Real Homes of Genius: Manhattan Beach Short Sale. Another Prime Real Estate Area Impacted.

22 01 2009

Real Homes of Genius: Manhattan Beach Short Sale. Another Prime Real Estate Area Impacted.

Posted by: admin in Real-estate news

Investing psychology is fascinating. When I profiled a 676 square foot Real Homes of Genius in Santa Monica there were a few doubters. “Santa Monica is immune!” or “I don’t believe that home is in Santa Monica” were a couple of the responses. Yet people forget that Santa Monica has a few zip codes. That […]
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Some people are still delusional. So far, we have featured 99 Real Homes of Genius since we started the series back in 2007. It is interesting that whenever I feature a home in a low to middle income neighborhood that is overpriced, normally most people are in agreement. Yet when we touch tiny over priced markets in Southern California people once again put on their bubble hats and preach the “real estate never goes down here” mentality. This flawed logic is being exposed as each day passes by.

When we talked about the Ed McMahon foreclosure in Beverly Hills, we actually noticed a major price decline at the time. This was occurring in a period when bidders were supposedly going to take over the home. That did not happen (at least not at the peak price). Here is the bottom line. Having a prime area isn’t enough anymore. Now people want a prime home in a prime area with the right zip code. Notice how the contingencies are getting more extensive? It used to be having a home in California was enough to ask for outrageous prices. This is no longer the case.

The reversal happened in typical fashion. Here are the stages of unraveling:

(a) Low priced sub-prime homes fall first

(b) Low to middle priced sub-prime, option ARM, and Alt-A homes then fall

(c) Middle to high income non-prime zip code areas fall

(d) Upper income prime zip codes start falling

We are in the initial stages of “d” right now. It is now widely accepted that lower income areas are going to implode. These areas are off 50 percent or more. Now, middle income areas are falling quickly with drops of over 40 percent. Finally, more prime areas will fall. At any given stage, there is resistance to believe that it can actually occur until it does. In fact, if you read some of the articles in 2007 some of the comment sections are comical. People denying the housing bubble and other such non-sense were prominent. Now it is self-evident.

Before we examine our Real Home of Genius today, let us first run a quick analysis of the Los Angeles market:

216 zip codes negative year over year median price

27 zip codes with positive year over year gains

27 zip codes with no sales last month or no data reporting

Interestingly enough, some zip codes in Santa Monica and Los Angeles had zero sales last month. We should also cut through the data with more precision

Sales in 216 negative year over year areas: 3,468

Sales in 27 zip codes with positive year over year gains: 188

That should put things into a more clear perspective for those trying to hide out. Only 188 sold homes in L.A. County last month actually saw a year over year positive median price jump. Considering this county has 10,000,000 people, that is a dismal performance.

Today’s Real Homes of Genius Award takes us to Manhattan Beach, another supposedly untouchable Los Angeles stronghold.

Manhattan Beach - Prime Garbage Can Photography

Most people have visions of the beach when they think of prime Southern California real estate. Maybe scenes from Baywatch go running through your mind. That is what someone thought when they purchased this 1,102 square foot home in Manhattan Beach in 2004 for $820,000. Good deal for a prime location right? You get 3 bedrooms and 1 bath in a prime L.A. zip code. After all, the current median price for Manhattan Beach is $1.183 million (although that is down 35.6% from last year). Of course detractors will once again try to knit pick but the point is this…no longer will a prime zip code save you from price declines.

So what is the pricing action on this place?

Price Reduced: 11/18/08 — $799,000 to $749,000
Price Reduced: 01/02/09 — $749,000 to $699,000

And with this kind of pricing action how can we ever leave out our fascinating trend of garbage can photography 2.0:

I love how the short sale ad tells us this is the perfect place for a first time buyer in Manhattan Beach. Too bad this place is not exactly what we would call beach front property:

You may think that a price reduction of $121,000 isn’t such a big deal but you need to know Los Angeles to realize how big these changes are especially in these zip codes. Why? Because few homes sell in these areas anyways and these will hurt comps. Drops in Santa Monica and Manhattan Beach are only the early signs that this is a once in a lifetime housing crash.

Today we salute you Manhattan Beach with our Real Homes of Genius Award.

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