Stapled-On Stone, Part I

Let's mix it up a bit here and talk about "cosmetic" stone laminate, or, as MBC prefers to call it, stapled-on stone.

It is now a simple matter to add tiles or stone laminates to a wood, concrete, stucco or cinder-block structure or wall to give the look of stone without the expense of actually building with stone. It's so simple to put stone anywhere now, people do put it anywhere and everywhere.

It's easy to make ghastly mistakes. Homeowners, builders and on-the-fly contractors seem to blow it regularly in MB.

The problem is that too often, the use of a stone-look material is conceived and executed with no thought as to whether the surface being covered might look like it was built with stone. If you're not careful, you'll end up with something that looks unnatural.

Our first example is a "flying chimney." This is a great house, but the "stone" chimney is on the second floor, above – nothing. Due to the laws of physics, this is not generally how real stone chimneys are built.

Visitors may find it hard to believe that this gigantic, apparently heavy stone fireplace and chimney are being held aloft by a few 8 x 8 posts. But if they realize it's just stapled-on stone, they won't worry about walking up and knocking on the door.



Here we have a case of the "climbing pavers." Flat stones that really belong on a walkway, outlining a driveway, maybe topping some walls, have instead gone vertical.

Stapled onto the exterior of the chimney (which may or may not be brick underneath in this remodeled home), the pavers are meant to evoke an old-world chimney built from the ground up.

Have you ever seen a stone chimney? They rarely feature smooth surfaces and tight corners. Ditto for stone walls.


Finally, in the "sue your contractor" department, MBC offers an example of OK conception, miserable execution. This home was purchased last year and remodeled. To add interest to a stucco box, the new owners repainted and added a waist-high wall of stone laminate to mimic a stone foundation.

But the contractor didn't keep a straight line. The rightmost half of the house seems to sag as the lines of differently sized stone pieces go more and more uneven. The "stone foundation" illusion breaks down, and now the stone suggests to the eye that the home is about to crumble in one corner. (It's evident in the photo but vivid in person.)

We've seen some beautiful, and well-conceived, uses of laminate stone. But examples of the stapled-on variety are all over town. We'll return to this subject occasionally.

More Info on ARM Resets

Two problems with adjustable-rate mortgages (ARMs) began the mortgage meltdown earlier this year: rate resets and payment "recasts."

Resets are simple enough to understand: a low interest rate (sometimes an ultra-low teaser rate) expires, and homeowners' payments shift to an adjustable rate, typically higher. That's one payment shock.

Payment "recasts" often occur at the same time – when the "interest only" period on the loan expires, the homeowner must begin to make fully amortized payments. This can boost the monthly payment by 15% or more.

So, this year's meltdown began with resets and recasts on a whole lot of recently issued "subprime" mortgages. Unable to refinance and unable to afford their new payments, many new homeowners stopped paying at all.

The big question for MB and other non-subprime markets is: When do the loans in our neighborhood start resetting/recasting, and then, what do the homeowners do in response?

MBC visited this subject a while back, when Credit Suisse published one chart (right; click to enlarge) showing the resets upcoming over the next 6 years. (Click here to download the whole Credit Suisse report [PDF].)

Our conclusion then: If there's going to be trouble from resets, it starts in 2-3 years.

By Spring 2009, the number of "Prime ARMs" resetting each month nationwide gets big. Presumably that means the phenomenon becomes more common in MB then, too.

A new chart (click to enlarge) by a Bank of America analyst, published Wednesday at Calculated Risk – one of our favorite housing & economics blogs – largely agrees with that conclusion on timing.

(Nerdy notes: If you compare these, note the different scales – the new chart goes up to $120b, while the older, longer-term chart goes up to just $60b. Also, BofA includes non-securitized loans.)

BofA's chart says that a surge in "Jumbo" and "Alt A" resets begins in earnest in March 2009. That would reflect 3-year locks from 2006 purchases as well as 5-year locks from 2004.

All over MB, people who can actually afford the amortized payments are making I/O payments. They'd like to refinance at some point, but it's not urgent. Others who can't really afford the amortized payments may need to refi to avoid the payment shocks.

But today you have to worry that the refi option won't be available. Whether it's the credit crunch, interest rates (in '09), your initial LTV, or the LTV in 2009 if the market declines, there might be no refi "safety valve." If that storm comes together, it could mean more forced sales, and presumably lower prices. (Did you notice the ifs?)

This is a long way of saying that most of the recent crop of MB buyers got better terms – especially longer locks – than the subprime buyers who are now in so much trouble, and all over the news. But when the locks expire here in droves, even upper-income homeowners could feel a lot of pressure.

We'd be remiss not to mention the screaming headline from the BofA graph.

Look at the orange bar in Jan. 2007. Those subprime resets were just taking off as the mortgage meltdown began. Now look at Jan. 2008, and March 2008, and beyond. That orange bar swells up nastily.

You think the "subprime debacle" is big news today? What happens 3-9 months from now?

It's Back...

Your humble correspondent is not much into (American) football before Labor Day. And yet, when we see the new listing for 3521 Elm, the first thought is: They're punting already!?!

MBC's wayback machine tells us that 3521 Elm was first offered in March 2007 for $1.279m. It was pitched as "the perfect starter home." It later sold to a builder for $130k less (-10%).

But now 3521 Elm is back for $1.229m, or $79k more than was paid in July. The new owner is willing to unload it, along with plans for new construction.

And now, instead of being the "perfect starter home," it's now pitched as the "perfect remodeling opportunity."

Something isn't perfect, though. Maybe the bottom line on the buy/build/sell spreadsheet.


UPDATE: Turns out this one is also being offered for rent – $3,850/mo.

Bright Spots

Maybe there's a gloomy mood out there, but there are folks making deals that are news...

2305 Pine, highlighted in one of MBC's very first stories, actually closed for $1.570m this week. We had thought it peculiar that the sellers would increase their price mid-listing from $1.495m to $1.595m. Guess what? They (basically) got it! It cost them 4 months on the market, but the tactic worked. We are humbled, and astonished. Last question: Did the buyers' agent tell the buyers that the home was once listed for $75k less than they paid?

3200 Elm is in escrow. This is a newer home priced at $1.95m to reflect a location issue (view of Ardmore). MBC is happy because the sellers are readers. You want your friends to do well.

1140 Laurel closed, after some stops and starts, at $1.535m (-$104k). This is the only one of 3 homes in the Arbolado Court development to be listed this year that actually sold. (And technically, it's not part of that group anymore.) MBC once penciled out a pure PPSF price comparison to suggest it shouldn't have gone over $1.5m. (This is what you get for predicting.)

316 Highland closed for $180k above asking at $2.175m. Yes, for all the talk about Sand Section haircuts, beautiful new(er) homes in nice locations do move fast. Bravo.

2804 Pacific closed for $1.420m, after asking $1.399m. They sold within 2 weeks while neighbors holding out for too much are still lingering. No "price war" broke out, but these sellers got out quick.

