Wednesday, September 17, 2008

Long Beach Housing Blog's 100th Post!

Address: 1775 Ohio Ave #105, 90804
Asking Price: $217,500
Year Built: 1993
Size: 3 beds, 2 baths, 1,225 sq. ft.
$/Sq. Ft.: $178
HOA Fine: $353
Purchase price: $418,500 (!)
Purchase date: 5/2006
MLS#: P655706
On Redfin: 6 days
Down Payment: $43,500
Monthly Payment: $1,746
Income Requirement: $54,375
Description: This is a very desirable 3 BEDROOM condo within a great complex with an nice open floor plan. This is a true 3 bedroom, 2 bathroom condo with over 1200+ square feet that is move-in condition. Large kitchen that opens to living area, seperate dining room, master-suite with huge closets, central air and heating, etc. Huge oversized private patio. This is the best priced 3 bedroom condo in Long Beach. Won't Last!

You know the tides of the real estate market have turned when your price per square foot is HALF the monthly HOA fee!

With a $1,746 (pre-tax benefit) mortgage payment, this three-bedroom condo would be an okay deal for an owner-occupant (assuming you want to live right on PCH in a shady part of town). Most notably, two–bedroom units in this complex rent for around $1750, so you could potentially have a cash-flow positive investment (assuming you can find reliable renters who want to live right on PCH in a shady part of town).

It’s worth noting this mediocre, non-upgraded apartment sold for a mind-blowing $418,500 just two years ago. Now, trying to keep up with the bombardment of foreclosures and short sales on the MLS (not to mention the carnage within the same building), this poor sap is desperately begging for a paltry $217,500.


The current asking price represents a $200,000 loss from the last purchase price and a 50% haircut once commissions are factored in. That’s gotta hurt!

Is it any wonder banks, investment houses, insurers, and even our own government sponsored entities Freddie Mac and Fannie Mae are going t*ts up at such a rapid pace?

Assuming this family made the median household income for this zip code ($35,063), that means a bank lent them money at nearly TWELVE FUCKING TIMES THEIR ANNUAL INCOME!

Even if we are to believe the former owners made twice the median household income, making them Rockefellers in comparison to their neighbors, that is still SIX TIMES INCOME!

I guess six times income isn't a problem if you don't have a car payment, a car insurance payment, or pay for gas. Also not a biggie if you don't eat groceries, use electricity, buy clothing, have a cell phone, or a social life. Six times income is also totally doable if you don't have children, credit card debt, student loan payments, or pay child support.

Enough of the bailouts already! It's obvious these banks absolutely, irrefutably, without any doubt in my mind, deserve to lose every. frigging. penny.

It simply amazes me that nobody, at any point during this transaction, from the (fraudulent) appraisal on to the stinky loan being repackaged and sold off to some clueless, faceless investors, stopped to think that something was amiss here.

I mean, don’t banks essentially manage risk for a living? Where were they?

I know I’m very bearish on this site, but the last few weeks have convinced me that it’s going to be much, much worse than anyone imagined. Assuming any of these Hail Mary actions by the Fed (“Ben, what do we do? Another huge bank is going bankrupt from writing bad loans to people who had no business buying a house!” “Hell, I don’t know—throw hundreds of billions of taxpayer dollars at it and hope everything works out.”) somehow miraculously stabilize the housing market, by the time that happens a U.S. dollar will be worth less than an Algebra II flash card.

The most terrifying thing about this whole mess is the appearance that nobody—I mean nobody—seems to have any idea what the hell is going on or what the hell to do about what they don’t know is going on. You have McCain making an inexplicably out of touch claim that “the fundamentals of our economy are strong” (and don’t give me that garbage about "he really meant the American workers are strong." Puh-lease), Treasury Secretary Hank Paulson pulling a Baghdad Bob by saying we can remain confident in the "soundness and resilience in the American financial system" despite the obvious carnage around him, and Senator Harry Reid straight up ADMITTING nobody knows what the hell to do.

I mean, can’t somebody at least pretend they’re doing more than just writing checks with our money and simply praying for the best? Can't someone in a position of power at least make some kind of effort to persuade us they have a basic understanding of economic principles?

