Tuesday, May 6, 2008

The New Floor in Pricing

Good luck with this one, pal.

Address: 140 Linden Ave, #957 (how many units are in this place?!) 90802
Asking Price: $615,000
HOA Fine: $420
Year Built: 1928
Size: 2 beds, 2 baths, 1210 sq. ft.
$/Sq. Ft.: $508
Purchase price: $76,000
Purchase date: 5/1999
MLS#: S518068
On Redfin: 112 days
Down Payment: $61,500
Monthly Payment: $4,700
Income Requirement: $154,000
Description: ULTRA MODERN ART DECO LIVING! Rarely on the market, this large 2bed/ 2bath corner unit is located on the 9th floor of The Historic Lafayette Building in the heart of the East Village Arts District. A designer home complete with: Australian Sandstone floors, a raised kitchen completely remodeled with Brazilian Mahogany wood Floors, Granite countertops, a glass backsplash, and a large elevated breakfast bar, dining area, and complimented with stainless steel appliance package . Finishing touches include recessed lighting, inset speakers, a walk in closet and computer area. The bathrooms maintain their original Art Deco tile with some modern finishes. Each Bedroom offers breath taking mountain, city and ocean. The building amenities include an onsite manager located in the beautiful 2 story main lobby, a rooftop solarium with panoramic views, and a state-of-the-art gym and billiards room.

Hey, dummy, ya think after 112 days on the market it might be time for a price reduction?

Notice that in that lengthy description, they didn’t mention the parking situation. That’s because there is no parking in the building. That’s right. Street parking. In downtown Long Beach. Hope you brought your running shoes.

If you want to protect your car and personal safety, it’s going to cost another $67 per month to park two and a half blocks down the street at the Marriott. Want to make sure your mom or your girlfriend don’t have to walk around downtown LB at night to get to your place? That’ll be $134 a month.


Could you imagine slapping down $4,700 a month** and being forced to drive around all night looking for street parking? Plus, if you’re pulling in the $154,000 per year required to afford this place, I’m sure you don’t drive a shitbox that you want to have sitting outside on the street constantly.

At this price, this condo ain’t going anywhere. Even at half price I don’t think it will see much interest. Keep in mind, that modern furniture and fancy schmancy decorating crap doesn’t come with it.

But, if you can’t quite swing the nearly $5,000 mortgage payment I have good news: The seller simultaneously trying to rent it out!


For rent by Owner. This large 2 bedroom, 2 bathroom corner unit is located on the 9th floor of the historic Lafayette Building in the heart of the east village arts District, a short walk to downtown urban shopping or the new waterfront project, The Pike at Rainbow Harbor.

It goes on an on with all that superfluous crap about Australian Sandstone floors, Brazilian mahogany floors, golden Peruvian soap dishes and chrome Mongolian microwave buttons. What’s most interesting about the rental description is that the lease is revealed as on a “month to month basis.” Why? You think some idiot, after 112 fruitless days rotting on the market at that ridiculous asking price, is going to suddenly come along and swoop it up for asking price? Good luck with that.

But from a rental perspective, apparently keeping all options open is this seller’s focus.

And renter beware.

This financial wizard might try to make you pay for his fiscal blunders and throw you out at the first glimpse of a sale (after happily taking your first and last month’s rent up-front).

And speaking of financial wizardry, let’s look at the asking rent.

Hmmm…$2,450, eh? Forget for a moment how ridiculous that is (remember, unfurnished), it’s barely HALF of the monthly mortgage. Please, oh wise one, explain to me why anyone, in their right and fluid mind, would consider stretching themselves to buy this over-designed luxo-shack when they could rent it for $2,000? (that’s right, I said it—two grand. No way you’re finding a sucker to pay $2,450 plus parking fees)

Clearly, this place is immensely overpriced.

But why? I suppose it’s because the seller dumped a lot of money into renovation and wants to get it back. However, assuming this place appreciated at a (generous) 5% per year after the purchase in 1999 for $76,000 (um, wow), this place would still be worth only $110,000. This condo looks nicely done, but is it $505,000 worth of “nicely done”?

Who knows, maybe those rare “Brazilian Mahogany wood floors” are really expensive.

Hmm, this neighbor also has Brazilian hardwood flooring, let’s find out:

Address: 140 Linden Ave, #711, 90802
Asking Price: $199,000
HOA Fine: $365
Year Built: 1928
Size: 2 beds, 2 baths, 1078 sq. ft.
$/Sq. Ft.: $185
Purchase price: $138,000
Purchase date: 6/2001
MLS#: R712304
On Redfin: 180 days (happy 6 month anniversary!)
Down Payment: $19,900
Monthly Payment: $2,100
Income Requirement: $50,000
Description: GIGANTIC PRICE DROP!! Nearly $300,000k off original list price!! No question this is the best price per sq. foot in downtown Long Beach. This is NOT a SHORT or REO - although it's priced like one! This amazing one-of-a-kind unit in the historic Lafayette Building is loaded with history and a classic vintage feel. The property includes a rooftop garden w/ fountain and city views, inside laundry hook-ups, and NO COMMON WALLS. New kitchen & Brazillian Cherry Floor in 2nd bedroom. A state-of-the-are gym is included in low HOA. The rooftop solarium has spectacular views of the entire L.A. basin and the Long Beach harbor / Catalina. BEST VALUE in the historic East Village landmark once owned by the Hiltons! Walk to everything! Pet friendly. Parking is available. Get the VALUE of a short sale without the hassle. This owner is motivated beyond belief! Get your offer in now before the deadline - call for details. Showings are appt. only. Investors this is your chance for a spectacular deal.

