Bulletproof Vest Not Included

Address: 1780 W 25th St., 90810
Asking Price: $339,000
Year Built: 1977
Size: 7 beds, 3 baths, 2,224 sq. ft.
$/Sq. Ft.: $152
Purchase price: $315,000
Purchase date: 4/2009
MLS#: R903780
On Redfin: 16 days
Down Payment: $68,000
Monthly Payment: $2,000
Income Requirement: $97,000
Description: Nice Home in Nice Long Beach Area This Home Features 7 bedrooms , 3 bath ,2 car garage. Perfect for Large family At this price it willnot Last

In high school, the Carl's Jr. in the Rossmoor Center was the hangout spot. We would hang out after school, take advantage of the free refills, and talk about the trials and tribulations of our teen years.

Anyhow, there was a guy who worked there named Robert. He was mentally disabled but the management was really generous and gave him a job. His disability was such that he was limited to what duties he could perform but the one thing he ACED was delivering food and collecting those little A-frames with the order numbers on them (the kids with classic cars would always swipe the "67" or "68" depending on the year of their car). And he would always say, in his unique voice:

"WOULD YOU LIKE KETCHUP WITH YOUR MEAL?"

Patrons answering in the affirmative would receive piles upon piles of (body temperature--HORF!) ketchup packets from his cornucopia of an apron until politely mentioning they were just fine with 34 packets.

The point of this story? I just wanted to congratulate ol' Robert on finding a new career as a realtor! Nice work, buddy! That listing description is AWESOME! Way to go! Gold star for you!

You know how I know this neighborhood sucks? Robert refused to get out of his car to take listing photos:

And Robert has reason to fear for his life. Last month a police officer was shot just a few blocks from here.

And speaking of grade-A listing photos, check out this little before-and-after action. Now you see the used car (and shopping cart) dealership:


Now you don't!

That's some David Blaine shit, right there!

The previous owner, who purchased in June 2004, plunked down a pants-wetting $535,000. In this 'hood? Yikes.

To their credit, the "owners" of this seven-bedroom gem made it almost five years before the enormous debt service swallowed them whole. Judging by the number of cars in the driveway, they were probably renting out several rooms and moving in extended family members to make ends meet. That, or they were operating a valet company out of there:

Anyhow, purchasing a house at TEN TIMES the median income is unsustainable, and with a mortgage like that you're only one pay cut or a leaky roof away from balance sheet detonation.

Ka-boom.

The owners eventually moonwalked away (probably after living there rent-free for a while) and the house went back to the bank for $315,000 in April. Six days later the lender listed it for $339,000--just enough to break even after commissions--and it's been sitting there collecting dust ever since.

By the way, at its current asking price, this boarding house is 38% off the 2004 price! Yowza!

And considering Robert is too afraid to get out of the car and can't be bothered to move a shopping cart (sorry, that's just GHETTO) out of the way...what do you suppose Robert thinks the odds are of this place selling for $339,000?

About as good as Michael Jackson performing at his London concerts (too soon?).

The Grenade on Granada

Address: 341 Granada, 90814
Asking Price: $699,000
Year Built: 1923
Size: 3 bed, 3 bath, 1,650 sq. ft.
$/Sq. Ft.: $424
Purchase Price: $415,000
Purchase Date: 4/2002
MLS#: P692837
On Redfin: 4 days
Down Payment: $140,000
Monthly Payment: $4,000
Income Requirement: $200,000
Description: A Long Beach Landmark! This stunning Collision design home features 3 levels of living space with spectacular Lagoon views from almost every window. 1st level features a large kitchen, laundry room, formal dining room, large bedroom and a 3/4 bathroom. 2nd level features large open living room area with tons of windows and light, optional 3rd bedroom and a bath. 3rd level features a huge master suite retreat with vaulted beamed ceilings, a balcony deck, large bathroom, and tons of light. The outside has been recently repainted to show the true uniqueness of this amazing home. The entire home features tons of natural light, wonderful open spaces, front courtyard area, and a 2-car garage.

Weird. I was just in this neighborhood yesterday (happy birthday, D!) and I don't remember seeing this house. You would think this Picasso-esque oddity--ERRR..."landmark" would stand out.

After looking at this exterior photo:

...I was expecting a lot more than 1,650 square feet.

