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A Tale of Two California Markets

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Desirable areas in Los Angeles County are finding bidding wars and many places are selling for prices last seen during the peak of the bubble. A fierce competition between flippers, foreign money, and households with healthy incomes leveraging low mortgage rates are pushing prices higher. A few readers were sending over some of the recent action taking place in Culver City. A few recounted their tales of open houses and the sense of urgency to purchase a property. The flood of easy money has certainly had an impact on mid-tier and prime locations. Only a two hour drive up north, in California City you can find homes selling for rock bottom prices. This is a trend bearing out in income statistics. It is becoming harder for the middle class to find affordable housing in California. Some have mentioned in zombie like fashion that some areas are becoming fortresses while other areas are left struggling. Let us take a look at some recent data.

 

Culver City – Bubble Prices Back

The median price of a Culver City home is $635,000 for the 90230 zip code and $703,000 for the 90232 zip code. One recent sale caught my attention because it is fresh and the current sale price is very near to what it sold during the previous mania:

culver city home 1

4348 Globe Ave Culver City, CA 90230

Beds: 2

Baths: 1

Square feet: 1,036

Year Built: 1950

This home looks to have the HGTV upgrades that seem to be very popular in SoCal:

culver city home 2

The listing history however shows us the impact flippers are having on the market. This home sold in 2006 for $600,000:

 

culver city peak prices

It was listed on the market earlier this year for $399,000. It sold for $420,500 in April meaning some eager flippers were fighting for this place in Culver City. A good deal was to be had here. After some HGTV remodeling the home was listed back on the market in August for $630,000. No action. Then in September, they dropped it down to $599,999 to show up on the radar for those that have alerts set up to go off when a “$500k” home shows up. It looks like it worked because early this month, a measly $6,999 reduction was all it took to get this place sold. So run the numbers:

Sale price: $593,000

Bought for: $420,500

Gain of $172,500. In a matter of a few months a remodel made this home go up in value by the median price of a US home. These flippers even accounting for the cost of the remodel and sales commission likely made out nicely.

Another example of a home shows the overall environment in places like Culver City:

culver city home other example

4367 Tuller Ave Culver City, CA 90230

Beds: 3

Baths: 1

Square feet: 1,124

Year Built: 1946

This is a recent sale as well. Here is the history on this place:

Listed for sale: August, 20 2012 at $529,000

Sold: October, 10 2012 for $565,000

When you see pricing like this it signifies that there was plenty of interest on the list price and likely caused the price to be pushed up. This is the kind of action that is occurring in Culver City. Are incomes higher? No. But what you have is flippers, foreign money, and maximum leverage via low interest rates creating a scenario where homes are reaching peak prices. Yet only a few hours away in California City, the busted housing bubble is still very much alive.

California City

California City has a population of 14,120 and is located in Kern County. People in some areas of LA and Orange County clearly do not look too far inland when they ask “but where are the cheap California homes?” Not too far away. In fact, you can find some areas where the popped housing bubble is clearly in action:

California city

9901 Pebble Beach Dr UNIT R California City, CA 93505

Beds: 3

Baths: 2

Type: Condo

Year Built: 1989

So how much is this condo selling for? How about $77,900. Maybe you want an actual single family home? How about this?

california city home

7354 Catalpa Ave California City, CA 93505

Beds: 3

Baths: 2

Square feet: 1,616

Year Built: 1990

The price on this home? This place is selling for $76,900. The price on this home is back to the early 1990s:

california city

Those that think the bubble popping did not impact California real estate are simply not looking hard enough. The Central Valley and Inland Empire for example have been hit hard and prices are still at affordable levels. Yet looking at more select areas you see that the bubble never popped. Flippers are back. Prices are back near peak levels. And bidding wars are back. For those buying in these high activity locations be prepared for the familiar smell of mania.

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Sat, 12/01/2012 - 02:48 | Link to Comment Lord Koos
Lord Koos's picture

Easy money for some, shit sandwiches for others...

Sat, 12/01/2012 - 00:40 | Link to Comment mrpxsytin
mrpxsytin's picture

You guys would be amazed by Perth, Western Australia. 

I could sell my 2bedroom, 850Sq Feet unit for ~$570,000 USD. It doesn't even have a backyard. We are experiencing the same mini-boom here. Except this mini-boom is coming off the back of only around a 5-10% drop in realestate prices. We never had the -30-50% drops like you had in the US. So if you think things are crazy in Culver City DO NOT come over here. It is total madness.

