one right after World War II and the other being the first years of this decade - the bubble years! Even including those periods (the most recent of which is now sharply correcting), real returns on housing average just .4% a year.
The Wall Street Journal states flatly that “economic studies have demonstrated over and over that houses (1) cost more than most people make when they sell and (2) rarely match the long-term returns of stocks or other investments.”
Unless you dare trying to time the market (and I’m in the minority in asserting that you can), consider your house a home, not an investment.
May 27, 2008
The news that Southland home sales rose in April for the first time in a long time was a hopeful sign for those waiting for the market to turn. But before you plunge a For Sale sign into your lawn or head off to the loan officer to get pre-approved, let’s take a closer look. From the DataQuick press release:
Southern California home sales surged last month to the highest level since August as bargain shoppers took advantage of price slashing. Although some higher-end coastal markets also posted gains, the swell in transactions mainly reflects more sales of homes under $500,000 in inland areas where depreciation and foreclosures have been greatest, a real estate information service reported.
In other words, those of us who live in and around L.A., where just about every home costs well over $500,000, aren’t seeing any difference. I haven’t seen a Sold sign in my neighborhood near the Grove in ages.
Also, DataQuick points out, home sales were still down 19% from April 2007.
Sales from March to April have risen on average 1.2 percent since 1988, when DataQuick’s statistics begin. Although last month’s sales total was the highest for any month since August 2007, when 17,755 homes sold, it was still the weakest April since April 1995, when 15,303 homes sold, and the second-lowest April on record. Last month was 38 percent below the April average of 25,311 sales.
About 38 percent of the homes sold had been foreclosed upon in the previous year, DataQuick said, accounting for more than one-quarter of Orange County sales and more than half of Riverside County sales.
Last month’s upswing in sales was most pronounced for homes priced under $500,000, which accounted for two-thirds of the Southland’s sales gain over March. Riverside County, the epicenter of Southland foreclosure activity and price declines, posted the region’s only year-over-year sales increase - that county’s first in two years. ZIP codes showing relatively large annual gains in sales of existing houses included those in San Jacinto and Lake Elsinore in Riverside County, Victorville in San Bernardino County, Lake Forest and Anaheim in Orange County, Lancaster in Los Angeles County and Chula Vista in San Diego County.
Some of the price declines in these areas have been quite dramatic. If you don’t care about a mind-numbing commute and are willing to be surrounded by other foreclosed properties for the foreseeable future, there are relative bargains to be had. Examples:
Lake Elsinore: 41014 Sunsprite St.
4BR/3B/3,613 square feet, built in 2006
Last sold in June 2006 for $550,000
Current price: $309,000 (bank-owned)
Victorville: 15035 Mesa Linda Ave.
4BR/3B/3,291 square feet, built in 2006
Last sold in February 2007 for $472,000
Current price: $270,000
Lancaster: 4808 Spur Ave.
5BR/5B/3,418 square feet, built in 2006
Last sold for $479,500 in June 2006
Current price: $299,000
Recent Redfin posts:
Downtown Decoded
The Case of the Mysterious Price Increase
May 27, 2008
Most of you who are familiar with the LAUSD know that our schools aren’t all ideal places of learning for our youth. In Westchester, the ratings of the elementary schools according to Great Schools are mostly 6’s and 7’s out of 10. (I don’t know about you, but a 6 or 7 isn’t impressive enough to make me want to send my child there. ) The public middle school and high school ratings aren’t even worth mentioning.
Great Schools ranks elementary, middle, and high schools based on how the institution’s California Standard Test (CST) scores compared to that of other schools in the state. The scores are matched by grade level.
For instance, the highest scores of the (non-charter) public schools in the area go to Cowan Avenue Elementary School and Loyola Village Elementary School. Their Academic Performance Index (API) scores, which indicate year-over-year growth, are 821 and 806, respectively. The statewide goal for API scores is 800 and of course, higher API numbers tend to indicate better test scores.
Incidentally, since our schools are already doing so well, schools should be doing much better in the wake of the current budget crisis. (Note the sarcasm.) This is a snippet from The Argonaut.
Despite Gov. Arnold Schwarzenegger’s recent announcement that he would not be seeking nearly $500 million in funding reductions to school districts throughout California, officials at the Los Angeles Unified School District (LAUSD) are wary that the cutbacks that he and the State Legislature are planning may be almost as drastic.
“The (reductions in the district’s budget) are going to impact us dramatically,” school board member Marlene Canter, who represents Westchester and Venice schools, told The Argonaut.
Despite the fact that Schwarzenegger included an additional $1.8 billion in state education funding, many believe that school districts will face an approximately $350 million deficit due to the budget’s failure to provide a cost-of-living increase.
Beyond our lovely school system, I still think Westchester is a great neighborhood to live. So here are some recently listed places on the market for you all.