Of course, almost all this activity is last month's news (or older) finally settling out with escrows closing. Good reminders, though, that the news doesn't all go in one direction. That's what makes this business interesting.

Housekeeping/comments

The comments from MBC readers are a big part of this site. You all are helping to develop the market intelligence here. We're very grateful.

So MBC has installed a new feature in the right column to highlight the newest comments. Let us know how that works for you.

Also, commenters, please consider creating a screen name when you write. Simply select "other" instead of "anonymous." You can create a new name each time, without registering or otherwise leaving tracks. In other words, you can identify yourself without giving yourself up.

Almost all of our comments now are anonymous, which is fine, but if more of you self-i.d., that might help the conversations. We'll know who is talking to whom.

The Lease-Option Gambit

People lacking the cash for large down payment (increasingly necessary these days) may be tempted by offers of a “lease-option” purchase or “seller financing.”

MBC recently mentioned a Sand Section property, 217 Sea View in El Porto, that is being marketed with both sweeteners. Here’s the pitch, courtesy of an email from the seller several days ago (note: the current price is $1.52m):

1. Monthly lease for 12-18 months (extension to 18 months contingent on no late lease payments).
2. Monthly lease to be $5,300.
3. $530 (10%) of the monthly lease is credited towards the downpayment.
4. Deposit of $17,000, all of which gets credited towards your downpayment in case you exercise the option to purchase.
5. Purchase price to be $1.53 million – appraised 5 weeks ago at $1.58 million (there are currently only 4 properties on the market for less in the "sand section" of Manhattan Beach and one is a tear down.

Advantages to you, the buyer of acquiring a home in this way:

1. Low downpayment – no need to come up with 10-20% downpayment.
2. Monthly lease is almost half of what the monthly mortgage payment would be.
3. No Real Estate taxes.
4. You may sell or sublease the property.
5. Several other advantages depending on agreement.

Let’s boil this down. You agree to a price of $1.5m or so. You pay $17k up front, and another $6k-$9k is credited toward your “down payment” over the next year to 18 months. When it’s time to exercise the option, you’ve got about $25k in the game – 1.5% of the purchase price.

Then what? You need to find a way to pay for the other 98.5%, or you’ll be forced to walk away from your $25k. (The seller doesn’t say so above, but that’s typical.)

MBC is skeptical that you, the hypothetical buyer, will be able to put together all the finances in such a short time. That 12-18 month window is a very quick trigger. If you aren’t able to buy it outright today, why do you think it will be easier next year?

Then there’s the declining-market problem. This relates to price as well as financing.

Whatever price is agreed to now, there’s a good chance that the home will be worth less next year. When you go shopping for loans, the lenders care about a current appraisal, not the contract price you agreed to before. If the value has gone down, you can get a loan, but you’ll need more cash to bridge the difference between your contract price and the appraisal.

But the seller will finance! Even with just 5% down! Yes, and that could be big, but it’s unclear for how long they’d loan you money. No doubt these sellers are sophisticated and can help make a deal work. But don’t kid yourself, they’re not going to play bank for 30 years.

If you must have this home, and you know you’ll be coming into some big money within the next year, going with the lease-option might make sense. It’s a great way to test-drive the home.

What about the home itself? Is it a must-have?

217 Sea View was purchased in Nov. 2004 for $945k, then massively remodeled – converted from a duplex to a 3br/2ba, 1440-sq.-ft. SFR. Everything, top to bottom, inside and out, was redone.

Many of the details are nice – both bathrooms are slick showpieces, and the master bedroom upstairs has a large walk-in closet – not a typical feature in a smaller home.

Alas, the two downstairs bedrooms – just off the entry – are impossibly small. And the small kitchen area was under-done, with mid-range materials and appliances. (What’s with the angled stove?)

There’s little common space and, of course, no yard on this half-lot. Views? You get a peek at the ocean down the alley. Otherwise, in a sadly typical El Porto fashion, most of the windows look out on the walls of neighboring houses.

Evidently there was already one taker, but the buyer didn’t “qualify.” Credit the sellers for being creative and aggressive in their marketing; they're trolling all the waters.

A Trickle

A week ago, MBC said we're all "waiting for new escrows."

And we got some. But not a lot.

Since Aug. 20, we saw these go:

• 1008 11th (new construx., pre-completion, Hill, $2.9m)
• 637 6th (newer, big, Hill, $3.9m)
• 225 Moonstone (remod, Sand, $1.3m)
• 217 9th [again] (new, Sand, $3.35m)

As we've noted before, there were some Sand Section TH sales, too, but MBC doesn't track those officially.

With the Hill and Sand Sections renewing their clocks, there are still these problems:

• Tree Section <$2m: 20 days now since last new escrow (3108 Poinsettia)
• Tree Section $2m+: 28 days now (2104 Palm)

The higher-end Tree Section drought, at 28 days, now exceeds the previous 25-day drought MBC reported on – way, way back in late July (see "Drought Ends, Glut Continues"). And the 20-day stoppage at the lower end is surprising, given the ravenous appetite of buyers earlier.

Question: Is anyone even looking in the $2m+ range?

A quick glance shows a total of 10 new escrows/pending sales in August (SFRs, west of Sep.), most of those in the first week of the month. That's about half the monthly volume for Spring and Summer this year, but the dropoff after Week 1 is the part that startles.

Meantime, we see hints of one late-stage escrow in trouble, but let's wait till that's news.

Is MB an 'Oasis Micro-Market?'

We all know there's something special about MB. Not only is it beautiful and wonderful for a hundred reasons, we have a real estate market that some would say defies gravity– no easy feat.

Today's LA Times carries a story with a darling tag we might attach to our little burg: an "oasis micro-market." Now, before we get carried away with Manhattan Beach exceptionalism, let's see if we meet the criteria:

* Close-in, established neighborhoods convenient to the urban center's employment and cultural attractions. They don't require residents to make long commutes, sit in traffic for hours or worry about gas prices.

These criteria are toughies for LA. One of the examples given is Chevy Chase, MD, a clear A-plus match. What is our region's "urban center," and how close is MB? Who here doesn't have a long, or at least annoying, commute? Next?

* Above-median-income areas -- often well above -- with home prices to match... Educational levels of residents exceed regional norms, local school systems are highly regarded, and crime rates generally are low.

Check.

* Prime mortgage territories, with little to none of the negative neighborhood impacts of rising foreclosures caused by payment-shock loans going sour.

"Little to none" – sounds about right.

So, now that we're an "oasis micro-market," what should we be seeing in the market?

Prices and sales are up this year over last, and plenty of buyers still want to move in.

We'll get to the data on that (again) separately. With median price that may be the case. No doubt about the buyers wanting to move in, though.

Now, can "oasis micro-markets" keep defying gravity as the broader housing market declines? Even if they seem to be now, says a Miami realtor:

"In my 38 years in real estate, I have never seen a market where more expensive properties have stayed relatively healthy, while entry-level houses are the toughest to sell."

