Wednesday, July 30, 2008

The Doctor is Out.

I'm flying to Chicago for the weekend, so no updates until sometime next week.

Enjoy the beautiful weather.

We're Number 1! We're Number 1!

Finally, the day has come.

According to another great post from Dr. Housing Bubble, Long Beach has finally claimed its #1 spot:


That's right, kids. 90813 in LB has claimed the top spot in year-over-year price declines (-65% since 6/2007). In your face, Pasadena!


Congratulations on your profound accomplishment, Long Beach. Go ahead and take a victory lap...you earned it.

Monday, July 28, 2008

Finished Before It Begins

The best way to describe this listing is as a defeated, exhausted shrug.


Address: 1130 E 1st St #301, 90802
Asking Price: $299,000
Year Built: 1959 (!)
Size: 2 beds, 2 baths, 977 sq. ft.
$/Sq. Ft.: $306
HOA Fine: $287
Purchase price: $415,000
Purchase date: 1/2007
MLS#: P648286
On Redfin: 5 days
Down Payment: $60,000
Monthly Payment: $2,100
Income Requirement: $75,000
Description: Unit was remodled two years ago. All new flooring, kitchen appliances,paint and lots of nice up grades. Front Corner, top floor. Great view of the city, the Queen Mary is visable from in front of unit. Two, assigned underground parking spaces, come with this unit. Short sale.

Three words into the listing and there's a typo. "Remodled"? They actually meant to say "reMOLDed," because this place sure as hell isn't "remodeled."

Please, I beg of you, other than the wood floors show me one picture containing "visable" evidence this 50s relic was remodeled ever, let alone two years ago.

"All new kitchen appliances"?

Just a suggestion, dummy: How about a picture? Redfin was generous enough to give you 15 photo slots and you couldn't think to post photo proof of these sure-to-be impressive new appliances? How about just the kitchen? No? FIRED.

"All new paint"?

Really? You mean that bile yellow foulness that was probably found in Home Depot's discount rack? The same paint that cost $3.50 per gallon AND WILL NEED FOUR LAYERS OF PRIMER BEFORE A NON-VOMIT-INDUCING COLOR CAN BE IMMEDIATELY REPAINTED ON TOP OF IT?


"Lots of nice up grades."

Prove it. No really, prove it.

Oh, never mind. What's the point of badgering this numbskull?

It's clear that this realtor acknowledges, just as everyone else does, that this too-close-to-the-downtown-riff-raff septic tank will not sell at any price over $200,000. In this condition, $299k is a marshmallow dream.

The current asking price of $299,000 represents a rollback to 2004 prices, but you, me, and especially the real estate agent, know that this dump with its atrocious $287 monthly HOA (no pool for you sucka!), will get no action until it approaches the '03 price of $189,000. Wait a minute, 40% appreciation in one year? What the hell was everyone smoking? And what was our soon-to-be-foreclosed-on owner smoking when he paid $415,000 for this piece of sh*t?

Now you see why this listing is like waving the white flag before the first shot is fired. Everyone knows this place is doomed.

Check out these pictures and tell me you can't picture a realtor shrugging through this entire process:

"YAAAAAAAAAAAAAAWWNNNN..."



"Whatevs, man..."


"Close enough...I guess..."

This place will rot like a corpse, and those pictures are worth a thousand worms.

Sunday, July 27, 2008

WTF?

In my Inbox this morning, Redfin informed me that six Long Beach property listings have been updated.

In a rapidly deteriorating market, this usually means one of two things:

1. Jackass realtors changing the status from "Active" to "Contingent" to make it look like people are actually interested in their overpriced properties, or

2. Price reductions

So imagine my surprise when I saw six price INCREASES staring at me. WTF?

It's worth noting that all properties are tiny, in the same no-man's-land 'hood, and listed by the same agent:



2530 E 10th St, 90804
The list price was "$284,000" and changed to "$324,000"
The status was "Active" and changed to "Contingent"

2540 E 10th St, 90804
The list price was "$284,000" and changed to "$324,000"

2542 E 10th St, 90804
The list price was "$289,000" and changed to "$329,000"

2544 E 10th St, 90804
The list price was "$299,000" and changed to "$339,000"

2524 E 10th St, 90804
The status was "Active" and changed to "Contingent"
The list price was "$274,000" and changed to "$314,000"

2526 E 10th St, 90804
The list price was "$279,000" and changed to "$324,000"

The really weird part? Every single listing starts with, "Reduced price!!"

