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?

Irvine Prices in Long Beach: FINAL UPDATE

6/14/11 - Sold $305,000

After years of bullshit wishing prices, this turkey has finally been put out of its misery. In the last update, I said, "...$277 per square foot seems reasonable enough to nab a buyer." It ended up going for $281 per square.

Of note, the robo-appraisal was actually dead on!

$207,276

$300,400

$414,552

I don't take much joy in being right anymore -- I mean, who really cares? The delusional realtards have long since accepted the truth expressed on this blog and conceded defeat.

Plus, it doesn't take a whole lot of effort to make these accurate predictions. As I've said since the beginning, it's just a simple matter of what local incomes can support. This price is now generally in line with the median income, so it found a buyer -- not exactly a shocking development.

For the record, this sales price represents a $240,000 discount from the original batshit-crazy asking price. Delusional? Yeah, just a tad.

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


Here's an oldie but goodie.

In one of the maiden posts on this blog (don't forget the update), I featured this property, sporting a mind-boggling $545,000 wishing price. That 2008 post prompted a decent amount of hate mail (including this idiot whose soaked-diaper logic I eviscerated in a response. The result? We never heard from him again).

Although much has changed since 2008 (not the least of which is the disappearance of whack job bubble-deniers and wrong-headed realtors spitting their delusional venom on this blog) but what has not changed is my ability to ascertain "true values" based on the facts, the numbers, and good old fashioned common sense.

At the time I said:

At $454 per square foot and 260 days on market, this thing isn't going anywhere. Sometimes I get the feeling owners just aren't serious about selling. I don't care how close you are to Belmont Heights, in this zip code the median household income is $30,353. This house is probably slightly above median considering the minor updates, but even if the median income were $50,000 a year, this thing wouldn't be priced more than $250,000.

Well, now it's back on the market as a short sale, priced at $299,000.

Although it remains to be seen whether it will actually drop to $250,000 (honestly, I doubt it. First, when I made that comment very few could foresee the insane amount of taxpayer cash the government would throw at the housing crisis to keep prices inflated. Second, although it's a short sale -- which as we all know means it isn't really for sale by any heretofore relied-upon measure -- $277 per square foot seems reasonable enough to nab a buyer), my craaaaaazy comment two years ago(!), which seemed so controversial at the time, ultimately wasn't that far off.

On the other hand, how did this rambling, incoherent prediction from "HagenindaGHETTO" work out?

Keep the OC folks in OC! Besides, there is more to do here, it's more fun and you don't have to DRIVE everywhere! We deserve to be more expensive! (unless they are buying all cash... then they come first...LOL)

FYI: This home was not a FIXER FLIPPER, the sellers fixed it for themselves but got transferred to Irvine (now that's ironic is it not?). By the way, I know the sellers, they HATE Irvine (even though they are Conservatives) they miss our GHETTO and the fun, and the walking, and the beach and the marina.....

The listing agent will be thankful the stuffed shirt Self Righteous writer of of this BLOG for a PRICE DROP....it always attracts more potential buyers.

As for the Price:
Half the price...??? Good thing you're an accountant. Just run the comps and talk about the FACTS...
The last thing we need are mendacious comments that give a skewed picture of realty. Dig?

Well, dummy, I ran the comps and I talked about the FACTS and it looks like you were, are, and always will be

DEAD.

ASS.

WRONG.

(How does that feel? Be honest.)

P.S. I can't help but thinking how pathetic it is that these fucking idiots waited so long to get real and price to reality and not fantasy. If they hadn't been so ignorantly focused on getting their greasy mitts on their "well-deserved" bubble profits, they might have had a shot at walking away with actual profits. Oh well.

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

One of my first blog posts featured a stunning, if controversial, example of Avarice is Bliss.


This house exemplified the entire premise of this blog: Long Beach, while a great city in its own right, pales in comparison to Orange County regarding schools, low crime rates, incomes, and cleanliness, and therefore cannot possibly justify asking prices that match (and in some cases exceed) the premium levied in OC.

However, Kool-Aid knows no bounds and Long Beach sellers (particularly those in less desirable areas of Long Beach) got drunk on Equity Juice and priced homes in less desirable neighborhoods like they would in Irvine, Huntington Beach, or much nicer cities in LA County.

By putting their greed on display, they held themselves out for ridicule and humiliation. Hence, the impetus and inspiration of this blog.

So, here we are today, more than a year after the home was first listed on the MLS at a laughable $454 per square foot. Like many others, the seller gave up and the property has since been taken off the market ("MY HOUSE IS SPECIAL, DAMN IT! IF THESE BUYERS ARE TOO STUPID TO REALIZE THAT, THEN I WILL JUST TAKE IT OFF THE MARKET. I REFUSE TO BE INSULTED!") and now they are attempting to rent it.

ADDRESS: 1533 E. BROADWAY AVE. (BROADWAY/CHERRY)BEAUTIFUL, LUXURY 2BED/2BATH HOUSE FOR RENT! Immaculate Hardwood Floors throughout House. Skylight in Large Living Room. Fireplace located in Living Room. Luxurious Kitchen with Stainless Steel Appliances. 2 Full Bedrooms with AIR CONDITIONING! Large Attic for Storage. Stacked Washer/Dryer. Wiring available for Direct TV and Surround Sound System! Charming, Large Backyard with Firepit and Entertainment Area. Great Location!!1 YEAR LEASEGardener ProvidedNo PetsTenant Pays ALL UTILTIES EXCEPT WATERMUST SEE!!!!

You are welcome to come into our office and pickup keys to view this unit M-F between 9am-4pm. WE ARE NOT OPEN OVER THE WEEKEND. Please feel free to contact me via email or at the office for further questions.

