Kate waits as prices fall

Kate in the Valley, my favorite sidelined househunting blogger, comes off the sidelines tonight to file an update: prices are falling in one of her preferred neighborhoods, and she's still not biting:

"You might remember that back in June I visited a little 3 bed + 2 bath house  in Fashion Square (a.k.a 'the house where it all started') that was listed at $825k.  When I told the agent that I thought that was way too high, she offered me a little cash back to sweeten the deal.  Needless to say, I didn't go for it.   Anyhoo, it's been almost six months and the house still hasn't sold.  But the agent gave me a call again recently. Yup.  She wanted me be the first to know (because, apparently, she  still does not read my blog) that the house is currently listed at $694k and: 'there's room to negotiate!'

"The new list price represents a nearly 16% decline over the last six months (assuming you offered to pay list but, given the agent's sales pitch, why would you?).  I still think it's too much and wouldn't be surprised if it dipped into the low $600s before it finally moves.   And this isn't the tale of one desperate seller either; the whole neighborhood has taken a significant hit in recent months.

"So what does this mean for me?  Well, for starters, it means I'm really glad we didn't buy a house this year. It also means that some of the allegedly bubble-proof neighborhoods in the Valley are starting to deflate much faster than the city-wide statistics reveal.   But it doesn't mean that I'm going to put in any offers right now or any time soon.  The price corrections have only just begun."

Thanks, Kate.
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Comments

[enlightenment]

wait until 2009!!! only a fool would buy now!!!

[blah_to_you]

Kate's doing the right thing. I'm waiting too. No way we should let the flippers/speculators make a dime. ARMS/interest-onlys don't peak until next year and will continue into '09.

The "prime" segment is going to feel some pain too, just take a little longer.

Anyone that paid more than $200/sq ft for a tract house was/is foolish.

[Steve Reynolds]

Mr. Kate is going to be really happy because now he is going to have some extra cash for the necessities of life. Bigger flat screen, better surround sound, new toys for the garage like a neon beer sign. Mr. Kate rocks, give me a bump fist!!!! I got your back...Kate, Mr. Kate and I think you're the best, we're always looking out for ya. This thing is going to drop like a rock or at least give back some of the big gains from the past few years. Go to propertyshark.com, pull up the address of whatever property you're looking for, take a look at the 1997 to 2001 levels and that is a good starting point. Why 1997, someone here on this blog made a great point, that's the time all this creative financing started. It's not gloom and doom, just an average correction.

[Charles Wilson]

Keep waiting, Kate. Pay no more than 130 times what a place can REALISTICALLY rent for per month.

[lefty]

i think prices in greater l.a. will be about the same next year as they are now. if that's true, you will have one year without a house. you will need to do a rental analysis.

[tony almonte]

does anyone have examples like Kate's on the Westside. it seems immune over there.

[John T Watts]

Kate, you're smart to wait. It may be months or it may be years, but somewhere there will be a bottom. You will probably be paying close attention and will recognize it when it comes. Others will not see it until prices have gone up a bit. How rapidly prices rise when there is a bottom is anyones guess. If you had a crystal ball you could put in an offer just before the bottom. Of course, prices might sort of just slog up and down somewhere near the bottom for a long long time. Then it wouldn't much matter when you make your offer.

[Hula Girl]

Kate: Rhymes With Wait...

Sit back and enjoy the sound of air hissing out of the tires. You are in the proverbial cat-bird seat. I just sold my house: The one I bought in 2006 thinking the West Side is immune. Well, guess what? I had to slash the price several times to get anyone to look at it. I finally reduced it to what I paid for it and someone from the greater-fool-school of real estate bought it. Miraculously, I broke even. BUT, I was just about ready to do a major price slash again before my buyer materialized. And I would've continued slashing until I unloaded it. (losing one's job is a powerful motivator), I've since watched prices decline $100-$200k in my former neighborhood - in the last two months.

The point is, there are many sellers like me and there will be even more if this WGA strike does not get resolved soon. The deals, they-are-a-coming.
While it was not fun to watch my fantasy money (equity) vanish overnight, it was a lot more pleasant than holding on to a soon to be upside down property and worrying about ruining my perfect credit.

Will I buy again? Hell yeah. But not until that sky quits falling and it seems that it's only just begun.

Hold on to your pocketbook, Kate. You will soon feel like the most popular girl in high school as agents and sellers whisper sweet price reductions into your ear,

[rae]

It does not make sense to spend $600,000.00 for a 60 years old that will cost you a minium of $200,000.00 to renovate. I Agree with Kate to wait

[Duh]

There is no such thing as a bubble-proof neighborhood in the Valley. If you are striving for bubble-proof, buy near the ocean. There's only so much land there.

[Westside Story- Just Call Me Maria]

It is deflating rapidly over here too. The homes we have looked at in Cheviot Hills, Pacific Palisades and Santa Monica still haven't gotten the message in capital letters, but we are seeing significant declines in asking prices for Culver City, Bel Air and Rancho Park- and the houses we want still aren't moving. Currently my eye is on a house in Bel Air that has creeped downward a $100,000 at a time for the last few months. As soon as I start seeing regular prices below a $1,000,000 asking price, then I know it will be time to purchase. There are already plenty of listings in Beverly Glen (Bel Air zip) below the threshold.

[arroyogrande]

As per Dataquick/LA Times, Los Angeles County is now negative in median year-over-year house prices:

Oct. 2006 $ Median SFH: $540,000
Oct. 2007 $ Median SFH: $525,000

Oct. 2006 Sales: 5489
Oct. 2007 Sales: 2917

Find a price that you like...if you have the cash and the good credit, be of the mindset that "you are not just going to give it away".