Low interest rates are awesome.... subsidising the non-productive sectors of society will totally make the world a better place. Meanwhile our governments are slashing education... FORWARD!

Sat, 12/01/2012 - 01:39 | Link to Comment francis_the_won...
francis_the_wonder_hamster's picture

For the record, I still rent an ocean-front condo in SoCal for $3000/mo.  If I bought it with 20% down, tax-adjusted, it would cost me $5800/mo. 

Do the math.

Fri, 11/30/2012 - 23:40 | Link to Comment SmittyinLA
SmittyinLA's picture

This is the effect mass illegal immigration has had on Ca home prices.  Believe it or not Culver city has a huge illegal alien population in spite of 600k 1 be 60 year old fixers.  Houses like that in LA will typically house 12-25 immigrants pricing out all the citizens, it gets worse when they have 6 kids and get paid for every single one.

Sat, 12/01/2012 - 00:14 | Link to Comment willwork4food
willwork4food's picture

Yes, and THAT my dear Smitty, you can blame entirely on our corrupt Congress who goes contrary to the will of the consitution and the people that once made America work.

I don't have a problem with Mexicans or whomever. Most are hard working people. I don't like that they are here illegally though if I was in their shoes I would do the same thing.

The things that are wrong are the funding of illegal's babies ad infinitum. I had to pay for my kids diapers with my hard earned money...and they can't?

Fri, 11/30/2012 - 23:12 | Link to Comment Kasperfx
Kasperfx's picture

I hope theirs not many "familys" buying into those single family homes as it's mostly the flipers" using their easy money to trade with eachother and or rent out, this is no were near organic in fact it's the polar opposites and will hurt any real buyers foollish enugh to buy into  that craze. 

 

 

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
Thomas Jefferson(Attributed)

Fri, 11/30/2012 - 23:04 | Link to Comment GrinandBearit
GrinandBearit's picture

These fucking flippers are parasites.

Sat, 12/01/2012 - 00:02 | Link to Comment Non Passaran
Non Passaran's picture

Why don't you flip better, deprive the scum of profits and donate your profits (of course, after compensating yourself and the US government for the hard work) to charity?

Sat, 12/01/2012 - 00:28 | Link to Comment tango
tango's picture

Get serious. That kind of poster instantly rushes to demonize whole groups. Like most who bash the entire sector of bankers, politicians, investors, brokers, it doesn't really matter, their info comes not from personal experience but fake tv shows and web sites,

I Guarantee if there was an article on zoo workers you'd soon read that they were all scum, should be shot, were parasites, etc. all a flipper does is add value and give choice while taking a huge chance that his gamble will pay off.

Fri, 11/30/2012 - 22:13 | Link to Comment D_o_C
D_o_C's picture

Hey my home town Culver City makes it on to ZH! Great place to live but some of the houses are way too small with no back yard but that would be my only gripe, as they say location location location. If you were to buy here it is worth looking around for the houses that are of decent size with good backyards, they do exist and they are less than a mill. In 2010 a shoe box shaped house with no yard up the corner from me sold for about 800k, what a rip! However if you want to compare owning to renting then a 2 bed/2 bath apt. with private garage is $2,000 per month and that's actually considered a deal.

 

Fri, 11/30/2012 - 22:08 | Link to Comment dolph9
dolph9's picture

Deluded "reality stars" of the moment and Asians trying to escape their own despotic lands keep bidding up nowherevilles in California.

Human delusion knows no bounds.

Of course things could be worse.  It could be like my hometown.  Word of mouth spread amongst the ghetto dwellers that it was a "nice" place to live with good schools.  And they were egged on by stupid articles in Forbes like "the best places to live" and the government, of course, aided and abetted through section 8 and affirmative action corporate jobs.  The corporations, of course, caving as they have unlimited fiat money to pay off the NAACP lawyers.

So the ghetto dwellers moved in and now my hometown is shit.

Fri, 11/30/2012 - 21:07 | Link to Comment SanOvaBeach
SanOvaBeach's picture

Flippers and whores, same thing.  Made the money, who gives a fuck.  Don't you just love it.  Buy a house, fix it up a little, and sell it to some stupid fuck...........

Fri, 11/30/2012 - 23:23 | Link to Comment willwork4food
willwork4food's picture

If you didn't have flippers, you would have less inventory. Less inventory means higher RE prices and higher rent command prices. The flipper puts his dick out on the line quite noticably in the hopes of selling the home at a profit over & above the interest & labor charges he incurred. I don't recall the  US ADAA forcing people to sign on the bottom line for an over priced house.