Actually, they've been attempting to rent it for more than a year, offering a "LEASE or LEASE TO OWN!" scheme--ERR, agreement from the get-go. No bites.

But, I thought "this is a NEW HOUSE." Well, if anything from 1918 could be considered new, I guess they're on to something. By the way, I can give you a sweet deal on a "NEW" Nash 681.

They seem a bit thick-headed, no? They refused to lower their asking price to a reasonable figure and the property didn't move. They refused to ask a reasonable rent and it's still vacant after a year.

I'm going to let this seller in on the most closely-guarded secret known to man. This wisdom is guaranteed to save the housing market in one fell swoop, but it has been elusive to all but those who travel in the darkest, most remote corners of the universe. But now I will unleash it upon the world for all to see, so that our housing market and the current misery and financial hell may end once and for all. And here it is:

Lower the price, dick.

You may have read there has been an uptick in sales recently. There is no complicated, macro economics-heavy explanation for this other than prices are cliff-diving. And when people can afford homes without bullshit, negative-amortizing, interest-only, Harry Houdini loans, homes start selling. Real simple, folks.

And if this seller had accepted this truism from the outset, he could have saved himself a year's worth of carrying costs, which at the time I estimated at $3,500 per month ($42,000 in a year!), and a lot of stress. Assuming this termite tent could get $2,000 per month in rent (which, judging by the time it's been sitting unoccupied, is yet another case of this individual's greed-faced lunacy), they are still bleeding cash to the tune of $1,500 per month! OUCH!



Incidentally, the Irvine property I compared this house sold for $540,000 in March. That was only $9,000 off the original asking price. Yikes, for a corner location? How much "equity" do you suppose that buyer has lost since his purchase?

The point is, Irvine can clearly get away with those prices, but our Long Beach seller learned after a year on the market that Alamitos Beach ain't Irvine.

If you'll recall in the original post, a local realtor and an offended resident posted invective comments with absolutely no analysis or data to support their misguided, rose-colored assessment of Long Beach real estate. They instead offered personal attacks and meaningless insults, but couldn't refute my opinion that:

"At $454 per square foot and 260 days on market, this thing isn't going anywhere. Sometimes I get the feeling owners just aren't serious about selling. I don't care how close you are to Belmont Heights, in this zip code the median household income is $30,353. This house is probably slightly above median considering the minor updates, but even if the median income were $50,000 a year, this thing wouldn't be priced more than $250,000."

I mean, it doesn't take Dionne Warwick and her psychic friends to call that one.

The fact is that homes are still overpriced and prices have a way to go before they meet market fundamentals (I'm not talking about the much-vaunted "bottom," I'm just talking about when a home purchase is a sound investment) and as long as banks have a large inventory of REO properties and that tidal wave of Option ARM resets is looming just off the coast, buying a property today is nothing more than a backstage pass to the Financial Agony show at the Wiltern (I heard Slayer is opening).

The New Floor in Pricing

Good luck with this one, pal.

Address: 140 Linden Ave, #957 (how many units are in this place?!) 90802
Asking Price: $615,000
HOA Fine: $420
Year Built: 1928
Size: 2 beds, 2 baths, 1210 sq. ft.
$/Sq. Ft.: $508
Purchase price: $76,000
Purchase date: 5/1999
MLS#: S518068
On Redfin: 112 days
Down Payment: $61,500
Monthly Payment: $4,700
Income Requirement: $154,000
Description: ULTRA MODERN ART DECO LIVING! Rarely on the market, this large 2bed/ 2bath corner unit is located on the 9th floor of The Historic Lafayette Building in the heart of the East Village Arts District. A designer home complete with: Australian Sandstone floors, a raised kitchen completely remodeled with Brazilian Mahogany wood Floors, Granite countertops, a glass backsplash, and a large elevated breakfast bar, dining area, and complimented with stainless steel appliance package . Finishing touches include recessed lighting, inset speakers, a walk in closet and computer area. The bathrooms maintain their original Art Deco tile with some modern finishes. Each Bedroom offers breath taking mountain, city and ocean. The building amenities include an onsite manager located in the beautiful 2 story main lobby, a rooftop solarium with panoramic views, and a state-of-the-art gym and billiards room.

Hey, dummy, ya think after 112 days on the market it might be time for a price reduction?

Notice that in that lengthy description, they didn’t mention the parking situation. That’s because there is no parking in the building. That’s right. Street parking. In downtown Long Beach. Hope you brought your running shoes.

If you want to protect your car and personal safety, it’s going to cost another $67 per month to park two and a half blocks down the street at the Marriott. Want to make sure your mom or your girlfriend don’t have to walk around downtown LB at night to get to your place? That’ll be $134 a month.

DEAL KILLER.

Could you imagine slapping down $4,700 a month** and being forced to drive around all night looking for street parking? Plus, if you’re pulling in the $154,000 per year required to afford this place, I’m sure you don’t drive a shitbox that you want to have sitting outside on the street constantly.

At this price, this condo ain’t going anywhere. Even at half price I don’t think it will see much interest. Keep in mind, that modern furniture and fancy schmancy decorating crap doesn’t come with it.

But, if you can’t quite swing the nearly $5,000 mortgage payment I have good news: The seller simultaneously trying to rent it out!

http://losangeles.craigslist.org/lgb/apa/662688660.html

For rent by Owner. This large 2 bedroom, 2 bathroom corner unit is located on the 9th floor of the historic Lafayette Building in the heart of the east village arts District, a short walk to downtown urban shopping or the new waterfront project, The Pike at Rainbow Harbor.