We'll take that as a "no" about the defying gravity thing.

Still, the notion of MB as, officially, an "oasis" is going to help us digest breakfast a little easier, after this story in the other Times (NY) made everyone feel queasy. (Hint: Save the scary stuff for weekdays!) According to some pointy-heads, by 2009:

In California, prices are expected to decline 16 percent — or about 20 percent after taking inflation into account.

You know things are deteriorating when David Lereah, late of the Nat'l Assn. of Realtors, admits he got the market wrong, what with his "the real estate boom will not bust" boosterism. Best he can say:

“The bears were bears way too early, and the bulls were bulls too late. You need to know when you are straying from fundamentals. It’s hard, when you are in the middle of the storm, to know.”

It's hard to know.

Just Rent It

Why buy now when you can rent?

That's a question that seems to be ever-present in our comments here.

Who knew that that would also be the question posed by builders offering new (and newer) construction?

But that's what's happening. Among homes now simultaneously for sale and for lease, MBC notes:

• 2105 Oak (new, 95 DOM) – list price: $2.19m, rental price: $8,500/mo.

• 2709 Oak (new, 373 DOM) – list price: $2.29m, rental price: $8,500/mo.

• 3611 Vista (new, TH, 45 DOM) – list price: $1.85m, rental price: $7,500/mo.

• 217 Sea View (big remodel, 5 DOM) – list price: $1.52m, rental price: $5,300/mo. (lease-option available)
  

• 512 John (newer, 190 DOM) – list price: $3.99m, rental price: $20k/mo.

MBC is pretty certain two recent listings at $2m+ in the Tree Section were rented instead:

• 2909 Elm (remod), listed for 250+ days, mostly at $2.8m, then, eventually, $2.025m – no info on rental price

• 2609 Oak (new), listed for 400+ days at $2.3m-$2.4m – no info on rental price
  

And we also recently saw the most expensive listing in the Sand Section go rental. 232 16th, cum 234 16th, rented for $9,500/mo. instead of selling for $4.55m (70 DOM).

For new construction, we're guessing that "just rent it out" wasn't part of the initial business plan. It's a stopgap. These folks didn't mean to become landlords.

And yet, offering your new stuff for lease has got a bullish edge. Doesn't it convey that the builders expect demand and prices to recover in the near term, so they can later take the profits they penciled out at the start? An intriguing gamble.

More Choices in the Trees

A little over 2 weeks ago, 2822 Ardmore was all alone in the Trees, the only listing below $1.585m.

Having watched everything else get snapped up, they raised their price a second time to $1.399m. MBC speculated that this might be the first successful use of the price-increase tactic.

Things have changed. Current listings:

• 1409 Oak ($1.225m)
• 1732 Pine ($1.295m)
• 3504 Maple ($1.299m)
• 2822 Ardmore ($1.399m)
• 637 13th ($1.450m)

Of these, the first two fell out of escrow and re-joined Ardmore. Maple is a new listing and 13th dropped from $1.585m this week.

All of these have challenges. Oak is, well, on Oak, and interestingly it's made of adobe. Sharply remodeled, but different. Pine and 13th are probably best as lot sales, but are overpriced as such.

Maple and Ardmore are move-in ready, but they're both on the smaller side and each has location issues. Actually, Ardmore buyers may have to wait for the sellers to find and close on their new home, which could be a wrinkle.

This segment was very hot for the last several weeks, but it's paused like everything else due to the mortgage mess. If you need to buy in the Trees now, these are your options at the lower end, but wouldn't it be nice to see some improvement in price and inventory?

Cutting Losses on John

It was a bad bet.

Someone bought 512 John this February for $4.075m. (We're told it was a builder who took the house in trade.) The bet was that this was actually a below-market price, and the property could be sold for more. Much more.

Six months ago, the day after the new owner's purchase recorded (Feb. 15), 512 John went up for $4.449m. After it lingered a while, the price dropped to $4.349m, but then, 5 weeks ago, the price shot up $400k to $4.750m. (Hint: This tactic apparently never works.)

No takers. No one even took them up on the option to rent the home for $20k/mo.

Now 512 John has dropped $750k (really, $450k) to $3.999m, below the price paid earlier this year. With holding costs and costs of selling, a bit of a bath may be taken.

Chalk it up to a confusing market, a bullish buyer (the builder) and the near-halt to sales activity this month due to the mortgage mess – it was a perfect storm. The seller now sees that it is time to get out ASAP, even if it means taking a loss, because the longer-term outlook suggests that losses could mount.

It's too bad. MBC rhapsodized a bit in the "rent this home" story:

This is a striking masterpiece of a home, built in 2000 in a great location, the kind that some folks are just dreaming about when they write "panoramic ocean views."

And there was more... There's nothing wrong with the home but the very specific style you have to buy into. So much to love (John St! Giant ocean views!).

The problem has been price.

This was a big move, but they still want $4m.

Another Notch Down at '232 30th Pl'

We're down to $1.329m now at 232 30th Pl., the home formerly (recently) known at 3009 Highland.

This is the second $20k step down in two weeks. (See story here.) Happily the listing agent was able to recycle the poetic:

JUST REDUCED!!! 20,000 smackers!!

Today, a full-price sale with 6% cost of sale would net the sellers $25k over their July 2005 purchase price.

Not 25%, $25,000.

Also, we see the first hint that the listing might be better off as a lot sale. New language tacked on at the end:

This is zoned for a three story home.

Next door, at 233 30th St., new construx just fetched $2.250m. That's on a (steep) walkstreet, not an alley, like "232 30th Pl." The builder paid $1.250m for that lot in July 2005 – a different time.

Hockey Sticks

After you've seen "An Inconvenient Truth" – perhaps the best film ever about graphs & charts – one image lingers: That of Al Gore mounting a cherry-picker to rise up and show the off-the-chart peak of a graph depicting the sudden, sharp rise of global warming.

Just as the climate crisis has its "hockey stick" graphs, so, too, does housing.

This week, readers of Time magazine are presented with one such graph, depicting the rise in home prices since the 1950s – adjusted for inflation. (Click here for the full Time story.) This probably gives the data its broadest audience yet.

Your humble correspondent recognized the Time chart as a slimmed-down version of one the New York Times ran somewhat recently, presented here as well. (Click to enlarge; it's worth it.) The chart goes back to 1890. Yes, 1890.

We don't actually do much in the way of "bubble talk" here, despite the subtitle for the blog. (We're pretty micro-focused.) Let's just say this: It's no surprise to anyone that home prices in MB have doubled – or more – in the last several years. What's striking is to see how unprecedented the comparable national trend has been.

A Hill Sale

There's a contingent sale pending now at 637 6th in the Hill Section, listed at $3.9m.

This is a beauty on a corner lot, referenced earlier in a story about two homes with very different markups over their purchase prices from 2-3 years ago.

