Open House: Reseda

We snuck out to five Open Houses in Reseda today. Headline: Thin traffic. In those five homes, we saw exactly one possible buyer. Houses, notes, and local flavor:

6900 Jamieson Avenue (pictured). 3-bed, 2-bath, 1,785 SF, remodeled, reduced; was $550,000, now $525,000.

6921 Lindley Avenue. "You Better Act Fast," reads the flyer for this scruffy (no grass, Bud Light can in the back yard) bank foreclosure. 3 bed, 1 bath plus a 1 bed/1 bath "guest unit." Was $457,900, reduced to $379,900. Suggested financing in hand-out: 35-year fixed, 100%, (interest only) under CAlHFA first-time homebuyer program, works out to $2057/month.

6856 Zelzah Avenue. 3-bedroom, 1 bath, 1,017 SF, flyer reads, "Price negotiable just reduced from $585,000 to $500,000." We thought that was a big price cut for 2 1/2 months on the market, so we asked the agent sitting house, "Why the big reduction?"  His four-word response: "Foreclosure on the corner."

18101 Gault Street. This one will be a short sale if and when it happens. Listing reads, "Reduced again! Seller wants to see all offers." 4-bedroom, 2 bath, 1,712 SF on a busy street; Reduced from $470,000 to $420,000. Was in escrow, in a previous short sale, but fell out of escrow while the lender (Countrywide) considered whether to accept the short sale offer.

6920 Garden Grove Avenue. 4-bedroom, 2-bath, 1,756 SF, tidy, well-kept, carpeted, nice lawn. On the market for a month, listed at $519,000, but the agent says, "They have a little room."

Comments? Thoughts? Insights?

Comments

[JK]

Please let this be only the beginning and let houses become affordable to regular working schmoes again! (under $300k)

[smokey]

OK here are some questions:

What prices are the insurance companies going to use when they settle the claims of homeowners whose house was destroyed by fire?

If the house was purchased in 2000 for $250,000.00 but "Zillow" says it was worth one million the day before the fire. Is the insurer going to write a check for one million?

Will the fires be the thing that UNsticks sticky home prices? As in the insurers refusing to acknowledge the "bubble" prices and in turn causing a return to reality.

[N_C]

Hey smokey. Insurance doesn't pay "market value". It pays replacement value which is $$/sq. ft. A "house" isn't just the building. It's also the land and the majority of the value in your "home" is the land. I'd guess it's something like 60-80% of the value. I'm no expert though.

[Martin]

The Lindley Avenue address is a good deal. The guest unit would cover at least $1100 a month of overhead. Maybe more. The main house, depending on condition, anywhere from $1400 to $2000. These prices are from three years ago. Yup. It's a panic out there. With ten to 20 percent down, the entire property could be rented with a positive monthly cash flow. But that's also considering a ton of cash does not need to spent to clean up the place.

[Bartelby the Scrivener]

Smokey, the insurer's check to the homeowner is determined by the insured amount on the homeowner's policy. The sales price is irrelevant. The insured amount should be the cost of rebuilding (or repairing) the existing house.

Remember also that part (sometimes most) of the sales price is the land itself, which is still there even if the structure burns down.

[Diaphne Down]

just checked one of these listings: 6856 Zelzah Avenue. they purchased for ca. 350K in dec. 2004. so if they only made 42% in 2 years (by selling at 500K), that's not too shabby. however, since they bought near the top of the market, i'd say the price could go down to 350K easily in the next six months.

[Toby]

The guest unit would cover at least $1100 a month of overhead. Maybe more. The main house, depending on condition, anywhere from $1400 to $2000. These prices are from three years ago.

Posted by: Martin

The key phrase is "from three years ago".

As you know, rents are fairly pegged to mortgage rates. Basically said, you can't rent out a place for more than it costs, but if prices go up, so do the rents.

Now sure, there's a fool born every minute. One who will pay whatever for whatever.

But that's the exception, not the rule.

As for today (post RE Bubble), Reseda is much like it was before the market boom. Much like it was in the movie "Karate Kid"...

The ghetto Encino.

[Cal]

The CalHFA loan requires Fannie/Freddie level documentation and underwriting (meaning you get qualified at the fully amortizing payment) at 100% financing its monthly payment would be $2777 the first 5 years and $2992 until you pay off the mortgage insurance then it would be $2723 the until payoff.