Did the realtor jack up the prices but was too lazy to remove the "Reduced price" language from the listing descriptions? A lazy realtor? BLASPHEMY!

Is it a ploy, aided by playing with the "Active"/"Contingent" status, designed to fool people into believing a bidding war is going on? A dishonest realtor? HOW DARE YOU!

Is it a typo, and the realtor actually meant to reduce the price to $224,000, $239,000, $229,000, etc.? A realtor with typos? STOP SPREADING LIES!

Or worse, does this realtor actually believe they can get $424 per square foot during the worst housing and lending crisis our country has faced since the Great Depression? A delusional realtor? YOU SIR, HAVE FINALLY CROSSED THE LINE!

What's your theory?

Saturday, July 26, 2008

Flippin' Ain't Easy: UPDATE

Reader James pointed out a property featured on the Long Beach Housing Blog has recently undergone a massive price reduction.



To bring you up to speed, please check out my post from April:

http://longbeachhousingblog.blogspot.com/2008/04/flippin-aint-easy.html

I mean, are those pictures amazing or what? It's like they couldn't get out of there fast enough!



Reality appears to be sinking in for this failed flip, because the asking price has been slashed once again--bringing the total price reduction since listing in February to $162,000.

Don't get too excited.

The original asking price was an astounding $562,599. That's like congratulating someone for losing weight, when all they did was take off their shoes.

Sadly, this recent $100,000 haircut is still not enough to move this half-completed wonder. As James said, "150-200K more and it would be worth considering."

The funny thing about James' timing is that I too noticed the recent price cut and was just talking to friends about this house yesterday. I am way more interested in owning a home than an apartment--ERRR, condo, and considering that a lot of the work is already done, this would make a nice little starter home.

However, I've been by the property a few times and there are some serious drawbacks that will substantially impede a sale at this price, or even at $300,000.

1. It's right on Temple. Although not a major thoroughfare like Redondo, it still generates significant traffic. Luckily the flipper installed what looks to be double-paned windows, but I wish you luck trying to back out of the (hideous) driveway. The only stop sign in the area slows down traffic going toward the beach, and you unfortunately would be forced to back out into northbound traffic coming at full clip from 4th Street.

2. It has no backyard. That's right. NO. BACK. YARD. Check out the overhead map and YIKES! Do you have to put your barbecue on the roof? Or how about you and all your friends kick it on the front lawn, five feet from a busy street? Major drawback for people like me who prioritize entertaining guests. And plus, what's the point of buying a house rather than a condo if it has NO FRIGGIN' YARD?!

3. It still needs work. For someone like me, that's not an issue because I'm obsessed with home improvement projects. However, for most buyers plunking down $300-$400k, knowing the house still needs exterior/interior painting, detailing (exposed electrical sockets), work on the midget garage, and God knows what else, isn't too appealing.





4. It's old, old, old. And judging by the half-assed work and even halfer-assed pictures, I can virtually guarantee corners were cut during the flip process. Then you have to worry about archaic electrical and decrepit plumbing. This is a big risk with these old houses as compared to buying a newer condo. Lowball accordingly.

When you put that all together, it's obvious the asking price is evidence of serious brain damage. As a reader recently articulated, "There ain't no cure for dumb."

Actually there IS a cure for dumb, and it's called Market Forces. And the less we screw around with bailouts and attempt to drag out this inevitable housing crash, the sooner idiots with eyes bigger than their checkbooks will be purged from the market and hardworking, responsible, first-time buyers with strong senses of financial responsibility can buy these houses for affordable prices.

The listing claims this house is a "Great home for 1st time buyers." At this price, a qualified first time buyer would have to be pulling down at least $100,000 per year and come to the table with $80,000. Even with those parameters met, this miracle buyer would STILL be cash-strapped and unable to save, live a decent lifestyle, or contribute to our ailing economy in any meaningful way.

If this property sold today for asking price, the loss would be a staggering $140,000. But everybody (except for this dummy) knows this thing won't sell for anywhere near that amount. At $300,000, I'd mosey on down for a look-see. But until we're in that pricing neighborhood, there's no way I'm moving to this neighborhood.

Claiming this is great for first time buyers is like saying amputating your leg is a great way to shed some pounds.

Thursday, July 24, 2008

The Loser of Linden

Well, as I'm sure you know by now, the Deadbeat Homedebtor/Greedfaced Lender Bailout legislation is all but a done deal. I'm almost too depressed to comment about it. All I will say is that while I see the value in rescuing Frannie and Freddie, considering how the government has allowed them to become essentially the linchpin of the lending arena and how their dissolution would most assuredly cause market panic and a freeze in lending, I am disappointed that our representatives have embraced the idea of moral hazard as fiscal policy.

