Monday, July 29, 2013

Market Has Peaked!

The summer of 2013 is here and like clockwork, it has peaked again exactly like it did 6 years ago. On the Westside in 2007, it happened almost overnight during the last week of July. If escrows weren't closed immediately they began blowing up. Perception of the market can change that fast, and as soon as the urgency to buy is gone, the market will react. Inventory starts to climb, bidding wars begin to subside, more properties come "back on the market", Wall Street is in full exit mode, loans begin opening up to marginal buyers, increasing foreclosure rates, building starts come to a screeching halt, mortgage applications dry up and all of a sudden, greed is replaced by fear. Sound familiar? It should, all of the signs are here. Those jumping into the market now, better plan on staying at least for 10 years, have stable jobs, not be concerned with rising interest rates and love their new neighborhood. Unfortunately that is not the norm for most. Putting your money into housing right now has much more downside risk than upside. Renting and putting your capital elsewhere is probably a better idea.
Obviously, I do not have a crystal ball and every one's situation is different, but I will go on the record saying that housing will flatten or decline from today forward over the next couple years. Looking at all the factors including lost opportunity cost, your housing investment dollars will be better spent in other segments of the financial arena.
For example, I believe investing in precious metals such as silver over the next 2 years, opposed to buying a home today. Here is a home picked at random that just closed escrow in Santa Monica at 1409 Ashland Avenue for $1,305,000 on July 25th, 2013. Click the link for all the details. Let's see how the numbers pencil out on buying versus renting this home.

Down Payment : $300,000

Monthly Nut:
Principal & Interest :$5,368
Property Taxes : $1,087
Insurance : $333
Maintenance $3262
Income Tax Savings -$1,573

Total = $8,477 x 12(months) = $101,724 (year) x 2 = $203,448 (not including closing costs)

Silver Investment: $300,000
(14,218 ounces x $21.10)

Monthly Nut:
Rent : $4,500
Insurance $75

Total = $4,575 x 12 (months) = $54,900 x 2 = $109,800

2 year savings in living expenses
$203,448 - $109,800 = $93,648

So, that's over $93,000 saved in 2 years of housing payments (not including opportunity cost), but the big wild card is what your $300,000 will do over the next 2 years. Will your equity position in your home be better than if you invested your money somewhere else? I guess time will tell.

Tuesday, May 14, 2013

Weekly And Monthly Sales Information

Here is a place where you can keep up to date on the Weekly  and Monthly sales in Santa Monica. Just click on the links and rolling sales data will pop up. Prices seem to have recovered back to their 2007 peak. Where do we go from here? Is this rally sustainable in the long run? Will the inventory remain limited in the future?

Give us your comments.

Monday, February 25, 2013

RPX Monthly Housing Report for December Gets To The Heart Of The Matter

As taken from The RPX Monthly Housing Report for December of 2012:

Gains in National Home Price Indices Are Not Sustainable

2012 Gains Were Driven by High Investor Activity, Low Interest Rates and a Shift in Sales Mix, None of Which Will Have an Enduring Impact

Like most major housing indices, the RPX Composite price increased in December 2012. It increased 11.8 percent year over year, the largest such gain since 2006. Though seemingly impressive, the strength in the RPX Composite is probably unsustainable, as it was fueled by unusually high investor activity, unusually low mortgage rates and a shift in sales activity between component submarkets. None of these drivers are likely to last, particularly as housing prices increase.

A real and sustainable recovery in home prices will be fuelled by job growth and improving consumer confidence, neither of which are much in evidence at the moment. Absent such factors, rising home prices will undermine housing demand and prompt an increase in supply, reducing the rate of home price appreciation or possibly reversing it.

On the demand side, rising home prices will reduce or eliminate the profitability of investments in single-family rental properties and investor demand will decrease. On the supply side, homeowners who are interested in selling their properties but have not done so due to declining market prices will put their homes on the market. Homeowners who have been underwater in their mortgages and therefore unable to sell will again try to do so as rising home values provide positive equity (or less negative equity) in their homes. Financial institutions may increase the rate of REO sales, just as home builders have increased the rate of housing starts in response to price signals. The US Census Bureau reports a 23.6 percent increase in single family housing starts from January 2012 to January 2013.
Thus, notwithstanding the gains in 2012, we expect to see housing prices decline again, though perhaps not to the lows seen in prior periods. The decline will be temporary, as falling prices will once again attract speculative demand and chill starts and sales. Home prices are likely follow such a saw-tooth pattern for a number of years, until consumer demand increases and inventories of distressed homes return to historical norms. One big unknown is the impact investor activity will have on this pattern.

Corporate investor purchases increased 62 percent from November 2011 through November 2012, as large financial institutions ramped up efforts to build portfolios of rental homes.[1] To put this in perspective, the 25-MSA RPX transaction count increased eight percent over the same time period, and non-corporate-investor purchases increased just three percent. So while the overall RPX transaction count may suggest a healthy gain in sales activity, most of that gain took the form of purchases by corporate investors. When we look only at non-investor purchases, the year on year gain is much less remarkable.

The increase in corporate investor purchases during 2012 occurred in non-motivated sales. As corporate investors ramped up their purchasing activity they turned away from REO sales and foreclosures, which had been their primary source of properties during much of 2010 and 2011, and turned toward new sources of properties. One such source was other investors, who had purchased foreclosures in prior motivated sales and likely were cashing out of their early investments.