6527 W. 81st St./3bd, 2bth/$949,000
8317 Winsford Ave./4bd, 2bth/$599,900
8040 Denrock Ave./4bd, 1.75bth/$849,000
May 26, 2008
There is a home in the Westchester neighborhood that has been on the market well over four months. And recently, it’s gone up in price from $750,000 to $760,000. Now, unless I’m mistaken, it’s a buyer’s market and prices are coming down - not up. The property is 7333 W. 90th St. It’s a three-bedroom, one-bathroom place with 1,590 square feet of space.
It looks all dressed up with recessed lighting, granite countertops, and a Sub-Zero fridge. But has there been any recent work done on the property? Even so, I’d be pretty surprised to see that anyone would put in expensive updates after four + months on the market. Maybe it’s just a ploy to get noticed again after all this time.
In case you’re wondering, there are no other three-bedroom, one-bathroom places that sold in the immediate area (west of Lincoln). I found a few three-bedroom homes with two bathrooms, though. Here’s what they sold for.
8706 Villanova Ave./3bd, 2bth/1,678 square feet/Sold $835,000
7327 W. 85th St./3bd, 2bth/1,589 square feet/Sold $815,000
May 23, 2008
Downtown is a maze of lofts and condos these days, with so many buildings converted or in the process that it can be hard to keep these places straight. Some make it easy with names, historic and otherwise, that keep them from being lost in the jumble—like the Eastern or the Rowan Lofts. Even then, it’s hard to visualize one from the other, with all of their rooftop decks and media rooms.
But the LA Downtown News this week has a great feature on downtown development, with a half-dozen page breakdown of each of the developments for sale or rent. It’s a great read for anyone looking in the area, giving readers a quick-reference guide on who the developer is, how many units there are, what phase of construction its in, and what amenities each building has.
There is more than ever on the market in the area these days, both from the developers and for-sale-by-owner listings. Here’s just a sample:
- This one is an 867-square-foot FSBO 1/1 with a sales price of $352,400. But the odd price an odd wording of the listing makes me wonder if it is bank or developer owned.
- Here’s another one listed as a FSBO, with the same odd wording (”ask about our current promotion!”). It’s a 1/1 with 1,102 square-feet and a 300-foot balcony. It’s only been on the market one day.
- This little place (670 square-feet) is in Santee Village, and has been on the market 108 days. It’s currently $370,900, down from an original listing price of $419,000.
And here’s one I’d be curious to have your opinion on: It’s a MySpace video/listing for a place in the Shyberry Grand Lofts (which has had a few recent sales in the past months, in the $300,000 range, like this one). It’s old- so I don’t even know if the place is on the market, but what about the listing video? Is it going to be the wave of the future, with music video-style tours of places for sale?
May 23, 2008
As of March of this year, single-family home sales in Westwood ZIP 90024 had remained relatively unaffected by the overall housing market. In mid-March, home sales vs. homes sold were nearly even: There were 19 homes for sale in 90024, plus 17 that had sold in the previous three months.
Today, there are 23 homes for sale in 90024, and 11 homes sold in the last three months — twice as much inventory as sales.
Furthermore, the gulf between listing prices and sold prices has widened. In March, the average sold price was higher than the average listing price. Today, the average listing price is $2,295,000, compared to an average sold price of $1,477,000.
Condo sales in Westwood have been soft for some time and remain so. But the slowing of single-family home sales is new, and may be connected to an overall softening of sales of higher-priced homes.
Here are some homes on the market:
924 Thayer Ave.
$2,199,000
4BR/4.5B/3,407 square feet
History: Came on the market Feb. 15 for $2,299,000.
1435 Crestview Court
$1,700,000
4BR/4.5B/3,792 square feet
History: Came on the market in January for $2,150,000; reduced to $1.9 million in April; reduced to its current price May 15.
10446 Wilkins Ave.
$1,445,000
3BR/3B/1,678 square feet
History: Came on the market March 18 for $1,545,000; reduced to its current price April 5.
10632 Ohio Ave.
$1,295,000
3BR/2.5B/1,933 square feet
History: Listed for $1,495,000 on Jan. 25; reduced to $1,325,000 Feb. 21; reduced to its current price May 3.
May 23, 2008
Twenty-five years ago, when I bought my first home, 20 percent down, or more, was the rule. If you were a first-time buyer or a veteran, you could take out an F.H.A. or Veterans Administration loan for 5 percent down, but your house had to pass a vigorous inspection. Of course, in the ’80s, homes cost a lot less, but even then, it wasn’t easy to come up with that 20 percent.
Now, with median home prices in California in the $500,000 range, how can an average household come up with 20 percent down? Not too many families have $100,000, plus closing costs, sitting around.
When lenders loosened up standards a few years ago, allowing people with little or no money down, poor credit, and/or inadequate income to qualify for homes, it opened doors (literally) for millions of people who otherwise never would have been able to buy.
According to this story from Reuters, home mortgages have gone back to the future. Credit has tightened up so much that even people with high income and good jobs are having trouble getting a mortgage.
