Kate cleans the carpets, stays put

Whew. Kate in the Valley is back. We thought for a moment we had lost her. (Was is something we said?) Or that maybe she bought a house and decided, "It's none of their business what I paid!" No, she's still looking, and in no rush to buy. Her latest:

"Two months ago I wrote about price reductions in the Fashion Square area of Sherman Oaks so I thought I should get back to you with what the neighborhood currently looks like.  As you'll see below, only two homes have sold in this neighborhood since I started watching it.  There have been double digit price reductions on plenty of homes but a few sellers are deep in denial and offering no price reductions after one-hundred-plus days on the market.  A few new listings obviously disregarded the high number of days on market and considered those ancient listings to be comps because they set their prices accordingly.  But, by and large, this neighborhood's listings have gone from a mid-$800k range to a low-$700k range. The high-$600k range seems to be on the horizon because a few listings have recently been reduced to that point.

"I'm currently watching the Northwest corner of Studio City, bound by Coldwater Canyon and the 101, because I think it will be the next to take a nose dive (stay tuned!).  But Mr. Kate and I have parked our down money in a high-yield savings account, had the carpets steam cleaned in our month-to-month rental condo, and accepted that we will stay put for at least another six months.  I would even be happy to wait another year because I suspect that by then the coveted South of the Boulevard homes might be affordable again.  But enough about me!  Let's get to the numbers: 

CURRENTLY LISTED BETWEEN $800k-$900k:

04/06/07:
13512 Addison St.
Price Reduced: 05/24/07 -- $899k to $885k
Price Reduced: 06/05/07 -- $885k to $875k
Price Reduced: 06/26/07 -- $875k to $850k
Price Reduced: 08/02/07 -- $850k to $825k
Price Reduced: 09/11/07 -- $825k to $807k (10.23% down)

05/01/07:
5124 Sunnyslope Ave. ($855k)

05/30/07
5057 Stern Ave. ($899k)

09/01/07:
5040 Greenbush Ave. ($859k)

10/11/07:
13307 Otsego St. ($849k)

CURRENTLY LISTED BELOW $800k:

04/11/07:
14007 Morrison St.
Price Reduced: 08/20/07 -- $820k to $779k (5.00% down)
* Note: this is a re-listing

05/07/07:
13454 Otsego Ave.
Price Reduced: 10/03/07 -- $830k to $628k (24.34% down)
*Note: this is a re-listing.

05/31/07:
4918 Ranchito Ave.
Price Reduced: 07/18/07 -- $825k to $775k
Price Reduced:  09/18/07 -- $775k to $699k (15.27% down)

05/31/07:
14019 Huston St.
Price Reduced: 06/27/07 -- $819k to $799k
Price Reduced: 07/12/07 -- $799k to $779k
Price Reduced: 07/26/07 -- $779k to $759k
Price Reduced: 07/31/07 -- $759k to $749k
Price Reduced: 09/09/07 -- $749k to $735k (10.25% down)

06/05/07:
13739 Hartsook St. (the infamous cash-back-at-close house)
Price Reduced: 07/06/07 --  $825k to $775k
Price Reduced: 08/14/07 -- $775k to $759k
Price Reduced: 09/04/07 -- $759k to $749k
Value Ranged: 09/30/07 -- $749k to $725k (12.12% down).

07/12/07:
4801 Murietta Ave.
Price Reduced: 08/10/07 -- $695k to $650k
Price Reduced: 08/21/07 -- $650k to $625k
Price Reduced: 09/12/07 -- $625k to $599k
Price Reduced: 09/29/07 -- $599k to $560k (19.42% down)

07/24/07:
13953 Hartsook St.
Price Reduced: 08/23/07 -- $779k to $729k
Price Reduced: 09/12/07 -- $729k to $669k ( 14.12% down)

08/01/07
14024 La Maida St.
Price Reduced: 08/02/07 -- $825k to $799k
Price Reduced: 08/14/07 -- $799k to $765k
Price Reduced: 09/14/07 -- $749k to $745k (9.70% down)
*Note: this house was inactive but is now back on market.