6th was marked up 25% over the $3.125m the owners paid in Nov. 2004.

So that ends the three-week sales drought in the Hills. There are townhomes selling in the Sand Section but we don't see SFRs going yet.

Another Failed Escrow

In the Trees, 1732 Pine is back.

A dated property needing TLC or a bulldozer was priced at $1.295m (high for a lot, reflecting a good location). It was gone in 10 days; it fell out today.

Scratching Pine, MBC now has records on 5 SFRs west of Sepulveda going into escrow in August:

• 1717 Pacific
• 3108 Poinsettia
• 2559 Valley
• 469 27th
• 316 Highland

We're also informed of one Hill Section property to go into escrow this month (1008 11th), though MBC never saw that one on the MLS.

What's average for a normal month? Looking back at inventory tracking this Spring and Summer, the answer appears to be about 20 new escrows per month for SFRs that were active on the MLS.

Again, we're at 5 now, with 10 days left in the month.

Waiting for New Escrows

We're sure homes will sell. But the mortgage market mess has clearly disrupted the local real estate market.

It has been 2-3 weeks since a new deal was made, depending on which part of MB you're looking in. (Remember we track only SFRs west of Sepulveda.) Here are the number of days since a new escrow last posted:

Hill Section: 21 days

Sand Section: 16 days

Trees <$2m: 12 days

Trees >$2m: 20 days

As we continue tracking, going forward, here are our starting points. MBC's records show:

Hill Section: Last escrow began July 30, for 877 8th ($3.7m).

Sand Section: Last escrow began Aug. 4, on 469 27th ($1.6m).

Trees <$2m: Last escrow began Aug. 8, on 3108 Poinsettia ($1.65m).

Trees >$2m: Last escrow began July 31, on 2104 Palm ($3.3m).

Corrections/additions/news are all welcome.


UPDATE 1: The first version of this story had a small math error, now fixed above.

UPDATE 2: A Hill Section home that we simply never saw on the MLS (1008 11th; new contrux at $2.9m) went into escrow Saturday. So there was a sale, but not from the homes MBC is tracking from the MLS. For now we're going to leave that 21 day figure above.

All's Well on 29th

Seeing as how MBC scolded the sellers of 579 29th for boosting their price mid-listing, it's appropriate now to say congrats and well-done on occasion of their closing escrow on a sale.

How did they do it? They got real.

Now they're out, while everyone with a live listing in the Trees over $2m is nervously wondering what's next.

The sellers of 579 29th put their home up on offer in early December 2006 (who starts in December?) at $2.575m. That was pushing the high limit. The home is 5 yrs. old, 5br/5ba, 3450 sq. ft., on a standard 4800 sq. ft. lot, and has some nice upgrades. But that was a new-construction price – and high, even then.

With no action, the price came down to $2.400m by early May. But later that month, the price shot back up to $2.519m. Huh?

The price kept moving – back to $2.4m, then to $2.329m, where it sold last month.

As of Friday, the closed price: $2.250m, down $325k (-13%). Price per square foot: $652. TDOM: 232.

That's a big cut – the largest we've seen in this market segment (Trees $2m+) since April, but we doubt the sellers will need grief counseling. They paid $1.4m five years ago.

Among current listings, there are clusters near $2.3m and near $2.5m. Here's a sale that moved from high in the upper group down to a notch below the lower group.

You might share MBC's opinion that they started too high (the sellers agreed and disagreed, so don't ask them), but the movement is noteworthy regardless. Market prices are set by those who close deals.

Now, about the 24 active Tree Section listings above $2m...

Stuff for the Time Capsule

The ad from which these chunks were pulled appears in this week's Beach Reporter.

Discussion of MB Market Update for 8/15/07

With this Market Update we’re trying something new: Publishing it on the main MBC page, instead of on our sister site/data-dump page, Manhattan Beach Market Update.

Also, you'll see the newest update may now be downloaded from the upper-right corner of the MBC front page. The older updates are still at the other site, and the data and spreadsheets will continue to be archived there as well.

So, what can we say about the first two weeks of August?

This period began briskly, especially in the Tree Section (sub-$2m segment), and then 5-7 days into the month, everything got strange. Cue the Shorewood agent quoted by the LA Times:

"The market is very perplexing right now, and people don't know what to do."

News of a rate spike for jumbo loans (basically all MB transactions) jangled nerves, but it turns out it’s the rules for loan programs that are the biggest hassle. It’s been harder to qualify buyers – even very solid ones – for high-LTV deals, which are characteristic of our market, due to prices.

Also, lenders are vanishing or going bankrupt, and we’re even hearing of escrows collapsing (outside MB, so far) at the last minute due to lender problems.

These problems may sort themselves out (or not), but what’s clear is that these shocks froze the market for the second week of August. MBC has seen no new escrows begin after Aug. 7, while two escrows failed. (We focus on SFRs west of Sepulveda.) We’ll find a new equilibrium soon, one imagines, but this was a weird time.


Hill Section

There are 11 active SFRs.

There were some curious developments: 3 active SFRs were canceled, 1 more went inactive (on hold), a new listing simply vanished, and a previously canceled listing – nearing a foreclosure auction – returned as a short sale.

There were no sales since the 7/31 update, and 1 price reduction – on 916 9th, the second cut there in a month.

Does this sound like the Hill Section we know?

Adios for now: 3 properties at completely different stages.

• 845 10th wanted $1.875m for the lot. It’s now canceled after 90 DOM, just like neighbor 903 10th ($1.8m), which stopped testing the waters in late May.
• 603 11th was a very nice, newer home (with a master “perfect for royalty,” the listing said), asking $3m, off the MLS after a month.
  
• 511 Pacific, now under construction (you can see it up off Ardmore), is not at this moment asking $8.150m anymore, after 90 days of marketing.

Also, 911 Duncan, listed at $3.77m for 2 months, went on hold.

Bienvenidos, otra vez: 601 Larsson is back. This one began March 20 at $2.695, dropped impressively to $2.395m, then dropped out a while. Backstory: Owner paid $2.0m in Sept. 2005. It’s been in and out of foreclosure this year, with auctions scheduled and canceled. Now they’ve got lender approval for a short sale at $1.999m or so. Also, though MBC does not track townhomes, we noted the return of another canceled listing, a townhome at 714 MBB, on which the owners are now certain to lose money.

Adonde vas? MBC is confused by 869 3rd. When this one came on the market at $3.995m (7/30/07), we noted that it was purchased 2 years ago by two realtors for $2.44m, so they’re saying it has appreciated 64% since then. Now the property is off the MLS, but there’s still a sign out. We’re keeping it in the update for now.


Sand Section

There are 19 active SFRs.

There was little activity in what has been a hoppin’ segment of the market. The update shows 2 new listings and 3 new sales, but one (513 21st) is actually a teardown that came on in mid-July and sold immediately, but skipped past our radar. That means in this period, we really saw 1 new listing and 2 sales.