I might agree with you in that many flippers pay their help @ barely sustainable wages and expect journeyman quality. Those types are coming out of the woodwork today and yes they are not much different than whores. But if someone wants to take a hard labor job at $10/hr thats their business.

Fri, 11/30/2012 - 22:07 | Link to Comment CheapBastard
CheapBastard's picture

Flippers, Landlords (renters) and investment companies have no stake in what used tio be called a "community" so the areas deteriorate inevitably.

Fri, 11/30/2012 - 23:58 | Link to Comment socalbeach
socalbeach's picture

Not always.

Landlord and flipper Bruce Norris on ABC News Nightline

[Reporter:] People in your position have been called vultures. What do you think about being called a vulture?
[Norris:] I think it comes from somebody that doesn't understand what we do...

Fri, 11/30/2012 - 21:00 | Link to Comment Supernova Born
Supernova Born's picture

"Lock your doors. Load your guns."

San Bernardino City attorney, November 2012.

Prop 30 now. Prop 13 next.

"They're coming to get you, Barbara."

Fri, 11/30/2012 - 19:50 | Link to Comment Rainman
Rainman's picture

That thousand foot, 62 y/o Culver City bungalow went for about 8 times median income for that area. Doesn't anybody ever ask "WTF"....??

Fri, 11/30/2012 - 22:09 | Link to Comment socalbeach
socalbeach's picture

I wouldn't have purchased the place, but it is probably competitive with renting because of low interest rates, courtesy of the Fed. 

Assume 3.5% interest rate, 1.25% prop tax in LA (Prop 13), and $700/yr in insurance.  Then interest, tax, and insurance comes to about $2,400/mo (assuming nothing down, and not counting principle reduction since it's not an expense technically).  At 3% the cost is only $2,160/mo.

I quickly located this place of similar size, 2br, 1ba, 1,088 sqft, in Culver City, and they're asking $2,700/mo for rent:

11861 Juniette St, Culver City

Fri, 11/30/2012 - 19:42 | Link to Comment Vendetta
Vendetta's picture

comparing California City to Culver City is kind of silly but we get the point about the bubblicious activity.  But if you have ever been out in the area around California City, you'd see a lot of nothing but scrub brush, tumbleweeds and dust then lancaster, palmdale and then a pretty lengthy drive from there to any jobs in LA ... it would be perfect if you have a perm job at edwards afb if there is such a thing as a perm job. 

Sat, 12/01/2012 - 01:22 | Link to Comment SoCalBusted
SoCalBusted's picture

Exactly, plus all those people that bought the "cheap" SoCal housing in the IE and work in LA now pay it back in the form of high gas prices as well as 2+ hours of daily commuting.

Fri, 11/30/2012 - 18:42 | Link to Comment willwork4food
willwork4food's picture

Near 600k???? For a one bath 1036sf bungalow? Something like that wouldn't fetch $200k IN the city and knock off half that if it was out of town.

 It just goes to show you the disparity with earnings in CA vs a right to work state like VA. What do they have that we don't have? (Besides valley girls)

Fri, 11/30/2012 - 22:23 | Link to Comment Freddie
Freddie's picture

"What do they have that we don't have?"

A daily dusting of that Fukashima MOX & Iodine 131, gamma rays, aerosols and isotopes.

http://www.ritholtz.com/blog/2012/03/california-slammed-with-fukushima-radiation/

Oh and Fukashima ain't "fixed." I doubt it will be "fixed" in our lifetimes or in say 50,000 years.

Sat, 12/01/2012 - 00:00 | Link to Comment socalbeach
socalbeach's picture

Yes, because everyone knows CA built a several mile high wall on the mountain tops running the length of the state, that prevents the radiation from going East once it gets here.

Fri, 11/30/2012 - 21:30 | Link to Comment Bear
Bear's picture

High realestate prices

Fri, 11/30/2012 - 23:13 | Link to Comment willwork4food
willwork4food's picture

Funny, we have high RE prices here too.

There might be a difference between 'high' REPs & fucking ridiculous 'high' REPs..

Fri, 11/30/2012 - 21:25 | Link to Comment Animal Cracker
Animal Cracker's picture

Year-round Spring, laborers so cheap regular joes hire out their yard care and car washing... and Medical Marijuana.

Fri, 11/30/2012 - 23:13 | Link to Comment GFKjunior
GFKjunior's picture

It's that damn weather.

