It got to the point where there was so much competition, nearly every place I looked at had granite counter tops, crown molding, and vinyl windows—it was practically the standard. But, as those of us who read the newspaper now know, those halcyon days of appreciation and insane up-bidding are dead as a doornail.
So, I’m featuring this property to highlight how rampant speculation can definitely pay, but only when you watch the signs on the horizon and time it correctly. Otherwise you get caught holding the bag, and with unoccupied units that’s a scary position to be in.
Address: 1055 Orizaba AVE #5, 90804
Asking Price: $310,000
Size: 2 beds, 1 baths, 787 sq. ft. (built in 1988)
$/Sq. Ft.: $394 (!)
Purchase price: N/A
Purchase date: N/A
MLS#: P597408
On Redfin: 7 days (Get it while it’s hot!)
Description: Contemporary building offers large open floor plans & private balconies. Recent renovation includes new hardwood & travertine floors, carpeted bedrooms, new dual-pane windows, all new cabinetry, granite counters, stainless appliances, inside laundry and secure parking. Ready for you to move in!! Some photos are of furnished models and not the actual unit, but are similar in details. This is a must see!! Appliances including washer/dryer & refrigerator included!
This is a very well-written description. Kudos! A few too many exclamation points, but nicely done.
I actually looked at these apartments—errr, condominiums this summer. My analysis follows:
The Good:
- The materials used are very good. Nice granite, tiles, fixtures, paint schemes, hardwoods, appliances, and most units come with a washer and dryer. It’s an attractive building on a somewhat appealing street.
- There is gated parking with a very nice brick courtyard in the middle of the complex. I found this to be a really nice touch and an example of builders who were taking this project seriously.
- The balconies on most units are huge. Definitely a plus. The front balconies look out to an elementary school’s basketball court, but they are still a selling point.
- It’s juuuuuuust close enough to the fantastic Rose Park neighborhood to justify highlighting its proximity (which they did not). A missed opportunity to glom onto the appeal of that neighborhood.
- At $310,000, it represents a significant (to the tune of 40 Large, if I recall correctly) price reduction. It shows they have capitulated to the overwhelming evidence that prices have a long way to go in this area of Long Beach. Those price cuts also signify an agent serious about selling, which demonstrates they, unlike many others, have an understanding of the economic factors at play.
The Bad:
- There are a lot of units in this building (23) and most of us know that apartment living, especially in big complexes, increases the odds of bad neighbors. Perhaps a resident can share their experiences on this blog.
- It’s directly across the street from a school. If you work at home (or are a sex offender) this could be a pretty miserable existence, but the good news is that after school lets out and the kids are all gone, there probably isn’t much street traffic.
- While the materials are good, the craftsmanship did not appear to be that great for the price. Uneven spots in the floors (the area leading from the bathroom in two units was raised, as if a cat was buried underneath) and other details were worrisome.
- Only one bathroom in this unit, which you should keep in mind if you are planning to rent out a room to offset the mortgage payment. Not a deal breaker though.
The Ugly:
- Even though it's tiny (787 square feet), at $394 per square foot they’re dreaming. Sorry, Charlie, that’s Huntington Beach money.
- It appears as if the listing agent keeps playing hide-and-seek with the properties. I’ve been watching this property for a while, and it seems as if units are listed, then taken off the market and promptly re-listed, giving the impression these units have not been dwindling on the market for more than 6 months (around the time I last visited the property). It’s possible the agent wants to cover up the fact that there are still numerous unoccupied units in this building so he just takes unit #100 off the market and puts #200 in its place until it grows old on the MLS, then shuffles #100 back in to show low days on market. Maybe not. Either way, there have been unoccupied units here for at least 180 days.
- This is past 10th Street, which in my opinion is no-man’s land. My friend and I were told by a realtor to ride our bikes (a favorite past time in LB if you’re in the right area) to a property just 3 blocks west of this one, and on the way it felt like we were transported to a 3rd world country. Bars on many windows, run-down properties, music blaring from different residences, junker cars, what appeared to be Section 8 housing…it was awful. So awful, in fact, we felt extremely unsafe and promptly returned home a bit shell-shocked.
- You need to shell out $200 a month in HOA fees. I’ll remind you that $2,400 per year is not deductible and is on top of maintenance, taxes, insurance, and possibly mortgage insurance if you’re only putting down 10%. $200 is pretty standard fare for a condo, but you have to analyze every aspect of purchasing this place (HOA, price, # of units, proximity to a school, size) within the context that to many people, this is not a very desirable neighborhood. From that perspective, $310,000--considering the drawbacks-- seems a little steep.
I won’t elaborate on the negative experience with the realtor, because I believe he was simply overwhelmed by the harsh realities of the housing situation and was under considerable pressure to close some deals. It is worth noting he was sincere, knowledgeable, and very friendly.
These are going from “Ridiculously Overpriced” to just “Overpriced.” However, after crunching the numbers it becomes clear these units will play MLS-peek-a-boo with no sale for a while. As the seller is now painfully aware, significant price reductions are in order to sell less desirable properties in this market, and almost $400 per square foot is fantasy pricing.
Keep in mind the median/median plus buyer, who until recently would have been able to buy this place thanks to loose lending standards and creative loans, is no longer a viable homeowner candidate. The nothing-down loans are gone, baby, gone, as are many of the interest-only variety. Unless a buyer has near-flawless credit, a significant down payment, and a healthy debt to income ratio, there are very few loan products available that would make this place affordable to the median/median+ buyer.
Here are the numbers:
Down Payment: A 10% down payment would run $31,000. Totally attainable.
Monthly Payment: Financing the remaining $279,000 at 6.5% would leave an approximate monthly payment (including property taxes, HOA fees, and homeowners insurance) of $2300. There’s no way you could rent this unit out to cover the PMIT, which is the traditional measure of a solid real estate investment (check out the comment from Hangenindaghetto in the “Why Buy In Orange County…” post about her friends who relocated for work, and were forced to sell instead of keeping their home as an investment property), but if you factor in the tax benefit of say, $500 a month, this place starts to make more financial sense (again, if you wish to live in this neighborhood).
Income Requirement: Assuming a 4x income calculation, the annual household income required to buy this unit would be $77,500. The median income for the area is roughly $35,000 per year. You’d be a Rockefeller in this neighborhood!
Again, price reductions are a positive sign they are serious about selling. However, until those magic buyers materialize, perhaps bank will decide to rent some units out in an attempt to slow the monthly bloodletting. That won’t make the owners who bought at the peak very happy, but at least the building won’t have so many unoccupied units.
UPDATE: In the time it took me to write this entry, Unit #18 suddenly popped up on the market. Unit #18 is a 1 bedroom loft with roughly the same square footage.
http://www.redfin.com/stingray/do/printable-listing?listing-id=1395568
Looks like I might be right about the re-listing peek-a-boo. It's supposedly been there for only 6 days (as of now we have #5, #10, #17, and #18), but judging by the fact there were many unsold units as much as 6 months ago, I hardly believe this is the first time it has been on the market.
I’ll keep an eye on this building and keep you updated.
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