Gone are the days when almost anyone could get a loan with a down payment of less than the traditional 20 percent…. These days, lenders are balking at anything other than “plain vanilla” loans to would-be buyers with stellar credit histories, significant downpayments and income that can be verified with government tax forms.
This can’t be good news for anyone buying and selling in California, because the number of folks that have saved enough to put 20 percent down is small. It also helps explain why most of the sales activity is in the under-$500,000 market, as was noted this week in this L.A. Times story.
But there is a reason that lenders require high down payments. They provide a cushion for the lender; if the buyer defaults, the lender can sell and presumably not lose money. Lenders also know that the more money a borrower puts down, the less likely they are to default. And anyone with the discipline to accumulate a 20 percent down payment is likely to be smart with money and a good credit risk.
The loose lending practices of the last few years fueled the housing frenzy and artificially pumped up prices. Things now are tight compared to how they were a few years ago, but in actuality, they’ve just gone back to how they were for decades.
Unfortunately, unlike 20 or 30 years ago, we’re a nation of spenders, not savers, and that’s unlikely to change. With credit standards returning to normal, people in high-priced areas, like Southern California, are going to have an incredibly tough time buying and selling. That’s why prices will have to continue to come down.
Recent Redfin posts:
Who’s the Disgusting One?
The Ups and Downs of LAX Real Estate: Is It Affordable Yet?
May 22, 2008
The L.A. Times’ Peter Hong this week reported that many high-end areas of Southern California, such as Beverly Hills and Newport Beach, are finally succumbing to price pressure.
Gated mansions and hillside estates have held their own through most of the real estate slump, but data released Monday showed big drops in the region’s most exclusive neighborhoods.
Median sale prices fell by 13% in Beverly Hills in April, compared with the same month last year. Rancho Palos Verdes dropped 18% over the same period, while Newport Beach’s 92660 ZIP Code took a 34% hit, according to DataQuick Information Systems.
What’s causing the change? The story says many people in wealthy areas have enough equity to ride out bad markets, but eventually they get sick of waiting for the market to turn and decide to sell. Also, the economy is causing wealthy execs to lose their jobs. And lastly, even affluent buyers think prices are too high.
A look at the inventory in Beverly Hills confirms that prices are indeed coming down. Examples:
135 Monovale Drive
Current listing price: $9,995,000
4BR/4.5B/7,438 square feet
History: This house came on the market in January 2007 for $12 million. A month later, it was reduced to $11,500,000. In March of this year, it was slashed to its current price.
1914 Shangri La Drive
Current listing price: $9,995,000
5BR/8.5B/12,000 square feet
History: Came on the market Aug. 23 for $13,500,000; reduced a month later to $12,995,000; three weeks later to $11,995,000; and to its current price on Valentine’s Day.
1133 Tower Road
Current listing price: $9,995,000
5BR/8B/6,350 square feet
History: Originally listed on Feb. 7 for $11,500,000.
1121 Marilyn Drive
Current listing price: $7,995,000
6BR/8.5B/$7,583 square feet
History: This still-under-construction house came on the market in November for $8,995,000.
And these are just asking prices; we don’t yet know what they’ll sell for. But one potential buyer in the story believes prices in luxury areas need to come down another 30 percent.
May 22, 2008
Countrywide Finanancial CEO Angelo Mozilo has a word for the folks who are trying to renegotiate the rip-off loans his company dealt out like playing cards during the last few years: “disgusting.” This from the L.A. Times story:
Apparently clicking “reply” when he meant to hit “forward,” Countrywide Financial Corp. Chairman Angelo Mozilo ignited an online furor Tuesday by describing a mortgage customer’s plea for help as a “disgusting” example of form letters inundating the Calabasas home lender. 
Poor Countrywide has been deluged with letters from distressed homeowners, many of whom are being advised by Web sites such as loansafe.org on how to contact lenders.
The email from customer Daniel Bailey Jr. was sent to 20 people at Countrywide, including Mozilo, who clearly is tired of hearing from dissatisfied customers.
“This is unbelievable,” Mozilo said in his e-mail. “Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the Internet. Disgusting.”
Like Mozilo, I don’t have a tremendous amount of sympathy for the many homeowners who were reckless with their finances and/or took out these absurdly risky loans. But I have even less sympathy for Mozilo, who made millions preying on people’s desire to own a bigger and better home, get something for nothing, and hit the housing jackpot.
If his company had practiced responsible lending, there would be far fewer homeowners inundating Countrywide’s email boxes, because the loans would not have been made in the first place. When you give out zero-down loans and option-ARM loans and negative-am loans to people with crappy credit and let them lie about their income, this is what you get. The momentary rush of raking in those thousands in mortgage fees has now been replaced with the dire consequence.
May these form letters swarm the inboxes of Countrywide execs every day and make their lives as miserable as those of their borrowers.
Recent Redfin posts:
Silver Lake’s Death Loop
Price Reductions Redux
