Monday, January 14, 2008

The Other Long Beach

Long Beach is one of those cities that goes from nice to 3rd World in a matter of two blocks. Belmont Shore and Naples are well-insulated from this phenomenon, but as the (ever-expanding) boundaries of Belmont Heights creep west into Alamitos Heights and especially into Downtown Long Beach and north past 7th St. (and most definitely past 10th St.), it can get downright scary without much warning.

To some extent, it's actually kind of endearing. One of the things I enjoy about Long Beach is that it has a little bit of a "real" city mixed in with nice, isolated, relatively clean areas with healthy property values and hard working people. The nicer areas are close enough to the gritty, lower-income areas as to lend the entire city an air of "culture" and "arsty" appeal. In Belmont Heights, between 4th and Broadway, south of Cherry, for example, is what's considered the "Art District," with vintage clothing stores, cool coffee shops, proximity to the beach, and unique little restaurants and bars.

Contrast that with, say, Irvine. Primarily chain restaurants, so clean as to be sterile, and zero creativity/artistry around. Just as Irvine appeals to families who value schools, low-crime, and planned communities, parts of Long Beach appeal to people like me who value coastal activities, housing affordability, less emphasis on materialism, and a modicum of culture.

However, in Long Beach it can very quickly go from "gritty" and "artsy" to "run-down" and "ghetto." To some people, ghetto is an offensive word. To those people I say: grow up.

In this context, ghetto, as defined by the Urban Dictionary, means: "An impoverished, neglected, or otherwise disadvantaged residential area of a city, usually troubled by a disproportionately large amount of crime." To characterize the bad areas of downtown as anything else is disingenous.

Today's featured property is an example of a ghetto house in a ghetto neighborhood with absolutely no idea what's happening in the real estate world.

Address: 1040 North Virginia CT, 90813

Asking Price: $375,000
Size: 3(?) Beds, 1 bath
Sq. Ft.: 700
$/Sq. Ft.: $536
Year Built: 1904
MLS#: P562143
On Redfin: 326 days
Description: Small but cute and very well maintained. Title indicates 3 bedrooms but 2 bedrooms were made into 1 by knocking down in-between wall. Alley access. Quiet area close to downtown. Perfect for first time buyers.

Quick observations:

  • Coming up on its first year anniversary for Days on Market! Congratulations!

  • And a belated Happy 100th birthday to the house!

  • At least they were honest about it being "small." Of course, I don't think "small" begins to describe how tight 3 beds and 1 bath squeezed into 700 square feet is. Yikes.

  • Oh, never mind. Even though the title indicates 3 bedrooms, a little elbow grease and we've got one really big one! How much would you like to bet that little Home Depot moment wasn't permitted and isn't exactly what inspectors would call "legal"?

  • Couldn't they bother getting the people (workers?) out of the picture first? A for effort, buddy. Plus, how cramped is that street where they have to take the picture from the alley?

  • Bars on the windows. For $375,000. Good luck with that! I could tell you this house was in Tijuana and you'd never question it.

  • Check out the "carport." Yeef! This is getting too easy.

  • "Perfect for first time buyers." I see this fairly often, and from what I gather it translates from Realtorese to English as such: "Even a broke ass like you can afford it." However, this is priced at $375,000. Not exactly a smoking deal for new families or first time buyers. With that said...

Let's crunch some numbers!

Down Payment: 10% down on this black-barred beauty would run you $37,500. Easily attainable. But so are pubic lice. Any takers?

Monthly Payment: Financing the remaining $337,500 at 6.5% would leave you with an approximate monthly payment (including property taxes and homeowners insurance) of $2500. Again, doable. But so is Chyna Doll. Any takers?

Income Requirement: Assuming a 4x income calculation, the annual household income required to buy this albatross would be $93,750. Now here is where it gets interesting. Median annual income in the area is $71,028. Okay, so that median household income person (I would say median family, but there's no way more than one person can live comfortably in 700 square feet) might have to stretch a bit to experience the pride and joy of being a homeowner...but that's not the point. When market fundamentals are healthy, the median income should be able to afford the median house. I don't know where you grew up, but there's no way this thing could be considered a median residence. This is a low-income, borderline poverty level residence no matter how you slice it.

However, according to the listing description, this home is perfect for me. I'm a first time buyer and I can scrape together that down and monthly payment. I want nothing more to be a homeowner, and the National Association of Realtors tells me now is a great time to buy and being a renter is a scarlet letter, so maybe I should jump in.

Well, just for kicks, let's check out what that negative stigma of renting looks like compared to purchasing this little emerald gem:

A comparable house a few blocks away (which looks much nicer) is renting for $1500 a month. Description: "2 bedroom house 1 bath house for rent 1st and last month or prorate your move in. carport, new carpet, newer bathroom tile and kitchen nice, well kept house in long beach/signal hill area. Section 8 OK."

By my simple calculations, to live in essentially the same shady area, I would save a whopping $1,000 a month. So where exactly is the advantage to buying? Factor in maintenance costs on a 100-year-old house (and we haven't even seen the inside) and your monthly savings would be substantially higher.

Again, here is an example of a seller completely ignorant of what's happening in the real estate world and the economy. Remember, it was less than a decade ago that it actually made sense to buy as opposed to renting. When your monthly mortgage payment (principal, insurance, taxes factoring in tax benefits) was close to local rents, that was the time to buy. Now that the ability for people (who in a normal world would never be have a shot at becoming homeowners) to get cheap, easy money is gone, housing prices have to return to levels where the median household income can sustain a monthly payment.

Until that happens, this place will rot.

Prediction: In two years, you will be able to buy this exercise in idiocy for $180,000.

**UPDATE: A commenter just informed me that this beauty is actually IN an alley. So when the description highlights the "alley access" what they really mean is you're smack dab in the middle of it.


  1. Downtown Long Beach is WEST of Belmont Heights.

    1040 North Virginia CT, 90803 is not in the 90803 zip code. It is in the 90813 zip code.

    North Virginia CT is an alley.

  2. Thanks for the corrections! I'm trying to get a lot of content out there, so there are bound to be typos.

    And 1040 is actually IN an alley? Great information and a key selling point.