Assuming 6.375% interest rates

Mortgage Payment (Monthly) $2018
Property Taxes (Monthly) $396
Hazard Insurance (Monthly) $95
Mortgage Insurance (Monthly) $269

[adoptivefather]

Read this. It explains everything including why we are headed for the greatest real estate bloodbath in the history of the world. US$ is going to tank as other countries realize what a scam this subprime deal was/is.

http://money.cnn.com/2007/10/15/markets/
junk_mortgages.fortune/index.htm?postversion=
2007101609

[Martin]

Toby wrote: "As you know, rents are fairly pegged to mortgage rates. Basically said, you can't rent out a place for more than it costs, but if prices go up, so do the rents."

I'm interested in what you said, Toby. But I can't follow the syntax of the comment. Why can't you rent out a place for more than it costs? And why do you think rents are tied to mortgage rates? Please respond.

I'm curious about another point that is rarely mentioned in this blog. Anybody care to comment on where they think mid-market and luxury rents (not under rent control) are headed during the next 12 months?

[joeinlosangeles]

--just checked one of these listings: 6856 Zelzah Avenue. they purchased for ca. 350K in dec. 2004. so if they only made 42% in 2 years (by selling at 500K), that's not too shabby. however, since they bought near the top of the market, i'd say the price could go down to 350K easily in the next six months.--

I don't see them getting anywhere close to $500K for an 1,100 square foot house in Reseda. For example, two blocks down the same street is an 1,100 sq foot house (albeit it with 2 bedrooms instead of three) is listed for $419K. They are just utterly clueless if they ever thought that a house they bought at the very height of the market for $350K could get them $585K now. That's why this is going to be a slow process. The sellers are already shocked that the listing prices they're putting out there are so much lower than they thought they would get -- and they're doubly shocked because what they perceive as these incredibly low prices are getting zero interest.

[Mike The Bookie]

All the cawing and flapping commotion around here ! What a buzzards roost. All cheering for the cash cow to drop dead so you can feast on its remains.

The dollar is at an all time low already. Unlike the last downturn, there is a relatively stable economy and low unemployment. I remember the last real estate down cycle everyone saying the same thing about the West Side. That it should go to the 280s. It didn't. You missed those bargains at the time because you wanted more, and people swooped in right under your noses and bought all the low end homes on the market in West LA and Santa Monica.

The valley is headed the same direction as the west side; there's no more room to build there. Supply and demand. Of course people always tend to think the way things ought to be should resemble their ideas more than anyone else's.

[John T Watts]

Martin, I would think mid-market and luxury rents would be on their way up during the next 12 months. The population is still going up and the economy is doing well. If people are not buying, they will be renting or living with others.

The upside of this downward price spiral is that every downtick puts a new group of buyers in the range of affordability. The trick for the buyers will be to decide when to stop waiting for more price reductions. At some point they will need to decide when to make an offer.

[Mike Barker]

The agents at the open houses seem to reveal their clients' secrets pretty easily. Isn't it a breach of Realtor ethics(or is that an oxymoron) to allow potential buyers to know the financial position or other details about the seller that could lead to a lower selling price?

[mark]

The upside of this downward price spiral is that every downtick puts a new group of buyers in the range of affordability. The trick for the buyers will be to decide when to stop waiting for more price reductions. At some point they will need to decide when to make an offer. '

really?how so?
As long as you need 20% down-which means 100k cash-i dont ssee any new buyers tillyou get to about the range of where aperson only has to putdown 15-20k cash down.Most people have zero savings.

[amir]

Oh, Mike the bookie, you make me laugh.

The last time prices fell, it was 1989-1995, six years of falling prices. Our current crisis has just begun a few months ago, this summer. I'm not saying this time it will take six years as well, but it won't be six months either.

A few things to consider. The dollar at all time low? True, but it could keep dropping. The stock market is predicting another rate cut. Expect more weakening.

No loss of jobs, you say? how about a WGA strike and several months of no production in LA. It will really hurt the local economy, just when housing drops.

Oil is going ever higher, especially with tensions in the middle east.

Adjustments of mortgage rates will continue deep into 2009.

This downturn will continue at least until 2009, and remember, just as markets tend to overshoot on the upside, they overshoot on the downside. With all the bad news out there, still many people like you think it's going to be short and painless. Is the bottom here yet?

Not remotely.

