Confidence is Key: UPDATE II

The list price was "$1,289,000" and changed to "$1,199,900"

When we first met this eternal optimist in September 2008, he was asking $1,749,000.

How'd that work out for you? You're still on the market a year later so I'll take a guess and say not too well.

Now asking $1.2 million, it seems he's priced about right for this neighborhood. But is there even a market for these million dollar+ homes? There has only been one sale over $1 million in the last six months so I guess the answer's in the question.

But, hey, this guy is obviously a follower of The Secret, and positive thinking always pays off--I'm sure a buyer armed with $200,000 down and jumbo financing is just around the corner!

Considering the seller purchased in 2007 for $955,000, assuming a magic seller flies in on the back of Falkor, a sale would provide a profit of about $190,000 after commissions. Nice!

BUT, remember how much work was put into the house, including foundation repairs (which they no longer mention in the listing--it probably scared too many people off), new kitchen, new appliances, new garage, new wine cellar, new laundry room, and on and on. With a house this big I imagine he easily ripped through $190,000 in restoration costs.

In other words, assuming he can find a buyer willing to spend the rest of his years with a can of lemon Pledge in his hand, they would essentially walk away with nothing after two years of ownership.

Could be worse I guess, but how stupid do you think they feel for asking such a WTF price a year ago? The seller doesn't appear quite so full of hubris, pride, and that greed-faced flipper mentality anymore.

I'm reposting the original entry below because, well, I think it was funny as hell.

+ + + + + + + + + + + + + + + + + + + + + + + + +

Atta boy.


Address: 2311 E 1st St, 90803
Asking Price: $1,749,000
Year Built: 1908
Size: 5 beds, 3 baths, 2,600 sq. ft.
$/Sq. Ft.: $673
Purchase price: $955,000
Purchase date: 3/2007
MLS#: P654248
On Redfin: 2 days
Down Payment: $350,000
Monthly Payment: $11,000
Income Requirement: $437,000
Description: Absolutely stunning Craftsman highly renovated Bluff Park showplace! This 100 year old home has had absolutely EVERYTHING done from the foundation, plumbing, electrical, roof, heating and so much more. This home features beautiful original hardwood floors throughout, wood beamed ceilings and craftsman window mouldings and castings throughout, original beautiful doors and knobs, a gorgeous formal dining room with built in hutch, brand new kitchen with Silestone countertops and Subway tile backsplash and d cor accents and a wonderful breakfast nook, 2 main floor bedrooms and large bathroom with his & her sinks, tons of closet space, 3 large additional upstairs bedrooms with 2 more completely remodeled baths, upstairs laundry room, secret tea room, huge rear yard with an oversized 2-car garage AND a 1,400 SqFt basement that could be used for many things! Truly too much to list! You must see this home to appreciate the detail at every turn.

Boo-ya!

Now that's how you flip a house! Pay top dollar for a run-down fixer-upper, put in some mediocre upgrades, give your bathrooms a cheap once-over reminiscent of the state of the art circa 1987, fix the crumbling infrastructure, and demand $794,000 for your troubles.



Bam!

And what timing! Buy in March of 2007, when the market is totally red hot, and sell at the end of summer in 2008--when the market it even hotter! Hot damn, this guy is good.

And you totally intimidated me with your staging. Teach me your ways, master! Nothing sells houses faster than that creepy, dead-grandparent-buried-underneath-the-pergo-floors vibe.

Nailed it!

Even better, you priced it 20% to 40% above nearby listings to let everyone know you are an aggressive, sophisticated investment strategist. Congratulations, you totally DOMINATED your neighborhood and let everyone know just how special your property is.


I believe!

Only pansies listen to that crap about price per square foot "anchored in the real world." You may not be on the sand, but that's even more reason to price it like you are. I mean, this is Long Beach! Are you going to let Laguna Beach, that wannabe city unworthy of the "LB" initials, outprice you? Hell no! You slap a $673 per square foot price on your house and show those "superior" beach cities that Long Beach is a world class city worthy of world class prices.



Don't let those naysayers and sissy bloggers push you around! No, you get right out there and show them that their "data" and "irrefutable facts" are just doom-and-gloom propaganda! I mean, hell, the National Association of Realtors, that unbiased, reliable source, says there are countless foreign investors earning $275,000 per year who are looking for a 100-year-old house just like yours. You can't throw a rock without hitting one in this hot market!

Man, with your aggressive style and savvy pricing strategy, I'll bet a bidding war starts like a forest fire this weekend! I am in awe.

$1.75 mil in your face! Suck on that, reality!

