Monday, January 14, 2008

First Blood

The first featured property on this site is 307 Roswell in the Belmont Heights area of Long Beach.

This is a prime example of a severely overpriced house and a realtor who simply doesn't get it. This spacious abode, spanning an impressive 1200 square feet, is asking $700 per square foot. At first I thought it was a typo, but no, the seller in fact believes they can get that monstrous sum for a cramped, non-upgraded, 86-year-old house.

Get a load of that old-school stove! I guess we won't be cooking a turkey at this place for Thanksgiving. I love that "Coffee" painted on the wall. Do you suppose they have "Urine" painted over the bathroom door?

Here is the raw data:

Address: 307 Roswell Ave., 90814
Wishing Price: $879,000
Size: 2 beds, 2 baths, 1256 sq. ft. (built in 1922)
$/Sq. Ft.: $700
Purchase price: $699,000
Purchase date: 3/3/2005
MLS#: S513050
On Redfin: 58 days
Description: This is a must see! Light & Ocean Air fill this charming Belmont Heights home. Living room has a beautiful new fireplace. Roomy formal dining room. Den/office leads to a private & peaceful large deck. Master has dual closets & sitting area. Bath has a deep soaking tub. Wood flooring, new ceiling fans, smooth ceilings, fresh paint inside & out, tons of storage. Yard has enough room to entertain without a lot of maintenance. Walk to beach, 2nd street and numerous attractions.

A few observations...

The Good:

  • That deck is awesome! That is a feature I'm definitely interested in.
  • It's a nice house in a prime area of Belmont Heights. Although people get carried away with where Belmont Heights begins and ends (much like a Texan Congressman gerrymandering his constituency), this is truly Belmont Heights and deserves a price premium because of it.
  • The description is concise, well-written, and a true anomaly.

The Bad:

  • Non-upgraded kitchen and bathroom counter tops, old appliances (realtor would probably describe them as "retro"), tiny rooms, and half-assed bathroom updates. In this market, you need more than flat screen TVs (not included) and hardwood floors to compete.

The Hideous:

  • Check out the "tile" shower curtain. Yikes.
  • I can live without granite counter tops, but blue particle board? No thanks.

Now, let's talk money. Based on their wishing--er, asking price of $879,000 (by the way, does this look like a near-million dollar house to you?), here are the financial implications of purchasing this home. I will be making some assumptions, so bear with me:

Down Payment: A 10% down payment* would run you $87,900. How many people do you know with nearly 90 grand in the bank? I'll bet not many.

Monthly Payment: Financing the remaining $791,100 at 6.5% would leave you with an approximate monthly payment (including property taxes, homeowners insurance, etc.) of $5,884.
Income Requirement: Assuming a 4x income calculation**, the annual household income required to buy this albatross would be $219, 750. You read that right. Do you really think a family (and with 1200 square feet, it's gotta be a very small family), pulling in that kind of loot classifies this place as their dream house?

The median household income for this zip code is around $49,073. You could argue this is not a median property, but could you argue it's a luxury property commanding 5 Large a month and 18x median income? I suspect there are simply not enough buyers at anywhere near the required income.

So, as you can see, some sellers in Long Beach are largely oblivious to the crashing housing markets around them. You could argue that all real estate is local and Long Beach is immune to the real estate declines in surrounding cities, but that's 1) Complete horsesh*t, and 2) If Long Beach is viewed as a "less expensive" alternative to Orange County, then lower prices in OC most definitely affect Long Beach, which has more crime, lower incomes, and less family appeal than OC.

At this price, this property will sit.

And sit.

And I will provide updates as they come.

*Many believe that the credit crunch we are experiencing and the upcoming lending institution write-downs (not to mention the near-bankruptcy of Countrywide due to issuing reckless zero-down, interest only, and other sub-prime loans) will make a return to 20% down payments the new standard. I don't take such a bearish stance, but I do believe 10% downs will be the absolute floor. The lenders learned their lesson with not ensuring buyers had a financial motive to stay in the house during hard times, and 0%/5% down payments won't return for many years.

**During the bubble--and nobody except those on commission are arguing there wasn't one--income multipliers were 5x, 6x, and more depending on how easy the money was to obtain. Those days are long gone, as banks realize putting people into loans they won't realistically be able to repay (without living on Top Ramen and working three jobs) is a bad idea.

1 comment:

  1. The "do they have Urine painted over the bathroom stall" comment was priceless.