A couple of years ago some MB homeowners got the urge to spread out a bit.
They already had a large (5br, 3600 sq. ft.) newer home, but putting up guests was apparently a challenge. The solution – not an option for everyone, let's be honest – was to buy the neighbor's house. It became the "guest house."
Despite its age and uninspired, boxy architecture, the neighboring home could be spiffed up with imaginative paint and carpet, and would make a pretty nice annex to the main home.
What's more, the back yards of the two homes could be joined by knocking down the wall between. Soon the big house had a pool and spa, courtesy of the "guest house" yard, and the guest house had access to the big new yard and lovely main house.
It was a great arrangement that lasted all of 2 years. Now, the guest house, 672 19th, is up for sale, for $1.789m. (Click for pics and details via Redfin.)
And now a few things are clear. In March 2006, the current owners overpaid. They plunked down $1.550m then for a 3br/2ba, 1700 sq. ft. home that is objectively terrible in many respects. It was more valuable to the buyers then, for their purposes, than it was to buyers in the open market.
They've now priced it like a flip, as if we're in some kind of hot market. The owners seek a substantial premium at $1.789m (+$239k/+15%).
This just in: The market ain't hot, and there are plenty of better options for $1.8m or less. Plenty. Indeed, with 20% down, you'd pay $7k-$8k or more per month for the privilege of owning. There are probably some rentals available for less that are much better on balance.
What are the issues at 672 19th? Let's count off a few:
- The master bath isn't. Sure, it's attached to the most masterlike of the bedrooms, but it also opens to the laundry room and can be accessed from a living room. It's small and lacks almost everything you'd expect in a nearly $2m home.
- Dated kitchen. It's tidy but smacks of an older remodel. One of the most overpriced, yet seemingly comparable nearby listings, at 1829 Poinsettia, at least offers an inspired update.
- Outdoor spaces. The home is oriented around a small, awful interior patio of cracked concrete. If you walk out back, there is that nice pool and newer hardscape plus spa. Don't look back at the house, though, for its roof and exterior look dreadful from the rear. (Then again, don't we all?)
- Location. The listing says the home is, "Centrally located," and that "this location has it all." We'll grant you that it's close to Live Oak Park and even downtown, but the block is pretty choppy. Nothing sings.
- Views. No.
This is a terrible time to be asking buyers to pay for your mistakes, if you paid too much in the first place. (See the quick devolution over at the highly inspired 794 27th for an example.)
But that reality doesn't stop anyone from trying. You might get lucky!
50 comments:
"You Pay For Their Mistakes."
I got up early in a good mood for a big day. Then I read Manhattan Beach Confidential. What you've written about these people and their house is appalling. Did you really need to imply that they are broke?
5:13: I think you may have misread MB's post. I think the mistake he's talking about was bigtime overpaying for a house in a way-too-hot market. I didn't get the impression that he was implying that they're broke.
I don't thinkk this is being priced as a flip. After the 5% commission that leaves them with 10% which you, they and everyone knows will probably be the markdown they'll have to provide to sell the property in this market. I think they're just trying to break even. Did they overpay in the first place? Maybe, maybe not, but for the same price or a few 100K more someone can now get a new or near new home...
For what it's worth I really don't think they're broke. I don't think the story makes any claim along those lines.
A crucial detail I don't have is whether they're committed to selling at market price – once that can be found – or whether they'd keep the guest house if they can't get out flat or turn a little profit.
Wow. These sellers are ambitious. They want 1.8M for that? If that house were a couple miles east in Gardena, I'd be surprised if it sold for 1/3 that amount.
and if this house was a few blocks West it might fetch 3 times that amount! Funny how that works, huh? Gardena is not relevant here, pal.
MBC wrote, "A crucial detail I don't have is whether they're committed to selling at market price..."
If market price was important to these sellers, they would have hired a different agent.
9:23 is correct in that location is driving the price of this home. If, however, you were to judge this house on its own merits and ignore the location, that house is probably worth around $100,000. If the lot is worth $1.2M, then that property should go for around $1.3M (lot value + house value).