These are scary times folks. Frankly, the idea of buying a house is no longer a priority for me. The word to live by during the next few years will be Survival.


  1. I agree. Which is why I will be moving into a smaller place (I rent thank god) soon. Which will allow me to save even more money then I currently do. I foresee some nasty sh*t for the next few years, and hopefully I wont lose my job because of this terrible economy, but if I do, I want to be able to weather it.

    Keep up the blog! Congratz on the 100th post!

  2. Woohoo!!! 100 posts of sanity in this insane market!
    Wow...these are scary times! Second to gm's comment...thank god I rent. It REALLY is starting to look like the market will have to fall to 1996 prices...or is that just wishful thinking on my part?

  3. Katy,

    If you asked me two months ago about houses plummeting to 1996 prices, I would have said you were way too bearish.

    But now, it's anybody's guess. It truly is.

    If job losses get on a hot streak and lending continues to tighten, '96 prices are not outside the realm of possibility.

    Some people might say '96 prices would never happen because the rent-to-buy calculation would be too out of whack. True, but what if job losses accelerate (25,000 people worked at Lehman Brothers, fyi)? Rents have to come down to meet those diminished incomes.

    It's all speculation at this point, but remember that some blinded-by-ignorance perma-bulls said a 20% decline was impossible and would "never happen in Southern California." We dropped more than 20% in ONE YEAR and there are no signs of the carnage stopping.

    Look, if unemployment goes up to 10 or 15% and Americans no longer have access to credit to participate in this consumer society of ours, house prices will be the least of our worries. Crime, slums, and mayhem will define the new America.

  4. Congrats on 100th post!

    And seriously, I'm worried too. All along I had been thinking that prices would drop down to 99 or 98 levels, just based on P/I fundamentals. But now with the coming 18 months or more of economic "troubles", I'm not so sure.

    For now, my downpayment fund is an emergency fund. Hopefully, the economy bounces back in the next year, but there is no way that housing prices will stabilize (or that I will purchase) before that.


  5. FreedomCM,

    I also had 1999 pegged as the bottom, but I sort of figured by the time the market hit those prices most of the good stuff would have already been swooped up. But I'm realizing there might not be many people left to do the swooping.

    My biggest fear is that I will put every penny of my hard-earned down payment money into a house next year, only to watch things unfurl even worse than expected--and see 10%, 15%, or 20% of my equity evaporate and find myself underwater. I would feel pretty dumb considering the bearish stance I take on this blog.

    I mean, as badly as I want to own and fix up a house, I can't even imagine being in a position where if I had just been a little more patient, I could have saved myself 20-50 grand.

    Anyhow, we'll see where this takes us. I, like you, am considering my down payment money to be an emergency fund for at least the next year. We'll be fortunate if our savings are worth anything once all of this unwinds.

  6. what to do, what to do...
    Let the pigmen sink.
    Let the speculators sink.
    Bailout no one.
    Socialize nothing.
    Feel the pain.
    Get angry.
    Re-learn the lessons our grandparents learned.
    Bring back Glass-Steagal.
    Reveal the exact extent of the losses now hiding on corpoRat books. This will be the beginning of re-establishing TRUST.
    Let the insolvent institutions FAIL.
    Return to a cash based economy.
    Do not PRINT dollars.
    Keep the full faith and credit of the u.s. (we will NEED it)
    Let the free markets be free.
    Go through a deep and painful recession without the added burden of trillions in new gov. DEBT. (this will enable our continued access to foreign capital. We still NEED it)

  7. Housing did an absolute batshit MOONSHOT on the way up...the overcorrection alone would take us to -96....but yeah, the job losses, California's budgetary clusterfuck (we are borrowing from the FED to fund unemployment now), and Wall Street's looting operation lead me to expect tough times for our amerikan oligarchy......

    The tides rose on credit/debt. As it washes out, millions of the "jobs" created on the back of that "capital" will disappear.
    I don't see hyperinflation though (unless the gov starts handing out FREE money cards to the proles en masse--wages sure as hell aint going up so how would inflation take hold?)
    Nope. DEFLATION is what we got. Dollars will remain precious and debt will remain ruinous for the for-seeable future.
    I'm looking to buy in at pennies on the dollar when we reach the point of ZERO credit availability.