Token price reductions

Sellers sometimes behave badly.

Look at 1413 Oak. Today this two-month-old listing "reduced" its price from $1.679m to $1.645m – a reduction of $34,000, or 2%.

Two percent? Why bother?

One answer is to "freshen" the listing by putting it on the week's "hot sheet." All reductions get treated as news, even if they're bogus. (Yes, even 2507 Valley will be given the treatment, despite the trickery there.)

Another answer is: The sellers are both nervous and stubborn. In this case, the sellers have had no nibbles at $1.679m. But they don't want to "give away" too much, either. They concede that a reduction is necessary, but not a real reduction.

At 2%, you're wasting everyone's time, your own included.

MBC would readily admit: If we sat down at a table and you offered $34,000 for nothing, that would seem like a lot of money. But in the weird world of real estate pricing, we don't pretend that's real money. You're trying to figure out how much to ask, you know you asked too much, so now you want to show movement. Fine. Act like you maybe mean it.

As always, we've inevitably singled out one listing when there are plenty of offenders. Examples abound.

In the Tree Section, 1733 Elm made two tiny steps to reduce asking by $50k, 3312 Maple dropped just $20k, and 758 14th recently dropped $65k to $1.925m. At least two of the three are now obviously overpriced, but they're stubborn.

You make these tiny, token moves at your own peril. Tiny reductions and bogus re-listings appear to be tactics intended to fool buyers, but today's buyers will see through it instantly. In fact, you'll increase the natural skepticism of buyers – they're less likely to think a seller will really deal if they see this stuff on your property's rap sheet.

If you think you priced it right, hold out. Again, in the Tree Section, 2812 Elm has done just that: 230 days at $1.769m. Someone will have to pay that, apparently.

If you think you guessed wrong, make real cuts. 2104 Poinsettia did that. They started at $2.099m in January, but took two separate $150k steps down. They went into escrow immediately after the second step down.

A quick glance at the "competition" among Tree Section listings (see the current MB Market Update) between $1.4m-$2.0m shows a mess of wrongly priced listings. MBC won't pretend to know the "right" prices, but every one of these has issues. Everyone could use a little guidance on where the market's really at to get some of these places sold.

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UPDATE: This story originally named, and was unduly critical of, the listing agent. After an apology during a discussion with the agent, MBC volunteered to remove the reference. We would also note that we were wrong to think the home was vastly overpriced at $1.645m, since it sold somewhat later for $1.628m. Lessons learned.

Market Update for 4/30/07

Check out the newest Market Updates for April 30, 2007.

MBC has been at it for a month now, tracking the "spring bounce" in MB from March 27 onward.

Links to spreadsheets and discussions are here.

When a $100k reduction isn't

MBC notes the re-listing of 2507 Valley at a, COUGH, reduced, COUGH, price of $1.999m.

When this house came (back) on the market in early March, it began at $1.999m. Within days, it was re-priced at $2.099m.

MBC mocked 2507 Valley and another listing at 2305 Pine for their post-listing price increases.

Since the tactic didn't work, this week, 2507 Valley got a fresh new MLS number and a price reduction. Achem.

These sellers really have a problem with pricing. In early 2006, they began at $2.249m. No takers. At $2.1m and $2.0m, no takers.

Here are the tactics that haven't worked to sell this property:

• Holding out for your price
• Reducing the price a bit
  
• Increasing the price
• Going on and off the market repeatedly over 14 months
  
• Waiting for the "right" buyer
• Re-listing over and over to cover the trail

There's just one thing MBC cannot see on that list: A substantial price reduction.

It would seem the market is saying it, but the sellers aren't hearing it.

It's strange that this sale is taking forever. On the face of things, you'd think the sellers have room to maneuver. They paid $1.54m in February '04.

Alas, alack, the MLS description now screams: "Subject to short sale!!"

Uh-oh, sellers.

What did you do with the $400,000 you borrowed against your house?!?

Decelerating returns

A newer North End listing draws MBC's attention.

A frequently sold home at 3009 Highland is for sale now at $1.369m. The sellers bought it for $1.225m at the peak in July 2005.

Here is a case of fairly realistic sellers. They don't expect a pot of gold for the trouble of living in the house for < 2 yrs. They're just ready to move on. They have room to offer price reductions without selling for less than they paid.

The home turned over a bit during the boom years, and previous owners did carry away gold. 3009 Highland sold for $510k in Oct. 1999, then for $789k in July 2003. Precisely 2 years later (July 1 '03-July 1 '05), it went for $1.225m to the current owners. (That was $400k in tax-free profit. Nice.)