[waitingitout]

Mike the Bookie,

what you're seeing in the market and reading in these blogs IS supply and demand. There is an oversupply of housing (record inventories) and insufficient demand for it (too many people priced out of the market). By rule, prices fall until the supply is met. And what's more, the supply is set to explode just at the time where demand is weakest, with so many recent "owners" unable to qualify and so many more foreclosed homes about to hit the market. There simply aren't enough potential home owners being created now to buy up all the properties that have/will forclose in the next 18-24 months. There's your supply and demand. And that's going to happen EVERYWHERE, including the Valley.

In this market I'd rather be a buzzard circling the cash cow than an ostrich with his head buried in the sand.

[Tom Petty]

It's a long day, living in Reseda. There's a freeway, running through the yard.

[Rich]

"The dollar is at an all time low already"

I take it the implied argument behind that comment is that if the dollar is at an all-time low, then these home prices are actually good value because they are denominated in devalued dollars. That's actually a valid point, provided that we are looking at this real estate in the context of an international market. So far that isn't the case, the pool of potential buyers for these homes being the American workers whose wages are also paid in devalued dollars and are currently making a median $43,000 of them in California, making the asking prices unaffordable. If foreign investors begin buying houses in California as vacation or investment housing, then that could validate the point made and hold back home price deflation. Interestingly, Chinese investors have begun buying shoreline property in less-popular areas of the East coast market I live in...

[Maggie Knowles]

I saw over 2000 buyers at the Los Angeles Convention Center, Exhibit Hall B on Sunday, October 28th. They sold about 100 homes in 4 hours, they had more, but I left after 2pm. Here's some of what sold:

1108 West Ave H4, Lancaster - Sold for $140K
3 bd, 2 ba, 1420 sf, .16 acres
was listed for $300K - $260K for 148 days Oct. 2006 thru March 2007

44037 Fern Ave., Lancaster - Sold for $125K (cash only)
3 bd, 1 ba, 1120 sf, .15 acres
was listed for $199,900 - $185,900 for 79 days June thru Sept. 2007

43348 22nd St. West, Lancaster - Sold for $305K
5 bd, 3.5 ba, 3708 sf, .17 acres
was listed for $474,900 - $374,900 for 170 days March thru Aug 2007

39321 Chantilly Lane, Palmdale - Sold for $305K
4 bd, 3 ba, 2408 sf, .18 acres
was listed for $399,900 - $359,900 for 61 days July thru Sept. 2007
(auction brochure says it was previously valued at $429,930)

19834 Pandy Court, Santa Clarita - Sold for $395K
4 bd, 2.5 ba, 1699 sf, .17 acres
Sold for $550K closed 2-06
was listed for $469,900 - $459,900 for 90 days July 2007 thru present (still active in MLS on "Hold")

28008 Magic Mountain Lane, Canyon Country - Sold for $435K
4 bd, 3 ba, 1870 sf, .23 acres
Sold for $515K closed 12-04
was listed for $639,900 - $569,900 for 143 days April thru Oct. 2007

3616 South Alma St., San Pedro - Sold for $565K
4 bd, 2 ba, 1560 sf, .1 acres
was listed for $669K 46 days Aug thru Sept 2007
(auction brochure says it was previously valued at $790K)

22603 Clarendon St., Woodland Hills - Sold for $640K
4 bd, 3.5 ba, 2501 sf, .15 acres
was listed for $759,900 - $679,900 125 days May thru Sept. 2007
(auction brochure says it was previously valued at $996,600)

19545 Sherman Way, Reseda - Sold for $255K (condo)
2 bd, 1.5 ba, 1319 sf, HOA $343/mo.
was listed for $399,900 - $329,900 130 days May thru Sept 2007
(auction brochure says it was previously valued at $408,300)

15512 Labrador St., Mission Hills - Sold for $335K
3 bd, 2 ba, 1506 sf, .19 acres
Sold for $510K closed 3-06
was listed for $560K 103 days July thru Oct. 2006
was listed for $546K - $516K 91 days March thru June 2007
was listed for $506K - $496K 91 days July thru Oct. 2007

631 Country Club Dr., Burbank - Sold for $695K
3 bd, 2 ba, 2033 sf, .33 acres
sold for $818K closed 8-05
was listed for $836,900 - $809,900 92 days March thru June 2007
was listed for $794,900 0 $769K 63 days July thru Oct. 2007

1314 N. Beachwood Dr., Burbank - Sold for $555K
3 bd, 2.5 ba, 1644 sf, .13 acres
sold for $557,100 closed 06-05
sold for $749K closed 05-06
was listed for $799K - $700K 61 days Jan. thru April 2007
was listed for $737,900 - $649,900 140 days May thru Sept. 2007

[MyLessThanPrimeBeef]

The "economy is stable and doing well, umemployment is low" crowd, would you please tell Uncle Bin Lackey to stop lowering rates?