It goes on an on with all that superfluous crap about Australian Sandstone floors, Brazilian mahogany floors, golden Peruvian soap dishes and chrome Mongolian microwave buttons. What’s most interesting about the rental description is that the lease is revealed as on a “month to month basis.” Why? You think some idiot, after 112 fruitless days rotting on the market at that ridiculous asking price, is going to suddenly come along and swoop it up for asking price? Good luck with that.

But from a rental perspective, apparently keeping all options open is this seller’s focus.

And renter beware.

This financial wizard might try to make you pay for his fiscal blunders and throw you out at the first glimpse of a sale (after happily taking your first and last month’s rent up-front).

And speaking of financial wizardry, let’s look at the asking rent.

Hmmm…$2,450, eh? Forget for a moment how ridiculous that is (remember, unfurnished), it’s barely HALF of the monthly mortgage. Please, oh wise one, explain to me why anyone, in their right and fluid mind, would consider stretching themselves to buy this over-designed luxo-shack when they could rent it for $2,000? (that’s right, I said it—two grand. No way you’re finding a sucker to pay $2,450 plus parking fees)

Clearly, this place is immensely overpriced.

But why? I suppose it’s because the seller dumped a lot of money into renovation and wants to get it back. However, assuming this place appreciated at a (generous) 5% per year after the purchase in 1999 for $76,000 (um, wow), this place would still be worth only $110,000. This condo looks nicely done, but is it $505,000 worth of “nicely done”?

Who knows, maybe those rare “Brazilian Mahogany wood floors” are really expensive.

Hmm, this neighbor also has Brazilian hardwood flooring, let’s find out:

Address: 140 Linden Ave, #711, 90802
Asking Price: $199,000
HOA Fine: $365
Year Built: 1928
Size: 2 beds, 2 baths, 1078 sq. ft.
$/Sq. Ft.: $185
Purchase price: $138,000
Purchase date: 6/2001
MLS#: R712304
On Redfin: 180 days (happy 6 month anniversary!)
Down Payment: $19,900
Monthly Payment: $2,100
Income Requirement: $50,000
Description: GIGANTIC PRICE DROP!! Nearly $300,000k off original list price!! No question this is the best price per sq. foot in downtown Long Beach. This is NOT a SHORT or REO - although it's priced like one! This amazing one-of-a-kind unit in the historic Lafayette Building is loaded with history and a classic vintage feel. The property includes a rooftop garden w/ fountain and city views, inside laundry hook-ups, and NO COMMON WALLS. New kitchen & Brazillian Cherry Floor in 2nd bedroom. A state-of-the-are gym is included in low HOA. The rooftop solarium has spectacular views of the entire L.A. basin and the Long Beach harbor / Catalina. BEST VALUE in the historic East Village landmark once owned by the Hiltons! Walk to everything! Pet friendly. Parking is available. Get the VALUE of a short sale without the hassle. This owner is motivated beyond belief! Get your offer in now before the deadline - call for details. Showings are appt. only. Investors this is your chance for a spectacular deal.


Whoops! Same floors (except with an extra “l”), dramatically different price. Can you say COMP KILLER?

I know, I know, the listing seems fishy. Suppose you’re in the market for a new car. You pick up an AutoTrader and flip to, let’s say, the HUMMER section. After determining that 2003 models with similar miles are going for $36,000 - $40,000, you stumble upon one with custom wheels and really low miles for $20,000.

Your first thought is, “What’s wrong with it?”

Well, that’s exactly what I thought about this listing. Regardless of whether it’s a ploy to start a bidding war, it’s a real listing. That’s right: A 2 bed/2 bath for $185 per square foot.

Anyhow, the most amazing part is that assuming this is not a foreclosure, assuming it’s not a short sale, and assuming the seller really is this serious…it almost pencils out in a rent vs. own calculation. Exciting, right? This is the first sign Long Beach is returning to the Land of the Logical!

But, before you get too titillated about this condo (like I did initially) you musn’t forget the $365 per month you’re plunking down for the HOA fine. Yes, there is a billiards room (there’s also one down the street at Rock Bottom Brewery and it’s MUCH cheaper than $365 a month), but the monthly fee adds another $131,400 during the life of the loan.

So now this place, with no parking, in an 89-year-old building, with old ass windows and disco mirrors on the wall is in fact priced at $330,400. Not such a smoking deal anymore, is it?

Regardless, this condo WILL sell at this price. There’s no doubt in my mind. It really is a good deal and I’m not even bearish enough to think it will go significantly lower than this (unless, like that low mileage Hummer, there is something seriously wrong with it). The fact is that it is near rental parity, meaning this close to the price it should be selling for.

I guess the larger question is, once this seller skips town with their 50 grand in cash (damn, if they had just priced aggressively from the start, they could have pulled in at least double that), what happens to the rest of the Lafayette? The new comp for a 2/2 will be a third of #957’s asking price, and will absolutely obliterate any hopes of the 1/1 units unloading for north of $150,000.

Anyhow, I’d just like to congratulate the seller at #711 for being the first property on this site to accept reality. You’re showing all those other idiotic, Kool-aid drinking sellers what it takes to move a property in this rapidly disintegrating market.

Your neighbors will want to put a phillip’s head screwdriver through your temple, but buyers like me will hold you in the highest esteem.

**Keep in mind my calculations take some serious liberties with assumptions. First, I’m assuming a 6% interest rate, which, on a jumbo loan, would be miraculous to obtain. Second, I’m assuming a lender will only require a 10% down payment in a rapidly declining area of Long Beach on a massive $500,000+ loan. I doubt you could find a lender to accept anything less than 15% in such a transaction.

