Perfect Starter is a Scraper

Some months ago, in MBC's inaugural days, we featured a home pitched as "The perfect Tree section starter!"

3521 Elm is a 1200 sq. ft. bungalow in a part of the Tree Section that's pretty forgettable. That the sellers believed that "move-in buyers" should pay just shy of $1.3m for this small "starter" in a minus location was galling.

As MBC said at the time:

To pay $1.2-$1.3m to live in a tiny house here seems like a desperation move.

The months passed, and the market seemed largely to agree.

In June, after this one went pending, the listing agent's ads started to show the home as one of several sales to builders. At that point, it was clear this would be no one's "starter home." It was a scraper.

This week the price came in at $1.150m, 10% off the start price, and seemingly a bit high for the location. Next stop? Part of the Tree Section new-construction glut.

Giant Price Drop on Elm

Another new listing that isn't so new draws our notice today, because it's down $775,000 from the initial asking price.

A perfectly nice early-90s home – updated in key areas – at 2909 Elm first went on offer November 7, 2006, at $2.8 million. That price was really pushing the envelope, garishly high, for what the home is (5br/4ba, 3450 sq. ft., slightly larger lot at 5600 sq ft).

By springtime, the price was down to $2.495m, and briefly in late June, down again to $2.395m. Even at that level, it was at or above the price of similarly sized, nearby new construction.

In a different market, you could keep waiting to get your price. But in the glutted Tree Section, the writing was on the wall: $2.4m was never going to happen.

Reality intervened. This week: New agent, new MLS number, and a new price: $2.025m.

At the moment, this makes 2909 Elm the lowest-priced home above $2m, and finally it compares favorably with the others at the same price point. (See the MB Market Update spreadsheets for more.) Now, at least, there's a fighting chance of making a sale.

Just had to shake off that extra $800,000.

These cuts brings to mind the shakedown at 108 S. Dianthus, a Hill Section home that sat for nearly 400 days before closing $1.25m below the initial asking price of $4.5m. Yes, it's possible to get your price wrong for a long, long time.

As a buyer, if you knew that Elm had made two steps down – one from a silly price to a semi-defensible price ($-305k), then down again to a more current-market price (-$470k), you might ask: How much lower will they go?!?

That's what re-listing is all about. The new agent doesn't want to answer those questions or otherwise to be saddled with the baggage of this property's listing history, so it's gone. The MLS #R937139, attached to this home since November, was canceled after 240 days, giving way to #S950200.

So please don't ask about the old listing or old prices, or what's motivating the sellers now – that's rude.

A $1.3m 'Starter Home'

In a way, I hate to pick on one listing. But I was struck silly reading the language pitching a 1,200 sq. ft. 3br/2ba bungalow at 3521 Elm listed at $1,279,000.

The listing begins: "The perfect Tree section starter!"

(Sigh.) A "starter home" for $1.3 million. So many questions.

How did we get here? Why is this considered normal? And, though it is surely the case that a "starter" like this did, at one point, command $1.3m in this area, is that still true?

Somebody might walk right up and pay the list price, or list -5% ($1.2m), and all the realtors and active buyers will nod their heads and say, yes, it's still ON, and we'll all just continue like normal... Or that might not happen, and these sellers may hang around a while and take $1m when the deal finally gets done. (They paid $685k in 2001, so don't cry for them.)

As I said, it's not fair to pick on this one house. There are perhaps a dozen homes in the price range west of Sepulveda that qualify as "starters," but they aren't being pitched that way. It's the honesty of the language here that causes MBC to single out the Elm listing.

Zillow, which usually seems to guess high in MB, says this one is worth $1.180m, or $100k less. A neighbor, at 3613 Elm, quite recently got $1.180m (exactly) for a fixer with 1,300 more square feet (2,500 total). In fact, for about this price -- more or less -- you can lock into much larger, nicer, better-located homes all over MB west of Sepulveda.

MBC is not a big fan of Elm. The block in question qualifies only technically as the Tree Section. Parts of Elm are quite nice (esp. between Ardmore & Marine), but here the phrases "steps to Sepulveda" and "steps to Rosecrans" ring out. You are otherwise isolated, you might have a view of the Chevron refinery, and you'll be driving wherever you go.

To pay $1.2-$1.3m to live in a tiny house here seems like a desperation move. Here's betting that today, in 2007, with lending standards tightening and some real churning in the marketplace, nobody pays that for this particular "starter."


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UPDATE: March 19 - 12 days after going on the market, the listing price was reduced $40k to $1.239m. Sort of a bogus drop.