Friday, October 31, 2008

Quick Updates

Happy Halloween, everyone!

A reader turned me on to the SoCalMLS site (I usually use Redfin), which is a great tool for finding closed sales (Thanks KatyinLBC!). So here are a few quick updates on some RE in the LBC featured properties:

655 Ultimo, 90814

Purchase price (10/2007): $575,000
Original Asking Price (3/2008): $1,199,000
Final Sales Price (10/2008): $975,000 (20% discount)
Profit After Commissions: +$340,000 (significant rennovation costs not factored in)

Notes: For all the trash I talked, this flipper was eventually able to find a greater fool. Congratulations! The flipper got a good deal when he purchased it, used top of the line materials to upgrade, and wasn't afraid to discount when the going got tough. Have to give credit where credit is due. And may Buddha have mercy on the knife-catcher's soul. With $5,900 a month in carrying costs, he's going to need it.

514 Temple, 90814

Purchase price (9/2005): $520,000
Original Asking Price (3/2008): $499,000
Final Sales Price (10/2008): $338,000 (~35% discount)
Loss After Commissions: -$202,000

Notes: If you recall, I was mildly interested in this house as an investment property. The new bag-holder paid $338,000 for this incomplete fixer-upper, making the carrying costs around $2,000 a month. Even after spending tens of thousands of dollars completing the flip and converting it back to a proper 2-bedroom, there is no way this place could rent for $2,000. That's called negative cashflow, Sparky, and you just caught a falling knife.

282 Redondo #302, 90803

Purchase price (1/2006): $445,000
Original Asking Price (1/2008): $420,000
Final Sales Price (5/2008): $373,000 (~18% discount)
Loss After Commissions: -$94,000

Notes: Aside from the stunning $94,000 loss, what stands out to me is that the monthly carrying costs are around $2,500. Dude, are you nuts?! You'd be lucky to rent it for $1,600! What were you thinking?

The good news is that houses and condos are still selling despite the terrible economy. More good news for us taxpayers is anybody buying right now has to meet stricter income requirements, is not using Option ARM, Interest Only garbage loans, and is (finally) putting significant skin in the game in the form of higher down payments. That means despite severely overpaying for something that will be much cheaper in the future, these newly-minted bag-holders are much more likely to be able to actually afford their payments. Nice!

However, if the people like 282 Redondo wake up tomorrow and realize they could rent the place next door for $900 less than they're paying now, or wake up a year from now and realize they could BUY the unit next door for the same $1,600, we might see walkaways regardless of the ability to pay.


  1. El Bee,
    Thanks for the follow up on these properties. It will be interesting to see how this plays out. Are these buyers getting in at the right time (not in my opinion) or will they be hatin life in '09?
    I'm not A. Einstein, but I can see the writing on the wall. Every, and I do mean every, company we do business with (all are major corps) are cutting back spending drastically. The coming year is shaping up to be ugly. Can't see how this will do anything but crush the housing market further.

  2. consider that unemployment just barely begun to poke its head out of the ground, things will get much much worse.

    AIG bailout will come unravelled, all the M&A loans need to be turned, and commercial property deals will also need to be turned in the current environment.

    Things will get much uglier. Newspapers are not yet screaming about the end of capitalism as we know it - some headlines here and there moaning about socialism, but no "This is the end of the system!" type stuff. That's when we know we hit bottom, when no one has a stomach for risk anymore. It ends with capitulation.

    This is like inning 2 of the game.

    Just my anonymous opinion.

  3. Everybody sitting around "waiting for things to return to normal" might be surprised at how long that takes because of government intervention.