That new listing is, intriguingly, a home that was in foreclosure and up for auction this past April. It’s 225 39th, 3br/3ba and 1600 sq. ft., freshly remodeled, on a slightly larger-than-normal lot (1525 sq. ft.) near Highland (steps to Sharkeez). A purchase closed 6/14/07 for $1.595m, and now it can be yours for $1.745m, exactly $150k more. Is it a foreclosure-shark flip? At $1,090 per square foot, that price does appear to be pushing on the ceiling.

Sold: 316 Highland, beautiful, newer and reasonably large (2500 sq. ft.) listed at $1.995m, went quickly. Further north, 469 27th, a superslick remodel tucked away near the cliff overlooking the Tree Section, went within a month – listed at $1.599m for 3br/3ba, 2100 sq. ft.

Ouch: At the high end of the market, there was rough sledding. A “landmark” home at 232 16th, no, 234 16th failed to sell at $4.55m and appears to have been rented out instead (at $9,500/mo.). New construction at 217 9th went into, and out of, escrow.

Cuts: Only one new reduction – the home formerly known as 3009 Highland (now “232 30th Place”) cut to $1.349m, though it’s debatable whether that was a $10k cut or a $20k cut. Perplexing. We also record here a $100k cut on the remodel-in-progress at 320 Rosecrans, a duplex next door to El Tarasco, now asking $1.999m – that didn’t get into the last update.

Closed sale prices: We have three new closed sale prices, including the cheapest sale in the Sand Section in about 15 years, er, well, in a while: 462 36th Place closed at $760k, down $39k, so that’s the price of half-lot in a pretty challenged location. Two brand new homes also sold, 233 30th St. ($2.250m, -$49k) and 3904 Ocean ($2.65m, -$100k).


Tree Section

There are 37 active SFRs. Of these, 13 are in the sub-$2m range, and 24 are above $2m.

Outta here: Five homes <$2m went into escrow at the beginning of the month; one (1409 Oak) later fell out. Of these, two were really super (2559 Valley at $1.999m and 3108 Poinsettia at $1.599m). Two were more downscale, but 1717 Pacific (at $1.479m, a remodeled flip) evidently had its charms and 1732 Pine, very tired, may simply be a lot sale at $1.295m.

Dropping in: Five new listings came up:

• A lovable wreck at 790 Rosecrans ($1.585m),
• A nice remodel at 2615 Valley ($1.699m),
• A newer home one door off Ardmore at 3200 Elm ($1.949m),
• A newer home on a busier street (2900 Blanche) joining all the newer stuf at $2.3m, and
• New construction at 2509 Walnut, two doors off Marine, starting at $2.449m.

Did you notice the location challenges for all of these? Uh-oh.

Best-priced may be 3200 Elm, since the owners didn’t pay all that much less than they’re asking now when they took it in 2004.

Dropping down: Eight Tree Section homes reduced their prices, but one increased (2822 Ardmore) because the sellers found themselves temporarily alone – nothing else was listed <$1.585m. Closing: Three closed sale prices came in, all at or near asking: a lot sale at 3404 Pine ($1.2m), a quick-flip remodel at 3528 Poinsettia ($1.260m) and a large remodel, 2509 Laurel, with 3650 sq. ft., at $1.725m ($473 PSF).

Back and Ready to Lose $

Turns out it wasn't time to close the books yet, but we're nearing the final installment of the saga of the dueling townhomes on MBB.

(For background, in order of most recent first, click here, here and here.)

This week, 714 MBB returned to the market.

Sellers paid $1.355m in April '06, and listed for $1.399m just 7 months later. It lingered and quit the market in May.

Now it's back at $1.220m.

Neighboring 710 MBB sold for $1.206m on July 27.

710 was fully upgraded; 714 is dated. But 714 has some big ocean views going for it, which are now being teased properly in the listing. And 714 has direct access to the underground garage, which not all the others do.

So right now the sellers are saying 714 is, on balance, superior to the upgraded unit that sold for less. What will buyers say?

A full price purchase, assuming 6% cost of sale, will leave the owners down $208k. That's a blow. Bringing cash to closing?

Sand Section Haircuts, 2006-07

An MBC reader requested a data run on the gap between asking prices and closed sales in the Sand Section over the last year or so. This was a buyer hoping to use the information for a negotiation on a future purchase.

Now we’ve got the results, covering 74 closed sales (all property types, SFRs, THs, condos and MFRs) in the Sand Section between March 2006 and July 2007. Click here to download the spreadsheets (PDF), which consist of several different sorts of the same data. Each sort runs 2 pages. The subject of the sort is labeled at top. Some logical groupings or gradations of data are noted with horizontal bars.

First thing: You’ll likely find this data fascinating. And yet, you may ask yourself – what do asking prices really mean?

Major caveat: The data aren’t complete, in that we’re only publishing sales with reductions, and even then, not all sales with reductions in the time period.

These are limitations that result mainly from our going back beyond the starting point of MBC’s extensive local-market data tracking – our first Market Update was dated March 27, 2007. Relying on other data sources (including a huge hat tip to the Manhattan Beach Real Estate Bubble blog, which posted a database here), it became clear we could not state with high levels of certainty that the data set was complete. Very likely we’d be missing some full-price or over-asking sales.

If we ignored a bunch of sales at or above asking, this would lead to criticism that MBC was skewing the data. So, we punted – we show no full-price sales, and ask readers to understand the decision. What that means is that we can’t describe how common it was for prices to be reduced – we have just this set of data on reductions that did occur as sellers did what they had to do to get a deal.

Solid numbers: The closing dates and sale prices are solid, drawn mainly from Zillow and the county assessor’s records.

Corrections: There may be errors in this data, despite our best efforts. This posting is Version 1. We will make corrections and post new versions as necessary. Correx can be posted in comments or by private email to mbwatcher@gmail.com.


Analysis by Order of Sorts

Sort by Address: This is self-explanatory. If you’re wondering how much less your neighbor took than they were asking, you may find the answer easily here.

Sort by $ reduction: This one shows the amount of the reduction between asking price and closed price. Keep in mind, we’re tracking from the original asking price, not the latest list price. (Our brethren at the MB Bubble blog took the same approach as MBC does: recording the actual start date and price, not to be fooled by bogus re-listings. That makes this data more accurate, on the whole, than MLS-generated reports.)

The range of reductions in this data set is $14,000 to $937,500.

Reductions by $

<$100k: 27
$100k-$200k: 18
$200k-$300k: 18
$300k or more: 11

Sort by % reduction: Total price reduction is divided by original asking price. This calculation can help smooth out the differences between homes at different market tiers. In other words, $250k seems like a big reduction, unless the home sells for $3.7m (e.g., 132 18th). That’s the same as taking $100k off a home priced nearer to $1.5m.