Greek Pillars = "Amazing Architectural Detail"

25 15th Pl #804, 90802
Price: $579,995
Beds: 3
Baths: 2
Sq. Ft.: 1,310
$/Sq. Ft.: $443
HOA: $407.40
Year Built: 1989
MLS#: P697199
On Redfin: 8 days
Down Payment: $116,000
Monthly Payment: $3,500
Income Requirement: $166,000
Description: The pride of Long Beach! Featuring astounding beach and ocean views, a gorgeous interior, and an impeccable presentation, this is a paradise for anyone that has ever dreamed of a peaceful and wonderful getaway for their home. It is impossible to not fall in love with this gem of a property! This 3-bed, 2-bath penthouse condo is located in a very secure, ocean-front building with direct beach access. You will enjoy breathtaking beach/ocean views from the enormous patio. Inside, amazing architectural details such as crown molding, indirect lighting, vaulted ceilings, gorgeous hardwood floors, pillars, stainless steel appliances, & a fully renovated kitchen will astound you. You'll never know how you lived before without a fireplace, walk-in closet, wet-bar, and even a wine fridge. Don't forget access to the nearby pool, jacuzzi, business center, and gym amenities, and a location moments from Long Beach's best spots (2nd street, Pine Ave, Downtown, and more). Welcome to your dream home!

What an enthusiastic listing description! Superfantasticdonchaknow!

I hate to break it to you, but anyone making the required $166,000 per year is probably familiar with fireplaces, closets, and mini wine fridges. Just a guess. I mean, is a rickity wet-bar the new tennis court?

This spacious apartment, in a killer beachfront location, is loaded to the gills with goodies (although some are of questionable taste). Someone obviously put a lot of dough into sprucing up this penthouse.

You can't really get a handle on the size of that balcony, but it looks pretty damn big. All the better to enjoy those ocean views.

You want to see something weird (yet kind of awesome)? I started writing this entry a few days ago, and since then the realtor took some new, better photos--including this one of the balcony on a sunny day:

Hey man, I give credit where credit is due--that was a smart move.

Unfortunately, there are a lot of useless photos as well:



Sadly, no amount of photography do-overs can fix that monstrosity of a kitchen. Yuck.

Dude, Smurfette's gonna be pissed you bit her style.

Here's how I imagine the cabinet selection process went:

"So, Mrs. Gerard, what kind of cabinets are you looking for exactly?"

"Show me the most hideous fucking things you've got."

"Uh, well, Snap-On just started producing cabinets that resemble toolboxes..."

"You had me at hello."

Anyhow, if you're cool with the decor, this classy joint can all be yours for a 2003 price of $579,995. Oddly, despite the fact that this seller paid $770,000(!) at the peak in 2006, this is not (yet) a short sale.

That means the seller put down at least $225,000. Because that is the amount it will take to cover the mortgage and selling costs and walk away clean without credit score anihilation. Considering the '06 purchase date, it's not hard to imagine bubble profits from another property sale serving as a large DP, explaining the equity sale status.

Keep in mind, that massive -$225,000 loss is predicated upon actually selling at this price. Maybe it will, maybe it won't. But even if it does, for the seller that must be a tough pillar to swallow.

Dawson's Crock: UPDATE II

Yet another price reduction for the Dump on Dawson.

Yawn.

And by the way, while we're declaring moratoriums on foreclosures, poverty, drugs, layoffs and barking dogs, I want to declare a moratorium on the "priced to sell!!!" line that realtors, including this one, so often use in listing descriptions.

If it were truly "priced to sell," we wouldn't be reading their illiterate garbage for hundreds of days on end--the shitbox would have sold already!

SUBMIT!!!

5585 E Pacific Coast Hwy #305, 90804
Price: $99,900
Beds: 0
Baths: 1
Sq. Ft.: 418
$/Sq. Ft.: $239
HOA: $207.31
Year Built: 1970
MLS#: P697667
On Redfin: 3 days
Down Payment: $20,000
Monthly Payment: $750
Income Requirement: $29,000
Description: FANTASTIC BUY ON THIS STUDIO UNIT VALUE PRICED FOR QUICK SALE!!! SPACIOUS LIVING AREA WITH TILED FLOORS, BRIGHT KITCHEN, MIRRORED CLOSET DOORS, BALCONY, VIEW OF THE COURTYARD, HOA POOL AND ONE PARKING SPACE. COMPLEX IS WALKING DISTANCE TO CAL STATE LONG BEACH AND LOCATION IS CONVENIENT TO SHOPPONG AND FREEWAYS. SUPER MOTIVATED SELLER WILL MAKE EVERY EFFORT TO WORK WITH YOUR QUALIFIED BUYERS. SUBMIT!!!

"Yo Craig, what'd you get up to this weekend?"

"Oh, not much. Just a little SHOPPONG."

I think it's hilarious when realtors include "SUBMIT!!!" in listings. You know what it kind of reminds me of?

"OBEY MY DOG!!!"

This tiny studio was repossessed by the bank in July for $79,900. They quickly got it back on the market and are now demanding a $20,000 premium that they were unable to get at auction. Can they get it?

Well, a 418 square foot unit did sell last month for $98,000, which is probably informing the bank's pricing strategy. And if you run the numbers the monthly PITIH (the "H" is for HOA) is only $750. It could rent for that, don't you think?

If that's the case, I don't think this FedEx box will last on the market for very long.

The real question is whether an investor (come on, no owner-occupier would buy this linoleum-lined prison cell and live in it themselves) would be catching a falling knife by buying right now.

