Elephantine Greed and Vanity: UPDATE

Eagle-eyed Anonymous noticed that our Failure on Florida is back on the market.

For those of you counting at home, we've finally hit 404 days on market.

Since the original listing in April of 2008, the asking price has been reduced a whopping $15,000.

That's right. A measly 4%. That's 1% per 101 days rotting on the MLS.

The funniest part is, this schmuck paid $281,000 way back in 2003 but has somehow convinced himself that he is entitled to emerge from the housing bubble implosion with a profit of $60,000 after commissions (but before upgrade costs). What he fails to realize is that judging by the Sold price per square foot in this neighborhood ($225), the most he could hope to get in this horrific market is $220,000. He's actually going to LOSE $60,000, plus commissions, plus costs of upgrades (I think the fierce competition in this neighborhood will guarantee much bigger losses, but 60k is the bare minimum loss).

And that, of course, is assuming this seller suddenly wakes up and cuts $140,000 from his asking price. Given the track record of this delusional tour de force, what do you think the odds are of that happening?

At the risk of being derivative, I would like to quote myself from the Rip Van Winkle Fell the Hell Asleep post (that dolt is still chillin' on the MLS after 779 days, by the way):

Believe me, even years from now as condos are selling at 2001-2002 prices, these true believers will still be out there. Kind of like those Japanese soldiers stuck on remote islands, not realizing (or refusing to believe) that World War II had ended, continuing to fight the war decades after Japan's surrender. To some, denial is more addictive than the best heroin or crack that money can buy.

A Question of Taste

Address: 1514 E Appleton St, 90802
Asking Price: $499,900
Year Built: 1907
Size: 3 beds, 2 baths, 1,148 sq. ft.
$/Sq. Ft.: $435
Purchase price: $245,000
Purchase date: 7/2001
MLS#: P688269
On Redfin: 9 days
Down Payment: $100,000
Monthly Payment: $2,600
Income Requirement: $143,000
Description: ***A TRULY EXQUISITE 1907 REMODELED VICTORIAN PERIOD HOME **** WITH LOTS OF CHARACTER THIS HOME FEATURES, BEAUTIFUL HARDWOOD FLOORS, CUSTOM PAINTING THROUGHOUT, ABSOLUTELY GORGEOUS REMODELED KITCHEN, NEWER REMODELED BATHROOMS, INSIDE LAUNDRY, TANKLESS WATER HEATER, REMODELED BATHROOMS....WITH A GREAT LOCATION...CLOSE TO BEACH,PARKS,ART MUSEUM,SHOPS & RESTAURANTS. DRIVEWAY FOR 2 CARS, STORAGE UNIT IN REAR YARD.....A TRUE GEM*** A MUST SEE ****

****THESE PEOPLE ARE OUT OF THEIR MINDS IF THEY THINK THEY CAN GET HALF A MILLION FOR THIS THING****

****IT’S SO CLOSE TO “BEACH,PARKS,ART MUSEUM,SHOPS” THAT THERE WAS NO ROOM FOR A SPACE AFTER EACH COMMA****

****WHY PERFORM ALL THAT REMODELING WORK ONLY TO INSTALL GROSS TWO-TONE KITCHEN TILES?....I THINK THEY WOULD HAVE BEEN MUCH BETTER OFF WITH SIMPLE WHITE QUARTZ COUNTERS****
****"NEWER" REMODELED BATHROOMS? IT'S EITHER NEW OR IT'S NOT. WOULD YOU SERVE "FRESH-ISH" SALMON TO YOUR FAMILY? JUST SAY "REMODELED BATHROOMS " AND YOU WON'T HAVE TO ANNOY PEOPLE WITH THAT KIND OF IDIOCY!****

****OH WAIT, YOU DID JUST SAY "REMODELED BATHROOMS" WHEN YOU MENTIONED THE BATHROOMS ONCE AGAIN IN YOUR LISTING DESCRIPTION. YOU PROBABLY MISSED IT BECAUSE YOU WERE TYPING IN ALL CAPS LIKE A 13-YEAR OLD TWITTERING ABOUT MILEY CYRUS' PONYTAILS****

Ugh, I gave myself a headache just writing like that for a few minutes. How do realtors do that all day?

Man, this place is small for the money. And on a matchbook lot.

But the description was correct about one thing: This place has lots of character.

And it has a neat little patio, but why dump all that money into remodeling the house if you're just going to leave that moldy, rotting storage shed as-is? Ugh, what an eyesore.

But kitchen and shit shed notwithstanding, they did an excellent job on the renovations. The mix of original cues and modern updates work pretty well together. I mean, check the original windows mixed in with some recessed lighting:

A faithful restoration like that must make the Long Beach’s Historical Society happy.

Overall, I think this little house looks great and the details are phenomenal.

But, as they (I) say: “One man’s top-notch upgrades and personal style choices mean fuckall to a new buyer.”

The balance between restoration to its original build condition and sensible modernization is great, but most of the details and expense will go unappreciated--or ignored completely--depending on the personal tastes and needs of buyers.

For an example, let's look at classic cars. One of my favorite cars is the 1963 Lincoln Continental convertible. Ideally I’m looking for one with red interior and black (or white) exterior.
And even though this car was built more than a decade before I was born, I want something as original as possible. We’re talking whitewall tires, original hubcaps, original seats, matching motor (anything unseen by the naked eye, such as new, more efficient engine internals are just fine), original radio, etc.

I’m old school like that.

So, while perusing Auto Trader, I find a sweet black Continental with custom wheels, an incredible Pioneer DVD stereo with custom speakers installed throughout. The beautiful leather seats have custom suede inserts, and the black paint--which is the original color--has a subtle ghost flame job. The seller says he bought it for $15,000 and put another $20,000 into customizing it.

Plus, he expects to be reimbursed for the blood sweat and tears he put into the car, so he's asking $40,000.

But he fails to realize that not everyone has his particular (or peculiar) taste or ideas about what a classic car should look like. And some people, like me, would have to spend money tearing out those custom speakers and replacing the interior panels--which have been carved up--with the original pieces.

And the leather and suede upholstery, which he absolutely adores and cost him a pretty penny, isn’t really my thing. I’d have to install the original red vinyl.

The black paint, although faithful to the original factory specs, has a flame job ghosted into it, which obviously isn’t original. I’d have to repaint the entire car to get it back to original shape.

Now, given that he needs to sell his custom Contie to fund his retirement, he wants to get the maximum amount of money out of his “investment.” I, on the other hand, could not possibly care less about how much he spent building a dream car to his liking because we don’t even remotely share similar tastes and, as he's finding out, neither do most buyers.

So I lowball him at $20,000, partially because I smell blood, and partially because it will cost me a decent amount of money to get the car to where I will feel proud to sling it around Long Beach for the next 40 or so years.

Unfortunately for the seller, while the paint was drying on his dream ride, the economy went into the crapper. Suddenly, the classic car market is showing signs of weakness. His fellow Baby Boomers have lost 30-40% of their 401(k)s, and they’re ALL trying to unload their dream cars at the same time. But his fellow soon-to-be-retirees are a lot more desperate than he is, and they’re no longer worried about making a profit on their cars. In fact, they’ve given up the ghost on breaking even on what they’ve put into their rides. Now they’ll take whatever they can get just to get rid of it.

But because the potential buyers of these expensive (and maintenance-hungry) vintage luxury items are starting to lose jobs, there are fewer and fewer people coming around to kick the tires. Furthermore, without the ability to take out HELOC loans against their equity to fund big purchases (like our seller did during the Easy Money Borrowing Bonanza), the prospective buyers can only buy what their income will support. And because the economy is so bad, it’s getting tougher and tougher to get an auto loan for a third car.

So the seller has two choices: He can either capitulate and give it to me for what I offered, or he can accuse me of being a “vulture” and being "unappreciative" of his attention to detail and reject my bid. In his mind, his Continental is “special” and is surely worthy of a premium over the other Lincolns on eBayMotors.

And even if he turns me down now, capitulation will eventually come. As he spends another year or two languishing in the AutoTrader with no bites because he’s still asking a WTF price, he’ll see the market (and financing) for classics like his has tanked even further, and in his desperation he’ll be glad to get $15,000 for his “special” whip.

Finally, once I've taken ownership of this car and restored it back to its original condition, I might find that trends have changed and very few people care about the time and effort I spent making it as original as possible. Maybe the new thing will be whipple charging these things and installing airbags in the suspension. And a buyer with those tastes won't give a rat's rump about my efforts to keep it original.

The similarities to housing are pretty clear: Most buyers don't give a fuck how much that bathtub you love so much cost you. This is their house now, and they hate that tub because they prefer showers.

This seller on Appleton, although he did an excellent and painstaking restoration to his tastes and style, may find that the prospective buyers are interested in customizing it to their own individual tastes--and therefore couldn’t give a steaming shit about how much work and money went into customizing (yes, restoring something to its original condition is “customizing,” just like my Lincoln) it. They’re going to make the house their home and it’s going to cost them money to do so. And that is factored into what their willing to pay.

I'm getting long-winded, I know, but here's another example: One Halloween I went to a house party in LB where the owner had fully customized his garage into a badass man-cave. It had poker and roulette tables, a hand-built bar with kegerator, flat screen TVs, custom lighting and carpeting--it was impressive and probably cost him at least $10,000 in materials plus countless hours designing, painting, and building.

Cool for a visitor, but what about a buyer?

Personally I would much rather be able to protect my cars than play a few hands of Texas Hold ‘Em every other month. That’s just how I roll.

So just how likely do you think it is that I would pay an extra $10,000 (plus money for “time invested”) for his idea of the “perfect” garage?

That's right...ZIPPO.

Anyhow, this is a great house, and if it were in a better area (Belmont Heights) it might have a shot at selling for this asking price.

But a good rule of thumb is to buy the least expensive house in the best neighborhood, not the other way around. And asking $435 per square foot when the average Sold price per square is $200 (hell, the average List price, which is fueled by ferocious delusion and greed, is only just above $300!) makes this the most expensive house in the area by a long shot.

Not to mention a prospective buyer would need to make 4.2 times the median income to reasonably afford this place. I have a feeling those well-heeled buyers would be shopping in more desirable neighborhoods.

And especially when you consider this house sold for $245,000 in 2001, I find it hard to believe they put in $205,000 in upgrades. Because we all know it sure as hell didn’t appreciate that much. Either way, regardless of how much they parted with to renovate this place, they would be lucky to get fifty cents on the dollar in return.

Hat tip to Anonymous for the find!

Loco "Loft" on Locust

Address: 835 Locust Ave #118, 90813
Asking Price: $555,000
Year Built: 2005
Size: 1 beds, 1 bath, 1,578 sq. ft.
$/Sq. Ft.: $352
HOA Fee: $380
Purchase price: $524,500
Purchase date: 6/2006 (nice timing!)
MLS#: P659722
On Redfin: 229 days
Down Payment: $111,000
Monthly Payment: $3,200
Income Requirement: $160,000
Description: WOW! One of only 4 lofts off of the amazing Lobby at The Temple Lofts. Enter this thoroughly modern space and enter the pages of Dwell magazine! Some of the custom features include: hi-end track and pendant lighting, custom bookshelves in living room and library, custom hardwood floor platforms in bedroom and den area, custom kitchen island with Carrerra marble top and storage, upgraded spa bathroom using Hans- Grohe fixtures and glass tiles, huge walk in shower with 4 shower heads and an extra large custom built medicine cabinet. Kitchen upgrades include: Viking fridge, range and microwave, hi-end added cabinetry, custom built pantry for additional storage space. In the dining area you will find a 'designer' built-in 'booth'...very cool! There has also been a walk-in closet added to the bedroom with an Elfa system. And maybe the best feature....a large yard-like patio...1 of only 4in the complex...very private with lots of plants and space. Check it out!

Is this idiot for real? He overpaid for this place in 2006 ($524,500), and now, three years into the worst housing crash ever witnessed by human eyes, he actually expects to get $555,000? Wait, your property is so special that it actually WENT UP in value while everyone else's dropped at least 20%?

HAHAHAHAHAHAHAHAHAHAHAHAHA!

For the last 230 days, this delusional wonder has convinced himself that he deserves to get out of this with no loss. Yep, as far as he's concerned, he won't lose a dime.

Does he realize he's on the ground floor? Does that even count as a "loft"? The dictionary definition of "loft" includes:

4. an upper story of a business building, warehouse, or factory, typically consisting of open, unpartitioned floor area.
5. such an upper story converted or adapted to any of various uses, as quarters for living, studios for artists or dancers, exhibition galleries, or theater space.

Yeah, I'm not sure you can call this a loft. Since "loft" connotes "lofty," or elevated, should we call this a "goft" to properly describe its ground-floor location?

Either way, you have to give the realtor credit for trying to put a positive spin on it with the "one of only 4 lofts off of the amazing Lobby" line, but his attempt at making this property seem "rare" because of this immense drawback is an EPIC FAIL.

If shit nobody wants makes it "rare," then I guess Gonorrhea is the four leaf clover of STDs.

I guess if you’re in a wheelchair a first floor apartment is convenient, but other than that who the hell would shell out all that scratch for a dark, dank, practically windowless ground-floor unit? How is that a selling point?

And another "rare" aspect ("1 of only 4in the complex"!), and "best feature" according to the realtor, is the "very private" patio.

How private is it? It's so private you can look right over the wall and take a few photos!

LOL!

Given these undesirable deficits, it takes a set of brass balls to ask $352 per square foot. Especially considering the going rate for sold properties is about $175 per square.

Good luck with that, buddy. Whatever this dude is smoking, he needs to hook us up with a dime bag.


Especially considering there’s some fierce competition upstairs in the form of this bank-owned property asking $299,000.

WHOOPS.

Mind you, the (much larger) bargain-priced REO (not a short sale), boldly undercutting our seller by an astounding $255,000, is still unsold after 50 days!

Our seller is doomed like a dozen donuts at Kirstie Alley's kitchen table.

On a related note, I’ve warned my readers about buying condos because the HOAs can arbitrarily levy “Special Assessments” on top of (what are usually already quite outrageous) HOA fines. Let’s say, for example, the HOA wants to repaint the building or renovate the leaky pool and it’ll run $70,000. If the HOA comes up short, it'll zap all residents with a Special Assessment. Forty residents = $1,750 each.

HOA President: "The roof needs replacing and the hallways need new carpet. The $200,000 we collected during the last 12 months won't cover it, so here is a Special Assessment for your share."

Resident: “Almost two grand?! My wife just lost her job--I don't have that kind of money!”

HOA President: “Fuck you, pay me.”

Resident: “No. It’s arbitrary and completely unfair.”

HOA President: “Fuck you, pay me.”

Resident: “No! I already shell out $400 a month to you leeches. It's not my fault you mismanaged the money.”

HOA President: “Fuck you, pay me.”

Resident: "Absolutely not."

HOA President: “Fuck you, we’re foreclosing on you.”

Does that sound fun?

Well, I just learned of “Loss Assessments.” I had never heard that term before, but apparently in situations when there is an "unexpected" shortfall in HOA funds (these days, in addition to HOA mismanagement, a big factor is the number of foreclosures and people no longer paying due to job losses), they can also slap you with a Loss Assessment.

If there are unplanned future expenses (like the plumbing system going out) or the HOA members just did a shitty job of planning, you, my friend, are screwed.
Check out this link: SIGN ON SAN DIEGO

An excerpt:

In Normal Heights, residents of an 88-unit condo conversion spent $68,000 last year on a sewage-line repair after enduring repeated sewage backups and flooding. That's in addition to the roughly $40,000 they took out of operating revenue to remove mold in four units at the 21-year-old complex.

This fall, the volunteer board overseeing a 186-unit Rancho Bernardo complex will ask fellow homeowners to finance more than $5 million in long-overdue repair projects, including painting, repaving of parking lots, new wood trim and replacement of stucco partition walls and rotted wooden arbors. Last year, the association was unable to secure majority approval for a similar proposal.

Even associations with well-heeled members, such as that of the oceanfront Surfsong condominium complex in Solana Beach, haven't escaped financial misery. Built in the mid-1970s, many of the units, with stunning, unobstructed ocean views, are valued at more than $1 million.

The 72-unit complex is in the midst of an $11 million rehab that includes new roofs, decks, railings, siding, fencing and a new sea wall. Each condo owner has been assessed more than $150,000 for the work, although the association had to foreclose on one owner who was unable to pay.

And definitely read the comments: PIGGINGTON

After absorbing all of that, is anyone still excited about buying a condo with a Homeowner's Association?

For this particular property on Locust, the construction is only a few years old so repairs shouldn't be much of an issue for a while. And as of yet there doesn't seem to be a substantial amount of loanowner distress, so not too many soon-to-be-former residents are skipping out on payments yet.

But that doesn’t provide a worry-free existence.

That’s because of the potential for a high rate of vacancy once that REO finally sells and puts the entire building severely underwater. If the underwater loft-dwellers (the real lofts, not this ground-floor nonsense) wake up and start moonwalking away from their commitments (to borrow a phrase from Dr. Housing Bubble) in droves, the remaining tenants are on the hook for any and all HOA deficits.

So, do your homework! Find out how many units are unsold in the building you're interested in, research which big repairs have been made (and which have been deferred--ESPECIALLY if the building is older, which is almost always the case with Long Beach's aging supply), and perform due diligence on the HOA, it's members, and topics of past meetings.

**If anyone has HOA tips, experiences or anecdotes, please feel free to share them in the comments.

When is a Price Reduction Not a Price Reduction?

Address: 383 Obispo Ave #4, 90814
Asking Price: $1,195,000
Year Built: 1919
Size: ? beds, ? baths, 3,500 sq. ft.
$/Sq. Ft.: $341
MLS#: P663215
On Redfin: 205 days
Down Payment: $120,000
Monthly Payment: $3,200
Income Requirement: $171,000
Description: Just Reduced by $200,000 Seller wants it sold. Seller Willing to Carry up to 20%. Beautiful 4-Plex in the desirable Bluff Heights Historic District. There are three detached building on the property, a craftsman Bungalow, and two spanish style duplexes. All four units are great condition and are all leased a market rents. Major renvoations completed in 2007. Cooper plumbing, earthquake retrofits made to all foundations. There is a large two car garage and laundry room on site.

"Just Reduced by $200,000"

Mar 12, 2009 - $999,000
May 22, 2009 - Price Changed $1,195,000

Uh, no, dumbass, you just INCREASED the price by $200,000.

"Seller wants it sold."

Liar.

He most assuredly does not want it sold. Sellers who actually want to sell don't rot on the MLS for 205 days.

"renvoations"?

"Cooper" plumbing?

And why would you capitalize "Willing to Carry" but not "spanish?"

Come on, dude. You're demanding $1.2 million and that's the best listing description you could come up with? Show a little pride.

Again, when it comes to multi-unit properties, if this is such a cashflow positive golden-egg-layin'-goose, then why sell during the worst housing crash known to mankind?

Oh, and what's that in the window? Why, it's a For Rent sign, meaning this thing already has vacancies--the kryptonite of investors.

And peep the burglar bars on the rental units. Yep, real attractive.

I don't have my realtorese decoder ring handy, so I'm still unclear how many actual beds and baths are on this property.

The actual listing lists, well, nothing.

The listing description says there are three separate buildings on the property, and in the same breath says there are four units. So we'll have to assume one of duplexes is split into two units? But how many bedrooms are in the main bungalow in front?

HEY GENIUS, MAYBE THE REASON YOU HAVEN'T SOLD IN 200+ DAYS IS BECAUSE NOBODY CAN TELL WHAT THE HELL KIND OF PROPERTY YOU'RE TRYING TO SELL.

Frankly, I have no idea what the going price in LB is for multi-unit properties like this, but I don't need to in order to conclude this place is overpriced. The Days on Market say it all.

I just wanted to highlight this property because of the sheer balls on the guy for raising the price by $200,000 in the midst of this ever-worsening deflationary environment, and then claiming in the listing description that the price has actually been reduced by that amount.

Long Beach sellers, the other dumb meat.

Lofty Goals and Expectations

Address: 115 W 4th St #405, 90802
Asking Price: $390,000
Year Built: 1929
Size: 1 beds, 1 baths, 1,226 sq. ft.
$/Sq. Ft.: $317
HOA Fee: $351
Purchase price: $359,500
Purchase date: 5/2002
MLS#: S563294
On Redfin: 45 days
Down Payment: $78,000
Monthly Payment: $2,300
Income Requirement: $111,000
Description: SHORT SALE APPROVED 5/18/09 BRING OFFER OVER $370K - This contemporary loft space opens up onto stunning city and downtown views with its five south-facing windows: keep them open for ocean breezes and sounds of the city. Abundant natural light is there if you desire if not, the blinds will keep your home a private sanctuary. The Walker building is arguably the finest loft conversion in the city and it is steps away from the Pine Ave Entertainment District, a short walk to the Pike, the Harbor, the East Village Arts District, the Aquarium and of course, the beach. The rooftop common area of the Walker Building features an outdoor fireplace, a built in BBQ grill, a kitchenette and a hot tub that provides a perfect place to watch the sunsets over Palos Verdes and the Vincent Thomas Bridge.

Dude, nice description! Long Beach realtors puttin’ in work!

This most recent re-listing has been on the market for 44 days, but in reality this loft has been for sale since August of 2007. Begging on the MLS just a few months shy of two years! Yikes!

As far as lofts go, this is pretty cool.

Maybe too cool. It’s a little cold and industrial for my tastes (and imagine what it will look like without the furniture), but nothing some nice rugs and colorful artwork can’t fix.

I’m very confused as to how many bedrooms this loft has because the description says one, but there are two different photos of beds.

Two-bedrooms would be ideal. That allows owner-occupiers to get a roommate in case they have trouble making that $2,300 monthly payment on their own. The roommate option also makes it more attractive as a rental investment (although the solo bathroom mitigates that appeal).

But the big news here is that the current bank-approved price of $370,000 is awfully close to rolling back to 2002 pricing. Like, within 3%.

And it’s still not moving.

Besides the nutso price, a single garage spot in downtown, apparent lack of a shower (WTF?), and inherent headaches associated with short sales are all likely contributors to the austere lack of interest in this property.

Plus, check out this nearby loft for rent:

LOFT for Rent: Modern/ Industrial Style, East Village Arts District, Downtown Long Beach, 1008 sq ft. 1.5 bathrooms (shower), Corner of Alamitos and 4th St. Large, open ceilings, skylights, ceiling fans, AC, mezzanine level for sleeping area/walk-in closets, custom paint, new carpet upstairs, French doors open to balcony facing courtyard patio. Washer/Dryer, stainless steel appliances, Common area has rooftop sundeck with BBQ, gym/community room. 2 secure tandem parking spots in subterranean garage. $1675 deposit. Available now. Showing property now. BTW.....this loft has been beautifully painted--unlike the stark white walls in the original pictures below. Hardwood flooring is being installed today.

A bit smaller, sure, but it has two (ugh, tandem) garage spots, a shower, hardwood floors, and actual pigmentation on the walls and is asking a mere $1,675 per month. For a little perspective, to compete with that monthly payment our seller would have to drop his asking price to (are you ready for this?) $255,000.

Um.

Yeah.

He'd better hope there are still knucklehead knife-catchers out there dumb enough to value "owning" so much that they're willing to pay an extra $625 per month for that vaunted privledge.

And speaking of bong-toke-induced wishful thinking, check out what's happening in 90802 between the List vs. Sold price per square foot:



Boy, they must be selling "Spring Bounce" in dime bags now.

Have a Great Holiday Weekend, Y'all!

Flush with Equity, Bursting with Hubris

Address: 4315 Broadway, 90803
Asking Price: $599,000
Year Built: 1922
Size: 2 beds, 1 bath, 1,254 sq. ft.
$/Sq. Ft.: $478
Purchase price: $375,000
Purchase date: 8/2001
MLS#: P641302
On Redfin: 345 days
Down Payment: $120,000
Monthly Payment: $3,200
Income Requirement: $171,000
Description: Rare affordable Spanish Belmont Heights single story home with nice rear yard. Close to Belmont Shore shopping, dining, beach with easy parking. Beautiful living-dining room area with hardwood floors, some newer double pane windows in living and bedroom, laundry room off kitchen, remodeled kitchen and bathroom. This is worth seeing.

"affordable"?

Guess that depends on your definition of "affordable." A monthly payment of $3,200 requires an annual income of at least $171,000 to realistically afford this lil' buddy. Hmm...the median income in this zip is (a healthy) $78,405. Wow, you need to make 2.2 times more than the already pretty high median income to afford an average median property.

Plus, you've been collecting MLS cobwebs since last summer, so clearly your definition of "affordable" doesn't quite match that of potential buyers.

I love when realtors gush over “newer” improvements in a home. Hey, I’m selling my car with a “newer” tank of gas. I last filled it up three years ago then parked it, but I’m sure it’ll run like a champ.

Plus, there are only some “newer double pane windows.” Way to go, cheapass. Is there anything chintzier than mixing new windows with the old, tattered originals? I realize double-paned windows are expensive, but replace them all or don’t even bother.

And, sorry dude, but the last time that kitchen was “updated,” Jimmy Carter was kickin' it in the White House.

Hey Brit, how do you feel about those floors?

You’ll notice there are no photos of the “updated” bathroom. In a home with only one baño, it better damn well be impressive, and you'd better damn well include a photo of it. I have a feeling there’s a distinct reason why this place hasn’t sold in 345 days. It starts with B, ends with M, and isn’t Bacchanalianism.

But the bathroom isn’t the only reason this place is about to celebrate its one year anniversary on the MLS. Check out the cocksure, defiantly stubborn, I-am-a-real-estate-genius-and-entitled-to-my-bubble-equity pricing strategy:

Jun 09, 2008 - Listed $749,950
Aug 18, 2008 - Price Changed $724,950
Dec 04, 2008 - Price Changed $699,500
Mar 06, 2009 - Price Changed $674,000
Mar 30, 2009 - Price Changed $649,000
May 15, 2009 - Price Changed $599,000


By swooping up this place in ’01 for $375k, the seller has stacked up a ton of equity. So, really, it’s no surprise it's taken him so damn long to price this thing within 20 miles of reality. He clearly wants to squeeze out every drop of profit.

But at what cost?

Given the awesome neighborhood (which is clearly getting to his head), he probably could have found a buyer for $599,000 in June of 2008. Instead, his original asking price was an absolutely ludicrous $750,000 (almost $600 per square foot!) for this conspicuously non-upgraded shack!

And ever since this seller first graced the MLS with his "rare" presence, he’s been dicking around with pathetic 3% price reductions and leisurely chasing the market down. It was only recently that he dipped below the stratosphere.

The going price per square foot in this zip is about $430, so he’s getting there. But if I were him I wouldn’t take a gamble on this economy suddenly getting much better. I’d start getting aggressive and try to preserve the substantial equity before it all evaporates. Pal, you're still going to walk with a bunch of cash, so stop with the bull-headed greed and lock in those profits while you still can.

Yo, Chef Ramsay, what say you about those curtains?

I know housing bulls and Long Beach Dreamers like to say Belmont Heights is “immune” but the exact opposite is true. Yes, there are more established, equity-rich owners in the Heights compared to other 'hoods, but there are also a lot of wannabes who had to take out liar loans or could only afford the minimum payments on their Option ARMs to squeeze in there. The inevitable implosion of those loans and the resulting increase in distressed properties (although probably much smaller in number than most neighborhoods) is going to put significant downward pressure on prices.

Low-end properties are close to the bottom, but it’s the mid- to upper-tier properties like this one that are really going to be hurting for buyers in the upcoming months and years.

Why? Because the "move-up buyer" is practically extinct. Think about it. During the bubble, you bought a starter condo, lived in it for two years, then sold it for a big profit and rolled that money into a bigger place, maybe a small detached home. You lived there for a few years, sold it for a profit to another move-up buyer (who just sold his starter condo), and rolled that money into an even bigger house after selling your detached home to another move-up buyer. Wash, rinse, repeat.

The problem now is that older people on the verge of retirement (Baby Boomers are a huge demographic) typically no longer need the big homes in which they raised their kids and are likely to actually move down into smaller, cheaper homes and condos in the coming years.

And the first time buyers getting into starter condos now will continue lose value before we hit bottom, which will put them at a monstrous deficit when home values finally begin to slowly appreciate again (if homeowners are lucky, appreciation will track inflation for quite a while--but the days of 5, 10, or 20% annual appreciation are dead for generations).

Furthermore, wages have been stagnant for some time, which used to be the traditional mechanism of moving up before irrationally exuberant home appreciation took its place during the last few years. This means entry-level buyers are stuck and won’t be moving up into larger, more expensive, detached homes--in turn severely limiting the buyer pool for half-million-dollar-plus homes like this.

And I haven’t even mentioned the effect rising unemployment rates, tightening lending standards, and interest rates that can only go up from here will have on the viability of that ever-shrinking pool of move-up buyers.

On a personal note, I’m really excited about what’s going on in housing right now. I’m excited because the government’s attempts to re-inflate house prices will only make the bottom lower (although they will be successful in postponing the arrival of said bottom). That means that instead of being relegated to checking out apartments with outrageous HOA fines, at this rate I’ll be able to make my dreams of owning a detached home in a sweet neighborhood a reality. As we approach the bottom, starter homes will once again be starter homes (and not starter apartments) and I for one am really looking forward to it.

Plus, by not buying during the last few years at inflated prices, I’ve been able to save up massive amounts of cash, make some money investing (and preserve a good amount of my 401k by getting the hell out of the stock market last summer and into safer investments), and live an amazing (but within-my-means) lifestyle. Gotta enjoy life but keep low overheads, kids!

So by the time this bubble is done deflating, I’ll have even more cash stowed away, I’ll be able to afford a much nicer and bigger place, I’ll have plenty of money to update/furnish it, I'll be able to afford a home instead of an condo (don’t get me wrong--there are some nice condos out there, and I understand the appeal of not doing yard work, etc., but I've always wanted a house), and prices will be so reasonable that I’ll be able to continue traveling, driving fast cars, and enjoying meals out on the town and vacations with friends and family without being a slave to my house.

