Scout's Honor!

Address: 3618 E 7th St., 90804
Asking Price: $595,000
Year Built: 1923
Size: 2 beds, 1 baths, 768 sq. ft.
Purchase price: $155,500
Purchase date: 11/2000
MLS#: P672892
On Redfin: 139 days
Down Payment: $119,000
Monthly Payment: $3,600
Income Requirement: $170,000
Description: Cute little 2 bedroom, 1 bathroom California bungalo with detached one car garage. Mixed use residential and commercial zoned, corner lot.

Price per square foot: $775
Dude, by my estimation you're juuuuuuust about finished with a softball-sized crack rock if you honestly believe this house is worth 600 grand. Really? You're entitled to $404,500 in bubble profits? REALLY?

Don't get out much, do you?

You see, pal, while you've been stuffing your face with mini corn dogs and watching American Idol (wait, that Lambert dude is gay?! GET OUTTA TOWN!), the country you live in has been hit by the worst economic crisis since The Great Depression.

No, seriously!

And I'm not sure if you've looked out your window lately, but your house is sitting on one of the busiest streets in Long Beach.

I swear!

And maybe you're not handy with a measuring tape, but it turns out your house is on a 50'x 45' lot.

For reals!

And by the way, you're asking $595,000 when the total taxable value on this house is only $178,383.

Believe it!

And the average price per square foot of Sold properties in this area is $260, a third of your asking price per square.

Crazy, I know!

And on top of that, if the bubble never occurred and your place appreciated at a generous 4% per year since purchase, it would be worth $221,000 today.

I'm telling ya!

And lastly, the most expensive nearby property is only asking $430,000 and it's a nice, clean, updated property in a highly-desirable area of Belmont Heights!

Scout's honor!

And, I'm not sure if you've been outside lately, but in comparison your house looks like this:

So, the point of all this is that you should raise the price immediately.

The reason nobody has so much as glanced at your house in 139 days is because it's too cheap for a house in such great shape, in such a stellar location, and with so many features worthy of a substantial premium. Buyers are probably assuming something is wrong with it when they see that super low price of $595,000.

It must be so frustrating to be this close to grabbing the bubble profits you're so obviously entitled to (dude, only $404,500 in profits? You deserve so much more for your time and effort), only to have the thousands of rich foreigners coming here to save the housing market think your place is too much of a bargain.

So, I think you should increase the ask by $100,000 immediately to let potential buyers know this place is truly special. After all, how many houses have this kind of access to 7th Street? And by "access" I mean RIGHT THE FUCK ON TOP OF.

Yeah, exactly.

And if in two weeks nobody has bit on your new aksing price, then it's still too cheap and you should raise it another $100k. Afterall, the Super Summer Selling Season is upon us, and you don't want to leave any money on the table do you?

Cracking the $100,000 Threshold

Address: 2507 E 15th St #213
Asking Price: $99,900
Year Built: 1988
Size: 2 beds, 2 baths, 842 sq. ft.
$/Sq. Ft.: $119
HOA Fee: [UPDATE FROM CARL]$442
Purchase price: $230,000
Purchase date: 12/2004
MLS#: P685972
On Redfin: 7 days
Down Payment: $20,000
Monthly Payment: $1,050
Income Requirement: $28,000
Description: End unit with upgraded bathrooms and flooring. Laminate wood flooring from the entry to living room and hallway. Ceramic tile flooring in the bathrooms. Indoor laundry. Balcony with a view of Signal Hill accessing to and from both bedrooms and living room. Complex has recreation room, community spa and BBQ. New painting of exterior in progress.

You have to love that cut-and-dry property description typical of short sales. Even the listing agent is rolling back his eyes and asking, "Ah, what's the point?"

"Condo. Has floor and roof. Toilet and shower. Bah, fuck it."

I mean, check out this tell-tale Waving the White Flag photo:


"Meh, whatevs."

And the agent's eyes aren't the only thing rolling back: The current asking price not only represents a 2000 price, it's actually the equivalent of a 1988 price!

Apr 06, 1990 - Sold $125,500
Jul 19, 1994 - Sold $133,996
Dec 16, 1994 - Sold $83,500
May 23, 2002 - Sold $115,000
Dec 01, 2004 - Sold $230,000
May 04, 2009 - Listed $99,900

Mind you, the 1988 price is what it cost when it was brand new!

