Saturday, October 18, 2008

A Tale of Two Cities: UPDATE IV

I hope you guys don't get bored with these update posts, but I love following certain properties and doing a Where Are They Now months after I've exposed their greed and delusion.

You may remember this booger barn, first featured in February:

Click here for the entire series of posts.

Well, they're still going strong, consistently dropping the price and praying to the high heavens for a sale. You really do have to respect the tenacity here.

However, their story is plagued by a single, harrowing theme of steadily chasing the market down, and consistently failing to get ahead of it.

The current asking price of $179,000 represents a discount of $131,000 since the property hit the MLS on February 5. That's a 42% reduction in asking price.

Not saying much considering the original asking price of $310,000 was an absolute joke, but still.

In February of this year I said:

Long Beach is living in fantasyland. There is no other explanation for the Wishing Price behind this 95-year-old, borderline-condemnable rat hole that sold just seven years ago for $130,000.

The point of this post is that Long Beach has not received the memo about the status of Southern California real estate. These informational and psychological barriers will come down, whether delusional Long Beach sellers like it or not. But my hope is that Long Beach stops fighting reality sooner than later, lest they further humiliate themselves with their offensive and frankly hilarious pricing strategies.

Well, it appears as if the informational and psychological barrier is crumbling (for these sellers at least). They are finally capitulating and getting aggressive so they can unload this albatross. I guess the important question is, Will this latest $36,000 reduction attract a buyer?

In March, regarding the large price reductions I said:

As long as big chunks of "equity" are being torn off indiscriminately and the house still sits, it means nobody knows what the hell anything is worth anymore. The only reliable indicators to steer this lost ship back to shore are incomes, rents, and availability of credit. Until all of those factors creep closer to alignment with house prices, the bottom is nowhere in sight.

So what the hell is this place worth? Remember, it sold for $130,000 in 2000.

In March I said:

At $160,000 it might make sense as an investment property. It would have to be torn down (or maybe the Historical Society would come down on you for trying to level this 95 year-old dumpster) and rebuilt, so you have to factor in those costs as well.

They're getting closer to $160,000, but I wonder if it's too late. Has the market for awful, poorly located properties like this evaporated with the credit crunch and lost jobs? Maybe 160k won't even get the job done.

Here's some perspective for you: If this house does sell for $160,000, they will walk away with perhaps $20,000. At least it's not a loss, right?

Or is it? They bought in 2000 and during the ensuing years witnessed the largest housing bubble in the history of the world, with properties appreciating 20% per year. They could have cashed in. And the reason they missed out on the opportunity to walk away with double their initial investment is because of greed. Pure and simple.

They thought it would last forever.

And when they realized (much too late) that the phantom appreciation was not going to last for perpetuity, they made a greed run and started with a ridiculous asking price. And they've been chasing the market ever since--256 days and counting.

If they had started with a lower asking price, or listed the home six months earlier--or both--they would have hit a once-in-a-lifetime lottery and had a chance at bettering their living situation and lives in general. But they blew it. And now this mound of mold just sits and sits.

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