Irvine Prices in Long Beach: UPDATE II

Here's an oldie but goodie.

In one of the maiden posts on this blog (don't forget the update), I featured this property, sporting a mind-boggling $545,000 wishing price. That 2008 post prompted a decent amount of hate mail (including this idiot whose soaked-diaper logic I eviscerated in a response. The result? We never heard from him again).

Although much has changed since 2008 (not the least of which is the disappearance of whack job bubble-deniers and wrong-headed realtors spitting their delusional venom on this blog) but what has not changed is my ability to ascertain "true values" based on the facts, the numbers, and good old fashioned common sense.

At the time I said:

At $454 per square foot and 260 days on market, this thing isn't going anywhere. Sometimes I get the feeling owners just aren't serious about selling. I don't care how close you are to Belmont Heights, in this zip code the median household income is $30,353. This house is probably slightly above median considering the minor updates, but even if the median income were $50,000 a year, this thing wouldn't be priced more than $250,000.

Well, now it's back on the market as a short sale, priced at $299,000.

Although it remains to be seen whether it will actually drop to $250,000 (honestly, I doubt it. First, when I made that comment very few could foresee the insane amount of taxpayer cash the government would throw at the housing crisis to keep prices inflated. Second, although it's a short sale -- which as we all know means it isn't really for sale by any heretofore relied-upon measure -- $277 per square foot seems reasonable enough to nab a buyer), my craaaaaazy comment two years ago(!), which seemed so controversial at the time, ultimately wasn't that far off.

On the other hand, how did this rambling, incoherent prediction from "HagenindaGHETTO" work out?

Keep the OC folks in OC! Besides, there is more to do here, it's more fun and you don't have to DRIVE everywhere! We deserve to be more expensive! (unless they are buying all cash... then they come first...LOL)

FYI: This home was not a FIXER FLIPPER, the sellers fixed it for themselves but got transferred to Irvine (now that's ironic is it not?). By the way, I know the sellers, they HATE Irvine (even though they are Conservatives) they miss our GHETTO and the fun, and the walking, and the beach and the marina.....

The listing agent will be thankful the stuffed shirt Self Righteous writer of of this BLOG for a PRICE DROP....it always attracts more potential buyers.

As for the Price:
Half the price...??? Good thing you're an accountant. Just run the comps and talk about the FACTS...
The last thing we need are mendacious comments that give a skewed picture of realty. Dig?

Well, dummy, I ran the comps and I talked about the FACTS and it looks like you were, are, and always will be

DEAD.

ASS.

WRONG.

(How does that feel? Be honest.)

P.S. I can't help but thinking how pathetic it is that these fucking idiots waited so long to get real and price to reality and not fantasy. If they hadn't been so ignorantly focused on getting their greasy mitts on their "well-deserved" bubble profits, they might have had a shot at walking away with actual profits. Oh well.

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

One of my first blog posts featured a stunning, if controversial, example of Avarice is Bliss.


This house exemplified the entire premise of this blog: Long Beach, while a great city in its own right, pales in comparison to Orange County regarding schools, low crime rates, incomes, and cleanliness, and therefore cannot possibly justify asking prices that match (and in some cases exceed) the premium levied in OC.

However, Kool-Aid knows no bounds and Long Beach sellers (particularly those in less desirable areas of Long Beach) got drunk on Equity Juice and priced homes in less desirable neighborhoods like they would in Irvine, Huntington Beach, or much nicer cities in LA County.

By putting their greed on display, they held themselves out for ridicule and humiliation. Hence, the impetus and inspiration of this blog.

So, here we are today, more than a year after the home was first listed on the MLS at a laughable $454 per square foot. Like many others, the seller gave up and the property has since been taken off the market ("MY HOUSE IS SPECIAL, DAMN IT! IF THESE BUYERS ARE TOO STUPID TO REALIZE THAT, THEN I WILL JUST TAKE IT OFF THE MARKET. I REFUSE TO BE INSULTED!") and now they are attempting to rent it.

ADDRESS: 1533 E. BROADWAY AVE. (BROADWAY/CHERRY)BEAUTIFUL, LUXURY 2BED/2BATH HOUSE FOR RENT! Immaculate Hardwood Floors throughout House. Skylight in Large Living Room. Fireplace located in Living Room. Luxurious Kitchen with Stainless Steel Appliances. 2 Full Bedrooms with AIR CONDITIONING! Large Attic for Storage. Stacked Washer/Dryer. Wiring available for Direct TV and Surround Sound System! Charming, Large Backyard with Firepit and Entertainment Area. Great Location!!1 YEAR LEASEGardener ProvidedNo PetsTenant Pays ALL UTILTIES EXCEPT WATERMUST SEE!!!!

You are welcome to come into our office and pickup keys to view this unit M-F between 9am-4pm. WE ARE NOT OPEN OVER THE WEEKEND. Please feel free to contact me via email or at the office for further questions.

Actually, they've been attempting to rent it for more than a year, offering a "LEASE or LEASE TO OWN!" scheme--ERR, agreement from the get-go. No bites.

But, I thought "this is a NEW HOUSE." Well, if anything from 1918 could be considered new, I guess they're on to something. By the way, I can give you a sweet deal on a "NEW" Nash 681.

They seem a bit thick-headed, no? They refused to lower their asking price to a reasonable figure and the property didn't move. They refused to ask a reasonable rent and it's still vacant after a year.

I'm going to let this seller in on the most closely-guarded secret known to man. This wisdom is guaranteed to save the housing market in one fell swoop, but it has been elusive to all but those who travel in the darkest, most remote corners of the universe. But now I will unleash it upon the world for all to see, so that our housing market and the current misery and financial hell may end once and for all. And here it is:

Lower the price, dick.

