Sunday, August 31, 2008

Profiles in Delusion: UPDATE

Ho hum. Another price reduction on another incredibly overpriced property. Yawn.

Address: 3401 E. 1st Street #6, 90803
Asking Price: $599,000
Year Built: 1966
Size: 2 beds, 2 baths, 1,481 sq. ft.
$/Sq. Ft.: $404
HOA Fine: $200
Purchase price: $375,000
Purchase date: 6/2003
MLS#: P623107
On Redfin: 194 days
New Down Payment: $119,800
New Monthly Payment: $3,800
New Income Requirement: $150,000
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.

The last time we featured this "priced to sell" property, the asking price was an eye-popping $649,000. Now, 42 painful, wasted days later, two price reductions have resulted in a new asking price of $599,000.

Again, do you see why it makes absolutely no sense to buy right now or in the near future? If you purchased this condo a mere three weeks ago, you would have cost yourself an extra FIFTY THOUSAND DOLLARS.

Think about that. If not for your impatience, you could have paid cash money for a brand new, loaded BMW 335i twin turbo. AND YOU WOULD BE LIVING IN THE SAME EXACT HOUSE!

You know where else that extra 50 Large would have come in handy? That god-awful kitchen:

It's obvious that prices still have a long way to go.

And if you're foolish and myopic enough to buy right now, two months from now, or even a year from now, you are guaranteed to be purchasing a depreciating asset. How badly do you need to feel part of the "Ownership Society"?

I've heard some pretty magical excuses to justify buying a SoCal house despite knowing Underwater Status will be acheived in no time. My favorite is, "Well, we're trying to start a family, so we need a house."

Oh, really? Because your zygote knows the difference between a condo and a single family detached residence?

Or, "Well, an apartment is just to small for two of us and a kid."

Huh. I'm pretty sure they have two bedroom apartments now. I know, sounds crazy. And I'm also fairly certain three-year-olds care more about Legos and Fruit Loops than about whether the roof over their head is rented from a bank or a management company.

I don't get it. If these people (whom I am powerless to convince) just waited a year, they would save enough money to put their precious little snowflake through a decent college. Cash money. Hell, maybe law school too if they play their cards right.

But, noooo...I hear, "We need to put down roots."

Okay, I kind of get that, but at what cost? Maybe it's just me, but 50, 75, or 100 grand is a big deal! Think about the investment opportunities you could take advantage of with that kind of loot. How about a down payment on an investment property? A few years from now you'll probably be able to achieve positive cash flow and have a nice asset in your portfolio. If you wait a year or two for fundamentals to realign, you would have TWO properties retaining, or even gaining, value. Why so impatient?

Keep in mind, the same commission-based vultures encouraging you to buy right now and lose equity immediately are the same ones who told you during the bubble that renting was "throwing money away."

Sorry, dummies, you can't have it both ways. Buying a depreciating asset and losing 5%, 10%, or 20% of your equity (which would take a very long time to recover in even a moderately healthy housing market--which we are years away from) is the very definition of pissing money away.


Anyhow, back to the property at hand. There is no doubt its size and location commands a significant premium, but despite the price cuts this seller is still smoking the good stuff. One look at that horrendous kitchen and we know they're not playing with a full deck. Plus there are STILL no pictures of the bathrooms, so you know they are awful as well. Knock off another $200,000, and people might think your diet consists of more than just Elmer's glue, buddy.

The bad news for those of us sick and tired of idiots wasting time on the MLS when they're clearly uninterested in selling is that there is a decent amount of equity in this apartment. That means this place will rot forever on the market, testing our patience by serving as a blinding reminder that no matter how far we come, the The Delusual are still strong and many.

Thursday, August 28, 2008

Location, Location, Laundry?

My mother taught me from a very young age that the three most important aspects of real estate investment are Location, Location, Location. This advice is so pervasive, and logical, that it’s a bonafide cliché.

But what does it really mean?

For one, location means neighborhood. To supplement with another clichéd piece of advice: buy the ugliest house in the best neighborhood. Meaning, you can always fix your property up and enjoy the appreciation that comes along with a desirable area, but it won’t do you much good having the largest, most opulent house if it's in the middle of a ghetto nobody wants to live in.

Secondly, location means proximity. If you buy a house on a busy street you will contend with traffic noise, pollution, and limited parking. Same goes for power lines, freeways, airports, and sewage treatment plants. Pretty common sense, right?

In addition to location, I happen to think there are other equally important aspects to consider, including amenities, layout, size, number of bathrooms, shared walls, etc.

Location and property characteristics are not only crucial to creating and maintaining a healthy quality of life, but they are doubly important when it comes time to sell and you need to appeal to the widest possible range of buyers.

In other words, when buying a small, one-bedroom condo, a large buyer pool of couples with children or empty nesters looking to move into a smaller place will be shut out entirely.

If that one-bedroom is in a shady neighborhood with litter, crime, and bad neighbors, you have further alienated your potential buyers. You need to think this through and not just consider what appeals to you, but also what will appeal to a potential buyer should you lose a job, divorce, or simply feel the need to move up.

