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Below you will find a line to a good article that appeared in the LA Times this past weekend about the high end home market. The reality has definitely hit seller’s and buyer’s are noticing. Agents are the busiest they have been with buyers in over three years in all price ranges.

Despite the challenges of getting jumbo financing, activity continues to get stronger with a flurry of cash buyers and foreign investors. High-end homes (over 2.5 million) properly priced 15-25% (depending on area) off the highs of 2006 are getting strong offers. However, expect prices to stay flat and trend further down (at a slower rate than 07-08) in this segment of the market for another 3-5 years.

Link: LA Times Article: High End Home Sellers Lower Their Sights

With inventory trending up but days-on-market trending down, conditions do not seem to have strong up or down pull in the 90402 zip. Despite the fact that there is a relatively high amount of available inventory, the Buyer’s market is still seeing prices move higher. Given inventory levels, these price conditions are fragile.

Rent comparison has long been hailed as a fundamental factor in setting the value of real estate. When it is cheaper or slightly more to purchase a home rather than rent, a purchase of real estate makes sense for a buyer. In recent reports, Deutsche has been using this indicator to try and gauge the future of housing prices.

For example, Deutsche Bank reported that Americans paid about 13% more to own a home in 1999 than to rent a comparable home. Compare that number with Americans paying 66% more to own than to rent during the 2000’s which brought the ensuing Great Recession.

Unfortunately the market stabilization would make one think it is a great time to buy but the this indicator does not reflect lender and government intervention. However, it is a great tool along with price per square foot to properly price a home. If a mortgage payment is 25-30% more than what the rent would be, does it make sense to buy?

Each week we will be updating you with Altos Research for Santa Monica, Brentwood, Pacific Palisades and Mar Vista. We hope to be adding Manhattan Beach and Culver City in the near future. The Altos research provides an overview of current real estate market conditions for Single Family Homes, trends in pricing and current levels of supply and demand. The data is gathered on Monday of every week and released to us on Wednesday. Please feel free to call our office whenever you would like more detailed information.

Last year I wrote quite a bit about prices dropping in the Palisades Riviera. Although we have seen some slight stabilization lately, 1136 Corsica Drive shows how far the market for high-end new construction dropped. This 6,800 square foot Mediterranean villa detailed with fine qualities and design, featuring a gourmet kitchen, vaulted ceilings, his and hers baths, and lush landscaping complete with pool, spa and barbeque debuted on the market in January of 2008 for $9,275,000.

After being leased in October 2008 for $35,000 it is now listed for sale at $6,495,000. This is a classic example of what happens when a seller doesn’t understand market reality and tries to catch a “falling knife” as opposed to adjusting to the market quickly. The current price properly reflects the market in that area and it should garner serious interest. Please feel free to call my office at 310-255-3447 if you would like further information or want to schedule a tour.

The typical interest rate for a 30-year fixed-rate mortgage was virtually unchanged this week, hovering just under 5%, Freddie Mac said on Thursday.

The rate edged down from 4.99% to 4.98%, according to the weekly Freddie Mac survey, which assumed that borrowers had a down payment of at least 20% and paid 0.6 points in upfront lender fees and points. Buyers often pay higher points to obtain a lower rate.
The average rate on a 15-year fixed mortgage was 4.39%, down from 4.40% last week.

The market is definitely starting to slow down in anticipation of the holidays. Only 1 new listing was available to look at in Pacific Palisades…1 in Mar Vista and 2 in North Santa Monica.

Deal of the week: 2312 27th Street, Santa Monica. About a 1.5 blocks south of Pico, this 1,5698 sq. ft., 3 bed/1/5 bath Spanish home on a 7,644 sq. ft. lot needs quite a bit of upgrading but has a solid floorplan and features that really enhance its value. The work shop/bomb shelter underneath the home is not counted in the sq. ft. and easily adds about 800 sq. feet of usable space. It has nice yard space leading toward a garage with a work shop attached allowing the perspective buyer to either gain more yard space or upgrade what is in place. I expect this property to get multiple offers. Today’s open house was very well attended.

Talk about slashing the sales price: 23 Oakmont located in Brentwood on one of the nicest streets on the Westside debut on the market at the end of last year for 21.5 million. It is now listed at 12.95 million. The architectural estate is 11,000 square feet and sits on 2 acres of land. . .

Home to Track: 2158 La Mesa Drive, Santa Monica, CA 90402: We should learn a lot about the high end home market by tracking the sale of this beautiful 1928 Spanish style home located on coveted La Mesa Drive. In late September of 2007, the property was listed for $5,500,000 and immediately sold in multiple offers for $6,332,000!