All this bill will succeed in doing is drawing out the housing crash longer than it needs to be; keeping responsible, hard-working people like me priced out of The American Dream(tm) and simultaneously rewarding stupid, uninformed, irresponsible behavior.

By the way, I lost $500 playing roulette last time I was in Vegas. The guy next to me, who told me he was an expert at betting, told me that after five reds in a row I was bound to hit black. Can I have my government bailout now?

Aaaaaaanyway, today's property is a prime example of someone who overpaid during the housing frenzy of 2005 and likely expects to be bailed out by you, me, and the rest of the American taxpayers.



Asking Price: $374,900
Year Built: 1987
Size: 2 beds, 2 baths, 1,064 sq. ft.
$/Sq. Ft.: $352
HOA Fine: $275
Purchase price: $490,000
Purchase date: 7/2005
MLS#: Y803235
On Redfin: 85 days
Down Payment: $74,980
Monthly Payment: $2,600
Income Requirement: $94,000
Description: Location, Location, Location! You can move in this TOP FLOOR Charmer. Located just seconds from the water in the East Village Arts District. Walking distance to many of Long Beach's best attractions. This unit offers an open floor plan, breakfast bar, IN-UNIT LAUNDRY, and Secured Parking. Enjoy the view from almost every room in the condo. Appraised in 2007 for 560,000. Seller has already bought another home and needs this one sold ASAP.

"Seller has already bought another home and needs this one sold ASAP." Oh really? That absurd price doesn't exactly scream ASAP.

And why mention what it appraised for in 2007? Has anything been proven more unreliable, useless, and fraud-derived than appraisals? That's like telling us what color the living room paint was in 1993--completely irrelevant.

Furthermore, if the $560,000 appraisal from a year ago meant anything as far as determining value, then why isn't today's asking price $560,000? After all, that's what the place is worth, right?

Idiot.


I suppose the intention is to make you think you're getting a smoking deal. If you know anybody stupid enough to have recently bought a home then I can virtually guarantee you heard some form of, "Dude, I only paid $500,000 for $600,000 house!"

Sure, that's one way to look at it.

The other way to look at it is DUMMY, YOU OVERPAID $500,000 FOR A $300,000 HOUSE.

I guess which way you choose to view the purchase makes the difference between sleeping at night and wearing adult diapers every time you crack open a newspaper.

The fact is, the last few years of "appreciation" were a dream. Sorry, doesn't count. Take your 2003/2004 price, lop off 10%, and you might have a shot at selling. And regardless of the bailout, the current market and lending conditions guarantee further carnage. Where will the Wheel of Disembowelment stop? 2002? 2001? 1998?

Just take this sucker. He paid an astounding $490,000 in 2005. Yes, that's right. With a kitchen like this:


Yikes.

Anyhow, his current asking price represents a 20% discount from his '05 purchase price. "Hey dude, I got a $490,000 place for $375,000!"

Not so fast, Drooly McDumbstain. Instead of working back from the unbelievably inflated 2005 price, let's work forward from the sales price before that.

Yep, in 1999 this "TOP FLOOR Charmer" sold for a whopping $177,000. I'll be charitable and apply a 5% annual appreciation since '99. That gives us a 2008 price of around $260,000.

Well that's weird. It looks like you just paid $375,000 for a $260,000 shoebox.

And what a glorious shoebox it is. I mean, it has views of Ocean Blvd:


Plenty of nearby foliage:



It has an indoor tree house loft entrance for the kids (B.Y.O.L.--The ladder is going with the seller):



A huge half-moon window that will be impossible to find coverings for:


And so much more. But there's a problem.

You see, there's some unwanted competition at this Location, location, location! Unit #408 in the same building is also trying to unload but he's not foolish enough to rely on appraisals from 2007 that may have a misplaced decimal point (come to think of it, I didn't see a dollar $ign next to the appraisal figure. It's possible they meant 560,000 Zimbabwean bank notes).

Other than not having a tree house like #508 (which just eats up precious square feet) they are identical. Right down to the same disgusting, all original kitchen:

And this seller (likely the bank) is wisely pricing to sell at $224,900. Another look at the pictures and it's clear that even at that seemingly cut-rate asking price, this claustrophobia capsule (the pictures make the ceilings look about five feet high) is still a bit overpriced. But you get an "A" for Assho--I MEAN, effort.

