los angeles SFR

[sdduuuude]

I only skimmed this board and the answers therein. This is a good group to help with this kind of decision.

I just wanted to warn you about this statement:
“i don’t want to net less than 400k”

This is a poor decision point. How much you make is irrelevant to the decision at hand. I know, it is hard to grasp this concept, but please try – you’ll be better off.

The question is – are you going to be in a better financial situation if you sell or if you don’t sell? That is the only question to answer.

Put several scenarios into a spredsheet, first assume you don’t sell then put in scenarios for selling now and buy back in 3 years, 5 years, 7 years, etc with varying depreciation figures. Don’t forget the “I don’t sell now, but am forced to sell due to a life change in 3 years.” scenario. Is your busines related to the RE industry? If so, worry.

Consider the cost of your time to facilitate a real estate transaction, the cost of moving, changes in property tax rates, tax breaks on mortgage interest, depreciation, 6% transaction fee for buying/selling, interest on any profits you can make (7% seems high, and don’t forget taxes on those earnings), the cost of renting, etc.

Even if you only make $200K by selling today, if the house price drops by $200K and you didn’t sell, that is $200K you won’t have.

My intuition tells me you are more on the “sell” side than the buy side.

D

[socalarm]

you’re right i’m more on the sell side, though i’m open to counter arguments.
i mentioned the 400k figure since that is a comfortable profit with which to return to RE in a year. i agree, it isn’t about the amount, but with anything less (300k) it will all get absorbed in the new house+remodel, judging from my remodel experience.
also, i plan to sell all my furniture and literally move out with basic stuff like books, computers, necessities. minimize moving hassles.
if i stay, my ARM resets and payment goes up. i have saved for that eventuality but can’t see why i should use it now.
if i rent, my payments go down substantially, my tax liability goes up marginally, and i earn reasonable interest by not buying for a year. by early 2008, the picture should be clearer either way. in the rosiest scenario, if RE has plateaued, i could still buy an entry level home (same as before) with the capital i created here. if RE has plummetted, even with a high inerest loan, i could put more money down and bear the increased cost. i will buy to move in permanently if needed.
i understand these sound vague without numbers, and honestly i haven’t run them diligently. but based on mortgage calculators i can’t see how i gain by staying here and paying more for an increasingly turbulent asset.

[VCJIM]

socalarm,

While a little late, it is still a good time for you to sell based on everything you’ve written. If you cannot sell, you’ve prepared yourself for your loan resets. It will not hurt to try!

I recommend using ZIP and Zillow extensively for your area to determine what you can really sell for now.

[socalarm]

thanks. i use zillow a lot, though it changes the value dramatically if you include your remodel budget.
also, since staying for me technically means dipping into a saving account, i’m really choosing house over savings. i’m self employed and if income slows down in the future it may not be the best investment. seen from that POV, i’d rather have savings but live in a rental.
i agree it is about 6 months after the party’s over, but even if i get january values (idle assumption) i don’t mind. i’m only back by 10 months, and i had a nice space to live in the meantime.
my biggest worry is getting a buyer with 5% down…LA has no shortage of people big on ambitions and short on fundamentals.

[no_such_reality]

SoCalARM, I think you’re more sell side too. Don’t sneeze at $300K, remember, a big chunk of that will be down payment, it isn’t really gone, just locked up once you rebuy. And I truely do think we’re going back to the old days of needing 10%-20% to get a decent rate on a loan.

The biggy for me is you’re indicating this really isn’t a long range home for you. Not only not long range, but also that near term ARM riding through the down turn will adversely affect your business plans. That’s bad. Very bad. The first two points on my original post are actually no and no. And to top it off, the third is owning likely will be more stress than not.

[VCJIM]

SoCalARM,

Your altruism is heartwarming, but unnecessary. Your prospective purchasers have their own situation; it is not your concern. For all you know, they may be paying cash. Even if they’re getting the worst IO Neg Am, ARM they may not be planning on staying there more than 1 year. Or they may be purchasing for tax reasons. I know this is unlikely, but my point is it isn’t for you to worry about.

[Nancy_s soothsayer]

SoCalARM,

Sell NOW. The foreclosure tsunami is approaching SouthCal shores because of too many funny-money loans propping huge mortgage loans. You will be able to buy again a nicer house in similar area at deep discounted rates after 4-5 years. Many of these “debt-drowned” refugees will migrate out of Southcal to get rehabilitation in cheaper locales.

