Profiles in Delusion.

After a cloudy, dreary, overcast day in Long Beach today, the sun finally broke through and we had an absolutely gorgeous day. Schooner or Later, if you've never been there, is a Southern California gem. In fact, realtors would be wise to mention a property's proximity to it:

"A TENN MEEnUTE BIKE RYdE 2 skOONER 'r L8R!!!1!"

Anyhow, we've seen some gloomy days in Long Beach real estate but I am confident the sun will eventually come out and those of us priced out of even the most disgusting, undesirable roach motels will have our pick of the litter for reasonable, economically sane prices.

Sadly, that day has not yet arrived and delusion is still ruling the roost in the LBC.

Address: 3401 E. 1st Street #6, 90803
Asking Price: $649,000
Year Built: 1966
Size: 2 beds, 2 baths, 1,481 sq. ft.
$/Sq. Ft.: $438
HOA Fine: $200
Purchase price: $375,000
Purchase date: 6/2003
MLS#: P623107
On Redfin: 152 days
Down Payment: $129,800
Monthly Payment: $4,000
Income Requirement: $160,000
Description: Top Floor Corner unit penthouse With excellent OCEAN VIEW from Unit and Superior 360 degree Roof top deck. Spacious 2 bedroom and 2 bathroom condo with Entertainment size Living room, Dinning Room and balcony. This home also offer an office area and eat in Kitchen. Priced to sell.

You'll notice that I have finally decided to join the likes of Irvine Housing Blog and others who have long predicted a return to 20% down payments. For a while I've used 10%, then 15% given the growing economic issues and rising lending standards, but from what I've gathered we're finally at the point where the average buyer (i.e. someone with good, but imperfect credit and real life debt like credit cards, student loans, and car payments) will have a difficult time getting financed without a huge down payment.

With that said, how many people do you know with $119,800 laying around for this property?

I hope it's not all in one account at IndyMac.

This is a large penthouse, ocean-view condo in a PRIME area. This would make an excellent investment and would be an amazing place to live.

It's just a shame that nobody was nice enough to inform the seller that it's no longer the halcyon days of 2005 and hardly anything priced above 2003-2004 prices is selling. I mean, who wants to be responsible for casting storm clouds on this seller's obviously sunny, optimistic day? Especially in the middle of our "Summer Selling Season."

There is simply no way this place, as prime as the location is, will find a buyer for $649,000 (a 100% profit for holding the condo for five years). Maybe that will happen in 2035, but not today.
And not for the reasons you think. Some buyers in this area might actually be able to swing the $160,000 income requirement, and there's a slight chance some of them might have $130,000 for a down payment. That's not the problem. The problem is, somebody with that kind of cash would never, not in a million years, pay $649,000 for a place with this kitchen:

If you're sensitive about strong language then skip past this next line.

WHAT A FUCKING ASSHOLE.

I mean, the nerve of this idiot. $649,000 and this is your kitchen?! And no pictures of the (obviously crappy) bathrooms? His asking price is tantamount to driving a minivan 20 miles per hour in the carpool lane during rush hour.

Want to know what's even worse for this dolt? A neighbor is asking $50,000 less for a highly upgraded version of this condo.

Address: 3401 E 1st Street #2, 90803
Asking Price: $599,000
Year Built: 1966
Size: 2 beds, 2 baths, 1,481 sq. ft.
$/Sq. Ft.: $404
HOA Fine: $225
Purchase price: $660,000
Purchase date: 3/2006
MLS#: S537749
On Redfin: 25 days
Down Payment: $119,800
Monthly Payment: $3,700
Income Requirement: $150,000
Description: YOU'VE BEEN WAITING FOR THIS ONE!!!Gorgeous ocean view home is light, airy, and beautifully decorated. Located in a private six unit building, this end unit has everything needed for gracious living.Designer upgrades include granite countertops, glass tile backsplash,stainless steel appliances,hardwood floors and new carpet throughout. Bathrooms have been completely upgraded with natural stone flooring and glass top vanities. The spacious one level floor plan boasts nearly 1500 sq.ft. Private entry from the elevator directly into an impressive foyer leads to the large living room, dining room, and bonus area that is perfect for computer or exercise space. The gourmet kitchen has bistro eating area,and upgraded cabinetry. Both bedrooms are large with lots of closet space. Large laundry room with full size washer and dryer in the unit adds convenience. Secure parking has two side by side spaces with ample storage space. Conveniently located near beach,parks dining and entertainment.

This ain't no median property, I can tell you that! Woo! This is a beautiful, well-upgraded, nicely-staged condo. Well done, sir (or madam).


However, they must be serving spiked coffee in that "bistro eating area" because even this gorgeous unit has no shot at selling at their ridiculous asking price of $599,000. And that certainly doesn't bode well for Unit #6.

Redfin's past sales tell an interesting story about Unit #2:

Feb 25, 2002 - $294,500
Jun 09, 2003 - $376,000 (21%/yr)
Jun 24, 2005 - $629,000 (28.7%/yr)
Mar 01, 2006 - $660,000

Wow, look at that appreciation! 21% for holding a condo ONE YEAR between '02 and '03. Now that is some serious return on investment. I'm assuming the upgrades came in 2003, given the astronomical sales price just two years later. Amazingly, the 2005 buyer who flipped to our current loanowner in 2006--as the market was still taking off like a poodle with a jetpack--was only able to break even after sales commissions.

What does that tell you?

THAT THIS PLACE WAS SEVERELY OVERPRICED IN 2005, making today's asking price a sure sign of industrial-strength delusion.

My final thoughts:

Unit #6: At 150 days on market with no interest and only one price change, it's obvious that avarice runs deep with this one. Considering their $375,000 purchase price, if they had priced realistically from the beginning they might have broken even. But we have a "Most Special Condo in LB" seller on our hands, trying to double their money during one of the worst housing busts in the history of the world, and this place will rot on the market because of it. Just a total waste of time and energy at this price.

Unit #2: Doomed. They are already close to losing $100,000 on their ill-timed purchase. Even if they lowered their price by another $100,000 I can't imagine all those high-income sideline buyers flush with cash, just chomping at the bit to buy that we keep hearing about would be interested even then. Once the sun busts through the cloud cover and this seller sees the light, he'll realize rents will never cover the insane carrying costs and it's simply not worth losing hundreds of thousands of dollars to achieve a sale. Next stop, back to the bank.