$225,000 would represent an annual appreciation of 2% since 2001, meaning somebody got the memo about pricing properties aggressively if you want a sale. Note: If #408 (which appears to need about 20 gallons of Formula 409) sells for current asking, that will represent an astounding 50% off the 2005 price.

And worst of all for the Loser of Linden in #508, a sale of #408 will quickly set the new comp for the entire building, dashing any hope whatsoever of avoiding foreclosure.

But hey, these are the people the government is "working to keep in their homes." That makes me feel so much better about rewarding him and other delusional gamblers for their utter failures so they can move on with absolutely no consequences or personal accountability.

Wednesday, July 23, 2008

Go Beach!

Peter Viles over at the excellent L.A. Land Blog posted a cool chart showing Southern California ZIP codes with the largest increase in foreclosures (among other useful information).

And guess what?

Out of all of SoCal, Long Beach made it into the Top Six! Go Beach!!

According to the chart, 90814 had 11 foreclosures compared to one in 2007, earning a 1000% increase. Nice!

Now, when you start out with one measly 2007 foreclosure, a 1000% increase isn't that newsworthy. But what is worth noting is that this is in 90814, hardly considered a crappy neighborhood. In fact, 90814 encompasses most of Belmont Heights, considered by many (including me) to be a very desirable part of town (well, parts of it, anyway). Either way, the median price is a whopping $570,000, meaning other so-called "immune" areas are going to start feeling the pressure from these foreclosure comps.



Some other notables:

90805: 119 foreclosures in second quarter 2008, earning the top spot in LB.


90807: 45 foreclosures in second quarter 2008 (the median home here costs $458,000)


90806: 38 foreclosures in second quarter 2008 (an increase of 850%)

Anybody still want to call a bottom (again)?

Sunday, July 20, 2008

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.

Friday, July 18, 2008

Tuesday, July 15, 2008

Question:

Q. Why are houses so much more expensive in Southern California than, say, Battle Creek, Michigan?

A. Higher incomes

Any reasonable, thinking person would accept that as a basic economic fact. If jobs don't pay much, people can't afford much. Supply and demand, baby.

My follow-up question is, if we can so readily accept that other parts of the country are less expensive because higher prices couldn't be supported by local incomes, why do so many (still) readily accept that the rules don't apply in California?

Sunday, July 13, 2008

Neglected on Nieto: UPDATE

You kids remember 204 Nieto in Belmont Shore? Well I have a little update for you:




Days on Market: 509

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!

New Description: Priced to Sell! Live in the Heart of Prestigious Belmont Shore! 2nd Street's Unique Shops, Restaurants and Coffee Shops are Steps Away! Enjoy a Short Stroll to the Beach to Watch the Sunset. This is a Beautiful Craftsman Home w/Hardwood Floors and has been Completely Updated. Best of all you Benefit from the Extra Income the One Bedroom Rental Unit brings in every Month. This Home is Georgous and a Must See!! Seller recieved job transfer and moving out of area. Seller is VERY motivated to sell!

"recieved"?


Georgous”?

Really, you didn't have enough time to fix those egregious typos?

Obviously this place isn’t “Priced to Sell!” because IT’S STILL ROTTING ON THE MARKET AFTER 509 EXCRUCIATING DAYS! Please see the original post, where I marveled at a then-insane 328 days.

And I see the new pricing strategy is to disingenuously pour a little blood in the water by claiming there was a job transfer, hoping a seller will bail this dumbass out because they sense a little desperation.

Hey, idiot, EVERY SELLER who bought in the last few years desperate! The important difference is that it is those who price desperately who have any shot at actually selling.

Let’s take a look at the price changes during that frankly INCREDIBLE 509 days on market:

Feb 20, 2007 - $899,000
Mar 10, 2007 - $898,000
Mar 14, 2007 - $889,000
Apr 05, 2007 - $889,500
May 02, 2007 - $889,000
Jun 06, 2007 - $889,500
Jul 13, 2007 - $889,000
Jul 17, 2007 - $889,500
Aug 18, 2007 - $874,000
Aug 29, 2007 - $859,000
Oct 04, 2007 - $849,000
Nov 24, 2007 - $834,000
Dec 20, 2007 - $833,500
Jan 04, 2008 - $834,000
Jan 06, 2008 - $829,000
Jan 21, 2008 - $824,000
Apr 15, 2008 - $814,000
Jun 09, 2008 - $799,000

It’s worth noting that this idiot bought in 12/05 for an astounding $879,000 and attempted to flip it just 14 months later for a small profit. And then the chase to the bottom began in earnest. Well, I should define "earnest."

