Monday, June 16, 2008

Irvine Prices in Long Beach: UPDATE

One of my first blog posts featured a stunning, if controversial, example of Avarice is Bliss.

This house exemplified the entire premise of this blog: Long Beach, while a great city in its own right, pales in comparison to Orange County regarding schools, low crime rates, incomes, and cleanliness, and therefore cannot possibly justify asking prices that match (and in some cases exceed) the premium levied in OC.

However, Kool-Aid knows no bounds and Long Beach sellers (particularly those in less desirable areas of Long Beach) got drunk on Equity Juice and priced homes in less desirable neighborhoods like they would in Irvine, Huntington Beach, or much nicer cities in LA County.

By putting their greed on display, they held themselves out for ridicule and humiliation. Hence, the impetus and inspiration of this blog.

So, here we are today, more than a year after the home was first listed on the MLS at a laughable $454 per square foot. Like many others, the seller gave up and the property has since been taken off the market ("MY HOUSE IS SPECIAL, DAMN IT! IF THESE BUYERS ARE TOO STUPID TO REALIZE THAT, THEN I WILL JUST TAKE IT OFF THE MARKET. I REFUSE TO BE INSULTED!") and now they are attempting to rent it.

ADDRESS: 1533 E. BROADWAY AVE. (BROADWAY/CHERRY)BEAUTIFUL, LUXURY 2BED/2BATH HOUSE FOR RENT! Immaculate Hardwood Floors throughout House. Skylight in Large Living Room. Fireplace located in Living Room. Luxurious Kitchen with Stainless Steel Appliances. 2 Full Bedrooms with AIR CONDITIONING! Large Attic for Storage. Stacked Washer/Dryer. Wiring available for Direct TV and Surround Sound System! Charming, Large Backyard with Firepit and Entertainment Area. Great Location!!1 YEAR LEASEGardener ProvidedNo PetsTenant Pays ALL UTILTIES EXCEPT WATERMUST SEE!!!!

You are welcome to come into our office and pickup keys to view this unit M-F between 9am-4pm. WE ARE NOT OPEN OVER THE WEEKEND. Please feel free to contact me via email or at the office for further questions.

Actually, they've been attempting to rent it for more than a year, offering a "LEASE or LEASE TO OWN!" scheme--ERR, agreement from the get-go. No bites.

But, I thought "this is a NEW HOUSE." Well, if anything from 1918 could be considered new, I guess they're on to something. By the way, I can give you a sweet deal on a "NEW" Nash 681.

They seem a bit thick-headed, no? They refused to lower their asking price to a reasonable figure and the property didn't move. They refused to ask a reasonable rent and it's still vacant after a year.

I'm going to let this seller in on the most closely-guarded secret known to man. This wisdom is guaranteed to save the housing market in one fell swoop, but it has been elusive to all but those who travel in the darkest, most remote corners of the universe. But now I will unleash it upon the world for all to see, so that our housing market and the current misery and financial hell may end once and for all. And here it is:

Lower the price, dick.

You may have read there has been an uptick in sales recently. There is no complicated, macro economics-heavy explanation for this other than prices are cliff-diving. And when people can afford homes without bullshit, negative-amortizing, interest-only, Harry Houdini loans, homes start selling. Real simple, folks.

And if this seller had accepted this truism from the outset, he could have saved himself a year's worth of carrying costs, which at the time I estimated at $3,500 per month ($42,000 in a year!), and a lot of stress. Assuming this termite tent could get $2,000 per month in rent (which, judging by the time it's been sitting unoccupied, is yet another case of this individual's greed-faced lunacy), they are still bleeding cash to the tune of $1,500 per month! OUCH!

Incidentally, the Irvine property I compared this house sold for $540,000 in March. That was only $9,000 off the original asking price. Yikes, for a corner location? How much "equity" do you suppose that buyer has lost since his purchase?

The point is, Irvine can clearly get away with those prices, but our Long Beach seller learned after a year on the market that Alamitos Beach ain't Irvine.

If you'll recall in the original post, a local realtor and an offended resident posted invective comments with absolutely no analysis or data to support their misguided, rose-colored assessment of Long Beach real estate. They instead offered personal attacks and meaningless insults, but couldn't refute my opinion that:

"At $454 per square foot and 260 days on market, this thing isn't going anywhere. Sometimes I get the feeling owners just aren't serious about selling. I don't care how close you are to Belmont Heights, in this zip code the median household income is $30,353. This house is probably slightly above median considering the minor updates, but even if the median income were $50,000 a year, this thing wouldn't be priced more than $250,000."

I mean, it doesn't take Dionne Warwick and her psychic friends to call that one.

The fact is that homes are still overpriced and prices have a way to go before they meet market fundamentals (I'm not talking about the much-vaunted "bottom," I'm just talking about when a home purchase is a sound investment) and as long as banks have a large inventory of REO properties and that tidal wave of Option ARM resets is looming just off the coast, buying a property today is nothing more than a backstage pass to the Financial Agony show at the Wiltern (I heard Slayer is opening).

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