Monday, March 24, 2008

Glory Daze: UPDATE 2

Man, the price cuts in Long Beach are coming so fast, I can't keep up with them!

Here is the first post I wrote on this property: and here is a comment from that post:

[When considering purchasing a rental property] Razing an old decrepit home and constructing a nice house or some rental units can be a smart investment—IN A NICE, UPCOMING NEIGHBORHOOD. This, I’m afraid, is not one of those neighborhoods. In fact, during my tenure, gunshots, car vandalism (the fact that quite a few cars are now parked behind a gate in the back yard tells me street parking still isn’t a good idea), homeless, and even car fires (!) were yin to cheap rent’s yang. I drove by for old time’s sake a few months ago and not much has changed.

And here was the second post in January discussing the $30,000 price drop: and here is a portion of my analysis from that post:

And the recent $30,000 haircut won't move this place either, but at least it demonstrates a degree of seriousness. Of course, in this crack-house neighborhood, it's going to need a higher degree of determination, translating to much larger price cuts.

Well, the seller lopped off an additional $40,000 last week and is currently asking for $499,000. What's funny is, if they had priced this tear-down at $499,000 in August of 2007 when it first hit the market (instead of their bong-a-licious $649,000 asking price) then they would have had a sliver of selling hope. But now, at 208 days on market, it might be too little too late.

By the way, the Long Beach real estate situation is playing out exactly as I predicted when I started this blog. I'm no fortune teller, I'm just a man armed with solid economic data, an understanding of basic market fundamentals, and the common sense notion that when LB is more expensive than Orange County and Los Angeles, there is some serious pricing correction on the horizon.

What do you think this party palace will sell for when it finally, mercifully does?

A Tale of Two Cities: UPDATE

Do you remember this lil' green goblin from February's A Tale of Two Cities post?

Well, it turns out somebody cracked open a newspaper. The wishing price for "the best house in the area" has been dropped from a staggering $310,000 to a less staggering but still hilarious $265,000.

Hey, they at least get an "A" for effort for finally waking up to the cold, hard reality that this dump, in this condition, in this terrible neighborhood ain't going anywhere until the price starts flirting with the 2000 value of $130,000.

That's a Tear Down price for what is clearly a Tear Down property.

And the thing I don't get is why they're selling the first place. Is it that tough to keep up with a $917 a month mortgage? Really?

They did, to their credit, buy years before the housing bubble inflated to the catastrophic proportions we witnessed in '06, so I can't blame them for taking their chances in this market hoping to squeak out a profit for living in such squalor for eight years. But if they think they're going to get rid of this place for a $120,000 profit after commissions then they're only cracking open that newspaper to read Family Circus.

At $160,000 it might make sense as an investment property. It would have to be torn down (or maybe the Historical Society would come down on you for trying to level this 95 year-old dumpster) and rebuilt, so you have to factor in those costs as well.

Oh, who knows. According to the commission-hungry zombies at the National Association of Realtors, existing home sales nudged up a whopping 2.9% in February, signifying to them that all is well in the real estate world and double-digit appreciation will return momentarily.

Look, an increase in sales is a good thing for stabilization of the market. But an increase in sales with a 13.6 regional decrease in prices and a 30% decrease in sales year-on-year makes this news MEANINGLESS. You are going to hear an awful lot from the NAR in the coming months about us hitting "a bottom" and they will try to pressure you by telling you if you "don't act now, you'll be priced out forever."

But it's just scare tactics, plain and simple. And many people believe the sales statistics actually include homes that were foreclosed on and "sold" back to the bank at foreclosure auction. That's right, folks. There is a distinct possibility these sales numbers include the record number of foreclosed homes.

Real estate has a long way to go and if you make a move in the next few months due to "record low interest rates!" or "great incentives from builders!" or "a huge discount from the '07 price!" then you're catching a falling knife, you'll be underwater instantly, and you'll be no better off than most of the fools I feature on this site.

Here's all you need to know about whether or not prices will still come down: This booger barn featured above was $45,000 more expensive five days ago. Not $4,500...forty five THOUSAND bones.

As long as big chunks of "equity" are being torn off indiscriminately and the house still sits, it means nobody knows what the hell anything is worth anymore. The only reliable indicators to steer this lost ship back to shore are incomes, rents, and availability of credit. Until all of those factors creep closer to alignment with house prices, the bottom is nowhere in sight.

Wednesday, March 19, 2008

Realty Bites

My Redfin account is set up to send an e-mail every time a new listing matching my preferences pops up on the MLS. There haven't been too many lately.

It's pretty much the same ol' properties I've been scoping out since last summer. Nothing's selling (save the occasional knife catcher who is suckered by the "15% less than the last buyer paid a year ago!") and homedebtors tempted to sell obviously know this.

And the reason nothing is moving is because most Long Beach sellers have either hit their absolute pricing floor (meaning if they drop any further, they'll have to cut a big fat check to keep their credit intact or risk foreclosure) or for whatever reason they're just not serious about selling (they have a decent amount of equity or they're not under an inordinate amount of stress yet).

In addition to e-mailing new listings, Redfin also sends me pricing updates on listed properties. Due to sellers clinging to the delusional hope that the market will turn around any minute now, these e-mails have also been slow.

Until now.

I've been noticing a lot more desperation in the market lately, and there have been some incredibly dramatic price cuts. In fact, this morning a Redfin e-mail referenced six condos that dropped their price last night. One property lopped off $58,000!

This indicates 1) Anyone who buys right now is an absolute fool, and 2) There is a measure of capitulation in the air that's only going to get stronger as rates start resetting and competing foreclosures add to the mayhem.

There are so many properites to choose from, but today I want to feature an entire building that's in deep trouble.

Address: 1605 East Second St. # 204, 90802
Asking Price: $349,900
Down Payment: $34,990
Montly Payment: $2,300
Income Requirement: $87,475 (2.5 times median income!)
Year Built: 1987
Size: 2 beds, 2 baths, 925 sq. ft.
$/Sq. Ft.: $378
MLS#: P572303
On Redfin: 336 days (YIKES!)
Description: One of 12 Luxury Remodeled Condominiums just 3 blocks from the Beach and 2 blocks West of Bixby Park. All units feature new kitchen cabinets, new stainless steel appliances, slab granite countertops in the kitchen and baths, travertine stone, new in unit stackable washer and dryers, new carpet, designer paint and balconies. The building features new windows, paint, landscaping and gated parking beneath the building at ground level.

Nice description my man! This is a cool looking building with nicely upgraded condos. It's not in a neighborhood I feel safe in at night, but it has a washer and dryer inside, only 12 units, garaged parking, and a relatively low HOA fine. Dang, I really dig this place! It has pretty much everything I want...

Except a realistic payment.

As you can see by the pricing history, this seller didn't start seeing the light until eight days ago:

Apr 18, 2007 - $429,000
Dec 27, 2007 - $428,900
Mar 11, 2008 - $398,500
Mar 18, 2008 - $349,900

For those of you counting at home, that's an almost 20% price cut in just 11 months. Now, that doesn't mean much considering the initial asking price was absolutely absurd, but imagine if you would have bought this place on March 17: Assuming you put 10% down, you would already be $10,000 underwater ...


Do you see why buying a home at today's price is so incredibly stupid? Regardless of how sweet these price reductions sound, there is no reason to conclude that they are anywhere close to stopping. We got so far away from basic market fundamentals and housing valuations that sellers, realtors, appraisers and buyers have no clue what anything is worth anymore.

I commend the seller for finally getting serious, but despite their latest price cut (which I'm sure caused instant diarrhea) means absolutely nothing because the place is still way overpriced.

Furthermore, from what I can gather there are five units for sale in this 12-unit building. Great for throwing parties, but not so great for home values. But judging by the seller's idiotic pricing I'd be willing to bet the entire building is vacant but they've just delayed putting the rest of the units on the market. No past sales show up on the MLS, so unless I'm corrected this place is completely uninhabited, collecting cobwebs.

As I said, this isn't my ideal neighborhood, but I'm definitely interested in buying one of these condos once prices enter reality. To any of you realtors out there reading this, contact me if your negotiating skills are strong. If you're looking for a client who is ready to roll, I'm looking for a realtor who can make things happen.

Plan on a first offer of $250,000.

Sunday, March 16, 2008

Hide and Seek: UPDATE 3 (!)

Today I have a quick update on our favorite MLS Manipulator over at 1055 Orizaba.

Since I started tracking the complex, we've seen the following condos listed (and in some cases relisted) for sale:

Unit #5
Unit #10
Unit #17
Unit #18
Unit #9
Unit #24

As of today there are three new listings:

Unit # 14
Unit # 8
Unit #15

A little napkin math tells us that nine units for sale means this complex is almost HALF EMPTY.

With their current asking prices ($365,000 for # 15, HA!) and hilarious $212 monthly HOA fee, it's easy to see why.

Thursday, March 13, 2008

That Didn't Take Long.

This is an exciting day! Today's property is a first of its kind for Real Estate in the LBC!

Address: 780 Mira Mar, 90804
Asking Price: $358,900
Year Built: 1923
Size: 2 beds, 1 baths, 735 sq. ft.
$/Sq. Ft.: $488 (Rrrrrrrrrrright...)
MLS#: P626601
On Redfin: 3 days
Description: Bank owned property, great opportunity, Charming two story traditional spanish style, has lots of potential. Cute bathroom and kitchen, this home is perfect for first time buyers. Why buy a condo when you can own a home in a quaint neighborhood!

And here's why this property is so special:

Purchase price: $481,400
Purchase date: 12/2007

That's right, friends...a FIRST PAYMENT DEFAULT.

This dummy, for whatever reason, decided to try his hand at real estate riches way too late in the game. Instead of fixing this place up (read: demolishing it) and flipping it for a healthy profit, he quickly discovered he didn't have enough scratch to put even one measly mortgage payment together, let alone make improvements. The foreclosure process typically takes around 90 days, and that's almost exactly where we are on the timeline.

Now, there is a possibility that the listed purchase in 12/2007 was actually the bank taking the property back at auction, but I find it very hard to believe this dump was bid up to half a million clams (after all, the bank was only into it for $410,000, so why wouldn't they just let the other bidder take it for that instead of fighting to keep this roach motel on their books?). Plus, that would mean the bank had three months to put lipstick on this pig and make it presentable, and this is what they ended up with.

So unless a reader can provide some more detail, I'm sticking to my conclusion that this was a dead beat flipper who realized immediately after signing on the dotted line that they weren't cut out for the real estate game in general, and the $3,000 monthly payment specifically.

Some notes:

"this home is perfect for first time buyers" (That's true, so long as these entry-level buyers pull in $90,000 a year. Maybe they meant "trust fund enhanced first time buyer")

"Why buy a condo when you can own a home in a quaint neighborhood!" (Assuming that was a poorly punctuated question, here's the answer: BECAUSE THIS DILAPIDATED PIECE OF SH*T COSTS $100,000 MORE THAN A DECENT CONDO THAT'S NOT SITUATED ACROSS FROM A SCHOOL AND IS IN A MUCH BETTER NEIGHBORHOOD!)

"Cute bathroom and kitchen" (Well, if you consider clear toilet seats "cute" I guess they're onto something. And if the kitchen is so cute, why not include a picture?)

Maybe they didn't show the kitchen because it was more important to include four nearly identical photos of the front of the house:

This crap shack is an absolute joke. The condition of this masterpiece (masterPOS, more like) makes the price patently offensive. A knife catcher already overpaid for this matchbox once, so the bank is hoping idiocy, much like lightning, strikes twice. Assuming the bank finds yet another knife catcher to swoop it up for $358,900, el banco estupido stands to lose a mind-blowing -$140,000 in three months! All for trying, out of the goodness of their hearts, to help someone acheive the American Dream.

"I've been a good bank, can I pleeeeeeease have a bailout?"

And truthfully, they deserve to lose every penny. To think loaning out a half a million dollars for this disaster was a smart, conservative financial move, they are clearly too dumb to be in the lending business
. Good riddance.

Instead of agreeing to write up that jumbo loan, they would have been better off simply taking that 140 Grand, placing it into two little stacks, and throwing it into the fireplace...

Wednesday, March 12, 2008


If you’ve ever spent a reasonable amount of time in Belmont Shore, I’m sure you’ve all seen this place. The reason I’m featuring it today is because I think it perfectly encapsulates The Great Housing Ponzi Scheme, unadulterated greed, and the ridiculousness of our consumer culture.

Address: 109 Park Ave, 90803
Wishing Price: $2,785,000
Year Built: 1925 (but it looks like this new house was built in ’07)
Size: 4 beds, 5 baths, 3,900 sq. ft.
$/Sq. Ft.: $714 (HAHAHAHA!)
Purchase price: $750,000
Purchase date: 4/2007
MLS#: P594673
On Redfin: 209 days
Description: The only 'Belmont Heights Estate-sized Home' located on the largest SFR Lot in Belmont Shore, just a block from the beach! Stunning, architectural-built like a piece of the furniture. One of a kind home offers formal LR & formal DR, 4 BRS 5 BAs (Twin master suites rest between a great room. )FR w/ FP. Almost 4,000 sq. ft. on a 6,100 sq. ft lot (2-1/3 lots) This is the largest lot and most presitigious home located in all of Belmot Shore. Mysterioursly private and breathtaking.

Okay, first of all, this realtor has problems, not the least of which is that they can’t spell the name of the neighborhood in which they are trying to sell a house. “Belmot Shore,” eh? Is that what they call the area east of Roycroft?

And then of course we have innovative and exciting adjectives like “presitigious” and “Mysterioursly” to whet our investment appetites.

What, at 209 days on market you didn’t have enough time to proof-read? Unbelievable. Need I remind you that this listing agent expects to receive more than $150,000 for their (allegedly) professional services? What a joke.

The really strange thing here is the history. It says the original house was purchased in April ’07 for $750,000, and then promptly listed on the market a mere four months later for $3.25 million. Did they buy this house as-is in the hopes of turning a quick, enormous profit? The price seems excessive for such a move.

I don’t have all the information so most of this is guessing, but it appears that this person bought this land in an already declining market, demolished whatever house was on it, built this completely-out-of-place behemoth in four months (is that even possible?), and as soon as the paint was dry put it on the market with the hopes of tripling their initial investment.

Only speculating, but this might be a speculator.

Plus, these pictures seem to indicate the property is unoccupied.

If this person is in fact a flipper intent on gaining maximum profit…WHY ON GOD’S GREEN EARTH WOULD THEY BUILD THIS THEME PARK-LOOKIN’ MONSTROSITY??

I mean, it’s difficult enough to find a buyer in this gloomy market. It’s even tougher to find a buyer with the required $278,500 down payment, $700,000 annual income, and enough wherewithal to cough up a $17,000 monthly mortgage payment.

But what are the odds of finding a buyer with that kind of capital that just happens to be a die-hard Benihana enthusiast?

I’ve just never understood why people inject so much of their “taste” or “personal expression” into a place that is intended to sell quickly and profitably. Which makes me wonder if it’s just a wealthy individual who built their dream house (must have had some questionable sushi before bed), only to discover after four mortgage payments that only an extremely wealthy individual could afford to live there.

Look, it's clear that some money was dumped into this place and it's certainly original but it’s completely out of place. Sure, there are some big, garish houses in Belmont Shore but one of the things I adore about Belmont Shore and the reason I will one day own there, is the subtlety of the money there.

The vibe I get is that the community is more Banana Republic than Neiman Marcus. And this look-at-me house, on a double lot no less, just screams ostentatious, nouveaux riche, conspicuous consumption. Which isn’t what Belmont Shore is about at all.

It can’t be easy to be the most expensive house in Belmont Shore (by double!), especially in a declining market with fewer and fewer lending options. This seller is slowly dropping the price below the stratosphere (already lopped of half a million in six months!) but nobody has this kind of money and if they did, they would be looking in Naples or at a place on the sand.

Plus, with only one garage space, do you really think the kind of family pulling down $700,000 a year who would live in this gaudy, high-profile, pay-attention-to-me “estate,” is modest enough to drive Accords and Blazers that they don’t mind parking outside? Doubtful.

Some are postulating that the new trend will be focusing on a more simplistic lifestyle and moving away from the “bigger, better, my-Breitling-is-bigger-than-yours, buy buy buy” mentality, and that the true status symbol in the coming years will be a more modest lifestyle and demonstrating fiscal responsibility.

I think the idea that people will flee in droves from material trappings…is utter crap. Total horsesh*t.

This is, and always will be, Southern California.

However, I do believe that distancing ourselves from the rampant consumption and “symbols of success” will be inevitable to a degree (thanks lots slowing economy!). Mostly because the bill is past due for the lavish lifestyles we led during the boom years. Some got out unharmed, some will come out battered but wiser, and some will be financially eviscerated. But hopefully a return to a more modest way of life is on the way.

I truly believe that if we look inward and focus on the truly important things in life ("Oh, you mean like poppin' bottles at Sutra?" Um, no) as opposed to simply propagating the attitude of “I got mine, screw everyone else,” then our country will be way "richer" than we ever thought we could get selling houses to each other at inflated prices.

Is a widespread shift away from materialism possible on a large scale?


Because while a recession and financial troubles will cause some to focus less on simply aquiring “things,” there will always be assholes out there who feel the need to build and live in garish, over-the-top testaments to immodesty and greed like this feng-shui disaster in the hopes of letting you know just how much they have, and how little you do in comparison.

Saturday, March 1, 2008

Love Thy Neighbor - UPDATE

In my January post Love Thy Neighbor, I featured one overpriced condo clinging to a ridiculous wishing price and his heartless, disgusting, comp-killing, bank-owned neighbor who priced $40,000 lower.

Well, that ruthless, scumbag bank (in the eyes of the wishing price neighbor) just made the weekly open houses a hell of a lot more uncomfortable. That's because the bank who owns #8 recently dropped the price another $30,000 to $369,000 (If it sold today at that price, the bank would eat $65,000 including commissions).

Now compare that new price to #13's $439,000 fantasy pricing and tell me what kind of day he's having.

While I respect Unlucky #13's pricing strategy (offend all buyers with a ridiculous price and STICK TO IT), if #8 miraculously sold for $369,000, #13 would IMMEDIATELY have to knock $60,000 off the price of his nearly identical property to meet the new comp and have any chance at a sale.

The worst part is that Unit #8's dramatic price reduction has been in effect for almost a month and it's still collecting MLS cobwebs. This does not bode well for either seller, but at least #13 still has some equity left.

However, if he doesn't get serious about selling soon, any hopes of getting out with a profit will disappear. My advice to him is to price 10% below the bank-owned property and keep cutting if he has any intention of avoiding a significant financial loss. The longer he waits, the worse it gets.