A month later there was a whopping $1,000 lopped off the astronomical asking price (those pathetic $500 and $1000 reductions during 2007 were likely an attempt to register “Price Reduction” updates via e-mail on the listing services). Reductions continued practically every month since it went on the market but the stark reality is that this place is nowhere near a luxury property and has no business being listed at luxury property prices. Obviously I'm not the only one who thought so.

Take a gander at those pictures and tell me one unique, impressive, or otherwise appreciable upgrade worthy of an asking price over $700,000.

This financial wizard has been slowly chasing the market down, likely turning down “offensive” offers along the way, desperately hanging on to the whimpering belief that “My house is special! B-b-b-b-but Belmont Shore is IMMUNE!” and is about to pay the price for his folly.

Why?

Because this idiota suprema insisted on renting money to overpay for a mediocre house during the peak of the housing bubble without even running the most rudimentary calculations.

Some may be asking why he doesn’t just give up (I mean, two years is an awfully long time), take it off the market, and rent it out.

The answer is, quite simply, because he can’t.

Based on his purchase price of $879,000, the monthly carrying costs on this beaut are approximately $6,000 per month (assuming 10% down, which in 2005 would have been pretty rare). Factor in the rental income from the 1 bedroom back house and we’re looking at roughly $4,900. A quick look at local rents and it appears the main house couldn’t rent for more than $2,200-$2,300. Let’s be extremely charitable and say this tiny 1,500 square footer could rent for $2,500. With a tax-benefit offset (some of which will be eaten by inevitable maintenance on such an old house, not to mention vacancy costs on your rental) that’s a negative cashflow of $1,900 per month. Based on my estimates, that’s a bleed of nearly $23,000 per year!! OUCH!!!

Even if you play with the numbers to get a smaller negative cashflow figure, there is no way local rents will save this loanowner (notice I avoided using the term “Homeowner”) from taking a monthly financial beating, so some may ask why he doesn’t just price it within the realm of reality and take the hit--just to be rid of it.

The answer is, rather obviously, because he can’t.

As it stands, if this property sold today for asking (let’s face it, the odds of that are about as good as me becoming a drunk-driving instructor) the loss would be a balance sheet-pounding $150,000. Holy sh*t folks, that’s a big loss for an area supposedly “immune” from the housing crash.

Because there is no mention of a short sale, I’m assuming this genius is wealthy and planning on taking these huge losses on the chin instead of walking away and sticking it to the lender (I mean, he sure doled out price reductions like it was HIS money).

Kids, this is why it’s extremely important to abide by rent vs. own calculations—especially during a declining market--otherwise you will face financial annihilation when hit with a divorce or job transfer (aka, Real Life). Sadly, this seller was too slow on the draw in chasing the bottom and, much like his occupation, this property is going to be “transferred”…back to the bank. I just don’t see how this individual can look at the potential losses combined with the lack of buyer interest and not be tempted to put it on the bank instead of his bank account.

I appreciate his commitment to his commitments, but it defies common sense at this point.

Rest assured, a knife-catcher will swoop in at $750,000. He’d be an idiot, but hey, that’s why they call them “knife catchers.” Not exactly a term that comes to mind when discussing smart, shrewd individuals.

The more I look at the pictures, the more offended I become at the asking price. I mean, really? After 509 days on the market you still can’t produce a picture of this “updated” kitchen? Well, this IS the same realtor who can’t be bothered to correct spelling errors after 20 months, so I guess that’s my answer.

On a final note: This house was purchased for $165,500 in 5/2001. I’m sure it wasn't in great shape but how bad could it have been if they didn't tear it down? The point is, that purchase price just FOUR years before this dolt pounced tells you an awful lot about the current seller. They actually believed this place was a solid investment despite the absolutely insane 43% annual appreciation since 2001. More red flags than a military base in communist China, but hey, real estate never goes down, right?

Thursday, July 10, 2008

Fashionably Late

Anybody trying to sell a property in this disastrous economic environment is either severely distressed or severely stupid. I'm having trouble figuring out which category this falls under.