MBC or anyone else, I noticed that many homes that were once on redfin.com are no longer there, but still on the market. Any specific reason for that, or are sellers just not allowing their info online for people to see DOM, etc...? Thanks for the help, love your site.
10:02 - Some listings are hanging out in "hold" mode which would take them off a normal search; also there continue to be cancellations, a few each week. Any specific ones you're curious about?
8:55- Probably doesn't even know where Gardena is.
I don't really think $1.55M was overpaying at the time they bought. Time will tell to see what they get. I remember last time (3200 Alma) was put to the test. Maybe a pricing poll should be considered here to see how ridiculous people on this site vote.
People are quick to jump on MBWatcher. He did not imply the people were broke. The problem with this market is that people still feel they are entitled to make money on their house and won't take their medicine. People keep telling me they are selling their house for a really good price. Well, a house is only worth the price that someone else is willing to pay. The realtors in MB are really not being realistic with their clients or themselves. Feels like everyone is waiting for a bailout...and one is not coming
someone help me understand
we bought our home in summer 2006 and our realtor said prices never go down in manhattan beach and that we would be able to sell in 2 years for 20% more
now we are being told by our friends that our home isn't worth what we paid for it
i don't understand
i have heard some stories about people suing their realtors do you think we have a case
please help
1:43!!! Am I to understand that a realtor lied to you?!
The outrage! Look, Little Red Riding Hood, I hate to break this you, but real estate makes the oldest profession look honorable in comparison.
Today's Los Angeles Times
Business Section
Front Page
"Home prices staying afloat at the beach."
"Sun, sand and solid prices"
http://www.latimes.com/business/la-fi-nubeach8apr08,1,4182814.story
"The Romeros say they are thrilled with their home purchase, even though it is farther inland than they had hoped. The one-story, ranch-style home has two bedrooms, a big kitchen, a formal dining room and a family room. It's still close enough to the water for Tony to grab one of his three surfboards and catch a wave before heading off to work. And from time to time, he said, "we even get a beach breeze."...WOW
Mr. Romero must either drive fast or go to work late because he bought a home East of Crenshaw...hardly a deal either.
Re: 313pm Post
Wrong. Two miles from the water is not only west of Crenshaw, but it's also west of Hawthorne, AND west of Anza. More mis-information being spread.
And besides, you missed the point of the article... Beach prices are being resilient, bending like trees in a storm, yes... but strong and resilient nonetheless. Mr. Romero is like many other buyers who still can't afford the beach, because it's prices are simply not falling commensuarate with other areas of the nation.
The Beach Cities are a juggernaut of value, especially its coveted crown jewel... Manhattan Beach. Long live the King!
Re: 3:25 Moron,
My post at 3:13 was 100% correct. The guy's address and purchase price are in the tax record. The home he and his wife bought is East of Crenshaw.
1:43 is a phony - another bitter renter who thinks pretending to be a homeowner on this blog can fool anyone, although he's apparently able to fool a number of MBC's cult members as they are already predisposed to his "message."
Hold on, we only cite negative economic and pricing information on this site. Mookmeister, AH7, 90266 (909er), where are you guys?
1:43, Yes, you do have a case. I submit as an example, the Coke commercial . . . you sue yourselves for negligent gullibility.
1:43- You might have a case depending on cicrumstances. Check out this link...
http://openthehomeblog.com/2008/01/27/marty-ummel-suing-an-agent-or-an-industry/
MB Watcher,
What happened to 1821 Walnut? I thought it went pending but I can't find it on MLS.
In addition, what happened to 757 30th? Did that go pending? I can't it on MLS.
Thanks.
Did anybody actually read that article in the Times? There is a serious disconnect between the headline and the facts presented in the article.
The first example cited is a story of somebody who bought a house for 12.5% less than what comparable were selling for in December.