08/30/07:
13920 Hartsook St. ($789k)

10/07/07:
5049 Matilija Ave. ($799k)

OFF MARKET (NO SALE RECORDED AS OF 10/12/07):

07/09/07:
4836 Ranchito Ave (list: $899k)
* CURRENTLY FOR RENT!

09/06/07:
4917 Woodman Ave.  (Inactive after 114 D.O.M.)
Price Reduced: 06/18/07 -- $869k to $849k
Price Reduced: 07/18/07 -- $849k to $799k (8.06% down)
*This home was available for lease at $3k/month

09/18/07:
4937 Woodman Ave. (Inactive after 159 D.O.M.)
Price Reduced: 04/17/07 -- $900k to $849.95k
Price Reduced: 05/31/07 -- $849.95k to $800k (11.11% down)

CONFIRMED SOLD:

07/24/04:
13952 Hartsook St.
Sale Price: $880k
*Note: this REO was previously sold at $1.2M

09/25/07:
13956 Otsego St. (list: $825k)
Sale Price: $838k

Comments

[mike]

OH SH@#$% I OWN A HOUSE SOUTH OF THE BLVD!

[JamesW]

This is refreshing. When I first read Kate's entries, i thought she was going to jump into something just to have something.

[Rich]

Great research on the figures, and this is one of those moments when I wish I also had some figures on percentages of people in the different income ranges because every single one of these asking prices is far outside the range of affordability for a single wage earner at the California median of $43,000 or even couples earning the median. Prices could only have gotten this high by people having inflated equity from home sales they made during the 7-year boom now ended, so without that equity, just how many people are able to buy in these price ranges? And would they buy in this location? If we assume that most prices will need to revert much closer to the range of affordability for median wages in order for any buyers to come forward because buyers have lost their equity, I would have to imagine these prices would need a PRECIPITOUS PLUNGE OF 35% OR MORE to sell...

[eprobert]

Good for you, Kate. It's nice to see some reality creeping into the market, on both the buy and sell side.

In my neighborhood prices are back down to 2005 levels for many houses, only the flippers (floppers?) are still priced higher than last year.

In a year or two you should have no problem getting what you want, once the flippers, speculators and borrow & spenders are flushed out of the market.

[CD]

Nice to hear from Kate. I am watching Magnolia blvd, prices going down as well.Getting tons of email from "downtown lofts " builders, more brunches, invitations for art shows, blablablah. I had the carpet cleaned as well and the windows washed,my very depressed landlord gave me a 10% discount with a month to month pass, I am anchoring down,shooting for a January purchase, pass the popcorn...

[Bubblewatcher]

Good work, Kate. These numbers seem to dovetail with the latest figures from housing tracker:

http://www.housingtracker.net/old_housingtracker/
location/California/LosAngeles/

Which indicate about an 8% year over year decrease in asking prices, and that we're on track (based on the 3.5% decrease over 3 months) for about a 12% haircut going out twelve months. Of course, this is asking prices. That said, who's offering over asking these days?

But wait! How do all these double-digit price decreases jibe with the CAR's prediction of a 4% increase in the median price this year? Or that 3.5% decrease for next year?

Oh wait...I just remembered. They're on crack.

Sorry about that. My bad.

[Alan]

Regarding home at 4917 Woodman Ave. listed at $800K asking $3K/month lease.

Note the disconect, $3k/month implies from a rental basis the homes value is $400K based on 10% down, 400/month taxes + $2400/month mortgage (borrow $350K at 7.25%).

This house would have to fall anther 50% for the lease value to equal purchase value.

And it's not clear that $3K is the lease value, the owners may have to drop this to get it rented.

[T]

07/24/04:
13952 Hartsook St.
Sale Price: $880k
*Note: this REO was previously sold at $1.2M

I looked at the zillow chart on this one. It looks like some kind of fraud. you can see zillow was caught out by the 1.2M sale. They had it estimated at 800k just before the sale. Looks like someone absconded with $400k and then bailed on the mortgage payments!