Address: 4045 E 3rd St #311, 90814
Asking Price: $361,500
Year Built: 1968
Size: 2 beds, 2 baths, 1,155 sq. ft.
$/Sq. Ft.: $330
HOA Fine: $274/month
Purchase price: $282,000
Purchase date: 7/2002
MLS#: P645213
On Redfin: 7 days
Down Payment: $57,225 @ 15%
Monthly Payment: ~$2,600
Income Requirement: $95,375
Description: Rarely on the market. Belmont Heights Casa Grande Condo. End Unit on the 3rd floor. Quiet and clean complex. Low HOA dues. 2 Parking SPACES! Pool. Walking distance to Ocean Blvd & 2nd Street. South Facing. Hills View. Great price, for this area! Spacious bedrooms. Well kept home. Move in ready. Great balcony with breeze. You cannot miss this opportunity to live in Belmont Heights at this price. Newer carpet, paint & bathroom fixtures. Seller to include a 1 year home warranty plan for the buyer.***Open House, 7/5/08 from 12-4pm.***


There are so many realtor clich├ęs in this listing. All it’s missing is “LITE & BRITE!!1!”

As you know, one of my absolute favorite manipulation ploys—ERR, sales techniques, is “Rarely on the market.”

In a not-so-subtle way, it implies that this is a rare, highly-vaunted gem of property and time is running out to secure your piece of Long Beach real estate legend.


I've concluded that realtors’ livelihoods depend largely on selling fear. Even when times were good and any dishwasher with a pulse could get qualified to overbid a 4 bedroom house, fear was still their primary survival tool. Think about it. What were some of the most common phrases from commission-heads trying to get you to buy during the last few years?

“If you don’t buy now, you’ll be priced out forever.”
“They’re not making any more land.”
“You’ll be throwing money away on rent.”
“Prices are only going to keep going up.”
“Don’t you want to secure your family’s future?”
“I’ve already got multiple bids on this one and I don’t expect it to last the weekend.”
“Interest rates are at historic lows—they’re only going up from here.”


“Rarely on the market” is the same fear-based tactic, with the same intended result: You ignoring fundamentals and swooping up an absurdly overpriced property so a homeowner gets bailed out of their panicked situation (or "earns" a lot of money for nothing) and a realtor gets their commission. Well, I hate to break it to this dynamic duo trying to get rid of 4045 E. 3rd, but that party you showed up for--you know, the one where you could con some unsuspecting fool into buying an overrated shack for twice the cost to rent it--is over. And everyone’s at home nursing MEAN hangovers and they're not in the shopping mood.


Don’t get me wrong, this is an okay property. However, I personally can’t imagine plunking down nearly $400,000 and walking downstairs to do my laundry. How many of you have had an asshole neighbor take your wet laundry out and leave it on the counter? Yeah, well now you’re paying $2,600 a month for that wonderful experience.



Furthermore, I’m a busy guy. I can’t sit in my home all day with an egg timer making sure my dress shirts don’t sit in the dryer two minutes too many, lest they be wadded up in a pile on the floor.

And look at the staging furniture. Is that a joke? Does Goodwill know they’ve been robbed? How can this not be an unoccupied REO?



On the plus side, this place is nicely sized, in a good neighborhood, has two underground parking spaces, and a sweet balcony. However, like a vast majority of Long Beach properties for sale it has one fatal flaw. Can you guess what it is? Say it with me:

“IT’S INCREDIBLY OVERPRICED.”

Yes it is.

We all know these places don’t rent out for $2,600 a month, so buying this place instead of renting a neighbor’s identical apartment is already a money-losing proposition.

Let’s be nice and say it would rent out for $1,800 a month. So what would the asking price have to be in order to meet rental parity? Are you ready?

$230,000.

Sounds crazy, I know. But when you consider that the median household income is around $50,000, a price of $230,000 STILL exceeds the traditional 4X income ratio. What, you gonna tell me this isn’t a median property? HA!

Plus, $230,000 also exceeds the .30 debt-to-income ratio required by lenders to get a loan. In fact, even if your household made closer to $60,000 a year the DTI ratio would still be .40. Even if you have no other outstanding debt (that means no car payment, no alimony, no credit card balances, no student loans) you still would have difficulty qualifying for a loan because the required income is $90,000.

But obviously this reality hasn’t deterred our fearless seller, who believes earnestly that nobody reads the newspaper anymore. They clearly overpaid in 2002 but are the last to realize it. The seller does not consider himself part of the housing bubble because he bought “early.” But prices were inflated even in the early 2000s.

If this seller manages to find a buyer at current asking price, the gain after commissions will be $57,810. That’s a pretty nice profit for holding the property for 6 years, considering the real estate carnage going on out there.