The second set of numbers presented describes the "average of median sale prices in 18 beachside ZIP Codes...down nearly 8.9% from August and 10.2% from February 2007." The usefulness of the "average of median sales prices" as a meaningful statistic is questionable. Nevertheless, it doesn't make sense that a greater than 10% drop in nominal home prices could be characterized as "staying afloat," especially a drop that occurred in such a short period of time.
The reason the beach city drop doesn't seem that bad is that the houses are still comparatively expensive and that they haven't fallen as far other places in SoCal. But, to imply that little is happening in the beach cities while reporting contradictory facts is poor reporting.
JR, why would any one read that "LA Times" thing? We get all our news from The Daily Breeze and MBC. Stop getting all factual and stuff.
A little Psych 101 lesson for you all.
A person will act "defensive' when he / she / it feels threatened...it's one of the most basic human reactions. Most useful when applied to survival.
....hence all the backlash when someone points out how someone else around here paid too much for their house.
A fact is a fact is a fact...and if you can't see the writing on the wall based on Q1 numbers...I don't know what to tell you.
Basically, there are 48 people who purchased homes here in Q1 who have just joined the rank and file of those who have over-paid for their dwelling. If you think the realtor / and in most cases his or her mortgage broker and appraisal buddies aren't completely gassing on you behind your back, think again.
Anon @ 7:31,
My bad.
Another Psych 101 lesson for you all:
When someone displays jealousy, he or she tends to lash out at their own issues. The clinical term is projecting. Sounds like 8:06pm is more than a little bit jealous of people:
1) with the ability to purchase a home;
and
2) people with the ability to purchase a home and not care about what the next 10 years brings in terms of value.
8:06pm - Sorry that "making money" is not in your cards! How proud you parents must be of you!
JR - good points re the LA Times piece; I'd guess they had their premise first and added the data later. Maybe their editors aren't paid for reading comprehension.
sidelines - 1821 Walnut posted as canceled midway thru escrow, but you can't be certain what that means. 757 30th was on "hold" status the last I saw it: listing limbo.
Psych 201:
For those of you in need of more advanced tutelage, I would submit that 8:06 is the embodiment of that psychological phenomenon lay people refer to as "sour grapes." It's a common defense mechanism akin to jealousy and envy. Without it, 8:06 might have to admit that there's no one to blame for his financial station in life but himself and we might end up having to trace that smell back to his kitchen and find him with his head in the oven.
For anyone interested in actual meaningful data, here are the median sales stats for all MB single family homes sold over the past 2+ years:
1st Half '06 - $1,790,000
2nd Half '06 - $1,687,500
1st Half '07 - $1,799,500
2nd Half '07 - $1,805,000
1st Half '08 (to date) - $1,825,000
To quote 8:06, a fact is a fact is a fact (sorry you can't face facts, loser). Maybe the writer of the LA Times article should have asked someone to compile these numbers from the MLS as I've done - easy to do and would have helped the "reading comprehension", right MBW?
Angry! You're back!
Yo can't really argue with the median numbers. Prices are going up without any falloff in MB. This isn't Riverside, after all. Sorry, jr.
It seems the Times did their own data analysis. Someone should tell them this is not the sort of thing civilians should attempt.
Anyway they didn't know how to contact you, Hugs. But welcome back.
I'd guess they had their premise first and added the data later.
Are you complaining about a headline? In this post?
MBC: Come for the pretty pictures. Stay for the delicious irony! :-)
I thought the Times piece was good, although I would like to see their graphs for more than just two cities.
In eight beach ZIP Codes, homes were selling for less in February than a year earlier. An additional seven ZIP Codes showed price increases over the year.
It sounds like MB may be in that latter group.
Don't you have to remove teardown/rebuilds from the mix when determining median prices in Manhattan Beach? My impression is that those comprise a decent number of sales in MB. If you don't remove them, you're not really comparing apples to apples.
Anon 12:48, get some sleep. We've discussed that topic over and over again, but just so that you know, the teardown part of that equation is almost never on the MLS, and that's where the data comes from.