You may have read there has been an uptick in sales recently. There is no complicated, macro economics-heavy explanation for this other than prices are cliff-diving. And when people can afford homes without bullshit, negative-amortizing, interest-only, Harry Houdini loans, homes start selling. Real simple, folks.

And if this seller had accepted this truism from the outset, he could have saved himself a year's worth of carrying costs, which at the time I estimated at $3,500 per month ($42,000 in a year!), and a lot of stress. Assuming this termite tent could get $2,000 per month in rent (which, judging by the time it's been sitting unoccupied, is yet another case of this individual's greed-faced lunacy), they are still bleeding cash to the tune of $1,500 per month! OUCH!



Incidentally, the Irvine property I compared this house sold for $540,000 in March. That was only $9,000 off the original asking price. Yikes, for a corner location? How much "equity" do you suppose that buyer has lost since his purchase?

The point is, Irvine can clearly get away with those prices, but our Long Beach seller learned after a year on the market that Alamitos Beach ain't Irvine.

If you'll recall in the original post, a local realtor and an offended resident posted invective comments with absolutely no analysis or data to support their misguided, rose-colored assessment of Long Beach real estate. They instead offered personal attacks and meaningless insults, but couldn't refute my opinion that:

"At $454 per square foot and 260 days on market, this thing isn't going anywhere. Sometimes I get the feeling owners just aren't serious about selling. I don't care how close you are to Belmont Heights, in this zip code the median household income is $30,353. This house is probably slightly above median considering the minor updates, but even if the median income were $50,000 a year, this thing wouldn't be priced more than $250,000."

I mean, it doesn't take Dionne Warwick and her psychic friends to call that one.

The fact is that homes are still overpriced and prices have a way to go before they meet market fundamentals (I'm not talking about the much-vaunted "bottom," I'm just talking about when a home purchase is a sound investment) and as long as banks have a large inventory of REO properties and that tidal wave of Option ARM resets is looming just off the coast, buying a property today is nothing more than a backstage pass to the Financial Agony show at the Wiltern (I heard Slayer is opening).

Argonne, Baby, Gone: UPDATE III

This rock-biting mongoloid is back on the market yet again. Jesus, bro...give it up already.

Despite the fresh "New Listing" classification, astute Long Beach Housing Blog readers will note that this joint has been around for more than 15 months, begging and pleading for some sucker to pay his ridiculous asking price.

In case you were thinking this refreshed listing would be, well, refreshed, we're treated to the same two useless photos (one of which features the shittiest MS Paint job you've ever seen).

The current listing price of $539,000, while certainly more realistic than the original $610,000 2010 ask, is still clocking in at $610 per square. Yo, I didn't know they relocated the Shore all the way up to 3rd Street!

I'll remind you that this is yet another in the growing contingent of buyers who got in "at the bottom" in Fall 2008 and refuse to believe that they are about to take it right in the devil's onion ring. Assuming he could somehow get this dreamscape of an asking price, his total losses would be roughly$92,000. Yep, 2.5 years of ownership and nothing but a smoldering pile of dust where his bank account once was.

Don't be surprised to see this thing start playing the short sale game in a few months.

Anyhow, good luck dummy! I feel like this time it's really gonna happen for you!

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

Ugh.

This dummy is still around?

The listing says "77 days" but don't be fooled -- this thing has been begging for nearly a year with absolutely no interest. Tiny square footage aside, it's obvious that the rabidly delusional pricing is the primary cause of its long, sad tenure on the MLS.

The current wishing price is $595,000, a whopping $5,000 discount since we last checked in last March. Aggressive!

Anyhow, it appears the last realtor didn't work out (probably suggested lowering the price to, you know, actually get it sold...which is exactly what sellers afflicted with My Place Is Special Syndrome -- MYPISS -- don't want to hear) so the new listing agent, instead of doing some actual work, decided he'd just fire up MS Paint and fuzz out the Century 21 sign from the old listing photo:


HAHAHAHAHAHAHAHA!

Can you believe this lazy turd?!

Gee, with a consummate pro like that on your team, I'm positive you'll find that full-price buyer during the 2011 Super Spring Selling Season(tm). This year is your year, bro!

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

Happy St. Patrick's Day!

The price was "$610,000" and changed to "$599,999"

We're officially below what he paid in September 2008 -- just a scant year and a half ago. After commissions, this will represent a $37,000 loss. And that's assuming this piss-ant price reduction garners a sale.

The bottom was in 2008? HORSESHIT.

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

Welcome Patrick.net readers!

And thanks Anon for sending this property in.

309 ARGONNE Ave, CA 90814
Wishing Price: $610,000
Beds: 2
Baths: 1
Sq. Ft.: 883
$/Sq. Ft.: $691
Lot Size: 2,520 Sq. Ft.
Year Built: 1923
MLS#: P720288
On Redfin: 26 days
Down Payment: $122,000 (20% down)/ $24,000 (FHA, although the loan amount would justexceed the jumbo limit, let's assume you could get a gov't loan)
Income Requirement: $174,000
Monthly Nut: $3,300 (conventional)/$3,800 (FHA)
Description: Beautiful 'Turn Key'home [SIC] in Belmont Heights. Do not waste your time with Short Sales! Standard Sale here. Home boasts hardwood floors throughout home, NEW kitchen with granite countertops, wood cabinetry, stainless steel appliances, ceramic floor, bay window, recessed lighting, designer paint throughout and french doors to rear patio. An updated bathroom w/ ceramic tile and new plumbing. The garage has been completely finished with drywall, insulated, lighting, electrical & laminate flooring and offers you approximately 190 Sq. Ft of additional space for your office/gym with a french door entrance from the patio. New double paned windows throughout, new washer & dryer, new electrical/plumbing, new air unit & energy efficient water heater. Private patio offers you outdoor living room to entertain or enjoy secluded mornings/afternoons. .. Customized closets in bedrooms. Landscaped to be drought resistant. Award winning school district. Walk to the beach, Belmont Shore, Colorado Lagoon, golf course's [SIC] & parks.