But this seller is forgetting one crucial fact: There is no way this non-upgraded, community laundry, sixties relic is going for asking price. Sorry, not going to happen.

It’s definitely possible, if the seller gets aggressive enough, that this place will produce a small profit. But, if the seller insists their apartment is “The Most Special Property in Long Beach” as so many of our featured suckers--ERRR, sellers do, then they will slowly chase the market down, missing the mark each time. Come late 2009, they will watch their dreams of real estate profits evaporate like a puddle in Mosul.

Seller, you were already late to the party once, and if I were you I would cut 15% off tomorrow and pray some knife-catcher with perfect credit, 20% down, no outstanding debt, and no internet connection comes a knockin’. If that happens, you’ll save yourself months, if not years, of agony.

But if you proceed the way I'm confident you will, instead of making $57 grand, odds are next fall you’ll have lost that much.

Sunday, July 6, 2008

Going Down(town) in Flames


Address: 1100 E. 3rd Street, 90802
Asking Price: $499,000
Year Refurbished: 2005
Size: 1 beds, 3 baths, 1818 sq. ft.
$/Sq. Ft.: $274
HOA Fine: $350/month
Purchase price: $799,000 (oofa.)
Purchase date: 9/2006
MLS#: G101212
On Redfin: 261 days
Down Payment: $74,850 @ 15%
Monthly Payment: $3,500
Income Requirement: $124,750
Description: FABULOUS LOFT AT THE BEACH!! Premier penthouse loft with enormous roof deck, breathtaking views, at the beautifully restored (2005) Ebell Lofts, just 3 blocks to the sand and 2 blocks to the trendy East Village area of Downtown Long Beach. Beautiful glossy concrete floors, high end kitchen with granite counter tops and stainless steel appliances, 1 full and 2 half baths, a balcony + roof top deck with city skyline and harbor views! Truly amazing! Must be seen to be believed!!!

Let’s cut right to the heart of the matter: If this loft sells for asking price, the loss to the owner will be $330,000. Even the Sultan of Brunei would wince in pain knowing he lost more than 40% on his investment in less than two years.

Keep in mind, they’ve been trying to offload this flip for (nearly) one of those years!

Heck, with a bathroom like this I can sort of see why:

Are those cabinets from Target?


However, it has 2 garage spots, plenty of bathrooms, oodles of square footage, really cool looking building, lots of amenities…and no shot in holy hell of selling at this price.

I mean, just look at the pricing action in the race to the bottom:

10/19/07: $869,000 (A valiant attempt at a flip for profit right after the credit crunch hit)

12/8/07: $799,000 (Bam! A money-losing price just 13 months after purchase)

4/1/08: $699,999 (After four months lingering on the market, desperation sets in and the seller is willing to eat a $140,000 loss)


4/18/08: $624,900 (Just weeks later our flipper starts to break a sweat and lops off $75,000. I remember realtors calling a bottom in April. Huh. It’s a good thing real estate “professionals” have lost nearly all credibility, otherwise some fool might have cost himself an extra 75k if he bought on 4/17)

5/12/08: $575,000 (Yawn)

6/13/08: $499,000 (Here we are today and still no dice)

Based on the pattern of price reductions, can I make a prediction for 7/13/08?

$425,000

Based on the lack of interest despite price reductions, can I make a prediction for 12/13/08?

BANK OWNED REO, ALL OFFERS ACCEPTED!!!


Given those drastic price reductions and the further cuts guaranteed in the future, we arrive at the all-too-familiar dilemma of how to value properties.

Who do you rely on? Realtors? They’ve already proven they have no idea what’s going on. I mean, just look at the listing agent. They actually believed $860,000 was a price that would lure buyers.

Appraisers? The ones that aren’t currently hiding in fear of a subpoena related to the WaMu collusion scandal must rely on comps. Not much is selling so that’s become much more difficult.

Zillow.com? They have this place pegged at $527,100 on the low end and $683,975 at the high end. Hell, we passed those prices MONTHS AGO.

Past sales? This building was redone in 2005, so that’s out. Plus, look how many times they've lowered the price with no buyers.

I'll say it again: The ONLY way to determine the value of any investment is to run calculations based on fundamentals. That's it.



And what do those rent vs. buy fundamentals tell us?

Based on nearby rents of similarly sized lofts, this gloomy gus would not even begin to make financial sense until the price reached $299,000.