MBC, please post this on your blog somewhere so that we don't have some genius thinking he's the first to bring it up in two weeks.
To the MB Watcher. Your credibility is much better when you stick to the facts or at least back up your opinions with relevant statements. I'm not a genius but I do know that the busy corner of Poinsettia and 19th is not a comparable location to this address.
Both properties seem to be closer to lot value because the houses are small, so some mention of lot size would be relevant. Can you back up your claim that there are better homes priced at or below the same list price that are west of Pacific and south of Marine (walking distance to downtown, parks, the beach and more). I'm sure you can find a better price on Oak.
After having an agent friend search the MLS, it seems that this home was not listed for sale when the current owners bought it. How do you know if they overpaid or underpaid at the time.
Did the buyer's get a better price by buying direct from the owners? How about all of the work the owners put into this home and back yard.
Maybe if you could show some relevant lot value comps you could back up your opinions.
My biggest issue with your blog is that you are using your "power" to scar some properties and promote others. Its hard when buyers want to pursue a property and they have to defend comments from your lemming like readers.
For full disclosure, I am a neighbor on 19th and I do want to see a good sales price. But more importantly, I would like you put a little more thought into pricing opinions and back it up with relevant sales information.
It might be interesting to see if how prices have fared in Manhattan beach west of Pacific versus east of Pacific. How about Strand pricing and West of Highland. I think you will find that the closer to the beach, the better the values have held or appreciated.
10:31, I share some of your views. When I looked up the locations, I questioned the lack of discussion regarding location of the so-called comp. Clearly this property is in a superior location, just up from the railroad tracks (green belt?), park and within easy walking distance to downtown and the beach. Also, I have commented on this before. If you are going to bash a specific house, you should not do it anonymously. If you really live here, keep in mind that many of these folks are decent people with good intentions, who may even be your neighbors.
"Lemming like" readers". I like that one, 10:31.
If nothing else, this blog is good group therapy for the 'lemmings,' most of whom are bitter about having to rent because of what they regard as unwarranted and unjustified high real estate prices. Now they can bash homes, homesellers (all greedy flippers and developers), homeowners (all idiots if they bought in the past 5 years) and realtors anonymously to their heart's content.
I guess that's better than harming small animals.
7:36AM - I don't see how your comment makes a difference. Aren't rebuilds an outlier, because they don't really give an indication on whether values are going up or down?
Anon 7:36 -- we've seen the claim that teardowns are sold off MLS several times in the comments. If that's true (it's always been unsupported), wouldn't that skew medians even more? (i.e. you wouldn't have a low priced sale to offset the high priced sale?)
11:44, median prices, as calculated off the MLS, take all reported sales, including new construction, and compares to median prices in previous time intervals based on all reported sales, including new construction. Since there are new homes being built and sold every year, their sales data does not skew the result. If new construction slows in the future - and there are indications to that effect - there may be downward pressure on median sale prices from less new product but that may be offset by upward price pressure on the few new ones as well as on newer existing homes.
12:03, your reasoning is flawed because off-MLS lot sales have been going on for years and years; it didn't just start in 2007-8. So the effect on median sale prices would be equal across all time periods and would not skew the results.
It's true that few lot sales make the open market, but the sale prices are sometimes reported, which would put _some_ into the MLS data.
You can never be certain exactly which sales are lot sales – especially when you see some that do hit the open market that could go either way. So it's hard to be scientific about excluding those. (One man's teardown may be another's rehab project.)
That means the imperfect data on median price we're speaking about here carries the assumption that the mix of lot sales reported in the MLS data remains roughly the same over time.
But check that assumption. If there are fewer lot sales to builders OR fewer are reported, the median will tend to jump up. If so, what does that reflect?
The class warfare on this blog continues to be astounding. Many of you truly seem to believe that renters are inferior to owners, based solely on the relative wealth and income of each group.
What about a young family around 30, their first kid an infant, looking for their first home? Both making decent money, more than enough to buy at prices along historical trend lines, but not nearly enough to afford today. Are they just disgusting renters? Their bad that they didn't have rich enough parents to buy them a home?