Whoops! Same floors (except with an extra “l”), dramatically different price. Can you say COMP KILLER?

I know, I know, the listing seems fishy. Suppose you’re in the market for a new car. You pick up an AutoTrader and flip to, let’s say, the HUMMER section. After determining that 2003 models with similar miles are going for $36,000 - $40,000, you stumble upon one with custom wheels and really low miles for $20,000.

Your first thought is, “What’s wrong with it?”

Well, that’s exactly what I thought about this listing. Regardless of whether it’s a ploy to start a bidding war, it’s a real listing. That’s right: A 2 bed/2 bath for $185 per square foot.

Anyhow, the most amazing part is that assuming this is not a foreclosure, assuming it’s not a short sale, and assuming the seller really is this serious…it almost pencils out in a rent vs. own calculation. Exciting, right? This is the first sign Long Beach is returning to the Land of the Logical!

But, before you get too titillated about this condo (like I did initially) you musn’t forget the $365 per month you’re plunking down for the HOA fine. Yes, there is a billiards room (there’s also one down the street at Rock Bottom Brewery and it’s MUCH cheaper than $365 a month), but the monthly fee adds another $131,400 during the life of the loan.

So now this place, with no parking, in an 89-year-old building, with old ass windows and disco mirrors on the wall is in fact priced at $330,400. Not such a smoking deal anymore, is it?

Regardless, this condo WILL sell at this price. There’s no doubt in my mind. It really is a good deal and I’m not even bearish enough to think it will go significantly lower than this (unless, like that low mileage Hummer, there is something seriously wrong with it). The fact is that it is near rental parity, meaning this close to the price it should be selling for.

I guess the larger question is, once this seller skips town with their 50 grand in cash (damn, if they had just priced aggressively from the start, they could have pulled in at least double that), what happens to the rest of the Lafayette? The new comp for a 2/2 will be a third of #957’s asking price, and will absolutely obliterate any hopes of the 1/1 units unloading for north of $150,000.

Anyhow, I’d just like to congratulate the seller at #711 for being the first property on this site to accept reality. You’re showing all those other idiotic, Kool-aid drinking sellers what it takes to move a property in this rapidly disintegrating market.

Your neighbors will want to put a phillip’s head screwdriver through your temple, but buyers like me will hold you in the highest esteem.

**Keep in mind my calculations take some serious liberties with assumptions. First, I’m assuming a 6% interest rate, which, on a jumbo loan, would be miraculous to obtain. Second, I’m assuming a lender will only require a 10% down payment in a rapidly declining area of Long Beach on a massive $500,000+ loan. I doubt you could find a lender to accept anything less than 15% in such a transaction.


  1. super great write-up!

    but is $2500 (2100+345) really what a 2bd with no parking is going for in downtown LB these days?

    btw, HUD has started dumping fast and furious. Today only one in north LB, but I expect that there will be lot more.



  2. Yes, $2,500, as nutty as it sounds, is what this dolt thinks is a reasonable asking rent in downtown with no parking. But is that any surprise? This is the person asking $615,000 for the same property.

    I concede the pictures are very impressive and the condo would be some swanky bachelor digs, but unless all that modern, guaranteed-to-look-good-but-give-you-crickets furniture is included, it's an exorbitant asking rent.

    However, in the Rent vs. Buy calculation for #711, we're awfully close to parity. To wit:

    $2000 / 2br - Historic Lafayette


    Live in the beautiful and desirable East Village Arts District. Two Bedroom and two bathroom Condo in the heart of downtown Long Beach. The Lafayette is a historic building located on the intersection of Broadway and Linden Ave. The building boasts two patios, a fitness facility, and rooftop solarium. Walking distance to beach (2 blocks), Pine Ave, shopping (Nordstrom's & Walmart), Shoreline Village, the New Pike (theaters, Borders, & many top notch restaurants), and Arts Galleries. Close to 710 freeway and Blueline. The Condo is actually two units #317 & #317.

    I think even $2,000 asking rent is giving the landlord crack pipe burns, but there it is.

    Re: HUD. Thanks for that information. Wow, wonder how soon until the effect of these dumping efforts will start to creep toward the water...

  3. maybe it comes furnished...

    me likes. very cool, indeed.