For a clue, let's peruse the recent sales:

$104,000 5585 E Pacific Coast Hwy Unit 350 Sold on Apr 24, 2009
1 bd / 1 ba 418 Sq. Ft.

$125,000 5585 E Pacific Coast Hwy Unit 372 Sold on Apr 29, 2009
1 bd / 1 ba 418 Sq. Ft.

$121,000 5585 E Pacific Coast Hwy Unit 227 Sold on Jul 23, 2009
1 bd / 1 ba 418 Sq. Ft.

$98,000 5585 E Pacific Coast Hwy Unit 107 Sold on Jul 17, 2009
1 bd / 1 ba 418 Sq. Ft.

**[UPDATE: Thanks to "FYI" for informing us that those previous sales were all studios, not one-bedrooms as listed on Redfin--the one-bedrooms in this complex are 597 square feet].

Did you notice that steady (if a bit inconsistent) decline in value? Do you have any reason to believe that pattern of price destruction will suddenly cease, given the unemployment situation?

The bank apparently does.

And, man, how do you think the April 29 knife-catcher who paid $125,000 is feeling right now about that -$27,000 tune-up? Ouch. I guess the bottom wasn't in, eh Sparky?

There is also an interesting story buried in this unit's sales history:

Jul 16, 2009 - Sold $79,900
Dec 01, 2004 - Sold $156,000
Dec 14, 2001 - Sold $60,000
Apr 03, 1989 - Sold $10,000

In 2004, the lender somehow determined this single-serving shit shack was worth $156,000 ($373 per square foot! For this!), despite selling for a third of that just a few years earlier!

Really? That didn't send up red flags?

Personally, I think this will go back to its 2001 value or lower when all is said and done. Unless there is a sudden jump in demand for living quarters so cramped you can't fully outstretch your arms. But if that's the case, you might be better off stealing a car and enjoying the free rent in prison. At least that way you wouldn't have to worry about food or utility costs.

Tsunami or Squirt Gun?

Lately I've been noticing debate is heating up over the so-called "foreclosure tsunami" that the more bearish among us are convinced is imminent.

The debate primarily surrounds whether or not a "shadow inventory" even exists, and if it does, whether it will see the light of day in the form of a flood, causing an explosion in supply and a crash in prices, or a trickle, resulting in a slow, painful, indelibly frustrating return to fundamental valuations.

I used to believe it would be a flood, but given the shenanigans of the large banks and a government and regulators complicit in allowing them to delay the foreclosure process for a year or longer (as well as delay a realization of losses), it seems abundantly clear that this supposed bottleneck of distressed inventory is unlikely to suddenly bum rush the market and cause an utter collapse in prices.

Sorry, uber bears. I just no longer think it's going to happen.

Even with the massive amounts of foreclosures in the past year, according to Redfin Long Beach inventory is down 33% YOY.

THIRTY THREE PERCENT!
Hell, 4% of that decline in inventory was just in the last 30 days! And in the middle of the Super Summer Selling Season, when more people should be trying to sell!

I know some of us sit here in slack-jawed amazement as dumpy houses and cramped apartments sell for WTF prices but you also have to understand that many people have been priced out of the market for YEARS. Pent-up demand absolutely exists--there's no doubt. Hell, I'm part of the pent-up demand! And if you're reading this right now, odds are you're part of it too.

See what I mean?

But the extremely bearish are betting that PUD in Southern California will wane, for that supply of gainfully employed, cash-flush buyers to "run out." After all, with unemployment in the double digits with no signs of improvement just how many people with 20% saved and stable incomes can possibly be left?!

Well, a lot apparently. A lot more than I previously thought.

And to make things worse, this contingent of eager buyers is fighting over an ever-shrinking pool of inventory, thus the bidding wars and the price declines dragging on for ages. This is the intent of the banks and the government, and it appears that is the way it will remain.

I certainly don't have the answers and anyone who claims to (especially those who earn a commission to) is full of brown. You hear me? FULL OF BROWN.

But all of the data I'm looking at indicates So Cal house prices won't be on the way up for a long, long time. On the other hand, it's increasingly unclear how much lower prices will go and how quickly. So what now? Just sit here in limbo?

Look, just as I think the constant bottom calling is absurd, I think it's foolish to wait for skyrocketing interest rates, 40% unemployment, or a fire hose of inventory to suddenly be turned on. The only one who can determine if "now is a great time to buy" is you, using rational, time-tested calculations. If you're paying close to what you would it would cost to rent the same place, if your debt-to-income ratio is within traditional bank-determined parameters*, you plan on being there for a long time, and you love it...well, shit, are you waiting for a sign from the heavens? Do it!

But if not, then don't worry about it. The irrational (and wholly misguided, according to the evience) fear of being "priced out of the market...again" is gripping the market. Don't succumb to it. If the numbers don't work, keep saving, stay sharp, listen to both sides of the issues, and most importantly...good luck.

*Front End Debt-to-Income: gross annual salary X .28 / 12 months = maximum monthly payment (yes, including HOA).