But then I saw this one:

...and it became abundantly clear why the interior dimensions appear so cramped.
Plus, when you click on Aerial View you can really see how the tiny triangular lot affects the interior layout.

The most disappointing thing about this house is that the level of creativity that went into the exterior evidently did not make it to the interior.



Glass blocks? A gray tub? Given the gross 80s cues, it's clear that the current owner, who purchased in '02, was not the one who built this house--he purchased this place as-is from the 1989 buyer.

I have to give credit to owners expressing themselves and building something unique in Long Beach but as I've said before, one person's quirky (and pricey) personal taste means fuckall to potential buyers.

The greatest example of that is this idiot on Park. After a tortuous 684 days on the MLS, documented here, it's clear that there is virtually no market for these custom-built oddities (especially overpriced ones).

If you're planning on living in it forever, shit, build whatever the hell you want. Custom build a place too look like Winnie the Pooh's house if that's your thing.

But don't hold your breath in anticipation of finding a cash-flush buyer who shares your particular love of that honey-chugging charmer willing to hand you a handsome profit for what your particular peculiarities hath wrought.

You know what I think to myself when I see houses like this? "Yeah, if it was dirt cheap I might buy it as a goof." In other words, this kind of look-at-me "uniqueness" is actually a detriment to selling because this level of customization and personal flair can easily put houses in the Only-At-A-Discount category.

Heck, just ask the 1989 buyer. He bought this property for $410,000 in October '89 and (presumably) built it to its current condition. After 13 years of ownership and hundreds of thousands in construction costs, he sold in April 2002 for $415,000--just five grand more than he paid. But the NAR told me home values double every 10 years!

Sure, he successfully found a buyer who shared his quirky tastes, but in order to make the deal happen he had to slash the price to the extent that he lost massive amounts of cash. Will our current seller have to do the same?

Given current sales in this neighborhood, asking $424 per square foot isn't that far off. But, again, the key question is: Will this house require an Idiosyncrasy Discount to sell?

New Terminology

I'm in West Palm Beach currently, and last night I struck up a conversation with the bartender at the resort. It turns out she, until recently, was a used home salespers--ERRR, real estate agent.

Apparently the resort (currently at only 50% capacity) is trying to sell some of the units as condos, starting from $900,000 and going all the way up to $3,000,000 for the four-bedroom ocean-view units.

To no surprise, in this economic environment they haven't exactly been selling like hotcakes (Florida is arguably in worse shape than California, real estate wise). BUT, the bartender used a realtorese term I have never heard before when trying to justify egregious prices for unfinished condos sporting concrete floors and exposed drywall tape:

"Decorator-Ready."

LOL!

The Benefits of Bottom Buying

Address: 1334 E 1st St #1, 90802
Asking Price: $349,000
Year Built: 1955
Size: 2 bed, 2 bath, 1,030 sq. ft.
$/Sq. Ft.: $339
HOA: $226
Purchase Price: $70,000
Purchase Date: 5/1996
MLS#: P691855
On Redfin: 5 days
Down Payment: $70,000
Monthly Payment: $2,100
Income Requirement: $100,000
Description: Absolutely stunning Alamitos Beach home located just 1 block from the sand!This incredibly remodeled home offers a gorgeous new kitchen w/ granite counter tops,stainless gas appliances,new dark wood cabinetry w/custom pulls,recessed lighting,new tiled kitchen floors and more!The rest of the home offers impeccable upgrades that include remodeled bathrooms with granite counter top and custom bowl sink,crown molding,recessed lighting,designer paint,newer carpet,wood floors in the dining rooom,dual paned vinyl windows,tiled bathroom floors, all of which are immaculately maintained!This corner unit has walls of windows and only 1 common wall with oversized bedrooms and a nice sized living room to entertain.With low HOA's,direct access from your private garage with additional parking space and a newly remodeled complex with new roof,electric,dual paned vinyl windows,new light fixtures,new front doors,new paint and redone plumbing this is sure to impress and will not last long at this price!

Man, they were so close! If you ignore the lack of spaces after each puncuation mark (quite a challenge, mind you), there is only one typo: "rooom." Ah well.

But the realtor knows a little something about marketing because the kitchen shot is the main photo in the listing, as opposed to, say, this shot of the exterior:

Oofa. Mudfence ugly if you ask me, but eye of the beholder and all of that, right?