I'm describing the young couple who lived above me, and could no longer afford to stay near their friends and family in California, and so just moved somewhere with much lower prices. The guy went to Harvard Business School, but he had taken only an average paying job at a non-profit (I guess that makes him a sucker?). For the past three years he waited, but could never afford a house here, so they've moved (out of the country, actually).
I guess I should send him a card saying, "you have only yourself to blame, renter!"
Epsilon:
Lame post. If you cannot afford a home in one neighborhood, buy in another and save until you can trade up. What is so wrong with that? Instead of going to the "parents helped you out" card, how about going to the, "buy what you can afford" card. My first home was $250k 16 years ago, and it wasn't in MB or HB. If you can't buy in MB, buy in RB or ES. When you save more, buy elsewhere. Duh. Do you really think that everyone should be able to afford a home in EVERY community? That is not how it works.
The couple I'm talking about did consider Simi Valley, but that was the only safe area they could afford. If you've got young kids, you can't just randomly buy anywhere just for the sake of getting into a house... the commute and the schools matter.
In LA, even a modest home in an area with decent schools and a reasonable commute is unaffordable to anyone who could accurately be described as "middle class." Thise couple wasn't looking to buy on the beach. Even the worst homes on the west side or South Bay tend to be $1 million plus. How is the average family supposed to afford that?
Please, tell me where an average family can buy without facing a 2 hour commute, horrible schools, crime, or all three?
Since you ask, I suggest Culver City where I lived for many years. Most parts are very middle class, it's centrally located, good schools, incredible redevelopment in the downtown area, close to Marina del Rey, and prices still below 1mill in most areas. Very little crime. Also, Torrance, similar demographics but larger town. Simi Valley . . . ohhhh the humanity.
Epsilon
Your point is well taken. It is true that house pricing has been so increasingly disconnected from historic fundamentals: IE: 4-6% yearly appreciation vs 20-40%. This has happened very gradually over the past 15 years. That's not so long ago! As your post accurately implies, the middle class is getting squeezed into oblivion. If, houses were bought as homes to live in, rather then as investment flips resulting in windfall profits or as access to endless ATM withdrawals... if, lenders adhered to sound requirements where lending meant 20% or greater down with more conservative income to loan ratio's AND if, the Federal Reserve reigned in too low interest rates sooner, you might not have seen the run up you are now scratching your head at.
All of these elements caused the feeding frenzy that has put housing out of the reach of many solid, middle class wage earners. The good news is, things are changing. Loans require proof that one is able to pay it back and the housing market is dramatically slower. Rest assured the market will continue at this very slow pace till pricing is marked to the market. Market fundamentals, credit environment and ones need to sell will continue to exert downward pressure on prices until the balance is restored. It won't happen over night, but it will happen. Tell that young couple not to lose heart, be patient, wait, save through wise investments ...
Their day will come.
Anon 1:40's post forgot one thing...16 years ago, one could still AFFORD to buy a first house in an area with close proximity to where they worked! 16 years ago Anon 1:40 wouldn't have been able to save enough to buy if the same market forces were in play back then. It's like comparing apples to oranges and simply does not apply!!
Epsilon said: "Please, tell me where an average family can buy without facing a 2 hour commute, horrible schools, crime, or all three?"
You get what you pay for. You want cake and eat it too? Nope. This is EXACTLY why people pay up.
Why not San Pedro (the nicer areas)? Why not Rancho PV? Prices will always be strong in desirable areas. Don't listen to the moron at 6:48pm. It isn't apples and oranges. Back then, I couldn't afford MB, so I bought elsewhere. Not much difference. Bottom line is, there are places to buy. Go to the valley. If you are looking for a $500k home, go to torrance. If your goal is finding a $500k home, you haven't saved enough, or you don't make enough money yet. That is the way it goes. Desireable areas cost more.
Thanks for the Culver City tip... I did some searching, and prices there are a lot more affordable than I thought was possible.
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