OUCH!

Like a 2x4 to the face! Right, Hacksaw Jim Duggan?

If it weren't for the outrageous $442 HOA, this apartment would be dirt cheap. But even factoring the additional $442 month HOA (your HOA fines are almost as much as your principal and interest!), at $99,900, it still pencils out. Let's look at the fundamentals:

LOCAL MEDIAN INCOME: $38,705 (Check! Income requirement is $28,000)

3.5X INCOME: (Check! 3.5X $28,000 is $98,000)

LOCAL RENTS: $1,200 - $1,300 (Check! PITI+HOA is $1,050)

PRE-BUBBLE PRICING: $100,000 (Check! Asking $99,900)

This, my friends, appears to be the bottom for shitty Long Beach neighborhoods. If it gets any lower for 2-bed/2-baths, we're probably in a Depression--and you would have much bigger fish to fry than house-hunting (like, say, stocking up on ammo).

Or is it the bottom?

Just ask this guy who bought in this building late last year thinking the bottom was in:

$148,500 2507 E 15th St Unit 313
Sold on Nov 17, 2008
0 miles 2 bd / 2 ba 842 Sq. Ft.

If our featured squat sale is approved at the current asking price of $99,900, in just seven months the buyer of #313 would already be -$50,000 underwater. That's almost 35% underwater in half a year!

Or, ask this guy:

$149,000 2507 E 15th St Unit 215
Sold on Dec 08, 2008
0 miles 2 bd / 2 ba 877 Sq. Ft.

A mere six months after his "bottom" he's $50k in the hole.

Maybe we should give this 2009 buyer ("I'm telling you Martha, it can't possibly go any lower!") a holler and see how he feels about being $40,000 underwater in a matter of months:

$139,500 2507 E 15th St Unit 120
Sold on Jan 16, 2009
0 miles 2 bd / 2 ba 856 Sq. Ft.

Remember, friends, no matter how great deals may seem at the moment, nobody knows how much worse unemployment is going to get before it gets better. The unfortunate bottom callers I just highlighted obviously didn't think things could get any worse, and look what happened. Don't make the same mistake they did.

And especially considering the numerous short sales in this building (btw, according to the sales history our featured seller is "short" by $131,000!), it's quite possible these still have further to fall and will fall well below rental parity when the bubble finally, mercifully, deflates.

And even if you have no interest in properties in bad neighborhoods like these and are looking in neighboring zips closer to the beach, $100 per square foot for newer construction in 90804 is going to put significant downward pressure on adjacent neighborhoods with older inventory.

Right, tarp-covered Pac-Man?

REO Deathwagon

Address: 1250 E Ocean Blvd #406, 90802
Asking Price: $275,025
Year Built: 1958
Size: 2 beds, 2 baths, 1,103 sq. ft.
$/Sq. Ft.: $249
HOA fee: $249
Purchase price: $200,000
Purchase date: 4/2002
MLS#: P690211
On Redfin: 4 days
Down Payment: $55,000
Monthly Payment: $1,800
Income Requirement: $79,000
Description: TOP FLOOR CORNER UNIT IN THE ELDORADO WITH PARTIAL OCEAN VIEW FROM THE LIVINGROOM. UNIT HAS HAD SOME RECENT UPDATING FROM THE PREVIOUS OWNER. NEWER DUAL PANE VINYL WINDOWS, CENTRAL AIR AND HEAT, AND BUILT-IN APPLIANCES IN THE KITCHEN.

I REALLY LIKE THE WINDCHIME HANGING IN YOUR KITCHEN. DOES THAT COME WITH THE HOUSE? BECAUSE IT TOTALLY MAKES SENSE THAT IT WOULD BE THERE. IN THE KITCHEN. DO YOU LIKE GOLDFISH?

Dude, banks aren't screwing around. Yesterday's REO might seem like a good deal, but today's lender-owned condo is asking $249 per square FOR OCEAN VIEWS!

BANK: "Hey comps, die in a fire!"

Further, in addition to dual-pane windows and other mild upgrades, the square footage is relatively gernerous for the beach and the HOA is a comparitively reasonable $249.


It doesn't have a balcony or an extra parking spot in the garage, but there's no denying this is a pretty decent deal compared to the tired crap being peddled by delusual Long Beach sellers.