This seller bought at the bottom of the last housing downturn and held througout the duration of the Great Housing Bubble. For once, the sales history doesn't document the irrational exuberance of the bubble. Just the opposite: it provides an interesting (and likely prescient) illustration of a bubble bust! Check it:

Sep 25, 1990 - Sold $125,000 PEAK
May 27, 1993 - Sold $114,177 LOSS -3.3%/yr
Oct 20, 1993 - Sold $90,000 LOSS -44.9%/yr
Oct 25, 1995 - Sold $82,248 LOSS -4.4%/yr
May 08, 1996 - Sold $70,000 BOTTOM -26.0%/yr (ouch)
Jun 19, 2009 - Listed $349,000 OH, HI!

Crazy, right? That's probably how sales histories are going to look for the next 5-10 years if the government keeps the misguided "soft landing" policy intact. A slow ride to the inevitable return to basic fundamentals.

Anyhow, the real question is: does this guy deserve a $290,000 windfall for holding this property for 13 years?


That's up to the market to decide, but one look at the Median Condo Values and it doesn't look likely:

Alamitos Beach: $220,000; $265 per square
Downtown: $239,999; $304 per square
90802: $259,000; $322 per square
Long Beach: $234,950; $261 per square

This seller, by asking $339 per square, isn't that far off. Given the quality of the interior and proximity to the ocean, a 10% reduction might be enough to be competitive with nearby sellers and find an impatient Super Summer Selling Season chump. He obviously has a big enough profit cushion to do it.

Unfortunately, looking at recent sales, there doesn't appear to be a big market for $350,000 condos in this 'hood:

$230,000 1273 E 1st St Apt 1E Sold on Apr 10, 2009
0.07 miles 2 bd / 1 ba 878 Sq. Ft.

$217,611 1250 E Ocean Blvd Apt 406 Sold on Jun 02, 2009
0.12 miles 2 bd / 2 ba 1,103 Sq. Ft.

$307,500 1605 E 2nd St Apt 306 Sold on Jun 09, 2009
0.17 miles 2 bd / 2 ba 800 Sq. Ft.

$305,000 1605 E 2nd St Apt 305 Sold on May 29, 2009
0.17 miles 2 bd / 2 ba 800 Sq. Ft.

$299,000 1200 E Ocean Blvd Apt 78 Sold on Feb 27, 2009
0.17 miles 2 bd / 2 ba 1,202 Sq. Ft.

$260,000 275 Esperanza Ave Apt 301 Sold on Jun 09, 2009
0.24 miles 2 bd / 2 ba 1,073 Sq. Ft.

I removed properties that were too small or lacked a second bath, as well as a few Ocean Blvd. luxury units that are obviously not comparables, but it's easy to see that NOTHING has sold for $350,000 this year.

Hey guy, you made a wise move by buying at the bottom of the last bubble, but don't start thinking you're some real estate impresario. After all, if you were truly a savvy investor, you would have jumped ship in 2007 when the market started to turn.

Two years, as many bullet-sweating sellers will tell you, has changed everything. If you, like most Long Beach sellers, coddle the misguided belief that your place is "special," you're going to learn quite quickly how easy it can be to have your profit margin cut in half by a thousand market-chasing cuts.

My fear is you will hold out for the price you "deserve" rather than accept whatever price you can get. Come on, dude! I'm pulling for you! Smarten up and do whatever it takes to get this thing sold (and enjoy your pallet of cold, hard cash).

UPDATE: "Accepting Backup Offers." That was fast. It will be interesting to see what he accepted.

The Problem with Peak Purchases

Address: 353 N Colorado Pl #205, 90814
Asking Price: $345,000
Year Built: 1976
Size: 2 beds, 2 baths, 892 sq. ft.
$/Sq. Ft.: $387
Purchase price: $350,000
Purchase date: 5/2007
MLS#: S578872
On Redfin: 1 day
Down Payment: $69,000
Monthly Payment: $2,000
Income Requirement: $100,000
Description: Beautiful atrium setting in small, quite, secure, end of cul-de-sac complex. 1 car private garage, blocks to beach. New harwood floors;almost new appliances, great shape. Walking distance to stores, shops, restaurants. Shows well. Cool ocean breezes; pet friendly building. YOUR CLIENTS WILL LOVE THIS ONE IN A GREAT AREA (EQUITY SELLER)...3% COMMISSION.

"harwood"?