Today's sellers put their 1400 sq. ft. home on offer in early April in a market with little competition. There's only one livable, directly comparable SFR for sale now (204 El Porto at $1.299m). Which is to say: it's hard to suggest what they should get.

These sellers' hope for a modest 10% gain over 2 years can be read as a signal of the MB market's slowing pace.

By contrast, two other Sand Section sellers seek nearly 20% each after just a bit more than 2 years:

224 31st Pl. – paid $1.4m in 3/04, now seeking $1.639m

225 1st St. – paid $1.685m in 12/04, now seeking $1.995m

We'll see how they fare. 31st Place is a new listing. The 1st St. house is at 90+ DOM and is due for a reduction.

Homes that turn over this year after being purchased at the peak will convey something about the state of the market and, perhaps, the future of prices in MB. This is one reason MBC's Market Updates take note of recent sale dates and prices. Turnover after 2-3 years provides good fodder for comparison.

One of the bellwethers MBC first sought to use, 864 12th Ct., recently was canceled after two months without a bite. Those sellers hoped for just $80k more than they'd paid in August 2005 ($1.469m), but apparently couldn't get it and wouldn't take less than they paid.

Crow may be eaten

MBC will generally steer clear of predictions. It's a bad idea to pretend to know something you cannot know.

But a recent post came close. Discussing 2500 Pacific Ave., MBC said:

When the same house was on the market in our last hot summer, 2005, it hung around for 90 days or so. Today's average is probably closer to 90-120 days for listings that have nice attributes.

A marginal listing is not a good market barometer. But same-property sales are an indicator. You can bet MBC will watch the action on 2500 Pacific. Our bet: They're fishing and they go back to renting it out.

Translation: MBC was expecting very long DOM and perhaps no sale.

But today, 2500 Pacific has gone pending. Just like that, two weeks on the market.

Oh, all the intrigue is still there – who bought it, for how much, and what are their plans? Big questions for a marginal listing. Bottom line: These were serious sellers.

Market Update for 4/17/07

Check out the newest MB market updates, current as of 4/17/07.

Discussion and links to the spreadsheets are here.

Foreclosures in the News, and in MB

It's comforting to think that the headlines about sub-prime loans and foreclosures simply don't mean anything for Manhattan Beach real estate.

Comforting, but not completely true.

First, the news: Today's LA Times business section features a front-page story, "Foreclosure pace nears decade high," much gloomier than the typical LA Times real estate story.

There are now 900 homeowners per week losing their homes in California to foreclosure, up from 100 per week one year ago. More than 11,000 foreclosures in the first three months of 2007 represented an 800% increase over the same period last year. Cue the housing bear:

"For this rise in foreclosures to be happening in the midst of a strong labor market is truly unique and scary," said analyst Christopher Thornberg of Beacon Economics.

Incredibly, Thornberg predicts a four- to five-fold increase in foreclosures.

A chart provided by the Times suggests that Thornberg expects foreclosures at triple the peak reached in 1996 (15,418). What if he's only half right?

The article goes on to discuss how foreclosures are concentrated in "the places with the cheapest housing in the state," with San Diego County as a notable exception – "the county's market peaked earlier than the rest of the state."

Whose loans are going into foreclosure? "Most of the loans," says the Times, "going into default now were made at the peak of the housing boom in 2005."

MBC offers a local example. On the market today, you'll find 601 Larsson, a nice Hill Section remodel, 4 bed, 4 bath, almost 4,000 square feet. Purchased in Sept. 2005 for $2.0m, now listed at $2.499 after starting (March 20) at $2.695.

601 Larsson goes to public auction May 4 if no one buys it real, real soon. Not that you'd know from the listing language – no reference to the legal troubles.

Also, the Beach Reporter carried a legal notice last week that 958 Rosecrans would go up for auction tomorrow, April 18. This 2 bed/1 bath, 975 sq. ft. house was purchased July 3, 2006, for $977,500. The note gone bad was worth over $800k. Who loses a house in less than a year?

Also coming up for auction May 4 – 225 39th St., just a door down from Highland Ave. in El Porto. No recent purchase here, but records indicate a $1.005m loan gone bad. HELOC hell? Zillow thinks the property is worth $982k, less than the loan. Minimum bid is $1.1m. Uh-oh.

Another active listing in default: 2816 Manhattan Ave. This is new construction first listed in Sept. 2006. However, it appears to be an old loan that went bad. Surely this can be fixed before auction, but the process must be stressful for the builder. Why, then, has there never been a price reduction after 7 months on market at $2.9m?

Overall, according to one source, there are just 4 homes in 90266 now in foreclosure, and 15 more in default. Not bad for a pretty big town with some very, very big mortgages. Let's hope this remains a rare phenomenon.