Declining REO inventories and rising REO prices pushed investors to broaden their search for low-priced properties beyond REO and foreclosures. As shown in Exhibit 5, prices paid by corporate investors in motivated sales increased 25 percent during the first 11 months of 2012, while prices paid by investors in other sales remained essentially flat during the same period. Also, REO inventories declined considerably during 2012. According to economist Tom Lawler, the total REO inventories held by Fannie Mae, Freddie Mac, FHA, private-label securities and FDIC insured institutions declined 21.7 percent from September 2011 to September 2012.[2] As Lawler notes, this analysis excludes non-FHA government REO (VA, USDA, etc.), non-FDIC-insured banks and thrifts, but it probably includes over 90 percent of the total REO inventory.

As investors expanded their search for properties beyond foreclosures, they contributed to an overall shift in the mix of transactions away from motivated sales. Motivated sales declined from 23 percent of sales in December 2011 to 13 percent of sales as of December 2012. Foreclosed homes have sold for 35 percent less than other homes, on average, over the last year so the decline in sales of these homes has helped push up the RPX Composite. When we control for the shift in mix by looking at prices for only non-foreclosure sales, the 25-MSA Composite price increased just 8 percent, as opposed to the 11.8 percent increase reported for the RPX Composite.

Any comments on this report and how it affects the local market?

Tuesday, April 10, 2012

$9,000,000 in Gillette Regent Square, North of Montana

 Fresh off the wire, a huge sale in GRS. At this price range, people buy whatever they like and price is no object. Whether you like the house or not, that's a huge footprint in this select part of Gillette Regent Square.


2202 Georgina Avenue, 90402
7 bedrooms, 8 bathrooms
11,000 square feet, .3 acre lot
 Library with full bath and walk-in closet,
Formal dining room,
Full basement features 2 bedroom suites,
Home theater, kitchenette, gym, wine cellar
Wine tasting room with fireplace
SOLD on 8/21/08 for $3,000,000
SOLD on 4/6/12 for $9,000,000

This should start some interesting conversation. Comments, questions ?

Friday, April 6, 2012

Weekly Sales Data For Santa Monica

This website will give you all of the transactions in Santa Monica reported on Redfin. Very simple, just click the link Weekly Sales Data, and automatically every sale over the last 7 days will appear. This includes SFRs, Townhouses, Condominiums, Raw Land, Apartment buildings and other types of housing. You can also research active listings as well, if you wish. Some of the information you will find are:

Short Sales
Square Footage
Lot Size
Taxes Paid
Similar Sales
Sales History

 Every neighborhood in Santa Monica is covered:

90401 Downtown
90402 North of Montana
90403 North of Wilshire
90404 East Santa Monica
90405 Ocean Park, Sunset Park

You can even change the zip code and research other areas on the Westside also. Hopefully we can get some meaningful discussions about homes that have currently sold. If you, know something about any of these sold homes, please chime in!

Tuesday, December 27, 2011

Last Month's Declining Sales Prices

As we approach the end of 2011, here are some year-ending sales that indicate the Santa Monica market is still trending downward. With interest rates at all time lows, sales should be booming at 20% off of the 2007 peak prices. Yet still we have this real estate malaise as many believe we have not bottomed yet.

With debt problems worldwide getting worse since the 2008 U.S. financial crisis, the Central Banks are merely applying bandaids in hopes of avoiding a full blown global crisis. Since nothing has yet to be resolved with the banking industry, could the next shoe be ready to drop ?

2010 Cloverfield 90404
1+1, 682 sqft
YB 1918, 4748 sqft Lot
SOLD on 5/27/05 for $637,500
SOLD on 12/14/11 for $385,000 (-39.6%)


464 25th Street 90402
3+2, 1712 sqft
YB 1937, 8700 sqft Lot
SOLD on 12/8/11 for $1,985,000

434 17th Street 90402
3+2, 1990 sqft
YB 1928, 7500 sqft Lot
SOLD on 12/20/11 for $1,725,000
Spanish Style

708 20th Street 90402
2+1.75, 1673 sqft
YB 1950, 8940 sqft Lot
SOLD on 12/6/11 for $1,860,000

220 12th Street 90402
2+1.75, 1571 sqft
YB 1939, 7512 sqft Lot
SOLD on  11/29/11 for $1,700,000


831 12th Street 90403
8+4 (4 units) 5020 sqft
YB 1928, 7497 sqft Lot
SOLD on 12/2/11 for $1,650,000

944 Berkeley Street 90403
3+3.5, 3303 sqft
YB 1937, 8400 sqft Lot
SOLD on 12/22/11 for $1,649,105

947 18th Street Apt #6 90403
1+1, 775 sqft
YB 1971, CONDO
SOLD on 9/12/91 for $163,000
SOLD on 11/29/11 for $310,000

Here is a very interesting take on how the shadow inventory could effect the RE market in 2012. Any guesses on what it might mean for prices in Santa Monica ?

Friday, November 25, 2011

Gillette Regent Square Land Value hits $179/sqft !

Here is home that must have been bought for land value. It is located only 2 lots from San Vicente, but is still in GRS. This is a new low not seen since the early 2000s....

210 21st Place 90402
2+2, 1500 sqft
YB 1939, 9073 sqft Lot
SOLD on 10/31/11 for $1,625,000
Land Value = $179 sq/ft

Any comments from 90402?