[Jax]

Kate, you come across as a smart lady. Why in the world would you ever consider buying in six months? With the large number of REO's that are now starting to come on the market and the huge number of ARM's that will reset and not even peak until more than two years from now..............prices will only continue to fall and fall and fall. Remember that when you pull the trigger, you're going to be stuck with your purchase price as the determining point for your property taxes. If you buy in six months and similar property drops another 25-35%, it's not that easy to get a re-assessment from the greedy tax-man. SoCal property (with the exception of the real mansions and super-luxury properties) is probably going to go back to 1998-1999 levels by the end of 2012. You're better off renting until then unless you plan to move to a non-bubble market where this ridiculous run-up of prices didn't occur. Good luck to you and your family.

[vultur]

This is exactly why the housing market is quite distinct from the stock market. Few people really were emotionally attached to pets.com. They bought for $100 and sold for $2 because they understood that was how the market had priced it.

In contrast, you have house sellers who look at previous sales in the area for comparable properties who dig in their heels and cling to some bizarre righteous indignation at the thought of THEIR HOUSE- their speculator, well kept, unique and irreplaceable homestead, possibly falling in value to a level that the invisible hands of the market defines as fair value.

What you'll see then is a huge drop in sales volumes (pink slips and no love lost for many many realtors) and really only sales by those who have to sell- specuvestors who can got burned (risk/return paradigm is restored) and those who genuinely needed cash from a sale to relocate somewhere. I think a giant number of actual sales in the past were people trading up, testing the market and getting their price etc. Those sellers are now on vacation.

As far as Kate is concerned, if she can now afford something that she likes I suggest she jump at the chance and stop trying to foolishly time the market. It is the people who actually derive maximum utility from a home purpose who end up owning the longest and not coincidentally making the most money out of a house purchase. Buy, nest, enjoy young Kate!

[Tex]

I have been going through the same exercise as Kate, except I've been watching the View Park, Windsor Hills and Leimert Park neighborhoods. What I've noticed are very few sales, lots of delusional sellers pricing based on last year's comps, and lots of houses quietly going off the market after the seller is unable to command an obscene price. Although a couple adequate properties have crept into my affordability range over the past several months, now my mindset is "why settle for an 'adequate' house when I can probably get a much better one for the same price or less next year?" As I am expecting prices to go down and to be stuck in whatever I buy for at least 10 years before it's worth what I paid for it, why blow all my money on a house that is a too small, on an alley, or which has a funny converted garage? If I find The House (capital T, capital H) for a reasonable price, I might buy it, but I'm not holding my breath at this time. As for the properties which would currently fit my definition of The House, my realtor is not interested in making offers $200K below the asking price.

In the meantime, my landlord is installing a dishwasher and refinishing our hardwood floors. I anticipate we will stay put for another 6 months to a year, while these sellers get a dose of reality and stop trying to make a 100% for selling their homes in the short space of 5 years.

[Jax]

Vultur, every $50k that your borrow will result in a payback of over $115k over the life of the mortgage. Paying $200k too much for a home results in big bucks and if you ever have to sell, you're upside down.

Also, when prices finally bottom out, whether it's in 2008 or 2015, they won't be going back up anytime soon. What drove the market up was liar loans and an availability of easy money........neither of which are available anymore. Just who do you think will buy all of these REO's and competing private sales and what will they buy them with?

[Giacomo]

Be at peace with renting, Kate.

As you count the tens of thousands you're saving, reward yourself with a little extra small-scale consumerism (iPhones, Starbucks, shoes, getaway week-ends), whatever it takes to keep you from "nesting" for the next 6 months. Celebrate your self-discipline!

[MyLessThanPrimeBeef]

I have read enough times about timing the housing market.

If there is a dress you really like, really want, for its own aesthetic sake, and not for flipping it, reselling it, and there are plenty of them on the shelf, and Macy's has just annouced that there will be a store-wide sale the day after tomorrow, for example, this could be the day before Christmas, would you wait or would you just buy now and hold it because you will enjoy wearing it?

Would waiting make you a 'timer?'

On the other hand, if this is in the middle of some stretch of time when you normally don't expect any bargains from the stores you shop, would anyone laugh at you if you don't wait and just buy it now?