Flipping a marginal listing

Marginal listings intrigue MBC.

A beaten-up house, a location with issues, "potential" that is difficult even for a sunny optimist to imagine... all make for a local real estate puzzle you just want to solve.

Today's puzzle is 2500 Pacific, newly listed this week. It's got all the issues.


2500 Pacific is at the corner of Valley and Pacific. It's one of two houses at this four-way stop. This is as close as you get to a major intersection in the Tree Section. Stop signs on all sides mean screeching brakes and revved-up engines all day long.

The home has been forgotten. It's large (2000 sq. ft.) but built in 1959, and only slightly updated since.

There are two things to do with this house: Rent it out or scrape it. You don't want to buy it and live there, not for anything near the $1,249,000 the sellers are asking.

The current owners chose to rent it out. 2500 Pacific was listed in May 2005 under a "value range marketing" price of $1.2m-$1.4m. (We don't see much VRM pricing in MB, and thank heavens for that.) These folks bought it in Aug. 2005 for $1.005m. (Nice discount – in Aug. 2005 nobody got 20-40% price breaks!) They promptly put it up for rent and got tenants shortly thereafter.

One assumes this purchase was meant to be a longer-term investment. Perhaps the rental income doesn't cover expenses, though. With home values in flux in the area, the owners are thinking this wasn't so good for the long term, after all – someone else take it, please!

Price is a huge issue for this listing. Where else are people getting $250k (25%) more than they paid in Aug. '05? Is any seller who is unloading a property bought at the peak making money today?

Developers are buying lots in the area, but further up Pacific (off of Valley), the lot values are in the 900s, not at $1.2+. Will these owners sell for a loss?

When the same house was on the market in our last hot summer, 2005, it hung around for 90 days or so. Today's average is probably closer to 90-120 days for listings that have nice attributes.

A marginal listing is not a good market barometer. But same-property sales are an indicator. You can bet MBC will watch the action on 2500 Pacific. Our bet: They're fishing and they go back to renting it out.

'Faith' in high prices

Today's LA Times tells us that most Americans have "faith" that home prices won't be going down any time soon.

Specifically, 83% believe that home values in their neighborhoods will remain the same or increase over the next six months. Just 16% think values will decrease.

To be fair, most of the no-decrease folks (51% of the 83% total) are just expecting flat values. Clearly these aren't go-go times.

MBC can offer a bit of context that the LA Times left out. Last year (13 months ago), the paper's polling shop asked the same question, and got about the same results (36 percent: increase, 14: decrease, 49: flat).

Consider that – a whole year's worth of escalating news about weakness in the housing sector, and opinions didn't change. That must be why they call it "faith."

The article offers several reality checks, including data from the National Association of Realtors showing that home prices fell last year. And these ditties:

From an Eagle Rock renter:

"The values are so inflated. It's ridiculous. But people are willing to pay the prices to live in certain areas. They want what they want, and they want it now."

And from a "housing expert:"

"Mortgage credit is clearly tightening, affordability is not good and there are a record number of unoccupied homes for sale," said Scott Simon, a mortgage-bond fund manager for Pacific Investment Management Co. in Newport Beach. "We think prices should be down a few percent this year and, if we are wrong, it will be worse than that."

Of course, all real estate is local.

On that note, Bearmaster at the South Bay bubble blog offers disquieting news for 90266. The total dollar volume of real estate transacted in MB in March was 20% lower than in the same month a year prior. Now, one-month stats don't tell a complete story, but that's a blow.

A 20% drop in dollar volume also undercuts one of the main observations (opinions) you'll hear about the state of the MB market – the notion that high-end properties are moving just fine while the bottom tier has slowed. More volume at the high end could have cancelled out slowing at the "bottom" (in this case, homes priced at $1m-$1.5m), but that didn't work out in March.

386 Days Later, a Sale

It's been a long road for 108 S. Dianthus, but the end is in sight.

On March 16, 2006, the owners put this quirky, large remodel on the market at $4.5 million. That didn't pan out. More than a year later, a million dollars had come off the price (a million!) and there was still no action.


Alas, a buyer has stepped forward. 108 S. Dianthus is PENDING, baby, after 386 DOM. (Not that you'd know with the multiple re-listings).

Last list price was $3.549m (as seen in the MB Market Update). Let's hope the buyers were fully informed just how stale the property really was, and got themselves a discount off that as well. In about a month, if this all works out, we'll see.

Worth noting: The sellers paid $2.34m way, way, way back in 2001. At the time that seemed like a lot of money for a house. There has been a lot of remodeling at 108 Dianthus since then.

