Real Homes of Genius Special Edition: Today we Salute you Southern California. 6 Counties and 6 Homes.

21 08 2008

Real Homes of Genius Special Edition: Today we Salute you Southern California. 6 Counties and 6 Homes.

Posted by: admin in Real-estate news

Dreams do come true. In the ongoing saga of Ed McMahon’s housing troubles on his Beverly Hills home, yesterday Ed’s realtor stepped up to plate asking for someone to come purchase the home before it would be foreclosed in the next two weeks. Well as it turns out none other than real estate mogul Donald […]
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Dreams do come true. In the ongoing saga of Ed McMahon’s housing troubles on his Beverly Hills home, yesterday Ed’s realtor stepped up to plate asking for someone to come purchase the home before it would be foreclosed in the next two weeks. Well as it turns out none other than real estate mogul Donald Trump will be purchasing the home according to the L.A. Times. The agreed upon price is currently undisclosed but Ed has lowered the price on the home from $7.7 million to $4.6 million. Either way, we’ll find out soon enough what the agreed upon price is. The Donald does have a sweet spot for the 90210 zip code.

Today in a very special Real Homes of Genius we are going to look at the 6 counties that make up the Southern California market and give you a taste of what is happening on the ground. These homes will range from super prime homes to something akin to the $1 home that sold in Detroit:

*Source: Zillow

You’ll love the aerial satellite view from Zillow before the place was stripped naked like a Playboy photo shoot. This may in fact be the ultimate Real Home of Genius and you can only imagine the face of the agent receiving the whopping 6 cents in commission. Now on this home we can say that it was worth every penny. People forget that these homes may have unpaid taxes, major repairs needed, and also may be more of a burden than anything else. You can be the judge of that. Detroit has many homes that are practically being given away just to get someone to move in.

In Southern California some people are still in delusion land and think that the housing correction is only a minor bump in the road. A speed bump in the infinite pursuit of unlimited appreciation. This is the psychology that is still prevalent in the market. The market seems to be at a standoff between those that believe the bottom is not yet here and those that think now is the time to buy before prices skyrocket once again. I tend to believe California won’t see a bottom for another 3 years and prices will fall overall by at least another 20 to 30 percent.

This isn’t some random theory. The Case-Shiller Index currently has the L.A./O.C. index at 198.59. The last sold future contract for November of 2011 sold for:

Someone is actually making the bet the Case-Shiller index will fall to 155. That translates into an additional fall of 21.9% for the entire region. These are bets that are made with real money. Clearly the line in the sand is being drawn. I think those making the bets for stability are vastly underestimating the explosive toxicity of the pay option ARM fiasco that will commence this forth quarter and will hit full stride in 2009.

So let us now salute the 6 counties that arguably are the most overpriced counties in our country. Today we salute you Southern California with our Real Homes of Genius Award.

County #1 - Los Angeles

Population: 9,948,081

Area Spotlight: Toluca Lake

Median Price zip code: $862,000

What more can you ask for than having NBC-4 weatherman Fritz Coleman as your honorary mayor? This small community of 16,978 people is between the city of Burbank and North Hollywood. The Santa Monica Mountains surround the area of Toluca Lake and provide one of the nicer areas of Los Angeles.

Toluca Lake even though it is considered prime, has not been immune to the housing bubble busting. The area’s median home price is now down 16.6% when it flirted with the $1 million mark. This 6 bedroom and 7 baths home provides a lake front view (hat tip L). You are going to love the view since it is going to cost you $6,650,000. Now before you go to your IndyMac FDIC taken over account to put down a earnest money deposit on this place, you may want to look at the pricing action:

Listing Price History

Date Price

May 23, 2007 $8,795,000

Jul 10, 2007 $7,795,000

Oct 17, 2007 $7,100,000

Feb 16, 2008 $6,650,000

This place has been on the market for 450 days and has seen a reduction in price by a stunning $2.1 million in one year. Now that is a true discount. But is it? Let us look at the previous sales history on this place:

Date Price

Jul 31, 1991 $1,200,000

Apr 09, 1999 $1,090,000

This place actually sold for a loss in 1999! Even given the current selling price, we are talking about a $5.5 million gain in 9 years. Now that is what we call high hopes.

County #2 - Orange

Population: 3,002,048

Area Spotlight: Newport Beach

Median Price zip code: $1.85 million

Just because Kobe Bryant lives in Newport Beach doesn’t mean all homes will sell for multi-millions. At least that reality is coming home now. It was thought during the days of housing bubble lore, that simply buying in Newport Beach meant you were going to be a millionaire with enough money for you to create your own rendition of Redline the movie.
This above home is amazing because who would of thought steel gates would be abound in a community with a $1.85 million median price. This 3 bedroom and 2 bath home is a nice starter home for any would be millionaire. This place is on the market and is a foreclosed home. A foreclosed home in Newport Beach? That is correct. The current list price for this home is $1.2 million. Not bad right? Well let us look at the previous sales history:

Sale History

12/21/2007: $949,900 *

06/27/2006: $1,477,000

The $949,900 price tag is simply the lender taking the place back. The more important price point is the $1.47 million. This home is already selling at a major loss since who only knows if there were second mortgages on this place that are now wiped out. Given the current market and lack of movement on this place, the current $1.2 million doesn’t seem to be wetting the appetite of many. At what price will this home sell? And when it sells, you can rest assured that median price is going to head lower.