However, in a housing bubble, adhering to the Location, Location, Location principle and considering long-term selling points isn’t mandatory because even the most undesirable properties in the worst neighborhoods continue to go up in value.

In a speculative frenzy, even if you can’t stand living in a 710 square foot shack alongside the 710, just hang on to it for a few years and some other sucker will come along and buy your flawed junk for $100,000 more than you paid. After all, in a rapidly appreciating market, common sense goes out the window and everything—-and I mean everything—-becomes a “good investment.”

However, ignoring basic investing principles and buying an undesirable property in a bad location comes back to haunt short-term thinkers the very moment the market turns sour. Now that lending is severely restricted, jobs are being lost, down payments are back, and real estate is perceived as a losing investment, you’re stuck with an overpriced rat’s nest in a terrible ‘hood, adjacent to a liquor store and train tracks.

To quote the investor Warren Buffett, “It’s only when the tide goes out that you learn who’s been swimming naked.”

Real estate wasn't exactly what Mr. Buffett was referring to, but I think it can be applied here.

Today’s property is one of many examples of people who didn’t think long-term and set aside basic investing principles. They became blinded by stories of real estate riches and failed to see that purchasing this property only made sense in a once-in-a-lifetime housing bonanza, but when the tide went out and easy lending dried up, they were naked as a jaybird holding on to an undesirable property for dear life.

Address: 4548 E Broadway, 90803
Asking Price: $325,000
Year Built: 1956
Size: 1 beds, 1 baths, 871 sq. ft.
$/Sq. Ft.: $398
HOA Fine: $82
Purchase price: $260,000
Purchase date: 10/2003
MLS#: P648869
On Redfin: 32 days
Down Payment: $65,000
Monthly Payment: $2,100
Income Requirement: $81,250
Description: IMMACULATE INSIDE. Large Rooms with Hardwood Floors. Very Nice Kitchen with Adjacent Eating Area. Remodeled Kitchen and Bathroom. Lots of Designer Features. Walk to 2nd Street Shops and Restaurants. Plenty of Street Parking.

Now, this buyer got the Location part right in the sense that they bought in a fantastic, highly-desirable neighborhood. But they let that cloud their judgment and didn’t consider the other side of the equation: the selling points. Yes, you should buy the ugliest house on the nicest block, but there are some deal-killers you just can't fix.

The building is DIRECTLY on Broadway, all but guaranteeing traffic noise all day and night. Strike one.

Furthermore, it’s a one-bedroom apartment. You can call it a condo or whatever you want, but a fleeting glance at the building tells your buyer this is most assuredly an apartment. An unsecured, street-accessible entry? Yikes. And although it’s large at 871 square feet, it has no balcony and two shared walls--further projecting the dread of apartment living into your buyers' minds. Strike two.

Worst of all, the Title Case Heavy listing description mentions “Plenty of Street Parking.” That’s because there is NO COVERED OR SECURED PARKING! In a neighborhood teeming with rentals. For $325,000?!! That’s strike three, and the last out of the game.

Worse than a one-bedroom apartment with zero assigned parking, two shared walls, traffic noise, and no balcony, this myopic wonder (over)paid $260,000 in 2003 for a place WITH NO LAUNDRY.


I'm pretty sure an army barracks has more amenities.

And now they expect you, in a rapidly declining market, to pay $2,100 a month for the pleasure of listening to traffic noise at all hours, sitting in the Laundromat every weekend, struggling to find parking every night in jam-packed Belmont Heights, having no balcony or common area to barbeque, and hearing your neighbors argue through paper-thin walls while you worry about the implications of having no secured access to the building?

Lady, are you effing serious?

Other than the great neighborhood, I can’t think of one solitary reason to rent here—let alone BUY this worthless place!

I can’t imagine this thing rents for more than $1300 a month, and I’d be shocked at that considering the laundry and parking situation.

This place, as an investment, is worth no more than $210,000. Sorry. And that's making the incredulous assumption you could find a buyer dumb enough to believe the considerable sacrifices in quality of life are worth residing here AT ANY PRICE. Good luck with that.

As a quick example, this condo down the street with lagoon views has garaged parking, in-unit laundry, a fireplace, a sweet ass balcony, skylight, upgraded bathroom and kitchen, and hardwoods…all for $339,000.

There’s no way even this place, with its great amenities, nestled in its BEYOND prime location near the lagoon, will sell at $339,000 so what on earth is the Bungler of Broadway smoking?

As I’ve said in previous posts, the halcyon days of easy money and “any ol’ property instantly becomes a money-making asset” are OVER.

We have been quickly slapped back to a time when money actually means something again. And looking at the substantial deal-killing negatives the Broadway apartment has to offer, $210,000 sure seems like a lot of money—let alone the $325,000 WTF price this delusional, severely misguided seller is banking on.

Wave Ya Hands in the Air, if You's a True Playa: UPDATE

Another property recently featured on the Long Beach Housing Blog has cut their asking price.

That's right, our two wild and crazy guys over at 5585 PCH knocked a whopping $5,000 off the asking price.

But, I thought we were supposed to "HURRY" because it "Won't Last." That's odd. Seems like it's lasting just fine at that price point.

Anyhow, it's obvious they're not serious about selling. If they were, they wouldn't be yanking our collective chains at $350 per square foot.

If they need a quick, merciless sale before the "Supposed Summer Selling Season" ends, these two wild and crazy guys better start acting more like Crazy Gideon.

Wednesday, August 27, 2008

Greed: The American Way -- UPDATE

The post featuring this "ELEGANT EUROPEAN CHATEAU" a few weeks ago was a blast to write.

I found the property just at the right time, too. Lately I've been finding myself allowing other priorities to trump blog updates due to a waning sense of motivation. To be honest, it gets tiring to write about delusional a-holes all the time. The severe level of denial out there, coupled with the government's attempts to maintain these outrageous home prices at the cost to responsible homeownership-aspiring taxpayers like myself, can be a little disheartening.

But man, once I saw this bad boy I knew I was back. The humor and inspiration just flowed, and it renewed my interest in exposing greed-faced scumbags.

Anyhow, just two weeks after my post, the asking price dropped $75,000. A less than 4% cut is nothing to get excited about, especially when the original astronomical asking price is so hallucinogen-fueled, but it's relevant because it's the first reduction since the property was listed 96 excruciating days ago.

Slowly but surely, reality is seeping in. Of course, at this rate of reality seepage, we won't reach a reasonable price for another few years.

Of note, the realtor, demanding more than $100,000 for their efforts, still hasn't bothered to fix the typos in the listing. But, really, who cares? I have a feeling Mr. Chateau, aka the Big Lebowski's wealthy older brother, is going to provide us with a whole lot of entertainment during the coming months.

Tuesday, August 26, 2008

Shorn in The Shore: FINAL UPDATE

A few weeks back I berated our favorite delusional seller at 185 Quincy #202.

In the August 7 post I wrote:

Especially with the slower selling seasons of fall and winter approaching, there's no hope for you selling at this asking price. And since reducing your asking price to a reasonable amount would result in the loss of $100,000 plus commissions--not to mention another ~$130,000 in carrying costs since your '05 purchase--you only have two choices:

1. Send the keys back to the bank and and rid yourself of this albatross that, given your astronomical purchase price, won't produce a profit for another 20 years, or

2. Take it off the market today, relax, and start enjoying "Belmont Shore living at it's [sic] finest."

Us taxpayers would prefer that you choose the latter, but either way, do us all a favor and throw in the towel. If you can't stand the heat, get out of the Smurf-blue kitchen.

Well, the seller has finally heeded my advice and taken the property off the market. After 8 fruitless months trying to unload their albatross for a loss (albaloss?), our seller has decided that the "scumbag lowballers" and "vulture-faced bottom-feeders" out there simply don't have the class and style to recognize just how "special" and "unique" his place is and he's taking his ball and going home.

As I pointed out several times in the past, this condo never had a shot at selling in the $400,000 price range (or even $350,000) in part because Rent vs. Buy calculations were a joke. I have been proven right once again.

But to be honest, victory seems hollow this time around.

You see, I was starting to have a special affection for #202's specific brand of delusion.

So, I'd like to take this time to salute our former seller for being so tenacious in the face of so much bad news (read: reality). Kudos for denying the facts for so long and reliably insisting your cramped quarters were worth whatever you claimed they were--I really appreciate the laughs.

We'll miss you, but ultimately you've done the right thing. My only hope is that during your wait for the market to "come back to normal" you can swing your monstrous apartment payment. Otherwise I guess we'll see you again in a few months after the Notice of Default goes through.

Of course, you'll be long gone by that time, trying desperately to convince the apartment manager at the complex off the 405 and Long Beach Blvd. that your busted credit score doesn't reflect the true you.

The incredible work ethic. The relentless optimism. The laser-focused determination. The affinity for royal blue.

Godspeed, Delusional Smurf. May you finally find real estate riches in the next housing bubble.

Monday, August 25, 2008

Flippin' Ain't Easy: UPDATE II

The last time we profiled this property, we noted a massive price reduction from $499,000 to $399,000. A call of desperation that went unreturned.

But now the house has been re-listed with a new description, a sales-killing disclosure, fewer pictures, and a price tag that must make the few remaining true believers out there shudder in their boots.

Address: 514 Temple Ave, 90814
New Asking Price: $309,900
New Down Payment: $61,980
New Monthly Payment: $2,100
New Income Requirement: $77,475
Year Built: 1923
Size: 1 bed, 2 baths, 1240 sq. ft.
$/Sq. Ft.: $250 (!)
Purchase price: $520,000
Purchase date: 9/2005
MLS#: P653081
On Redfin: 2 days
Fantastic Value On This Charming Spanish '1 Bedroom + Den' House. Den Could Easily Be Converted Back In To A Master Suite with Fireplace, Master Bath and Walk In Closet. Priced For A Quick Sale!!! Spacious Living Room with Ceramic Tiles, Upgraded Open & Bright Kitchen with Granite Counters, Wood Cabinets, New Plumbing Fixtures, Remodeled Bathrooms With Granite Counters, French Doors, Recessed Lighting, and Detached Garage With Long Driveway For Extra Parking. Submit!!!!

It appears as if the "sale" on July 23 for $420,000 was actually a return to the bank. Boy, who could have predicted that? Um, well, me, actually.

In April I wrote:

The former residents got in over their heads financially and got the hell out of dodge. And judging by their hilarious pricing strategy and lazy-ass photos, I don’t think they’re the types to make much effort to avoid foreclosure.

This new asking price of $309,900 represents a nearly 45% scalping from the asking price of $562,599 just six months ago. Can you say capitulation?

The first thing I notice about the new listing is that the bank only included one measly photo. And all that photo shows is the still-unimproved front of the house and their "foreclosure lawn." It's a damn shame the bank didn't maintain that lawn. I think it was one of the best features of this dump:

And if you recall, in July I said:

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.

But that's before I noticed the new, previously-undisclosed information that this house is in fact only a 1-bedroom.





And this gem made me laugh: "Den Could Easily Be Converted Back In To A Master Suite with Fireplace, Master Bath and Walk In Closet."

Yeah, sounds like a blast! Just what I wanted to do after plunking down $300,000! I hope they didn't knock down any walls or add those awful double doors. Either way, good luck with that.

Now that this information has been added to the listing description, there is absolutely no way I'd consider this house. I mean, who wants to deal with that? If this were any other place, it might not be a big deal, but given the lack of detail in the uncompleted flip and the fact that these speculative overpayers were clearly uninterested in ever living have to wonder about the craftsmanship.

And even though it's priced at an appealing $250 per square foot, I still think it will have trouble finding a buyer. Location, age, no yard, only 1 bedroom, needs's possible--but not likely--that the bank will find a buyer even at this price.

I guess the real question is, now that detached Long Beach houses with bathroom and kitchen upgrades have hit $250 per square, how nervous do you suppose nearby sellers and distressed loanowners are?

Sunday, August 17, 2008

The Delusual

Do you remember the movie Big with Tom Hanks? Of course you do. It was the film that led an entire generation of boys to grow up wanting an enormous light-up piano keyboard, a job at a toy company, and a huge loft apartment decorated with cool stuff like pinball machines and trampolines.

Yeah, see, the problem is that I never outgrew those prepubescent desires when I grew up [Note: To this day there is still much debate about whether I, in fact, ever "grew up"].

I want a loft. And I want one bad. And I'll even live in a crappy area of downtown Long Beach to get my hands on one.

The problem with loft living (aside from heating/cooling issues, the cold, industrial, concrete-infested, echo-laden feel, living in a much less desirable area, and the lack of a yard) is that there are many young, single professional males like myself who vowed to procure a fat bachelor's loft when they had the means.

That contributes to lots of demand. And that, in turn, translates into higher prices despite the major drawbacks inherent in loft-dwelling.

Some Long Beach home sellers, however, take this perceived demand a little too far, and believe their loft is "special" and immune from economic forces and the realities of today's real estate market.

Address: 834 E 4th St #13, 90802
Asking Price: $449,000
Year Built: 2004
Size: 1 beds, 2 bath, 1,200 sq. ft.
$/Sq. Ft.: $374
HOA Fine: $235
Purchase price: $360,000
Purchase date: 6/2004
MLS#: P643442
On Redfin: 55 days
Down Payment: $88,800
Monthly Payment: $2,900
Income Requirement: $112,800
Description: Inspired living in the East Village Arts District. 16' tall ceilings allow a tremendous wall of windows to flood the space with natural light.Nothing is comprimised:polished concrete & Brazilian hardwood flooring,an organized kitchen workspace,in-unit laundry,walk-in closet,ample storage,skylights,& a private patio deck w/dramatic views.Unique to this loft-a thoughtful division of space that creates room for a second bedroom/office/den. Close proximity to all the best cafes,shops & galleries.

This place is awesome. Flat out. I mean, just check out those windows! Gimme gimme gimme!

This is the babe lair those two wild and crazy guys from the last post dream of every night while resting on their satin leopard print sheets. But, the Ladies' Men would sorely miss their pool.


But yikes! That price tag is brutal. A premium is to be expected for a luxury penthouse with such amenities, but almost half a million dollars has no connection to reality whatsoever. Sorry Nathanial--you owe your client better advice.

Forget for a moment that you would need to make an astounding FOUR TIMES the median income to afford this place. Instead, focus on the fact that this was purchased as brand new construction just four years ago--meaning the hardwoods, appliances and other upgrades were most likley present AT PURCHASE. I'd be willing to bet this seller hasn't put a penny into upgrading beyond what was already there at closing.

So how else do you explain this seller's belief that the loft appreciated $89,000 during the last few years (the last three of which transpired during one of the most horrendous housing value meltdowns in human history)?


The usual.

In fact, I'm going to employ a new term that will sweep the real estate internet tubes and take over as the most effective way to describe the tendency for sellers to cling to wholly unrealistic prices with the full expectation that someone will--or could get financing to--bail them out of their financial mistakes:

The Delusual.

I think it perfectly describes the level of self-delusion of Long Beach sellers, along with how pervasive and frustrating this mental illness is.

Yes, there are huge pluses to this place and lofts can generally be expected to sell for more than regular ol' condos, but let's not forget where it is. Some people might feel like a prisoner in their own home living in this neighborhood.

Look, even if you're really into that whole "downtown," no-chance-in-hell-I'd-leave-my-car-on-the-street-or-have-my-mom-walk-around-by-herself thing, everybody knows (for the exception of one particularly optimistic seller) this place has ZERO chance of selling for anything over the 2004 purchase price.

Hell, don't listen to me--just ask the neighbors as they try to escape like rats from a sinking ship:

Address: 834 E 4th St #17, 90802
Asking Price: $280,000
Year Built: 2004
Size: 1 beds, 2 bath, 839 sq. ft.
$/Sq. Ft.: $334
HOA Fine: $250 ($15 more than the bigger place? WTF?)
Purchase price: $285,000
Purchase date: 6/2004
MLS#: P626821
On Redfin: 158 days
Down Payment: $56,000
Monthly Payment: $2,000
Income Requirement: $70,000
Description: FINALLY FINALLY... and Aproved Sale... original listing 295K.. we are now approved at 280K...Originally bought at 470K 2 years ago... DONT MISS OUT ON THIS ONE... This kitchen is exquisite with stainless steal appliances. One bathroom is down stairs for your guest. Also the balcony has a view of the southern pacific sea and sky. You will be able to enjoy the fireworks from the comfort of your own balcony. Don t hesitate if you desire to live in a luxury loft.

Looks like SOMEONE in this building has joined us in the land of reality. The short sale asking price is $5,000 less than what they paid in 2004. As I've explained ad nauseum on this blog, the vast majority of properties in Long Beach are selling for 2004 prices and the sooner sellers accept that cold, hard fact, the closer they will be to offloading their debt trap before '03 and '02 prices come a knockin'.

Oh, and realtard, don't think you're getting off the hook:


"Stainless steal"?


"Don t"?

Whenever I see such egregious errors in listing descriptions, in addition to losing all faith in our education system, I'm often reminded of this exchange from There's Something About Mary:

"Step into my office."


"'Cause you're f*cking fired!"

Anyhow, the worst part of the neighbors finding REligion is what it means for unlucky #13 in the penthouse, who is busy chasing top dollar in fantasy land. A little perspective: #17 has been undercutting #13 by $160,000 for 159 days on market and still no dice. Doesn't bode well for Mr. Big upstairs does it?

Yeah yeah, they're not accurate comps because this is ground floor compared to penthouse, 839 square feet versus 1,200, etc. But think big picture for a moment: 2004 prices aren't even moving this place. That means the penthouse has to come down AT LEAST to 2004 prices to hope for a sale.

And lest you think the short sale at #17 is an anomoly, Unit #20 is also asking $280,000.

Keep in mind #20 is likely nicer than #17, in that it was purchased for $313,000 (or he was just a really crappy negotiator). This means he or she is actually well into 2003 pricing territory if you go by the '04 purchase price.

Time keeps on slipping, slipping, slipping, while the penthouse playboy is sipping, sipping, sipping on housing Kool-Aid.

Wednesday, August 13, 2008

Wave Ya Hands in the Air, if You's a True Playa

During the housing bubble, prices became so grossly inflated that creativity was a must for those rushing to buy out of an irrational fear they would be "priced out forever."

Creativity in the way of financing allowed subprime deadbeats with terrible credit histories to borrow six or seven times their incomes, and we had an influx of Alt-A loans which allowed people with decent FICO scores--but no verifiable income or ability to handle such extreme debt loads--to buy overpriced homes (usually with nothing down).

In addition, we heard creative advice from real estate "professionals" for buyers to raid their 401(k) for down payment help, and heard buyers should rent out rooms to offset the crushing weight of the monthly mortgage payment. From a financial perspective, buying a 2 bedroom, 2 bath place and renting out a room is a good idea. Why anyone would work so hard to finally buy their own home only to have a Craig's List Creeper cramp their style and lower their quality of enjoyment, I have no idea. But financially, sure, I get that.

Today's property is a prime example of a condo too expensive to afford on Long Beach's median income alone--necessitating at least one roommate to achieve some semblance of affordability.

Address: 5585 E Pacific Coast Hwy #154, 90804
Asking Price: $324,900
Year Built: 1970
Size: 2 beds, 2 bath, 913 sq. ft.
$/Sq. Ft.: $356
HOA Fine: $229
Purchase price: NA
Purchase date: NA
MLS#: P646198
On Redfin: 36 days
Down Payment: $64,980
Monthly Payment: $2300
Income Requirement: $81,225
Description: Wonderful 1st floor CORNER location....Quietest in the complex !(Only 1 shared wall) Popular 'Park Ocean' building with Community Pool,Spa,Sauna,Tennis,Basketball,New BBQ grills,Workout Room w/ New Equipment,AND unit is wired for FIOS & Cable all included in the Low Assoc.Dues ! Best floor plan with Two Master Bedrooms and 2 Private Baths-Both Newly Remodeled w/ Custom Tiling,New Vanities,Faucets,Fixtures,Sinks,AND Designer Shower Door and Granite Counters... Modern,Open Living Area w/ Pergo-Type Flooring,Air Cond,New Doors and Custom Blinds. Contemporary Kitchen w/extra storage Maple Cabinets w/under lighting,'2' 7foot Pantries,Recessed Lighting w/ Dimmer Switches (also in Bathrooms),and Stainless Steel Appliances. Desireable 'Park Estates' neighborhood- Conveniently located to Golf Course,Cal-State Long Beach,Stores,Shops,Freeways, and Beaches !!!!!!! One of the Lowest Association Dues with the Most Amenities in the Area. HURRY- Won't Last..Lowest Price per sq.ft.

As I scanned through pictures of this "Desireable" property, I found this gem and began to wonder about the roommate situation in this place:

And then this crazy four-post bed caught my eye:

And I started forming a mental image of the two roommates inhabiting this place:


Can't you totally picture that? Out at the pool in their speedos, doing pushups near the ladies' restroom, trying to get girls to come back to their pad for lukewarm white russians and naked Jenga.

Then I noticed there are no pictures of the second bedroom. Sex dungeon, maybe? Further, the fact there is "only one shared wall" is one of the first things mentioned in the listing description. Maybe this condo is for true players only.

"Don't worry baby, nobody will hear us. 'Discreet' is my middle name. Actually, it's Daniel, but you're pickin' up what I'm puttin' down, right?"

The blue trim around this bathroom door really stood out too.

Is that a subtle homage to the 1972 porno movie Behind the Green Door? Classy!

There, that's more like it.

I could go on for days with this stuff.

Anyhow, back to the property at hand (pimp hand, that is)...

You have to give the listing agent credit for going green. Some people are cutting down on fuel consumption, others are reducing their water usage…this dude is cutting back on spaces after punctuation marks and unnecessary letters. Al Gore approves.

Trying to make sense of that listing description, with its sporadic TiTle CAse madness, is like trying to read the Constitution while hanging upside down on a dimly-lit bullet train. Nauseating.

“Lowest Price per sq.ft.” – Compared to what? A penthouse on the Upper East Side? $356 per square is a joke.

“HURRY- Won’t Last..” – Boy, that sounds familiar. Unless some major price reductions start happening, I have a sneaking suspicion we’ll be seeing this listing a year from now.

In the interest of trying to find ONE positive thing to say about this property, at least the FIOS and cable are included in the HOA fee. Which is important because with a $2,300 monthly nut--even with the income of a true player--you're not going to have any money left over to go to the movies or--DAMN IT! I was trying so hard to stay positive!

I'll try again.

Ummm...your kitchen might be bigger than one in my dad's old Winnebago! Awesome!

And, um, you were able to maximize the three square feet of kitchen counter space by relocating the microwave to a totally natural, not-at-all-awkward location! Functional!

Uhhhh...I think I see Jesus in your kitchen tile! Do you know what that's worth on eBay?! You're rich!

Let's see...the gaps in your kitchen cabinets and the missing cabinet over the refrigerator looks way retro--like, 1930's depression-era retro, where people had to use whatever was around because they had no money. That totally looks like it belongs there! Trend setting!

Oh, and before any of you players out there interested in plunking down nearly 70 grand for a down payment and parting with $2,300 a month for this 913 square foot babe lair, the seller has informed us that the "Listing Price Excludes: PLASMA T.V. AND WALL MOUNT, AND ALL ARTWORK THRU-OUT.... "

Sorry, player, when it comes to recreating the sexy magic of this lovers' lounge, you're on your own.

Tuesday, August 12, 2008

Greed: The American Way.

I hadn’t really been following the Olympics until I happened to catch the men’s 400 meter swim relay. Now that was some exciting television!

It made me so proud to be an American.

Sure, competing for gold medals on the world stage and representing your country is an incredible experience, but ultimately these athletes are competing for extremely lucrative endorsement deals. When they return from China, they will be absolutely inundated with offers from companies trying to get these men and women to shill for their consumer goods. Don’t get me wrong, there’s nothing wrong with that. I don't think a love of money is ALL bad. I just think we should talk honestly about it.

Anyhow, it got me thinking about all the cash involved in putting these Olympics on and what the root driver of the Olympics, in this day and age, actually is; from the reasons countries fight tooth and nail to host the games, to the competition for broadcasting rights, to the estimated $1.5 Billion spent on advertising: Greed.

It’s all about money. And for the many reasons I’m proud of this country, the one thing we do better than anyone else on the planet is pure, unadulterated GREED.

Here's another gold-medal winner:

Address: 226 Roycroft Ave, 90803
Asking Price: $1,950,000
Year Built: 1922
Size: 3 beds, 3 baths, 2,489 sq. ft.
$/Sq. Ft.: $783
Purchase price: $980,000
Purchase date: 8/2005
MLS#: P638836
On Redfin: 81 days

Well, now that I’ve finally stopped laughing I can start my write up. I mean, “BELMONT SHORS”? Are you serious, dude? Your commission is like, $127,000, and you can’t even spell Belmont Shore??

Be honest, dear reader: have you ever seen an uglier $2 million house in your life? Is that a town home in Garden Grove? What is that?

And check out the interior. Good God, man. This thing is like a migraine wrapped in a box of vertigo, nestled in a dresser drawer of seasickness. Recording studio? Chandeliers? Wine cellar? Who is this place supposed to appeal to? 16th century oenophile dukes with a penchant for gold trim and making phat beats?

Methinks this seller expected their horrendous—I MEAN, eclectic taste would translate.

It hasn’t.

For 81 days.

And counting.

To recap, this idiot actually believes the hideous attempts to “upgrade” DOUBLED the property value in just three short years. This “COMPLETE REMODEL” is worth one million dollars? In the quiet words of the Virgin Mary...come again?

Shit man, do you have the other $850,000 insulating the recording studio walls or what? Because I can’t point to a single aspect of this house indicating more than $150,000 has been spent “improving” this Roaring 20’s relic.

Some might point to the construction of the so-called “lap pool.” The term "lap pool" implies you can make laps back and forth in said pool to promote vigorous cardiovascular exercise.

That pool is so small it looks like a lap would consist of stretching your arms out and touching both sides. Is that a lap bucket? Judging by the photos, the 8’ tub has more room than the supposed pool.

And don’t forget, the price tag does not include the (absolutely revolting) furniture or decorations they seem so proud of. Note: This may be a good thing.

To be fair, that rooftop patio is simply AWESOME. However, we all know it’s not $783-per-square-foot awesome.

Anyhow, assuming this chump finds this music-recording, wine-collecting, swimming-averse sucker—ERRR, buyer, just how much scratch would this mystery buyer need in order to purchase this vomitorium?

Well, for starters, the new buyer must walk in with $390,000 for a down payment. Period. So now in addition to being a wine-loving music producer with terrible taste and no interest in swimming, they would have to be an EXTREMELY WEALTHY wine-loving music producer with terrible taste and no interest in swimming. Boy, that buyer pool, much like the lap pool, keeps shrinking by the minute.

And by the way, that $390,000 down payment assumes the new buyer can actually get an ultra, mega, super jumbo loan with only 20% down. Shrink shrink shrink.

Okay, so we’ve established that the new buyer has a lot of money lying around in cash. How much is this going to cost him in carrying costs per month? Try at least 10 grand per month. Shrink shrink shrink.

So, just how much does a person who can comfortably afford a $10,000 monthly nut need to rake in annually to reasonably afford such an “ELEGANT EUROPEAN CHATEAU”? About $487,500. Shrink shrink shrink.

So let me get this straight. This seller, in the midst of one of the worst housing collapses in the history of the world, is catering to a music-recording, wine-collecting, swimming-averse buyer with absolutely no taste…that pulls in half a million per year?

That's an awfully narrow scope, but I think I’ve identified your new buyer:

And if that doesn’t work out, there’s always 2028.

Saturday, August 9, 2008

In The Year 2000...

Are you familiar with that bit from Late Night with Conan O'Brien, In The Year 2000?

Conan dons a black robe and a futuristic collar, and cuts the lights. With a flashlight underneath his chin (like telling a ghost story at camp), he makes wacky predictions about what will take place in the future. It's absolutely hilarious.

"In an effort to make fast food even faster, McDonald's will begin pumping their food directly into customers' stomachs. To keep pace Wendy's will pump their food directly into people's toilets."

Anyhow, the bit was created before the year 2000, but the title stayed even after the millennium. It's a little off-putting to watch a bit premised on what will happen in the future, even though we are already 8 years past The Year 2000. But still a classic bit.

The reason that applies to this post is because there is so much debate about what the future holds, when we will hit a pricing bottom in housing, and the "price year" the bottom will correspond to. We all know that currently, a vast majority of houses in Long Beach are only able to sell when 2004 prices are offered. The idea that a seller can get what they paid in '05, '06, or '07 is the equivalent of wishing in one hand, crapping in the other, and seeing which gets filled first. Those days are done and only the most delusional and desperate disagree.

And 2004 pricing is quickly becoming an endangered species, as many homes are dropping into 2003 territory to attract buyers. So where does it all stop? If I could predict the future, I'd make Richie Rich look like a meth addict living under the 710 freeway, but my instincts tell me we have a long way to go.

I believe this bubble really got started around the year 2000. That's when many of the obscure, wacky loan products became more available and when annual appreciation first started to take off. The dot-com money, freshly burned from that bubble, was looking for a home and found it in home investment. Around 2003-2004 the Adjustable Rate Mortgages and other suicide loans came into favor, deadbeats suddenly became viable homeownership candidates, and the bubble began to get out of control.

There is little doubt in my mind that most bubble "equity" built up between 2000 and the peak in 2006 will evaporate. Poof! All economic data (and common sense) indicates this housing crash will overshoot fundamentals on the way down.

That's why I think we will return to 2000-2001 prices in most parts of Long Beach. There are a lot of reasons why I believe that, but an obvious one is because that's the last time rents and mortgages were near parity. Not only that, but with rising interest rates, significantly increased down payment and income verification requirements, stagnant wages, job losses, rising food and fuel (yes, there has been some minor relief on gas, but it's still very expensive compared to last year) costs, there aren't many people who will qualify for $350 per square foot in downtown. To attract buyers, prices will have to come down dramatically.

It is worth noting that some of my friends and co-workers think I'm certifiably nuts. Just a doom-and-gloomer who is rooting for things to fall apart. When I share my belief that we will see 2000-2001 prices in most of LB during the next few years, people look at me like I'm crazy. But, as Dr. Housing Bubble so convincingly pointed out, there are at least 10 reasons why California is a long way from hitting a pricing bottom.

Perhaps this property can provide some insight into my opinions:

Address: 418 Nebraska, 90802
Asking Price: $249,900
Year Built: In The Year 1900
Size: 2 beds, 1 bath, 836 sq. ft.
$/Sq. Ft.: $299
Purchase price: $442,000
Purchase date: 3/2006
MLS#: P629723
On Redfin: 132 days
Down Payment: $50,000
Monthly Payment: $1,600
Income Requirement: $62,000
Description: Vintage cottage near downtown and the beach with upgraded windows, copper plumbing, covered deck, fence, landscaping and more. Bright open kitchen,large bedrooms and inside laundry make this a great starter home or investment property.

Yikes. These pictures give me the creeps. Just imagining the sheer amount of dust in this place makes me want to sneeze.

On the plus side, they re-plumbed the place with copper piping. All of these ancient houses in Long Beach need that upgrade, and it shows that the owners at least gave half a crap about it during their tenure. New windows is a plus. Furthermore, the kitchen looks surprisingly decent:

If it was closer to Ocean and on the good side of Cherry, with a little elbow grease this could be a cool little beach bungalow and would make a decent purchase.

This tiny relic, if you can believe it, was purchased in March of 2006 for a whopping $442,000. Good God, man. That's $517 per square foot in what I consider to be an undesirable area of Long Beach (especially for that much money). Setting aside my suspicions of fraud, this seems to be a case of a family that bit off way more than they could chew. Judging by their pricing strategy, it looks like they are very desperate to get out of this financial trap.

Mar 30, 2008 - $350,000
Jul 18, 2008 - $299,900
Aug 08, 2008 - $249,900

On the fast track to capitulation! When the property was initially listed, just two years after purchase, they already knew it was a losing proposition. Including commissions, the original asking price represented a $100,000 loss. Bada-bing!

In July, hoping for the summer selling season to relieve them of their crushing mortgage payment (around $3,000 for this shack!! What do you suppose it rents for? Less than half that?), they bent over for another $50,000. In August, another $50,000 discount came and here we are today, still unsold at what is actually approaching a reasonable asking price of $249,900. That represents a loss of $200,000 after commissions!

[Can someone please explain to me how a house can sell for a $200,000 haircut without it being a short sale? The interior decor doesn't exactly indicate Rockefellers live here--how is it possible for them to absorb this loss themselves? There is no indication the bank owns it either. These types of listings are enigmas to me.]

And the reason it hasn't sold? One guess is a buyer's thinking: Well heck, if they've managed to chop off 50 grand a month for the last two months, what would stop them from lopping another 50k in September?

Again, we're back to the original question on every buyer's (and seller's, I guess) mind: When will the bleeding stop?

To find out the "price year" we will reach before fundamentals are met again and the carnage halts, let's first look at the sales history:

Jul 26, 1999 - $115,000
Nov 24, 2004 - $325,000 (21.5% annual appreciation)
Mar 17, 2006 - $442,000 (26.5% annual appreciation)

This example is perfect because the earliest purchase date on record was in 1999, before the bubble really took off.

By asking $249,900, they've clearly surpassed the 2006 purchase price. As I said, most homes selling in Long Beach these days are at 2004 prices, but it looks like this home has already undercut the '04 purchase price by -$75,000!

Even if we're really optimistic and pretend the annual appreciation rate of 21.5% between 1999 and 2004 was real, $249,000 (a price at which the house is still not selling) is below 2003 pricing!

Ah, but now that the housing bubble has burst, we all know a 21.5-26.5% annual appreciation rate was not of this world. How do you calculate a "year price" when prices during the last several years were so egregiously inflated?

One way to gain perspective is to calculate "year value" by starting at 1999 and applying a more realistic appreciation rate. If we use a very generous (especially for this neighborhood) 5% annual appreciation rate, and compound that from the 1999 purchase price until today, the actual 2008 value would be $212,384. Still overpriced by nearly $40,000, but getting there.

Trying to predict what "year price" will be reached reinforces the importance of using basic investing fundamentals such as Rent vs. Buy. The Rent vs. Buy calculation, assuming a rent of $1,400 x 160 grm = present value of $224,000. That's pretty close to our "year value" calculation. And that would put this house firmly in 2002 pricing--even assuming that ridiculous 21.5% annual appreciation was somehow legitimate.

And considering the Price to Income ratio is still WAY OFF and lenders are requiring much larger down payments, there is more room to drop.

My head is spinning from all these numbers but the overall point is that this little house, like many others in Long Beach, has left 2007, 2006, 2005, and 2004 prices--whether inflated or not--in the dust. And quickly! And I simply don't see any possibility for that to stop any time soon.

For those who say, "You're dreaming if you think we're going back to 2000 prices," given the fact that we just erased four years (or more) of equity in just a matter of months, what on earth makes you think the bottom is here, and that the bleeding will magically stop?