And so will you, my friends, as long as you're patient, nimble, and optimistic.

See, who says this blog never focuses positive news?

A Collection of Listing Photos Featuring Animals

Why not?


Ha! I just noticed that little buddy on the left is peeing on the chair! Nice!

Failed Flip in the Ranchos

Address: 7131 E Mezzanine Way, 90808
Asking Price: $645,000
Year Built: 1953
Size: 3 beds, 2 baths, 1,130 sq. ft.
$/Sq. Ft.: $571
Purchase price: $599,000
Purchase date: 4/2007
MLS#: P686990
On Redfin: 8 days
Down Payment: $129,000
Monthly Payment: $3,400
Income Requirement: $184,000
Description: This immaculate, authentic Cliff May Rancho has been extensively refurbished by its owners, and represents the bright, open, indoor-outdoor lifestyle that Cliff May intended in his residential designs. The numerous upgrades to this home include: a custom kitchen with hand built birch cabinetry, full extension glide drawers, and GE profile appliances; new birch paneling throughout the interior and new interior birch doors, all built to original specs; remodeled bathrooms with stainless steel fixtures; an upgraded electrical system with 200 amp panel; and, newer furnace and water heater. This home sits in a quiet interior location within the tract, set back from the street for privacy and serenity. The entire neighborhood is bordered by beautiful El Dorado Park and Nature Center, which has 800 acres of fields, streams, lakes and paths.

DAAAAAAAAAAAAAMN! This Cliff May house is freakin' awesome. I love it!

They did such an amazing job of staging it, I would be tempted to buy it fully furnished. Sure, this house is tiny (I mean, how do you even cram three bedrooms into 1100 square feet? By the way, in laptop computer technology, "mezzanine" means "a sheet of plastic insulating different parts of circuitry from each other in cramped environments.") but overall I'm impressed with the house, the great listing description, and the photos (although that Thunderbird is an early 60s model and misaligned with the 50s theme of the house but I still give them an "A" for effort).


This flipper purchased in April 2007 for $599,000, which, frankly, is completely insane. But he saw potential for massive profits and with dollar signs shooting out of his retinas, he made his move. He obviously put a lot of money, time, and effort into tastefully updating the home while staying consistent with the Cliff May design themes. Unfortunately, he picked the worst possible time to sell.

You see, even if he was able to find a knife-catcher willing to pay this absurd asking price of $645,000, commissions alone would eat up $38,700, leaving a meager profit of $6,300 for his troubles. The only way this guy is walking away with any profit whatsoever is if the upgrades cost less than $6,300.

I guess he saved a few bucks by choosing cheap floors and hideous blue formica countertops (WTF?) for the kitchen...


...but still, I'm guessing these improvements, updates, and furniture set him back at least $60 grand.

That means, if a buyer decides to pay full asking price of $645k (the second most expensive house in the Ranchos by $5,000), the loss to the flipper will be at least -$92,000.

Brutal.

Worse yet, that doesn't include the carrying costs for two years of ownership, which would run about -$67,000. And that's after the tax benefit!

Ultimately, the total out-of-pocket cost of following his Flip This House-inspired dreams of real estate riches will likely be -$159,000.

Ouch.



Those losses, of course, assume this flipper can find a knife-catcher foolish enough to shell out for this stylish, but cramped and overpriced homestead. Not going to happen.

And here's why. First, although we have seen a wide discrepancy in Long Beach between the asking per square foot price versus the ppsft homes actually sell for, in 90808 that's not the case:


It's pretty clear that most homes in 90808 are listing, and selling, for $340 per square on average. This dude is trying to unload for $571 per square for one of the smallest Cliff May models. Yeah, good luck with that.

Second, this nearby seller's Cliff May house is arguably just as nice as 7131 Mezzanine (seriously, take out the modern/retro furniture and they're pretty similar) and has 200 extra square feet, an extra bedroom, and nice hardwood floors.


And the Kallin house, rotting on the market for 108 days, is asking $30,000 less!

In other words, the Mezzanine flipper is in deep shit if he doesn't start pricing competitively. Like, yesterday.

When property values inevitably come down to earth and align with local incomes (a healthy $82,431 in this zip), I would be all over a house like this, as small as it is. Until then, the longer this guy waits to lower the price, the more crushing the monthly carrying costs will be, and the further into the hole he will go on this well-executed, but poorly timed, flip.

Hat tip to Carl