Which do you think will happen first? That 60-plus% total price reduction or this flipper walking away?

Wednesday, July 2, 2008

Wouldn't Sell if it Was Free

Good lord.



Address: 1450 Locust #117, 90813
Asking Price: $112,900
Year Built: 1990 (wow, that was a ROUGH 18 years)
Size: 2 beds, 2 baths, 728 sq. ft.
$/Sq. Ft.: $155
HOA Fine: $225
Purchase price: $239,169
Purchase date: 5/2007
MLS#: R804233
On Redfin: 69 days
Down Payment: $16,935 @ 15%
Monthly Payment: $1100
Income Requirement: $28,225
Description: This excellent ground floor unit will make an great investment. Two bedroom, two bath great starter home near downtown. The property is in need of rehabbing, but fix it and save. Excellent live-in unit or rental.

"In need of rehabbing" eh? Yeah, you could say that. This place makes the apartment from that scene in Se7en (You know, the one with all the air fresheners hanging from the ceiling) look like the lobby of the Maui Four Seasons.

The handful of pictures and the lack of any cleaning whatsoever makes me think the listing agent couldn't hold his nose any longer and bailed.


What do you suppose this yellow sticker says? "CONDEMNED" most likely.



Take a gander at the past sales on this pestilent shithole:

Jul 21, 1994 - $86,227
Oct 29, 1999 - $50,000
Apr 20, 2005 - $200,000
Apr 27, 2006 - $232,500
Aug 29, 2006 - $280,000 ($384 a square foot!)
May 25, 2007 - $239,169


Unbelievable. As if you needed further proof that this housing bubble got WAY out of hand, just look at the August 2006 price. Look how many times this place changed hands in a two year period.

If this rat's nest sold for asking price (I know, I know...bear with me) the loss would be a mind-blowing -$126,269. That's almost 50% off the sales price just a year ago.

On a condo no less. OUCHIE.

And who exactly is losing? It doesn't say REO, but there's no way an individual can absorb a loss like that and live to tell about it. Plus, would anybody be stupid enough to buy in 2007 thinking this was a good deal because it was 40 grand off the previous price? Don't answer that.

Either way, this bad boy is going to cause somebody a whole lotta pain and heartache.


As to the agent's claim that this would make a great rental or owner-occupied unit, let's check out the neighborhood:

One killed in spate of attacks

By Kelly Puente Staff Writer
6/28/2008


LONG BEACH - One man was killed and four men were injured early Saturday in four separate drive-by shootings that occurred within less than an hour, police said.

Long Beach Police Officer Jackie Bezart said authorities haven't ruled out the possibilty that two of the shootings could be related.

The first shooting occurred in the 1400 block of Linden Avenue at 2:07 a.m. when a group was approached by a vehicle, Bezart said.

Shots were fired from the vehicle and two male adults were hit, she said.

One of the victims was hit in the lower torso and transported to a nearby hospital, where he later died. His name was withheld pending notification of family.

The second victim was also hit in the lower torso and is expected to live, she said.

About 20 minutes later in North Long Beach, a man was walking in the area of 64th Street and Lewis Avenue when shots were fired from a passing vehicle. The victim was transported to a nearby hospital with non-life-threatening injuries.

At 2:43 a.m., two more drive-by shootings occurred within blocks and minutes of each other in the area of 57th Street and Lime Avenue. The victims, both adult men, suffered non-life-threatening injuries, Bezart said.

Authorities suspect these last two shootings could be related, she said.

Suspect descriptions on all of Saturday morning's incidents are limited, she said.

Anyone with information on the homicide is urged to contact Long Beach Police Department Homicide Detectives Dennis Robbins or Daniel Mendoza at 562-570-7244.

Whoopsie! That fatal shooting was about 300 meters away from our featured property. In this 'hood, good luck finding a reliable tenant that meets income and credit requirements and whose wardrobe includes a bullet-proof vest.

Considering the amount of work needed to make this petri dish inhabitable and the exorbitant HOA fine, this condo will absolutely rot (that is, rot further) until the price more closely resembles the 1999 price of $50,000.

You couldn't pay me to live here and it would have to be cashflow positive to the tune of $500 a month before I'd even consider dealing with the guaranteed vacancy time.

By the way, an REO literally the next door down asking $100,000 has been dwindling on the market for an excruciating 256 days. http://www.redfin.com/CA/Long-Beach/1450-Locust-Ave-90813/unit-118/home/7614687

These units, in this building, in this condition, in this neighborhood will not sell at any price.