[Kate]

"The agents at the open houses seem to reveal their clients' secrets pretty easily. Isn't it a breach of Realtor ethics(or is that an oxymoron) to allow potential buyers to know the financial position or other details about the seller that could lead to a lower selling price?"

And even if it isn't a breach of ethics, how would the owners feel about having this information appear on the website for the L.A. Times? This sounds like a realtor who doesn't understand how information is transmitted today.

Mike, I'm not sure you're right. I agree that you can't time the real estate market any more than you can time any other market, but I don't think we've reached bottom yet.

[george]

prices will fall by 60-90% before they explode again:

dollar will fall much more because fed rates will keep falling
this will cause mortgage rates to keep going up, following inflation unleashed by too many less-worthy dollars
real incomes will keep falling, because 'no nation has ever found prosperity by devaluating' and so US will not either
because of these, short/medium term housing prices will be reduced by 60 - 90% of their current value....
this will help banks squeeze lots of people to work for their stupidity for buying what they can't afford (helps cook books when you getting high mortgage payments but value is worth nothing)
then, after that, hyperinflation will happen to let banks buy back all the properties so that in next cycle they can start selling for high once it subsides....

[mark]

The upside of this downward price spiral is that every downtick puts a new group of buyers in the range of affordability. The trick for the buyers will be to decide when to stop waiting for more price reductions. At some point they will need to decide when to make an offer. '

really?how so?
As long as you need 20% down-which means 100k cash-i dont ssee any new buyers tillyou get to about the range of where aperson only has to putdown 15-20k cash down.Most people have zero savings.

[ProblemWithCaring]

The CalHFA loan requires Fannie/Freddie level documentation and underwriting (meaning you get qualified at the fully amortizing payment)...
posted by Cal.

Which mean you still need a gross income of about $90K for a $379,000 loan to afford to live in "ghetto-ass Encino." (which - for the record - I don't think Reseda is.)

$90K is at least within a stone's throw of Sherman Oaks' annual median income per household of $71K, but still, not very near the actual Reseda median income of $43K per household per year.

[Toby]

I'm interested in what you said, Toby. But I can't follow the syntax of the comment. Why can't you rent out a place for more than it costs? And why do you think rents are tied to mortgage rates? Please respond.

I'm curious about another point that is rarely mentioned in this blog. Anybody care to comment on where they think mid-market and luxury rents (not under rent control) are headed during the next 12 months?

Posted by: Martin

Meaning, why pay rent if a mortgage is cheaper? And really only down payment issues affect low income housing.

Mid to high Income (1,000 and above per month) doesn't have a financial problem with saving the deposit (statistically, that is), it's more of a virtue problem (money burns a whole in their pocket kind of thing).

Again, basically said, if some one could buy the exact same place your trying to rent for less (say your trying to rent it for 2,500 but the mortgage would cost 2,000 a month).

You wont be able to rent it. Double it your doing mid to high end properties.

In fact, they say the rule of thumb with market value is 10% below current mortgage payments...meaning if the mortgage would be 2,000 dollars a month, then 1,800 would be the "sweet spot".

That's why buying a non-rental property (like a single family home or a stand alone Condo) and then renting it out has never been a good business model. Mostly because in a normal market, the equity you are getting off the property is being mostly absorbed by the difference you have to pay to rent out the place.

Really, in the end, it you'd make WAY more money if you took that cash and put it in the Stock market or a Mutual Fund.

As for your second question....The rental market (or at least LA's rental market) is the next to have a melt down.

Mostly because of the over building of the Condo market. There are 5,000 High-end (one project is the W hotel, yeah, high end) Condo hitting the Hollywood market alone in the next 18 months.

Plus another 4,000 Low, mid & high end rental units hitting the Hollywood market in the next 18 months (it was part of the deal to build all those condos).

Now since the new business model with builders and Flippers is to rent them out until the market gets better....

Here's a question for everyone: What happens to a rental market when there's a "New" High end standard?

Let me explain, when these condos hit the market (and some have already) they will have amenities that the rest of the high end rental market does not.

Like Washer and Dryer hook ups, brand new EVERYTHING, expensive features (like name brand appliances, real brass ect ect ect).