Yet another 2008 loser!

Seriously, what were people thinking buying in late 2008? Don't they read this blog? I wonder if we'll be saying the same thing about 2009 buyers?

It only took this guy 18 payments before he figured out he couldn't possibly afford this place. And now he's looking for an out and is optimistically asking $9,000 more than he paid a year and a half ago, hoping to somewhat mitigate the pain of a -$28,000 loss (all in commissions).

This asking price seems based on the assumption that he perfectly timed the bottom in '08 and the housing market has been steadily recovering ever since.

I guess he doesn't read the news:

POW!

BIFF!

SOCK!

Yes, massive government intervention, artificially low interest rates, manipulated REO supply, extend-and-pretend HAMP tomfoolery, and free ponies in the form of first-time homebuyer tax credits have helped to stem the housing free-fall, but a slowdown in price declines is very different than an increase in values.

If you go from losing two quarts of blood per hour to half a quart, you're still losing a half a quart of blood! Slowing down the blood loss is very different from stopping the bleeding, mounting a full recovery, and being discharged from the hospital.

Unless he gets aggressive with his pricing very soon, our misguided seller could easily end up without a chair once the game of Government-Manipulated Musical Chairs comes to a grinding halt. I'd do whatever I could to sell now instead of taking my chances with higher interest rates, the elimination of homebuyer incentives, and more foreclosures on the market (and in the pipeline).

Once government attempts to keep home prices inflated (and, ultimately, unaffordable) run out of steam (or political support, or funding) and home values are allowed to return to some semblance of normalcy, sellers like this will regret not taking a big hit earlier. Because that "big hit" will look like what you find in the bottom of a clothes dryer compared to the massive loss incurred as a result of sticking to your guns and demanding a batshit-crazy wishing price in an worsening selling environment.

Peep the listing history:

Feb 03, 2010 - Listed $610,000
Sep 02, 2008 - Sold $601,000 (7.7%/yr)
May 23, 2008 - Price Changed $660,000
Apr 08, 2008 - Listed $695,000
May 26, 1993 - Sold $192,500

This dude probably thought he was getting a smoking deal in September '08 when he negotiated a 15% "discount" from the original $695,000 asking price. I bet he was quite proud of himself for "stealing it" for only $601,000 ($680 per square foot).

Hey, dummy, 15% off of something overvalued by 50% is still overpaying by 35%.

It's the Men's Half-Yearly Sale analogy: Nordstrom gives you a 20% off coupon and you go suit shopping. You find a tough-looking pinstriped Hugo Boss with a $1,000 price tag. After running the numbers you're thrilled to pay only $800. Wow, a $200 savings! I'd be stupid not to buy!

But you didn't do your homework. And you failed to notice the suit was $700 last week. You see, the night before the sale, the price was jacked up by 30%, meaning a suit that used to be $700 with zero discounts just cost you an extra $100 with a coupon. But, that doesn't matter because buying it on sale "felt" like a better deal. After all, the initial asking price of $1,000 was such a big number, $800 by comparison seemed like a more drastic "savings."

Realtors and home sellers similarly rely on Americans' complete inability to do math.

I know plenty of people who use peak pricing as the yardstick, and compare today's prices to that insanely lofty, easy-money-bullshit-fueled number to feel better about overpaying. What they should be doing is starting at pre-bubble pricing and comparing today's asking prices tothat number. If more people did so, they would realize prices have a long way to go before they are in line with traditional home value appreciation.

Back to the property at hand: the lot is tiny but the location is great. The interior, although cramped, looks pretty nice too and the listing description mentions a decent amount of upgrades and goodies.

The solo bathroom is straight out of Scarface, but it's nothing a basic remodel couldn't fix. You know, because you'll have so much spare cash after making that $3,300 monthly payment.

HORF!

However, the backyard patio looks pretty cool:

And with only 883 square feet of living space, I'm sure you'll be spending quite a bit of time out there to offset the terminal claustrophobia.

I particularly like this photo of the junk accumulating the driveway:

For some reason, the first thing that came to mind was this:

What, you don't see it?

From what I can tell, little bungalows like this rent for around $2,000 a month. Let's be generous and say this could rent for $2,200 given the location and interior quality. So now you're paying $1,100 more per month (or $1,600 more if you go FHA) for "pride of ownership." Does that make any kind of sense?

Knowing that the bottom will arrive when the monthly rent approaches the Principal, Interest, Taxes and Insurance (there is debate about how to calculate this. Some say not to consider the tax refund because that money will largely be eaten up by maintenance and ancillary ownership costs. Others, mostly commission-based, suggest factoring in what you'll get back in tax refunds, which lowers the "buy" aspect of the rent vs. buy calculation and just happens to make buying more easily pencil out. I personally think the latter approach is dangerous because of the likelihood taxes, fees, insurance, and ownership costs will increase in the future given the impending state and federal fiscal issues), this asking price is way out of line with reality.

How far out of line? By (roughly) calculating pre- and post-tax monthly payments, in order for this to make sense as a purchase the price needs to be between $450,000 at the low end and$510,000 at the high end.

As you can clearly see, $610,000 for this snuff box is waaaaaaaaaaaaaaaay overpriced.