- arroyogrande

[Neekolaaz]

I'm still pessimistic on the Westside, but while prices have dropped a tiny bit, I don't see anything like 16% discounts (with a plea to negotiate).

Yet.

The Valley is just a leading indicator of what's coming in the Westside. I still believe that - just gotta be patient.

[anon]

Kate will probably eventually get a great deal on a house, but that deal will probably have little to nothing to do with market timing.

Kate is not the typical house-hunter:
She is far more informed than the typical house-hunter.
She is far more diligent than the typical house-hunter.
And, most important, by far, she is far more well-known and connected (due to her blog and all the publicity it generates) than 99.9% of house-hunters will ever be.

My guess is that one of her groupies here will have some inside info on a distressed/inheritance/divorce discounted house in the 'hood she's looking for and will pass that info on to Kate some day.

Kate will get a bargain deal and everyone will ascribe it to her smart timing of the market when, in fact, it will just be a bargain based on that old-fashioned advantage: insider info.

It's not what you know (or how you time the market); it' who you know.

Kate's blogger fame has greatly expanded her investment capital in the "who-you-know" account.

[Rich]

"How rapidly prices rise when there is a bottom is anyones guess. If you had a crystal ball you could put in an offer just before the bottom"

I don't think you want to wait for a general market bottom the way you would for stocks, whose individual prices are tied to the fate of the market as a whole--rather than seeing an identifiable bottom, there will be 2 markets going on in the same space, houses that are priced fairly and are selling, and houses that are overpriced and not moving. Expect to see a steady flow of buying/selling for houses that are priced well for their amenities even as foreclosures and oversupply dominate the news. When the house you want seems fairly priced IN RELATION TO YOUR OWN INCOME and the size/condition/features/location of the house itself, go ahead and buy. A study reported on recently indicates people have a good intuitive sense of what their house is worth in relation to others, so if you "feel" the price is in a good-value zone, you're probably right. Also, it's almost impossible to make a mistake when the price of the house is within striking distance of the median income of a working couple. A $400k purchase will be much safer than a $700k purchase, where the pool of potential buyers is so much smaller...

[IE Baby]

Don't pay more than 200 a sq ft for a tract house? Ha ha, in the IE builders can build new houses for $50 a sq ft. We now have tons of listings in the Temecula area for around $100 a sq ft (nice newer houses). We have better schools, better retail, minimal traffic, way less crime and 6% annual job growth. When are you people going to get it ?

[Joseph]

For those asking about the "immune" westside, here's an excellent blog that charts recent activity in Santa Monica and its environs:

http://smdistress.blogspot.com/

And of course, the always excellent: westside-bubble.blogspot.com

[Rob]

Funny Anon,

"The famous house that Kate bought." It will make it on the map of the stars homes sold on Sunset and Melrose. Sorry couldnt resist...........

[MyLessThanPrimeBeef]

Me too, I am p!ssmistic about the Westside.

BTW, let me share one secret timing indicator with you good people here and perhaps this will help Kate too.

The time to buy is when you no longer see investorguy post here.

Why?

Because despite of what investorguy is saying and writing, the very fact that a sharp operator like him has time to loiter around here betrays the very situation he is in - that this is no time to buy, prices will fall even more, thus nothing to do and plenty of time to hang out here.

Now, one day in the very distant fuutre when he's backing up the truck buying hand over fist, he'll be too busy to keep you guys entertained.

Of course, now that I have revealed this secret knowldege, the National Assoication of Realtors will probably put him on permanent paid leave covertly.

[arroyogrande]

"Kate will probably eventually get a great deal on a house, but that deal will probably have little to nothing to do with market timing."

Agreed. However, for the rest of us, 'now is a great time to buy', 'selection is great', 'you had better buy now before prices start going back up'...right?

The truth is, us *qualified* buyers (buyers with cash in the bank, a good job, and good credit scores) are *not* just going to give our money away. For us, there is no hurry to buy today, tomorrow, next week, next month, or next year.

Yes, there are buyers that are still buying. More power to them. However, I for one am taking my dear sweet time to find something I like at a price I can actually afford...unlike many who bought into the "no money down, you don't have to prove your income level, just refinance into another option-ARM or teaser rate when your loan resets" mantra.

- arroyogrande

[investorguy]

Less Than: I just check in to keep you guys honest. Heaven knows some of you need it. Even at my busiest, making money doesn't take more than a few hours a day. I'm busy as ever, just not in LA.

[Rob]

IE Baby wrote:
"When are you people going to get it ?"

Get what? You are not really trying to sell the IE as some hidden gem?

[perks]

IE Baby wrote: "Don't pay more than 200 a sq ft for a tract house? Ha ha, in the IE builders can build new houses for $50 a sq ft. We now have tons of listings in the Temecula area for around $100 a sq ft (nice newer houses). We have better schools, better retail, minimal traffic, way less crime and 6% annual job growth. When are you people going to get it ?"

If Temecula's so special and great, why are you so anxious to get people to come out there and buy your homes, fill your schools, congest your roads, and increase crime?

I'm not saying Temecula isn't a decent place (I do find it a reasonably nice area), but it's really stretching to make an argument that any part of So Cal has something that absolutely no other part does.

I actually like NOT having to drive from my house to the nearest generic strip mall to eat, shop, etc. Good luck finding any walkable community anywhere in the IE.

[MyLessThanPrimeBeef]

I suggest we have a Virgin Homebuyers Association whose members shall pledge to postpone their 'first time' and will not 'do it' until at least 2012.

[Just call me Maria]

IE Baby wrote:
"When are you people going to get it ?"

When are the big builders in the IE going to get that our jobs are WAAAAAY over here and the commute is not an option. How many hours a day do your children spend in daycare?