County #3 - Riverside

Population: 2,026,803

Area Spotlight: Riverside

Median Price zip code: $300,000

I love trash can real estate photography. You almost expect Oscar the Grouch to pop and say, “buy me, buy me, buy me!” Riverside is being hit hard by the housing crisis. This zip code is now down 36.6% on a year over year basis and once we go into the details of this Real Home of Genius, you will know why. This 5 bedroom 4 bath home has been on the market only for 3 days at least according to the MLS data. The current list price is $794,900. Is this a deal? Well let us now examine the previous sales history to find out:

Sale History

07/25/2008: $750,000 *

03/21/2007: $1,200,000

04/30/2002: $635,000

Again that $750,000 is simply the lender taking the place back. With the current sales price, it looks like the lender is simply trying to recoup part of the first mortgage. This place sold at its peak only last year for $1.2 million. If you do the math on the current discount, it works out to be approximately 33%. Lenders are paying attention to the current market price and are cutting prices to reflect this. A $400,000+ discount is not a bad deal. That is, if someone even has the money to buy this place in an area where the median priced home is $300,000! Do you see why this bottom is nowhere insight?

Until we start seeing housing glamour shots, we are nowhere near a bottom. I’ve seen places in the Midwest where lenders take the time and meticulously arrange homes to sell for $200,000! Here for a $794,900 home they can’t even move the garbage and recycle cans out of the way.

County #4 - San Bernardino

Population: 1,999,332

Area Spotlight: Fontana

Median Price zip code: $321,000

Don’t you love model homes? I would get tons of brochures about these places during the boom. San Bernardino and Riverside counties make up the Inland Empire. These two areas have been absolutely slammed by the housing correction. Yet as you can see with L.A. and Orange counties we are simply a year away from catching up as well.

This above home is one reason why Southern California was the epicenter of the housing bubble. This 4 bedroom 4 baths home have been on the market for 115 days. Currently the list price is $569,000 which is high for an area with a median priced home goes for $321,000. This zip code has fallen 25.5% in the last year. The current list price may not be such a good deal:

The listing description tells us this is a short sale but the MLS data is stating that it is a foreclosure. I would venture after looking at the sales price that this is a foreclosure:

Sale History

03/14/2006: $875,000

A 34% discount in two years. This is why the Inland Empire is having so much pain. Also given the still high price of fuel, who is willing to commute 30 or 40 miles into OC or L.A. county for work? The numbers simply do not work. The incomes in these areas do not remotely reflect the price of some homes.

County #5 - Ventura

Population: 799,720

Area Spotlight: Newbury Park

Median Price zip code: $699,000

This home should be called “when refinancing goes wrong.” This home is located in Ventura County in the city of Newbury Park. Newbury Park has seen a 15.7% yearly decline in their housing prices and this is one of the more prime areas of the county. This home above is a 4 bedroom 3 bath home with apparently dry grass. This is an REO and is currently on the market for $875,900. This home simply by looking at the sales history, we can tell that this was a refinance machine:

08/01/2008: $700,000 *

07/27/2006: $296,695*

11/07/2005: $163,000

Again, the August number is simply the bank taking the place back. But between November of 2005 some $500,000+ in who knows what of mortgages was attached to this place. Normally the banks take back the REOs should their be no matching bid at auction for the face value of the first mortgage. The 2006 price was probably a refinance and given the 2008 number, this place was a mortgage equity withdrawal machine. Don’t you wish you lived in California so you can max out your home, suck out all the equity, and let the bank take back the place? A salute to you Real Home of Genius in Newbury Park!

County #6 - San Diego

Population: 2,941,454

Area Spotlight: Poway

Median Price zip code: $550,000

Our final stop takes us to Poway in San Diego County. San Diego was the first county to falter during the Southern California bust. It appreciated the quickest but also fell first. This 4 bedroom 2 baths home in Poway is another example of the hyper bubble here in the Southland. First let us look at the sales history action:

07/16/2008: $293,203 *

11/06/2006: $498,000

12/08/2000: $225,000

The bank is going to take a major hit on this one. The current list price is $320,000 and is sold “as-is” which you are going to see a lot of in the months to come. The peak price of $498,000 is absurd and even the current price of $320,000 is the lender simply trying to get out as soon as possible.

So there you have it. These 6 counties have a combined population of 20,830,000+ and still have prices that reflect very little of the incomes of those in the areas. California is years away from the bubble. Need more reasons than the above examples? Read 10 reasons why we are on the verge of flying off the diving board into the housing abyss.

Today we salute you Southern California with our Real Homes of Genius Award.

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