However, I am confident a knifecatcher will step in long before the asking price drops below$510,000, but I'm just pointing out what it would take to make any kind of financial sense and ensure you're not overpaying.

Irvine Prices in Long Beach: UPDATE

One of my first blog posts featured a stunning, if controversial, example of Avarice is Bliss.






This house exemplified the entire premise of this blog: Long Beach, while a great city in its own right, pales in comparison to Orange County regarding schools, low crime rates, incomes, and cleanliness, and therefore cannot possibly justify asking prices that match (and in some cases exceed) the premium levied in OC.

However, Kool-Aid knows no bounds and Long Beach sellers (particularly those in less desirable areas of Long Beach) got drunk on Equity Juice and priced homes in less desirable neighborhoods like they would in Irvine, Huntington Beach, or much nicer cities in LA County.

By putting their greed on display, they held themselves out for ridicule and humiliation. Hence, the impetus and inspiration of this blog.

So, here we are today, more than a year after the home was first listed on the MLS at a laughable $454 per square foot. Like many others, the seller gave up and the property has since been taken off the market ("MY HOUSE IS SPECIAL, DAMN IT! IF THESE BUYERS ARE TOO STUPID TO REALIZE THAT, THEN I WILL JUST TAKE IT OFF THE MARKET. I REFUSE TO BE INSULTED!") and now they are attempting to rent it.

ADDRESS: 1533 E. BROADWAY AVE. (BROADWAY/CHERRY)BEAUTIFUL, LUXURY 2BED/2BATH HOUSE FOR RENT! Immaculate Hardwood Floors throughout House. Skylight in Large Living Room. Fireplace located in Living Room. Luxurious Kitchen with Stainless Steel Appliances. 2 Full Bedrooms with AIR CONDITIONING! Large Attic for Storage. Stacked Washer/Dryer. Wiring available for Direct TV and Surround Sound System! Charming, Large Backyard with Firepit and Entertainment Area. Great Location!!1 YEAR LEASEGardener ProvidedNo PetsTenant Pays ALL UTILTIES EXCEPT WATERMUST SEE!!!!

You are welcome to come into our office and pickup keys to view this unit M-F between 9am-4pm. WE ARE NOT OPEN OVER THE WEEKEND. Please feel free to contact me via email or at the office for further questions.

Actually, they've been attempting to rent it for more than a year, offering a "LEASE or LEASE TO OWN!" scheme--ERR, agreement from the get-go. No bites.

But, I thought "this is a NEW HOUSE." Well, if anything from 1918 could be considered new, I guess they're on to something. By the way, I can give you a sweet deal on a "NEW" Nash 681.

They seem a bit thick-headed, no? They refused to lower their asking price to a reasonable figure and the property didn't move. They refused to ask a reasonable rent and it's still vacant after a year.

I'm going to let this seller in on the most closely-guarded secret known to man. This wisdom is guaranteed to save the housing market in one fell swoop, but it has been elusive to all but those who travel in the darkest, most remote corners of the universe. But now I will unleash it upon the world for all to see, so that our housing market and the current misery and financial hell may end once and for all. And here it is:

Lower the price, dick.

You may have read there has been an uptick in sales recently. There is no complicated, macro economics-heavy explanation for this other than prices are cliff-diving. And when people can afford homes without bullshit, negative-amortizing, interest-only, Harry Houdini loans, homes start selling. Real simple, folks.

And if this seller had accepted this truism from the outset, he could have saved himself a year's worth of carrying costs, which at the time I estimated at $3,500 per month ($42,000 in a year!), and a lot of stress. Assuming this termite tent could get $2,000 per month in rent (which, judging by the time it's been sitting unoccupied, is yet another case of this individual's greed-faced lunacy), they are still bleeding cash to the tune of $1,500 per month! OUCH!



Incidentally, the Irvine property I compared this house sold for $540,000 in March. That was only $9,000 off the original asking price. Yikes, for a corner location? How much "equity" do you suppose that buyer has lost since his purchase?

The point is, Irvine can clearly get away with those prices, but our Long Beach seller learned after a year on the market that Alamitos Beach ain't Irvine.

If you'll recall in the original post, a local realtor and an offended resident posted invective comments with absolutely no analysis or data to support their misguided, rose-colored assessment of Long Beach real estate. They instead offered personal attacks and meaningless insults, but couldn't refute my opinion that:

"At $454 per square foot and 260 days on market, this thing isn't going anywhere. Sometimes I get the feeling owners just aren't serious about selling. I don't care how close you are to Belmont Heights, in this zip code the median household income is $30,353. This house is probably slightly above median considering the minor updates, but even if the median income were $50,000 a year, this thing wouldn't be priced more than $250,000."

I mean, it doesn't take Dionne Warwick and her psychic friends to call that one.

The fact is that homes are still overpriced and prices have a way to go before they meet market fundamentals (I'm not talking about the much-vaunted "bottom," I'm just talking about when a home purchase is a sound investment) and as long as banks have a large inventory of REO properties and that tidal wave of Option ARM resets is looming just off the coast, buying a property today is nothing more than a backstage pass to the Financial Agony show at the Wiltern (I heard Slayer is opening).

Argonne, Baby, Gone: UPDATE IV

Anonymous writes:

This house has been in default - NOD filed 1/27/2010 (apx. 14K delinquent). [Trustee Sale] filed 4/29/10. Sale postponed, then I'm sure was eventually cancelled with no new NOD filed. Currently off the market, probably trying to modify $400K 1st TD. Problem is there's still some equity in it so likely will be denied.

Thanks for the inside information, Anon. I actually tried to get in to see this house when it was still on the MLS. They wouldn't even take appointments. Like the vast majority of short sales, it wasn't actually for sale.