The price of oil, which is higher now in Southcal, is going to get higher still, because of BP Amoco’s problems. For example, gas prices in Texas in the foreseeable future won’t be as expensive as in California ($2.89 vs.$3.39 lately.) Because of cheaper living costs in midwestern states like Texas, folks would be following out-migration from SouthCal to cheaper midwestern states, leaving more vacant homes in SouthCal for you to choose from later on.

Better still, why not follow the herd of out-migration from SouthCal? This is just an idea to think about. During the Depression in the 1930’s, it was the Okies going their way to California. This time around, it will be the other way – the Cali-poories going to Oklahoma. The soon-to-be Bushco-NAFTA mega/super highway and corridors will make their travels easier to rehabilitation land.

[(former)FormerSanDiegan]

Or you could just keep the house you already bought for half-price and worry about other stuff.

[socalarm]

our agent came over today with his team — they work together and pool their resources.
they estimated anywhere between 850 to 1.1. that’s a huge variation, but the paradox is this. it’s a great house in an okay neighborhood. so in a way the comps aren’t similar.
he wants to price it at the lower end – like 900, but wants to wait for thanksgiving and use this period as a ‘run-up’ to market it. he’s sold a lot of high profile homes and is known for selling stuff like this, and he was very careful in repeating to me he wouldn’t ask me to sell at some outrageous price because that’s not how he does business. so far i like his approach.
he says traditionally october is much better than august and since the fed paused the edge has abated (temporarily for now i suppose)…

[Anonymous]

Yeah, really smart. In a falling market, wait a couple months THEN try to sell.

“October is a much better month than August.” What’s this, NAR feng shui or something? Please spare me the pain. Find a realtor that wants to sell this house NOW. It might take 2 months even priced well..

[socalarm]

lol. NAR feng shui. it probably is, but we’re beginning the listing process in a few weeks. he’s researching the comps this week. i guess he means by the time the buying happens it will have been two months. i don’t think he’s saying anything different. this will easily take till thanksgiving.

my neighbor has been trying to sell his house for three months. he overpriced the hell out of it (815k), put it on the market in summer, then cut the price like crazy (730) and it’s still sitting there. his ludicrous sign says ‘price REDUCED’ and ‘buy me i’m gorgeous’ in case you thought you couldn’t get both gorgeous and cheap. it’s resembling the crossdressers who frequent our street corner. i have to love this city. i’m trying to sell a million dollar home. a house opposite our street has a family of 15 that hangs washing to dry on a tin roof and hookers park their car on our street. and people who visit say “how did you find such a pretty little street?”
maybe the broker’s cracking up at home thinking of me…

[VCJIM]

I really don’t know s**t, but I would think August is a drop-dead time for certain people to buy. In particular, those that want to get their kids into a specific school district before school starts. Being in or near Culver City, this may or may not apply to you, but if you have good schools near you it can be important to get it listed asap.

[(former)FormerSanDiegan]

I agree with VCJIM

One of the draws for Culver City over other areas is the elementary schools are considered better, relative to LA Unified schools. Culver City has its own school district.

Seasonal trends have always favored the summer months, even in So Cal.

[(former)FormerSanDiegan]

Oops, just re-read through the post and see you are just outside Culver City, so ignore my school comment. However, the seasonal trends strongly favor the March – July timeframe in So Cal for home sales.

I see lots of price reductions in Culver City and surroundings. We looked in this area in June 2005 and saw nothing in the quality Culver City areas such as Carlson Park, Vet’s Park, Lindbergh Park under about 850K. WHat are the prices today ? about the same.

IMO, you will start seeing Y-O-Y price decreases in this area by this time next year. LA-Westside has been about 1 year behind San Diego in real estate trends for the last 5 years or so that I have been watching it.

[powayseller]

Seasonal trends show sales are way down in the fall, but you have fewer looky-loos, i.e. more serious buyers. I think that by fall, more sellers who were just testing the market will retreat, and the remaining listings will be weighted toward motivated sellers.

I think the pace of price declines will increase after August. Buyers know that the remaining listings are motivated sellers, and will bargain for good deals. More ARM adjustments and financial shocks from higher interest on revolving credit will increase the pool of motivated sellers. Sellers know there are fewer buyers, and start dropping their price. Until summer ends, sellers still have hopes of snatching a summer buyer.

I would think that anyone wanting to sell would rush to get on the MLS, at a competitive price. Time is against the seller.

[Author]

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