Reductions by %

0-5%: 27
6-10%: 19
11-15%: 9
16-20%: 13
20%+: 6

Most reductions (62%) were less than 10%. Nearly a third (30%) were between 11-20%, however.

Sort by Price Per Square Foot (PPSF): Knowing PPSF for nearby, comparable sales can be very helpful. But with differences in lot size and many less-quantifiable factors (view, vintage, build quality, location, etc.), this measure can shrink in importance when comparing homes. Teardowns further skew the data, since they’re typically small homes being sold for lot value (70-80% or so of local property values) before they're replaced by much larger homes.

That said, there’s a clear confluence in these data around the $800-$900 range per square foot.

Price Per Square Foot

<$700: 6
$700-$800: 14
$800-$900: 31
$900+: 22

Sort by Closed Sale Date: This one is interesting because it appears to disprove a theory one might have about the market generally, which we’ve read elsewhere. To wit: 2005 was the market peak, but by 2006 the winds shifted and many sellers were confused as to how to price their properties. By 2007 the confusion had dissipated and asking prices were gradually more realistic.

Not so. Watch the reductions-by-% column while scanning down this sort by date. There’s no pattern in the percentage reductions that corresponds with the sale closing date. Sellers were just as likely to be wrong on price in Spring 2006 as they were in Summer 2007.

Bottom Line

Looking at price reductions this way is just one of many interesting, but flawed ways to evaluate the state of the market. (The data is probably most useful for the purpose of the original requester – to use in negotiations.)

Median price, for example, is dreadful for tracking the market, because it is so susceptible to changes in the market mix, as we are witnessing today on a broad scale and locally. Price per square foot is a good measure, but it’s thrown off by differences in lot size, location, variability in age and build quality, and, of course, teardowns/lot sales. We could go on…

But if there are this many reductions to talk about in one sub-section of Manhattan Beach, that tells us one thing pretty clearly – as if it needed to be repeated – these ain’t the go-go days of wild and crazy appreciation, speculators and routine multiple-offer situations.

More subtly, the data show us that sellers are still struggling to balance their demands against the shifting market.

And as we go through this data now, there is a broad, palpable sense that this particular chapter is closing, as the market shifts from strange and confusing to… something else.

In and Out (of Escrow)

We all know escrows can fail for any number of reasons. But MBC is watching this sub-segment of activity more closely in the wake of last week's hullabaloo over mortgage credit, terms & rates.

So far, in just a few days, we have seen no new escrows begin, and two fail.

Quite possibly these are unrelated to the mortgage mess, but we'll discuss them anyway.

1409 Oak is the slickest 1,000-sq.-ft. home west of Sepulveda. The fact that it is barely west of Sepulveda calls for a discount, and it's at $1.225m, a lot-sale price. Word is they accepted an offer at $1.250m. But that fell apart. If you're up for Oak living and $1,200/sq. ft., this is your place.

217 9th is new construction on a corner-lot/half-lot between Manhattan Ave. and Highland (at Bayview) right near downtown. The house is modernist and has some appealing features. It has also been on the market for 418 days (including pre-construction phase). A correspondent reports:

It borders parking lots, a teardown rental and the alley behind Sidedoor bar/900 Club.

What? A location downtown with issues?

The sellers are quite firm, however. They began at $3.250m and increased to $3.350m on July 16, 2007. We're told they dropped in this language (which we don't see now):

Seller will not take less than asking price. Right now is a great time to write an offer!

Instead, we read this:

This is a very unique and special property with state-of-the-art green construction is over loaded with fabulous amenities. Buyer has to understand the extra value of construction cost and less deferred maintenance in the future and the longevity of this Eco-Conscious home.

Hey, we're all for eco-conscious, but aren't you dis-inviting offers with this sort of lecturing?

Down $700k, Facing Foreclosure or Short Sale

So much for the flirtation with Craigslist – 601 Larsson is back on the MLS.

A home that began March 20 at $2.695m is now up at $1.999m, with this language:

Bargain priced estate home in the prestigious manhattan beach "hill section". Lender approved short pay.

The owner paid $2.0m in Sept. 2005, so the home is priced somewhat surprisingly at a 2-yrs.-ago level. (This one will throw off the two-year-itch averages.) Last list before they quit was $5k short of $2.4m, so this is a hefty drop.

Now the question is how short you can go.

Can we guess it's the holder of the 2nd who recognized the threat of a total wipeout if this proceeds to auction Sept. 5? (Auctions have been scheduled and canceled a few times, but that game can't go on forever.)

At this price, even with its location issues, there oughta be buyers. Oh, wait, there's some trouble on that side, too...

NYT's Take on the Spike

Again, Sunday, MBC was thinking of "spikes" in a completely different way. But reality intruded.

A commenter posted a link to this Sunday NY Times story, which echoes a bit here in MB.

It's mostly an analysis of the scare in the mortgage markets last week, and the possible impact on housing – particularly the higher end.

The "real person" at the center of the story, illustrating the problem of spiking jumbo loan rates, is an investment banker (never named) trying last week to buy a home on Long Island for $1.5m.

The guy's rate was quoted at 8% and jumped to 13% three days later when he was ready to move on the loan. Needless to say he didn't take that offer:

In the end, he was able to get a mortgage with a lower interest rate, but it will adjust in five years, possibly to a much higher level.

Here's a guess – that 8% quote was for a 30-yr. fixed, but he blanched at all the new fixed rates for jumbos and went for the adjustable instead. A move both desperate and bullish.

We get a parade of gloomy quotes:

NY-area mortgage broker: “There is a lot of fear in the markets. When there is fear, people have a tendency to overreact.”

NYT: "There have been sudden changes in the mortgage market before, but this one may be both more severe and more damaging than those in the past."

SF mortage broker: "In California, [the rate spike] has shut down the purchase market. It has shut down the refi market.”

NYT: "[A] problem that began with Wall Street excesses that provided easy credit to borrowers — and made it possible for people to pay more for homes — has now turned around and severely damaged the very housing market that it helped for so long."

Some of that talk, we're the first to say, sounds like a postmortem before the body's cold. We can't be sure what is in store. It ain't over.

So we'll see what the next week brings. The rate spike may be temporary. New rules for loans seem to be the silent, deadly problem.

MBC is aware of just one recent MB escrow to fail thus far – since the news of the spike – but it was on a lot sale, not a high-end purchase. We're watching for new escrows as well as cancellations.

Shootin' Fish in a Beach Reporter

Admittedly MBC has been offline a bit, with a mild sunburn to prove it. AVP came to town.

In between matches, we found some minor howlers in this week's edition of the RE adsheet of choice, the Beach Reporter:










Zen like? Tranquility?

This is a pitch for 801 11th. As discussed here, it is on Pacific, backs up to a commercial building, and rests about 100 feet from MBB. You may prefer your tranquility in less compressed, busy, noisy settings.