[Jimmy]

Kates situation sums up whats going on with this blog as well. There was a moment when the possible downturn was exciting but things are just hanging. When I first came to this blog it was both entertaining and informative, Now its just these number stats and the lender news. Im bored. Is it the lack of creative writing or is it just getting old? Kates even boring me... why do i want to read about someone doing what Im doing but going even deeper into it where you dont need to go to find a house?

[Tex]

Jax, I can't speak for Kate, but here are some reasons I would buy in the next six months, if I found a decent house I could afford.

I am tired of living in a rental. I have a beautiful rent-controlled 2/1 duplex in a great neighborhood. However, it has no yard, it has termites, and my landlord is not interested in scraping the cottage cheese off the ceiling. It needs some remodeling, but I am not about to spend money remodeling my landlord's property. Also, in the not-too-distant future, we will need more space -- I'd like to have at least 1 more bathroom and a yard. Renting a decent, larger, centrally-located house will probably cost more than twice my current rent, and if I have to spend that kind of money on housing, I'd rather be paying a mortgage. Although I do expect prices to drop, I don't think it's likely to be to 1998 levels as you suggest; I think 20% is more realistic in desirable areas, and even if that happens god knows how long it will take. In the meantime, I don't want to be stuck in an apartment. I know how much I can afford with a fixed mortgage, and if I find that house I love in my price range, and I can see myself living in it for at least 10 years, why not buy it? Also, I have no tax deductions, and the government is just going to use my tax money on a homeowner bailout, so "if you can't beat 'em, join 'em..."

[Rob]

24.34% down....Love it........

[Cal]

I had just re-signed my lease when a house I looked at previously when it was for sale came on the rental market for 60% the monthly payment it would have cost to buy it. The management company was cool about me breaking the lease and I am now a proud renter of a nice home.

40% off and I get to miss out on depreciation, sounds good to me.

[Mark G]

Kate,
You little tease, rrroowww. Would never live in the valley though....

[sfvrealestate]

Once again, my comments are kinda beside the point, but:
Jax, it's not that hard to get a reassessment from the county tax assessor. It takes about three months to get one to go through.
Kate, regarding sellers with dug-in heels: if people were realistic about their money, Las Vegas wouldn't exist.

[sandiegan]

Alan,
You have some "fuzzy math" going on.

$3000/mo rental = $700K owner occupied house, not $400K.

20% down (The historic norm)
$560K mortgage at 7% (they might be able to do much better)=$3725/mo
Tax= $640mo
$4365/mo

However $460/mo goes to paying down the loan
And $915/mo income tax savings. (28% of $3265)
Revised total: $2990/mo vs. $3000/mo rent

Oh. If rents rise, or prices rebound, owning that $700K house is a slam-dunk winner over renting.

[Steve Reynolds]

I like Kate even though she told me to go back to my cave and don't male bond with Mr. Kate anymore, that's ok we got your back Mr. Kate!!!!. At this pont get ready to negotiate with the lender don't even bother with sellers. Here is a nice example of a property that just came back to Indymac - ERWIN STREET City: WOODLAND HILLS St: CA Bedrooms: 3 Baths: 3 List Price: $478900. Here's a little hint of info, both Countrywide and Indymac have all their REOs' listed on their website in fact they'll send you an e-mail everyday of the properties coming back to them. I'm sure after taking a little look you'll get a pretty good picture of what's coming down the pipe.

[BetterVillage]

Let's not bore Jimmy anymore! I think the problem is that this big old saggy hot air balloon has such a slow leak. We were all bracing for sudden impact. (I'm sure the folks losing their homes feel this with more immediacy) Everyone was excited when we found the leak, but now we're all just sitting around listening to the wheezy hiss as it empties at a maddening pace. Where's our ability to delay gratification gone. It's happening - just not any faster than the speed of glaciers melting. I guess.

[mike d.]

RE: MyLessThanPrimeBeef

There's a huge difference between buying a dress and a house. So what if you overpay or get a great deal on a dress? It's likely not going to have a material effect on your finances. But overpaying by potentially several hundred thousand dollars for a house will likely have disastrous results for the average person's finances for years to come.

[Kate]

Oops! I totally forgot to mention that I still want a porch and a deck. Discuss.

(I kid because I love, People, I kid because I love).