Fri, 11/30/2012 - 18:29 | Link to Comment Joebloinvestor
Joebloinvestor's picture

By the way, one should do some research if you think you are gonna buy a house and rent it out.

The government changed the tax laws so you cannot "write off" improvements until you sell.

Fri, 11/30/2012 - 17:44 | Link to Comment Joebloinvestor
Joebloinvestor's picture

Location,location, location........

Fri, 11/30/2012 - 20:57 | Link to Comment Supernova Born
Supernova Born's picture

Outside the borders of CA, CA, CA.

Fri, 11/30/2012 - 17:32 | Link to Comment Pool Shark
Pool Shark's picture

 

 

California City???!!!

IT'S IN THE MIDDLE OF A F***IN' DESERT!!!

http://www.youtube.com/watch?v=vN7ehccspao

 

Fri, 11/30/2012 - 17:23 | Link to Comment adr
adr's picture

In my neighborhood that house would be worth $45k max, and I live in a middle class white suburb. In fact that house makes some Cleveland ghetto houses look attractive. You can still buy those fixed up for about $10k.

Take away the palm trees and replace the BMW with an Escalade and I'd swear you were in East Cleveland.

Fri, 11/30/2012 - 17:52 | Link to Comment walküre
walküre's picture

Might be a good market buy a house and put it on a trailer to the East Coast.

You can't build a house for 10k anywhere. Even 45k is next to impossible when you figure $80 per sq/ft. That's on the lower end.

Seriously, there is a huge rebuilding effort coming in the NE due to Sandy. Some of those cheap boxes in OH could simply get moved by trucks. I've seen it done number of times.

Fri, 11/30/2012 - 22:02 | Link to Comment Freddie
Freddie's picture

Those homes in the NE were built like crap.  Sandy was a minor storm.  Also too many people too close to the water from the flood surge damage. 

Fri, 11/30/2012 - 21:32 | Link to Comment Bear
Bear's picture

$80 / sqft ... Cali minimum is $150

Fri, 11/30/2012 - 17:12 | Link to Comment optimator
optimator's picture

And the most expensive house bought this year?  The White House!

Fri, 11/30/2012 - 21:34 | Link to Comment Bear
Bear's picture

At least it will be flipped to someone else in four years (1511 days to be precise)

Fri, 11/30/2012 - 21:46 | Link to Comment hawk nation
hawk nation's picture

Im not so sure of that and might be willing to bet against it for the right odds

Fri, 11/30/2012 - 22:38 | Link to Comment Joe Davola
Joe Davola's picture

Barack Hussein Morsi is barely an Executive Order from Eternal President status.

Fri, 11/30/2012 - 19:44 | Link to Comment Vendetta
Vendetta's picture

Lloyd and Jamie own the white house.

Fri, 11/30/2012 - 17:02 | Link to Comment walküre
walküre's picture

I love those remodel specials. Can't blame the guys who purchased the Culver City box for 420k earlier this year, put 30k in upgrades into the place and flipped it right back to market before the election. Sold date 11/05 lol!

After fees, commissions etc the guys made a solid 150k gain in a matter of months. They took the risk and could have been stuck with the box. Renting it out would have been their last option. Not sure what rents are out there.

Sat, 12/01/2012 - 11:00 | Link to Comment Imminent Crucible
Imminent Crucible's picture

"put 30k in upgrades into the place"

Not likely. For $30k, you might get a bath remodel in that district. A kitchen remodel can easily set you back three times that.  I flew out there in May to look things over. And yes, I'm a contractor/developer in the building trades since the early 70's.  Another thing, when you go to get a building permit out there, the impact fee schedule will blow the top of your head off.

When everybody is certain it's easy to get rich refurbishing and flipping, the ax is about to fall. Again.

Fri, 11/30/2012 - 22:59 | Link to Comment vast-dom
vast-dom's picture

this post is too overly simplistic. culver city is close to several movie studios and effects houses. that is why it is expensive. and as such there are many good restaurants and shops and a quick drive to Venice as well as fairly close to town.

so you can't compare buttfuck Cali city to Culver City, shitty houses in both places notwithstanding. 

Fri, 11/30/2012 - 21:51 | Link to Comment hawk nation
hawk nation's picture

They took not so much risk since they were probably friends with the banker and if things went bad they would walk away and leave fanny or freddie holding the bag with the bankster being made whole on the morgage by the gov.

ULTIMATELY THERE IS NO RISK SINCE ALL TRANSACTIONS WERE IN FIAT MONEY

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