The current owners have done a few upgrades to the home (plumbing, some roof, resurfacing floors) but nothing that would be considered significant (100-150K worth of work?). It is now listed for $5,795,000 (came on the market November 1st) and had a very well attended open house today. The property is on the Santa Monica resources inventory list but it will not affect value of the very inviting 6,430 sq. ft. home.

The eventual sale of this home will provide great insight into what the market has done over the past two years in a superior location. . .

Summary of the main points of the extension:

* Income eligibility for home buyers increases to $125,000 for individuals and $225,000 for couples.

* The tax credit for first-time home buyers (anyone who has not owned in the last 3 years) will be the lesser of $8,000 or 10% of the purchase price.

* For move-up buyers – “who have lived in their current home for at least five years” – the credit would be limited to $6,500.

*The credit runs from Dec. 1, 2009 to April 30, 2010, with an additional 60 day period to close escrow. (So end of April to sign contract, end of June to close escrow)

Please see: Full Article

Please find below sales activity for August and September of this year compared to last year and in 2006 for Santa Monica, Brentwood, Beverly Hills, Pacific Palisades and Mar Vista. The number of pended sales as of 10-12-09 is also listed. SFR stands for Single Family Residence and the Condo sales for that time period immediately follow. *Please e-mail me if you would like this information for a different Westside/South Bay area:

Santa Monica

SFR Condos
September 09: 30 29
August 09: 23 30
Sept. 08: 15 39
Sept. 06: 23 48
Pended: 36 67

Brentwood

SFR Condos
September 09: 26 15
August 09: 16 6
Sept. 08: 10 7
Sept. 06: 18 18
Pended: 45 36

Pacific Palisades

SFR Condos
September 09: 13 4
August 09: 19 5
Sept. 08: 12 2
Sept. 06: 27 3
Pended: 32 15

Beverly Hills

SFR Condos
September 09: 9 6
August 09: 9 5
Sept. 08: 3 8
Sept. 06: 11 7
Pended: 24 10

Mar Vista

SFR Condos
September 09: 26 7
August 09: 20 10
Sept. 08: 29 8
Sept. 06: 24 14
Pended: 42 21

**Buyers are jumping into the North of Montana market with prices finally starting to adjust correctly. I still think we will see more downward movement next year but the strong price drop of 2009 (20% +/- depending on property type) has encouraged patient buyers to step into the market.

Recap of a few sales within the past month:

**After being on the market for over a year, 209 25th Street sold for 1.525 million. The original asking price was 2.050. The house was a tear-down or major remodel candidate that gets discounted in comparison to other North of Montana lots due to its location. It is right next to San Vicente and shares a wall with Washington Mutual and the commercial district on 26th street. According to the MLS (Multiple Listing Service), This is the lowest tear-down sale of a lot that is at least 8,000 square feet since 2003.

**721 19th street originally listed for 2.050 million received at least 12 offers and countered the perspective buyer’s at 2.150 with a request by the owner’s to be able to lease the property back for a couple of months. The property is a 5+3, 2,418 sq. ft. home on an 8,900 sq. ft. lot. Though the home requires updating, it is in decent shape and has a solid floorplan. The property received so much interest because it is extremely difficult to find usable square footage over 2,000 sq. ft. on an 8,900 sq. ft. lot in this price range. Families looking to break into the Franklin Elementary School District were out in full force. A few years ago this home easily sells for around $2.6. . .

**231 18th street, a 1,829 sq. ft. home also on a 8,900 sq. ft. lot went into escrow within a week of coming on the market and sold for 1.968 slightly off the 1.994 list price. This Spanish style home is definitely a remodel candidate over time and will more than likely be expanded. However, it is an livable condition for now and on one of the nicest streets in the area. The house sold in March of 2008 to a developer for 2.325.

**340 21st place, a 1,728 sq. ft. home on a 9,000 sq. ft. lot sold for 1.810 in 35 days. The original list price was 2.095. The home will more than likely be torn down and is a solid comp for land value prices on 8,900 sq. ft. lots North of Montana. Lot values have gone from about 2.4-2.5 at the height of the market to between 1.7-1.9 based on the street.

**215 24th Street, a very nice 3,050 sq. ft. home on an 8,700 sq. ft. lot sold for 2.650 slightly off its 2.725 asking price. The home went into escrow in 27 days. It is in by far the best shape of the homes listed in this post and the back-yard has a very nice pool/spa. This is a solid mid-level entry home for the North of Montana area and is strong evidence to seller’s the mid-level market is between 2.5 to 2.75 and not 3.0 to 3.25. . .