Wednesday, October 15, 2008

A Fiesta into a Ferrari: UPDATE

The last time I profiled this house, I lambasted the sellers for their greed and ignorance of economic reality.

Well, since then the listing has been taken down and re-listed with a brand new, attention-grabbing asking price. A new leaf! A new attitude! A new opportunity to show (the few remaining) Long Beach buyers you're serious about selling!

Um, well, not exactly. There has been a significant $74,800 price reduction, but keep in mind the original asking price of $899,800 was certifiably WTF.

Interestingly, at the time I said:

Expect at least a 10% price cut within the next four weeks.

My well-documented prediction powers were a scant .05% off. Maybe next time.

However, it's worth noting I predicted that reduction needed to happen months ago to garner any buyer interest. These financial geniuses, unfortunately, waited until last week to step up to the plate! Too late, bucko.

The housing market has changed dramatically for the worse during the last few arduous months, and prices have long since passed these sellers by--doing 95 mph with the top down and middle finger straight up.

The new asking price of $825,000, while it represents a modicum of reality acceptance, is still indicative of a gravely brain-damaged seller. Just for the hell of it, let's take a closer look at the new listing and crunch some numbers.

Address: 366 Orizaba Ave, 90814
New Asking Price: $825,000
Year Built: 1918
Size: 2 beds, 2 baths, 1560 sq. ft.
New $/Sq. Ft.: $529
Purchase price: $423,000
Purchase date: 7/2002
New MLS#: P659618
On Redfin: 7 days
Description: Beautifully restored 1918 Craftsman Bungalow in the historic Bluff Heights neighborhood of Long Beach. Living and dining room combination with a working fireplace,skylight, and original hardwoods. Guest bath completely redone with marble and slate, a pedestal sink,custom lighting and glass shower divider. Guest bedroom is spacious. Master suite includes high end custom cabinetry,ceramic tile floors, indonesian rock walk-in shower and separate tub, and designer glass tile wall with vessel sink. Dream eat-in kitchen/great room with slate flooring, newer cabinets,granite counters and large center island and pantry. Sliders from the kitchen open up to a peaceful backyard deck overlooking the yard and koi pond. The house has been painted a soothing palate of designer colors, has custom window coverings, and has been landscaped front and back. New roof installed 3 years ago. Nothing left to do except move in and enjoy!!

New Down Payment: $206,250 (In June I was still calculating using a 10% down payment requirement. We all know those days are long gone and 20% is the new standard)
New Monthly Payment: $5,000 (Assuming a 6.5% interest rate. A jumbo loan would almost certainly need to be used, which carry much higher rates. But for the sake of simplicity, we'll use the same rate I applied in June)
New Income Requirement: $206,250 (Down from $225k)

How they came up with this pricing strategy is anybody's guess. I mean, just look at the nearby properties for sale. Hell, the highest priced 2-bedroom is only asking $599,000 (and that idiot has been begging for 245 days).

But all we really need to confirm our suspicions that this seller is in need of psychological evaluation is the recently closed sales:

$451,000 351 Coronado Ave Sold on Jun 04, 2008 - 3 bd / 1 ba 1,493 Sq. Ft.
$480,000 3225 E 4th St Sold on Jul 31, 2008 - 0.18 miles 4 bd / 2 ba 1,384 Sq. Ft.
$504,000 291 Redondo Ave Sold on Sep 15, 2008 - 0.28 miles 3 bd / 2 ba 1,856 Sq. Ft.
$232,500 380 Wisconsin Ave Sold on Apr 28, 2008 - 0.28 miles 2 bd / 1 ba 1,739 Sq. Ft.
$610,000 618 Ohio Ave Sold on Sep 23, 2008 - 0.31 miles 2 bd / 1 ba 1,372 Sq. Ft.

Dude, there isn't enough granite, stainless steel, or bullshit hand-polished Nairobian soap dish tiles to justify the kind of hole-headed greed and delusion informing your $825,000 asking price.

At the time I also said:

It’s also worth noting that the median income in this zip code is $49,073 annually. The income required to afford this house is $225,000 per year. Sure, this can't be called a "starter home," but it is most assuredly still a median home (the upper end of it). How can a tiny 2 bedroom, 2 bath, 1,500 square foot house (not on the sand) qualify as anything else?

Oh, it’s got an “indonesian rock” shower, you say? Big effing deal. You can put a spoiler and a set of 22" spinners on your '83 Ford Fiesta, but that doesn't mean it's suddenly going to be in the Ferrari section of the AutoTrader.

The foolish, misguided seller's decision to buy the most expensive materials possible has absolutely no effect on the house’s resale “value” in a declining market.

It's amazing he can sit there with a straight face and demand such a princely sum for what is ultimately, as I said back in June, a "heavily lipsticked pig."

"Rare," "imported" or "designer" upgrade materials are like those "In Loving Memory of ____" stickers people put on the back window of their car.

Nice enough, I guess, but utterly meaningless to anyone but you.

Most people don't want to live in someone else's idea of "trendy" or "modern." In fact, one of the oft-touted home ownership advantages, straight out of the National Association of Realtors handbook, is "The ability to remodel or customize your home."


This sucker watched too many episodes of Flip That Property Ladder by Design and absolutely refuses to give up the dream. If you combine the old and new listings, this house has been on the market since (at least) June 17. That's around 120 days--the kiss of death for most listings, especially entering into the historically slow winter selling months.

Sir, I don't claim to be an economic expert, but I, unlike you, have an uncanny ability to see the writing on the wall. And my self-education and utter immersion in everything Common Sense leads me to conclude that if you don't lop off 20% right now, tonight, you will get absolutely crushed as interest rates rise.

Instead of walking away with your hoped-for, fantasy land $400,000 in profits, by continuing with this avarice-infused pricing strategy you'll be lucky to walk away, beaten, bloodied, and bruised, with what you paid in 2004--meaning you will lose every dime you spent fixing it up.

It's your call. Capitulate or continue on the road to destruction. I didn't create the law of gravity, I just respect the hell out of it.

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