We had to figure out what the reality tie was here, so we saw some pictures. Turns out the interior (newer home) is quite stark, sharply modern and yes, a bit "zen-like," if we may abuse the term here along with the listing agent.

Also, the home appears to be largely, or entirely, vacant. No clothes in the master closet. Some rooms unfurnished.

Maybe that's just the style.








This screamer appears in an ad for 1400 Elm. It began June 5 at $2.35m. Now it's at $2.295m.

That is $55k (-2%).

It's not really incredible.















You might like to build some equity. In real estate, over the long term, you will.

In the short term, equity building ain't gonna be automatic anymore, just from buying and holding.

So what is this ad trying to tell us? Buy it and it will appreciate? Buy it, fix it, flip it?

The listing language is more frank, recognizing that this will take a contractor or "owner looking for a remodel project" to turn a dog into a fast pony.

Bottom line: This is a 2100 sq. ft. lot, normal for this side of 13th, but tiny for most of the surrounding area. Asking $1.6m is ambitious. It won't go up from there without a ton of work.













Not again!

Seven weeks ago, MBC noted that a very similar-looking ad had rather wrongly characterized 2709 Oak as a "new" listing. In a few days, it will be one year old. What qualifies as "new?"

Price is still right: 7 weeks ago, 2709 Oak was "priced right" at $2.349m. Now, it's "priced right" at $2.299m. It began – oh so long ago, even though it's new – at $2.395m. So we are finally down almost $100k, still "priced right," still waiting for something to happen. After a year, could it be that price is the problem?

What we didn't see in the BR...

No free car anymore at 1313 Oak.

The price is down now from $2.490m to $2.390m, and with that, we lost the offer of a "free" 2007 Mercedes S550 (price, new: $90k).

At this point, buyers have missed out on $300k in free furniture and a $90k Mercedes. The list price is down $409k from last year. It's nice, but people wouldn't buy it with prizes attached, so how do you gin up interest now?

Bearish Leo at LA Times Blog

LA Times blogger Peter Viles interviewed local realtor Leo Nordine in the wake of this week's news.

By Viles' reckoning, Leo is "among the most bearish industry players we know," but he knows our market and he knows tough times.

Here's a link to today's interview. Recommended. Warning: It would appear Leo believes the sky actually is falling.

Also, twice previously the LA Land blog at the Times spoke w/ Leo: here, and here.

More bullish views are appearing in the comments to this recent MBC post, thanks (presumably) to a local realtor.

Overhyping a Token Cut

We know listing language is ad copy.

We know buyers must beware.

But you can still insult your readers with hype and overstatement.

There's a new reduction on "232 30th Place" (not so long ago, 3009 Highland – before a mid-listing address change). It's down from $1.369m to $1.349m. To celebrate, the listing now screams:

JUST REDUCED!!! 20,000 smackers!!

Yes, but, it's really just 10,000, er, "smackers." Because as of July 10, the same home was listed at $1.359m. The price was bumped up to $1.369m when it was re-listed with the new address.

There's also this:

This the best deal going so make a move on this quick or it will be gone.

Today, the listing is almost 4 months old. (It began April 10.) Evidence suggests you don't have to move that quickly.

We have to go back to our first post on this home. MBC noted that the owners paid $1.225m two years ago, but it had wildly appreciated in the prior years:

3009 Highland sold for $510k in Oct. 1999, then for $789k in July 2003. Precisely 2 years later (July 1 '03-July 1 '05), it went for $1.225m to the current owners.

It doesn't look like it will go for much more this time.

At $1.349m and 6% cost of sale, the sellers will barely profit ($<45k).

With each dollar below $1.349m, the owners are threated with a net loss. Does that sort of thing happen in the Sand Section?

What's Right for 505 3rd?

MBC has discussed 505 3rd St. in the Market Updates a couple of times (here and here).

This one offers 4br/3ba, 2550 sq. ft. on a typical local lot of 2700 sq. ft., for $1.949m. No yard, and it ain't pretty.

We've called it:

• a dated, mishmash, sorta-remodel
• a challenge
• awkward
• in need
• a head-scratcher

So, it's not our dream house.

The South End location is nice, but there are recent sales nearby to consider...

• 532 1st, 4/3, 2650 sq. ft. nicely remodeled and on a larger 4000 sq. ft. lot, sold for $1.9m in late April (third pic)

• 525 2nd St., 4/4, 2750 on a 2700 sq. ft. lot, newer and crisp, closed for $2.125m in early July (fourth pic)

• 440 6th, a small home on a corner lot (@ Ingleside) on a walkstreet (quite possibly a teardown), in escrow, was listed at $1.899m

So, recent comps, seemingly all better homes or better locations, have been at $1.9m or a tick higher. At $1.949m, 3rd is playing the equal or better to the comps above, though it isn't.


505 3rd has been around since early June. (There has never been a sign out front.) They pulled a bogus re-list this week so the current MLS# (S952443) starts Aug. 7.

The re-list was, evidently, due to a failed escrow. (Doesn't that justify pretending you have a new listing?)

MBC might march out and say 505 3rd is overpriced, but they already had one acceptable offer, so how far off can they be?

The sellers paid $1.6m in Sept. 2005. They are getting out, and a profit would be nice.

But this is one of those listings that falls into the nether-regions – they want too much for the lot, but the house ain't that great, and pricing is a mystery as a result. Where should it be?


UPDATE: We hear that 440 6th (the walkstreet corner) went for $2.050m, well above the $1.9m list.

Affordability and Prices at Higher Rates

Let's open this one up for discussion, since there are plenty of readers here far more savvy in the ways of finance than your humble correspondent.

MBC was wondering something... if rates are up to stay (debatable!), how much might prices adjust to allow buyers to "turn back the clock" to earlier this year?

We made these assumptions and fed them into a mortgage-rate Univac online...

Home price: $2.0m
Down (20%): $400k
1st TD: $1.600m

The computer spat back:

30y fixed payments at...

6.5%: $10,118
7.5%: $11,187 (+$1,074)
8.5%: $12,303 (+$2,190)

Then we wondered, if a buyer has missed out on the chance at 6.5% rates, but still wants to pay right around $10k/mo. on the 1st, how much can that buyer now afford?

At 7.5%, the loan amt. for the 1st should be: $1.450m (-$150k)
At 8.5%, the 1st should be: $1.325m (-$275k)

So here, the buyer goes shopping for less-expensive homes, or the higher-priced homes drop 7-14% to keep the interest of the priced-out buyers.

This may be premature to consider, but what does prior experience suggest? Reactions to these assumptions or figures?

Wouldja Believe: 8.5%?

MBC was about to check with a friendly mortgage broker regarding current rates, but lo, Kaye Thomas has already covered the ground quite well, thanks.

In her new post, she warns that jumbo rates are volatile but have been quoted as high as 8.5%, and that's for your 80% LTV 1st.

