A 27% price drop in Reseda

A quick follow-up to yesterday's post about open houses in Reseda. We checked Zillow for the sales history on the foreclosed house at 6921 Lindley Ave., and it's instructive. It looks like this:

Sold 4/2004: $345,000
Sold 7/2006: $520,000
Sold 4/2007: $441,429
Listed (date unknown): $457,900
Reduced, now listed: $379,900

This is the listing billed as "You Better Act Fast" ... "Bank Foreclosure"... "Needs some minor TLC" ... "Bank is serious so make an offer!"  It's a 3-bedroom, 1-bath with a one-bedroom "guest unit" that "may not have permit." It needs some cosmetic repairs and is on a busy, noisy street. The hard-pan back yard was decorated Sunday with a Bud Light can.

Our take: What shows up as an April 2007 sale is probably the foreclosure. If the home sells for the current listing price -- a big stretch -- the decline in price from the 2006 peak would be 27% in 16 months. That's steep. And that's assuming it sells at the listing price, which is unlikely.

Thoughts? Comments? Insights? Email story tips to lalandblog@yahoo.com.

Comments

[Cal]

"The hard-pan back yard was decorated Sunday with a Bud Light can."

Those home stagers really know how to make a home feel lived in.

[JK]

Except at the end of the day, you will live in Reseda...

[John]

I was kind of hoping this type of analysis could be expanded on a city by city basis for comparative purposes- it might make for an interesting article and a more rational discussion of LA housing prices.

The flaws in picking out a single house are obvious. I think a similar analysis involving a statistically significant number of houses would be very informative.

[Joe]

it will probably sell around the 2004 price
that is the level many houses will be going to over the next few months

[Michael Snyder]

So, what we really have here is a 2 + 1 with a slapped up structure on the original patio you're calling a "guest unit" although it has no bathroom or kitchen. Did I mention permit? And we wonder why this market is in trouble...
If I actually walked this property I'll bet I'd find the original wiring and galvanized plumbing. No upgrades in the kitchen and bath and it'll have a hundred amp panel with no insulation in the attic. Just another valley fixer in need of at least $60,000 in upgrades to become a marketable 3 + 2 and more than just another rental on a busy street. Somehow I don't think a fresh coat of paint and a little sod is gonna cut it.
Who ever appraised this "brown water special" at $520,000 must have ignored the structure of this home and appraised it solely on its' description. Whoever sold it for $441,000 in April really earned their commission. Now the bank's got to unload this turkey. To say "it needs a little TLC" is like saying "We've just had a few small fires in San Diego."
An un-permitted structure is an un-inspected structure and there are no guarantees as to its' safety. It's important to remember not to code work can and will invalidate your insurance. The fact that you bought the home that way won't help you as you're picking through the ashes. My nickel is on a value a lot closer to $300,000. Time will tell.

[MyLessThanPrimeBeef]

A disciple of investorguy would think it is worth $189,950, which is 50% of the asking price.

[Pat]

For those who think the nicer areas are immune, I have seen an 18% price drop in the Hermosa Beach sand section.

[Giacomo]

I'd bet there a lot of these dogs that have just been fodder for flippers over the past few years; but in the "real world" they are so fatally flawed by their location that no one wants to buy them to actually LIVE in them. They'll be bought when the price makes sense as income (rental) property.

[mark]

no permit means illegal,no?
so if you want to live in that scruffy location you will have to come up with 38k for downpayment and thats if you have excellent credit and job.But thats the problem.Who in their right mind with a good job and income and credit is looking to buy garbage?Okay,so a low income family might be interested but they are going to need 80k downpayment because they need 20% downpayment.Hmmm,what lo income family has 80k cash lying around?Manias work on the way up and the way down.

[xtine]

If they sell at the new asking price it looks to me like it made a 30K appreciation since 2004. Pretty good in a normalized market.

[investorguy]

MyLess: Based on the description, I wouldn't touch it. Busy street wasn't an issue three years ago, today it is.

But if it were on a normal street, that's exactly what I would offer to the bank. Then I'd rehab it and put it back on the market at 80 percent of market value. It would sell quickly at that price in good condition. And I'd have a nice profit.

You're getting this ;-)

[MyLessThanPrimeBeef]

Investorguy, we might have to joint venture one day.

[Jeff Lebowski]

xtine: I agree with the basic approach of looking at what the price ought to be assuming a "normal" market appreciation, but is 2004 really a good starting point? If I recall, the period from the late 90s and even through the dot com bubble burst saw a lot of appreciation, too. So using 2004 as your starting point may incorporate a lot of bubble froth into the price (meaning, the new asking price for this property may still be too high).

Of course, the problem is trying to find any year as a good starting point. With the peaks and valleys of a cyclical market, taking 1998 as your starting point may be too low. Makes my head ache.

[Dave]

"For those who think the nicer areas are immune, I have seen an 18% price drop in the Hermosa Beach sand section."

Agreed. There's a house around the corner from me in the Hollywood Riviera section of Redondo that is a short sale! Purchased for $1.65M in '05 listed at $1.5M. It's been on the market for 4 months and has very little action during the Sunday open houses, which are becoming less frequent as time goes on. Ouch.

[John T Watts]

Just for fun, I got on Realtor.com to see what you could get for the same amount of money or less in Blossom, Texas. It appears to be quite a lot. But then, who on earth would want to live in a god forsaken place like Blossom Texas and give up the wonderfulness of living in a cosmopolitan place like Reseda with lots of culture and entertainment and jobs. You would probably have to be out of your mind and retired or something.

[Jeremy R]

"For those who think the nicer areas are immune, I have seen an 18% price drop in the Hermosa Beach sand section."

What was the original asking? I have been house hunting in hermosa on occasion. I would see nice charming houses on sell for 1.2 million ,and then a crappy and hastily built condo with faux accents 2/3 the size priced for 1.6 million. I have also seen falling apart homes priced at around 2 million that werent bigger than the charming ones at 1.2. Sure they had a big deck and were a measely 3 blocks closer to the beach, but it wasnt worth the premium.

So many homes have such ridiculous speculative pricing that its hard to evaluate falling prices.

The meltdown is doing something very nice to our market. It is removing all of the pretenders that were jacking up prices. Some people list at ridiculous prices because people would pay them in 2005. Falling apart houses on busy roads with no backyard would price itself the same as a charming home on a quiet tree shaded street with a park nearby.

The pretenders have been free falling. I belive I saw one home slash 400k off asking. That wasnt a drop in the market! It was 400k higher than competitively priced homes in the neighorhood and needed a reality check.

I find that competitively priced homes in Hermosa and Manhattan remain strong, much to my chagrin. There has been no TRUE drop yet! All of these dumb condos with tiny closets, horrible materials, and no parking are getting hit hard, but I dont pay attention to those places!

[Pat]

Started at $1,219,000 and dropped to $999,000.

[investorguy]

MyLess: Word.