The value still has further to fall in the coming years (it's an old building and the unit is a bit outdated) so even buying at this seemingly reasonable price is still catching a falling knife. But, I think the partial ocean view will help to keep the value remain somewhat sticky.

Come on, admit you're getting excited for 2011. Assuming your job doesn't get shipped off to Bangalore, if the last two featured REO properties are any indication, there is going to be some amazingly dirt cheap, high-quality inventory to choose from in the future.

**UPDATE: Backup Offers Accepted**

Yeah, no shit. At that price I'm surprised it took that long.

Signs of Hope?

I've featured units in this building before, and today I have one of particular interest for those patiently waiting for the inevitable return to sanity in real estate prices:

Address: 420 Redondo Ave #207, 90814
Asking Price: $150,000
Year Built: 1970
Size: 1 beds, 1 baths, 883 sq. ft.
$/Sq. Ft.: $170
HOA Fee: $242.32
Purchase price: $307,000
Purchase date: 8/2006
MLS#: S576939
On Redfin: 3 days
Down Payment: $30,000
Monthly Payment: $1,000 (@6%, because, well, it's inevitable at this point)
Income Requirement: $43,000
Description: Ideal and Clean 1 bedroom for a one party occupant, newlyweds or investors! Well maintained Belmont Heights building. A few blocks from the beach. Balcony with morning sun. An easy walk to Belmont heights restaurants, night life, shopping and attractions. Association pays water and trash. All electric, clean living.

"All electric, clean living"? What the eff does that mean?

I imagine that's how an robot, fresh out of rehab, describes its menial, 12-step existence.

SOBER ROBOT-/-MISSES TASTE-/-OF SWEET, SWEET BOOZE.

BUT-/-SOBER ROBOT-/-LOOKING FORWARD TO NEW LIFE OF ALL ELECTRIC, CLEAN LIVING.

SOBER ROBOT-/-MICROCHIPS SWEATING-/-THINKS ONE BEER CAN'T HURT.

SOBER ROBOT-/-NOW BUZZED ROBOT-/-HAVING HARD TIME-/-COMPUTING HOW ONE HEINEKEN-/-CAN TASTE-/-SO DELICIOUS.
BUZZED ROBOT-/-ON BEER #9.344-/-LOSING CONTROL.

DANGER!

DANGER!

M4LFU..NC/T1O:N!1!

KILL! KILL! KILL!

Uh.

Sorry.

As you can see, this place is pretty much all orginal:

One custom touch that caught my eye was the handicap handles in the bathroom (well, those and the sexy pink tiles):


I guess an elderly person lived here? There doesn't appear to be a shower, so add that to the list of improvements you'll need to make right from jump street.

Anyhow, here's the deal: Priced at $150,000, this Belmont Heights condo is slightly cheaper to buy than to rent. Yep.

There it is.

This is pretty encouraging and even the perma-bears have to perk up and take notice. At first I thought the $150,000 price tag was a typo and it was supposed to be $250,000. But, a neighbor a few doors down sold two months ago for 190k:

420 Redondo Ave Unit 212
Sold on Apr 08, 2009 - $190,000
0 miles 1 bd / 1 ba 884 Sq. Ft.

So $150,000 is a realistic price for an REO (Real Estate Owned) unit, which tend to significantly undercut nearby sellers. And considering the ragged condition of this unit, the 20% discount seems about right.

At this price, the bank clearly wants this property off its books--comps be damned. I think it will get bid up somewhat from this price, but considering it has surpassed rental parity and is easily affordable on the local median income, I imagine this condo will go quickly.

Here's some background:

In August 2006, the former owner inexplicably decided to buy this outdated one-bedroom for an eye-bulging $307,000.

Um.

Wow.

It appears that the property went back to the bank in April 2009 for $232,405. If this place sells for the current asking price of $150,000, the loss to the bank will be -$91,000 (including $9,000 in commissions).

The former owner is likely out around -$75,000, based on two years of mortgage payments and any down payment. And they say renting is throwing away money!

Anyhow, assuming the bank is serious about this price, it represents a significant turning point in Long Beach real estate and spells utter disaster for nearby sellers.

Failed Flip in the Ranchos: UPDATE

"The list price was $645,000 and changed to $624,500"