There's also some question about "piggyback" seconds, both what rates will be, and what the willingness of lenders might be, in the weeks and months to come. Cue Kaye:

The credit market is changing on a day by day basis, Lenders are determining rates on their individual assessment of risk... which means that rates will vary depending on the lender... and no one knows what's happening...

I do know that if this jump in rates for jumbo loans continues over a prolonged period.... and buyers who need those loans are unable to do stated income and/or lenders begin requiring larger down payments.... our market is in big trouble as the buyer pool just shrunk...

Another factor to consider is whether stated income jumbo loans (Alt-A) with less them 20% down are about to disappear. It is a huge possibility and many people who have large incomes are not salaried...

If I were a seller right now I would make darn sure that anyone buying my house was 100% rock solid with a FICO score of 780 or better and a lot of cash.

It's worth repeating (or rephrasing) some things Kaye said – everything is moving, no one knows what's going on, the future is unknown. That is: uncertainty and volatility are taking hold in the mortgage market, as in the rest of the financial markets – for now.

We've seen interest rate fluctuations before. The rates could revert next week.

In the shorter term, buyers without rate locks are going to want to pause. We could lose a few escrows. If the rates stay high, the next logical step is price adjustments.

Remember when some major market leaders called the bottom in the South Bay RE market back in June? They qualified their comments thusly:

Prices are holding steady for the most part and smart buyers have decided not to wait for further downturns, which frankly we don’t think will occur, so long as mortgage rates hold steady.

Right.

Jumbo Rates Spike

From today's Wall Street Journal:

Turmoil in the U.S. home-mortgage market is starting to pinch even buyers of high-end homes with good credit records, in the latest sign of rising anxiety among lenders and investors.

This surge in rates on so-called jumbo loans is particularly notable because rates on 10-year Treasury bonds have been falling....

Lenders were charging an average 7.34% for prime 30-year fixed-rate jumbo loans yesterday, according to a survey by financial publisher HSH Associates. That is up from an average of about 7.1% last week and 6.5% in mid-May.

The higher costs for such loans will put further downward pressure on home prices in areas where homes typically bought by middle-class people can easily cost $500,000 to $700,000.

Where are those houses?

On a related note, the Journal also has a briefer today about the state of the mortgage market, entitled, "How Credit Got So Easy, and Why It's Tightening." Short take-away: It's the CDOs.

And while we're lifting from the WSJ, there was an oped there Friday by former Fed governor and Bush economic adviser Lawrence B. Lindsey. Lindsey argued that a bill, S. 1299, by Sen. Charles Schumer (D-NY), threatens to limit consumers' choice of mortgage products and crash the housing market. Bad idea. Instead:

The key to getting America out of its current housing and mortgage market mess is to do everything possible to maximize the availability of credit.

Wow, did he really just say that amid the near-panic regarding mortgage credit on Wall Street?

Yes, he did. What's the argument?

Credit is crucial to making sure there are buyers. Buyers maintain home prices. Sustainable home prices are the key to minimizing foreclosures.

So, pushing more credit out there at, or after, a market peak will lead to "sustainable" home prices? This is an interesting argument that sounds pretty fringey right here today, but might look better in a couple of years. In the meantime, Lindsey warns against legislating a solution:

The Schumer bill would depress [housing] demand still further...

[T]he cost of [Schumer's] approach to every existing homeowner and would-be homeowner is potentially staggering...

The values of every existing home in America are at stake.

While Lindsey is warning everyone to beware Washington, D.C., it seems the problems are flaring in NYC. Are we already playing the blame game?

Bump it Up? Why Not?

There is a chance we'll see the price-increase tactic succeed for the first time. No guarantees, of course.

The home at 2822 Ardmore began at $1.299m on June 29, and shortly afterward (12 days) re-listed and bumped up to $1.345m. Today they pulled another bogus re-list and moved up to $1.399m.

The thing is, this one is all alone. There is nothing for sale in the Tree Section for less than $1.5m, actually $1.585m. Everything has been snapped up, starting with the wave of sales that triggered MBC's story "A Clearing in the Trees" in mid-July. It's all happening fast in this segment.

There are homes lingering below $2m, but there's no denying the action. Over at Ardmore, they're feeling confident now.

Listing Language that Sings

MBC has taken some potshots at goofy listing language from time to time, and we've held back even more.

Now it's only fair to praise some great copy. This from 337 16th St., a new Sand Section listing:

this delightful mediterranean home with panoramic ocean and hillside views, has been transformed... through an enchanting fusion of color, texture and animal magic, into a warm and fun-loving home environment that you must experience.

Doesn't that make you want to learn a lot more about this one?

MBC can offer basics: 4br/5ba (incl. partials), 4550 sq. ft., on a 2700 sq. ft. lot, super location, $4.1m. If you need more, you know what to do.

Obligatory market point: Down the street, on Highland, 234 16th, repped by the same agent, offers 450 sq. ft. more, in a significantly older house (25 y.o. vs. 10 y.o. here), for $450k more. Seems both the price and the copy are better higher up the street.

A Canceled Listing Revived on Craigslist

If you want a deal in the Hill Section, 601 Larsson could be your best bet. Just be prepared for some twists and turns.

The current owner paid $2.0m in Sept. 2005.

The home hit the market this Spring at $2.695m, then quickly came down to $2.495m. In time, the price hit $2.395m, but there were no takers.

By mid-July, the listing was canceled and the signs were down. But it's available again.

Today it's on Craigslist (yes, they sell real estate there), and Zillow lists it as FSBO.

Here's the language from the Craigslist listing:

Investors...Take over payments "subject to" + $100,000 cash. Comps include a home, seconds away, just went into escrow listed at $4,295,000. This property 3800 sq.ft, large corner lot, hardwood floors, granite, etc.

Of course, the big question is how much is owed on the house. Is it near the $2m paid <2 years ago?

If you just want to move in, the loan terms and monthly payment are what matters – provided you really could take over the mortgage, no easy feat. Payment has got to be $10k+/mo., and you've got $20k in property taxes each year to worry about, too.

Finally, the seller wants $100k. Maybe that's for his or her pockets, maybe it's to bring payments current, maybe some of both. This is what the seller wants to walk away – a clearer statement of a seller's bottom line than you'll often see. (Is it negotiable?)

Before you think this looks like a great flip opportunity, let's dispense with the ad's reference to a potential comp. That was new construction at 300 N Dianthus, 1700 sq. ft. more of living space and a lot that is 2000 sq. ft. larger. There are so many reasons you should not consider Dianthus in relation to Larsson. But savvy investors will see past that instantly.

The vital fact is that the market has rejected this home at $2.4m this year, so its resale value appears to be something below that, if you could get it now on good terms.

MBC has asked the owner to provide some details, and we'll update this story if we get a response.

True DOM for May-July

There is a new True DOM chart & discussion over at MBC's sister site, Manhattan Beach Market Update, showing average DOM as of July 31.

Take a gander at that for more detail, but meantime here's a reverse-chron rundown of the DOM story at the end of May, June and July: