Wednesday, April 2, 2008

"To you. Only to you."

Address: 464 Cherry Ave, 90802
Asking Price: $475,000
Year Built: 1911
Size: 2 beds, 2 baths, 1196 sq. ft.
$/Sq. Ft.: $397
Purchase price: $637,500
Purchase date: 7/2006
MLS#: P622225
On Redfin: 49 days
Description: [Left blank by listing agent]
Down Payment: $47,500
Monthly Payment: $3,100 (that doesn't factor in the maintenence costs on a 100-year-old house with no interior photos)
Income Requirement: $118,750 (Four times the local median income!)

You all know how I feel about anything on, near, or past Cherry, so I won't elaborate further on the undesirability of this neighborhood when the housing budget is approaching half a million dollars. Instead, I want to focus on the financial meltdown occurring here. Rough calculations inform us that if this seller manages to find a sucker to pay full asking price, the loss will be -$200,000 in a tragically brief year and a half.

The worst part is that this place, positioned directly on a busy street (good luck backing out of your driveway in the morning) in a questionable neighborhood, has no chance of selling at this price despite the stark price reduction compared to the 2006 purchase price. I mean, who in their right mind would jump in now on this place, given the fact that we just witnessed a 30% price disintegration on it during the last 20 months? What on earth would lead someone to believe there isn't another 30% haircut coming?

By the way, another 30% off would put it right around the 2003 price. The few properties selling in Long Beach have already rolled back to 2004 prices, so why not 2003?

It's worth noting that the listing agent only put up one picture, indicating a drive-by-and-take-a-picture-from-the-car-window-because-even-the-realtor-knows-this-place-doesn't-have-a-hooker's-chance-in-Eliot-Spitzer's-hotel-room-of-selling-at-this-price attitude. Plus, the listing agent has had 50 days to write a description and still nothing. Do you sense the level of frustration? He must have 30 of these properties on his roster.

It's clear that the so-called "equity" built during the last few years of reality-resistant appreciation was straight up Monopoly money. It's been erased completely, and whatever hopes newly-underwater '05 owners had of selling their home for "break-even" are rapidly showing up on milk cartons. I wish I could say Long Beach sellers are bright enough to accept that harsh reality, but I have yet to see any clear evidence.

A recent piece in the New York Times clearly illustrates the psychological factors at play across the country and in Long Beach in particular:

In the wake of the biggest housing boom on record, it’s understandably hard to accept a new reality. Robert Glinert, a real estate agent in the Los Angeles area, said he has recently been saying no to almost half the sellers who have asked him to represent them. Their initial asking price is just too unrealistic.

“People say, ‘I don’t care about the market — my home is still worth what I paid for it in 2006,’ ” Mr. Glinert told me. “And I say, ‘To you. Only to you.’ ”

In my opinion, the longer it takes for sellers to understand the derelict domicile they overpaid for just a few sweet years ago has no chance of selling at current prices, the worse the pain will be. Given the rising inventory and increased bank-owned properties adding to the competition, 2002 prices--especially for less desirable properties--aren't very far off.

At least this particular seller has seen the light. Hallelujah, he's seen the light! Sadly, the rapidly approaching light belongs on the grille of a Peterbilt turbodiesel badly in need of a brake job.


  1. they dropped the price:
    Feb 13, 2008 $475,000
    Apr 16, 2008 $449,000

    but I think this one is already REO, but since the light is on in the realtard's one picture from a safe distance, I'm betting that the sheriff hasn't been around to notify the homedebtor yet that it is time to leave. who is going to do the eviction, the buyer or the bank?

    (and I'll bet a final sale price of $325).

  2. Good call!

    Thanks for the price reduction info, Anonymous. For a minute I wasn't sure if anyone besides angry realtors surreptitiously getting their dose of reality was reading this blog (and I know the realtors are still reading. This poison just tastes so sweet).

    Thanks for commenting and please spread the word. I'm sure there are many more people besides us interested in discussing LB real estate.

    My goal is to generate some lively discussion and even form some debates about where we are now and where this will all end up. And yes, that includes commission-mongers who strongly disagree with my opinions.

    As far as the eventual sales price, I think your $325,000 prediction is right on the money (heyoooo!).

    Assuming the remodel is complete and quality materials were used, I think 325K is a solid price. I mean, the psychology alone of "50% off the 2006 price!!1! OMG!! BUY NOWZZZ!!" will lure a buyer at that price point (by the way, can you BELIEVE some sucker bought this 1,200 square foot house ON Cherry for $637,500? Unreal).

    The questions I have are:

    1. Would the bank ever let it go for $325K?

    2. Would the prospective buyer actually be a knife-catcher even at that seemingly good deal?

    3. What happens to the rest of the neighborhood comps when it goes for 270/sq. ft.?