Let's start with the sales history:

Jun 20, 2009 - Listed $345,000
May 30, 2007 - Sold $350,000
Mar 24, 2007 - Listed
Jan 12, 2007 - Sold $416,839
Aug 05, 2006 - Listed
Aug 06, 1998 - Sold $87,000

After living in this apartment for eight years (pretty much to the day), the 1998 buyer put it on the market. He only paid $87,000 so he might have owned this thing outright by 2006, right? Pure gravy bubble profits, right?

Not so fast, mon chien.

You see, the pre-bubble buyer owned this place during the choicest years of the easy-credit, HELOC, cash-out refi panty party...and he couldn't help but bury his gaping maw in the trough.

See that strange sales price of $416,839 in January 2007? Most houses sell for $415,000 or $420,000--but that kind of number means it went back to the bank. A random collection of numbers generally indicates the remaining balance left on the mortgage.

That's right, my friends. That lunatic, likely through various refinances, sucked the bubble teat for almost half a million dollars. So when he sent the keys back to the bank, he walked away with nothing (well, except for ruined credit and possibly a deficiency judgment on his recourse loans) and had to kiss six years of equity goodbye.

"Oh, but he had medical bills! He had to pay for college tuition! He didn't know what he was signing! He was a victiiiiiiim!"

Oh, please. Stop it with that happy horseshit.

The fact is, this pig refi'd himself into oblivion, lived the high life for a few years, and stuck us with the tab. He deserves our scorn and condemnation, and frankly I'd like to see him in a debtor's prison for 30 years breaking rocks to work off his debt.

But, alas, we as taxpayers, who are ungraciously forced to pick up the tab, will likely see no such relief.

/rant.

So here is where it gets interesting. The current seller picked up the property for $350,000 two months after the bank listed it in Spring 2007. The lender (and by proxy, the taxpaying public) took a bath on it, but at least this guy got a "huge discount," from the previous price, right?

Well, we'll see about that.

The listing description claims it's an "equity seller" but I have a feeling it's on the razor's edge of becoming a short sale. If it sells for the current wishing price of $345,000, the loss after commissions (3%, in this case) will be -$15,000.

That sounds like a realistic down payment amount for 2007, so maybe he/she will break even.

But that, of course, fully depends on nabbing a new buyer willing to pay $387 per square foot for this tiny, plain, non-upgraded (save the laminate floors) apartment.

When the going rate in this neighborhood is $308 per square, I have heart-attack serious doubts about that happening. Peep it:

MEDIAN CONDO VALUES (PRICE; $/SQ. FT.)
Alamitos Beach: $220,000; $265
East Side: $225,000; $269
90814: $247,450; $308
Long Beach: $234,950; $261

Good luck with that. The fact is, there is nothing this small selling for anywhere close to $345,000.

Plus, this flat probably rents out for $1,400 a month, but the monthly mortgage payment would be at least $600 more. That is an awfully big premium for "owning."

Lastly, the income requirement is $100,000/year! Yowza! This seller, who didn't even last two years before the monthly payments overwhelmed his pocketbook, is a PRIME example of the importance of income requirements.

The traditional calculation for "affordability" is 3x Gross Annual Income = Home Price (I use 3.5x income because there is a difference between what is recommended and what real estate-crazy Coastal Californians will spend).

The median income in this zip is $54,170, making this asking price nearly SIX TIMES the median! That's simply not sustainable. Obviously, given the sale.

The reason banks used to religiously implement the 3x income rule is because they knew that was the sweet spot where a person could afford their payment for 30 years, have enough disposable income to live, and most importantly, could likely survive a disruption in income.

But at 6x income, forget about it. A 5% pay cut, a leaky water heater, or a toasted clutch on the Corolla will all but guarantee distress, missed payments, and foreclosure. With so much money going toward debt service, there simply wouldn't be any room to cut.

Which leads us to where we are today. The seller is trying to unload for close to what he paid in the hopes of salvaging his credit rating and minimizing the losses. But it's a lost cause.

I think this shoebox would be lucky to garner $250,000. If by some miracle he had a $100,000 down payment, he loses that but escapes with his credit.

But if he only put down 5% (which is much more likely in '07), this will be a short sale or foreclosure in no time as he learns just how slim his odds are of getting $345k, and he'll walk away with obliterated credit and (at least) a $15,000 loss.

I'll bet when he bought just two years ago he never thought he'd be face-to-face with those two horrendous choices.