So the "old" high end (except the cream of the crop that has all of the above amenities) gets pushed down.

It's called Rental Deflation. And almost the exact same thing happen in Japan in the 90s. They overbuilt the high-end segment so much (like they did in LA) that it literally crushed the entire market.

And here's a side note: remember, the housing market boom had NOTHING to do with people looking for a home to live, but people looking for a great short term investment. That's why there's no mad dash of people looking to rent. And since rental prices fluctuate so much even on the same street, you'll never have that mad "frenzy" that happened in the RE market.

[Tbone]

Mark-

If you can only save 15-20k up for a down payment on a .... HOME, then you shouldn't even be trying to buy a house, period.

Most people who have been able to buy a home did so by saving for several years and making some sacrifices. People seem to forget that buying real estate is an investment, not the same thing as plunking down a month's security on an apartment. That's how we got into this subprime mess to begin with. Too many people buying homes that had no business doing so.

[Mark G]

I am waiting until prices fall 100%, until they have to pay ME to take their homes.

[Paul Ulman]

Thanks Maggie Knowles for the info.
I participated in REDC auction couple of months ago, and saw the prices back then. Now, I actually looked at the checked the house in woodland hills (Clarendon) This house is serious fixer-upper that needs about 200K$ to make it livable. Now 3-5 months ago, it would sell for 800K on same auction. Today, as you said it was sold for 640K. It will not be a mistake to say that in 6 months to 12 months from today this house will sell for 500K max.
Taking into account many other factors, house like this in its condition will probably dip to $300K as the lowest point somewhere 2008-2009 (maybe even 2010)
So basically all investors and flippers know that. Since they will not buy a property to keep for 10 years, they will not go and spend 600K just to find themselves with property worth 300K....

[Steve]

You could not pay me $500K to live in any of these dumps. When they are free call me, what an over rated shacks.

[Cal]

Thanks for the update Maggie, I cant believe 22603 Clarendon St., Woodland Hills Sold for $640k. It appeared to me to have a second story added sometime later (if you look at the other houses on the block you'll see what I mean). That area was flipper heaven (and I dont mean that as positive, fraud central). Stick the address in foreclosure radar.

If I was a lender I'd be holding those auctions as often as possible.

[Paul Ulman]

Cal : hanks for the update Maggie, I cant believe 22603 Clarendon St., Woodland Hills Sold for $640k. It appeared to me to have a second story added sometime later (if you look at the other houses on the block you'll see what I mean). That area was flipper heaven (and I dont mean that as positive, fraud central);....
What do you mean by that? Are you saying this house is worth more than 640K?
I think that if it was sold on the street by regular sign (not auction) it would simply not sell because of its condition, and we know the banks are stubborn still, and will not let go. but if they would or in case of private owner, it would sell for 450-500k today. But as i said, the target price for it is 300K.
Great job Maggie.
btw: does someone know a way to find out the prices of these houses that were sold on the auction (without waiting for it to show on zillow....)

[John T Watts]

Mark, you make a good point. Some will never have the down payment. But there are people who do have it who are waiting for prices to stop dropping.

[Cal]

22603 Clarendon St. was last on the MLS for 679k..

With a 5% auction fee the person buying it purchased it for 672k..

People will buy anything if they THINK they are getting a deal. Sheer stupidity.

[Paul Ulman]

Cal,
I see what you're saying, and i agree with that. The problem with 2000 people auction is well known. Also a new sucker is born every minute. One of the side effects of the last 5-6 years of crazy prices is that there are people with money that can afford to buy that house for 672K. If the market was normal, this house would be sold for 300K adjusted for inflation. However since spec investors and flippers started to jump and buy 2nd and 3rd house, it created artificial demand. This was a de facto demand that pushed prices up as multiple offers start to show on every shack or dog house. things like no down and 0.9% for 3 years sure help those flippers to buy 2-3 houses with no money...no problem.
See, if today the price of bread will go from 1.99 to 3.99. 90% or more of the people could still afford that and therefore will buy it, for RE with no down needed made 90% of people buy houses...85% of them could not afford 30 year fixed rate payments but manage to escape couple of years with those teaser rates of 0-2%. On these mortgages, $5000 payment was $2500 for 3 golden years....

[Richard Johnston]

There a lot of bank owned homes for sale in Reseda. here is the link to view them. http://bankowned.la/Reseda-Bank-Owned.htm