Also intriguing: These buyers passed on some pretty nice comparable properties in the Hill Section in the $2.7m-$3.4m range, including larger, beautiful new construction at 114 N Ardmore and a nice 5,000 sq. ft. "Hacienda" at 873 8th. What Dianthus had over most or all of those is the coveted "big blue marble" panoramic ocean views.

This news means the crustiest Hill Section listing is the peculiar, artsy, ultra-modern remodel at 844 11th, approaching its first birthday on the MLS after $480k in cuts to asking. $2.7m is still too much there.

Market Update for 4/5/07

Check out the newest MB Market Updates, current as of April 5.

The newest discussion and links are here.

Never Mind, I Don't Need $300k

It's already time for MBC's first "where are they now" follow-up story.

Not so long ago, we featured 521 Manhattan Beach Blvd., a duplex near Ardmore, in "I waited 6 months, now give me $300k."

Then we discussed an attempted flip, purchased for $1.495m in Aug. '06, on market 1/31/07 for $1.875m after some interior remodeling.

But now, $305,000 has come off the price. That's right, the same listing is up now for $1.570m.

At this point, the flippers just want their costs back so they can move on.

Of course, the property is "relisted" (#S944336) and there's no trace of the old price. New start date is 3/30/07. (This relist is courtesy of Shorewood.)

How quickly dreams confront reality, eh? Oh, right, this ain't over.

We Call Out Relistings

If you take a chance to read the Manhattan Beach Market Updates, you'll see MBC is trying to not let sellers hide their real Days on Market (DOM) or original list prices.

An example today – hardly the worst offender, just the newest: 2612 Poinsettia.

This is new construction in the Tree Section rather close to Ardmore. It first went up for sale Sept. 5, 2006, at $2.399m. It lingered, went off the MLS for a while (holiday break) and came back at $2.375m in February.

Your average internet-browsing buyer didn't know about the (token) price drop, or how long the house had lingered previously. That's relevant information if you are considering buying.

Today 2612 Poinsettia is back again, just like new, at $2.350m. It sports a brand-new MLS # – S944409 replacing S941755.

Look it up today, and you'll see 1 DOM.

Actual DOM: 210.

Consumers need the truth – buyers and market watchers alike. Relisting hides the truth.

Slapping a new MLS number on the listing simply adds a layer of willful deception. (The listing agency is RE/MAX Beach Cities, but let's not pretend they're the only ones who do this.)

If you're a serious buyer, you might not get the wool pulled over your eyes. Your Realtor will have access to more complete data on properties than is found on most publicly accessible MLS searches. (Why should that be so?)

There's a field Realtors can see in their systems labeled "CDOM" right next to "DOM," signifying "COMBINED Days on Market." The mere existence of that data field tells you right away that the practice of bogus relistings is entrenched.

Not everyone who is watching or considering buying in this market will have that resource. So MBC will do whatever's possible to call out the offenders in our little corner of the woods.

Wanted: Sweat Equity of $750k

A new Tree Section listing is a classic higher-end flip.


1800 Laurel is a Tudor-style mini-castle, on a quiet tree-lined street west of Pacific and near the American Martyrs church and school. It is large and nicely updated – 4br/4ba and 3000 sq. ft., nice materials and finishes inside, a clean coat of smooth white stucco outside.

Before the current sellers bought it in December 2004, this house had been punished by time and poor upkeep. A home built in 1982 looked like a poorly done 60s-era shack. You had to have vision to have any interest in the place back then.

The current owners did have vision. They paid $1.6m and poured time and money into a complete modernization effort. They could easily be into this house for $2m or more by now.

Just about exactly 2 years after they moved in, the sellers are getting out.

They're asking $2.499m to start. That means they believe it is reasonable to say: "With the work we put in, and the continued rise in the real estate market, this house is worth $900,000 more after only two years."

If they get this price, and pay the full standard 6% in commissions (unlikely), these sellers will gain $750,000, minus, of course, their remodeling costs. If we assume expenses at or near $300k, what these sellers are shooting for is the full $500k tax-free profit possible after living in the residence two years.

But the price is fishy, and the goal may be elusive. Today there are 17 homes in the Tree Section priced over $2m, and only two – including this one – are remodels. The rest are new or only a few years old.

For $1.990m, you can get a house just a few blocks away, same size, newer construction, at 758 14th. (Recently featured by MBC and purchased last year for $1.7m.) Comparably sized homes at 2812 Elm and 1413 Oak can be had for about $1.7m, more than enough of a discount to offset the location differences.

These are savvy flippers, though. They picked their project well and they've attempted to time their sale for maximum advantage. They have room to drop the price if they don't get lucky within a couple of weeks. MBC will watch and report back.