From what I've been told, you are correct that they are in the process of modifying the loan. As I predicted in May, they'll play the short sale game and sign up for every government program (HAMP, HARP, HAFA, etc.) to buy some more time and enjoy the free/discounted rent. But what definitely WON'T happen is the bank foreclosing.

It's going to be a long time before we see this place back on the market.

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

This rock-biting mongoloid is back on the market yet again. Jesus, bro...give it up already.

Despite the fresh "New Listing" classification, astute Long Beach Housing Blog readers will note that this joint has been around for more than 15 months, begging and pleading for some sucker to pay his ridiculous asking price.

In case you were thinking this refreshed listing would be, well, refreshed, we're treated to the same two useless photos (one of which features the shittiest MS Paint job you've ever seen).

The current listing price of $539,000, while certainly more realistic than the original $610,000 2010 ask, is still clocking in at $610 per square. Yo, I didn't know they relocated the Shore all the way up to 3rd Street!

I'll remind you that this is yet another in the growing contingent of buyers who got in "at the bottom" in Fall 2008 and refuse to believe that they are about to take it right in the devil's onion ring. Assuming he could somehow get this dreamscape of an asking price, his total losses would be roughly$92,000. Yep, 2.5 years of ownership and nothing but a smoldering pile of dust where his bank account once was.

Don't be surprised to see this thing start playing the short sale game in a few months.

Anyhow, good luck dummy! I feel like this time it's really gonna happen for you!

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

Ugh.

This dummy is still around?

The listing says "77 days" but don't be fooled -- this thing has been begging for nearly a year with absolutely no interest. Tiny square footage aside, it's obvious that the rabidly delusional pricing is the primary cause of its long, sad tenure on the MLS.

The current wishing price is $595,000, a whopping $5,000 discount since we last checked in last March. Aggressive!

Anyhow, it appears the last realtor didn't work out (probably suggested lowering the price to, you know, actually get it sold...which is exactly what sellers afflicted with My Place Is Special Syndrome -- MYPISS -- don't want to hear) so the new listing agent, instead of doing some actual work, decided he'd just fire up MS Paint and fuzz out the Century 21 sign from the old listing photo:

HAHAHAHAHAHAHAHA!

Can you believe this lazy turd?!

Gee, with a consummate pro like that on your team, I'm positive you'll find that full-price buyer during the 2011 Super Spring Selling Season(tm). This year is your year, bro!

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

Happy St. Patrick's Day!

The price was "$610,000" and changed to "$599,999"

We're officially below what he paid in September 2008 -- just a scant year and a half ago. After commissions, this will represent a $37,000 loss. And that's assuming this piss-ant price reduction garners a sale.

The bottom was in 2008? HORSESHIT.

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

Welcome Patrick.net readers!

And thanks Anon for sending this property in.

309 ARGONNE Ave, CA 90814

Wishing Price: $610,000

Beds: 2

Baths: 1

Sq. Ft.: 883

$/Sq. Ft.: $691

Lot Size: 2,520 Sq. Ft.

Year Built: 1923

MLS#: P720288

On Redfin: 26 days

Down Payment: $122,000 (20% down)/ $24,000 (FHA, although the loan amount would justexceed the jumbo limit, let's assume you could get a gov't loan)

Income Requirement: $174,000

Monthly Nut: $3,300 (conventional)/$3,800 (FHA)

Description: Beautiful 'Turn Key'home [SIC] in Belmont Heights. Do not waste your time with Short Sales! Standard Sale here. Home boasts hardwood floors throughout home, NEW kitchen with granite countertops, wood cabinetry, stainless steel appliances, ceramic floor, bay window, recessed lighting, designer paint throughout and french doors to rear patio. An updated bathroom w/ ceramic tile and new plumbing. The garage has been completely finished with drywall, insulated, lighting, electrical & laminate flooring and offers you approximately 190 Sq. Ft of additional space for your office/gym with a french door entrance from the patio. New double paned windows throughout, new washer & dryer, new electrical/plumbing, new air unit & energy efficient water heater. Private patio offers you outdoor living room to entertain or enjoy secluded mornings/afternoons. .. Customized closets in bedrooms. Landscaped to be drought resistant. Award winning school district. Walk to the beach, Belmont Shore, Colorado Lagoon, golf course's [SIC] & parks.

Yet another 2008 loser!

Seriously, what were people thinking buying in late 2008? Don't they read this blog? I wonder if we'll be saying the same thing about 2009 buyers?

It only took this guy 18 payments before he figured out he couldn't possibly afford this place. And now he's looking for an out and is optimistically asking $9,000 more than he paid a year and a half ago, hoping to somewhat mitigate the pain of a -$28,000 loss (all in commissions).

This asking price seems based on the assumption that he perfectly timed the bottom in '08 and the housing market has been steadily recovering ever since.

I guess he doesn't read the news:

POW!

BIFF!

SOCK!

Yes, massive government intervention, artificially low interest rates, manipulated REO supply, extend-and-pretend HAMP tomfoolery, and free ponies in the form of first-time homebuyer tax credits have helped to stem the housing free-fall, but a slowdown in price declines is very different than an increase in values.

If you go from losing two quarts of blood per hour to half a quart, you're still losing a half a quart of blood! Slowing down the blood loss is very different from stopping the bleeding, mounting a full recovery, and being discharged from the hospital.

Unless he gets aggressive with his pricing very soon, our misguided seller could easily end up without a chair once the game of Government-Manipulated Musical Chairs comes to a grinding halt. I'd do whatever I could to sell now instead of taking my chances with higher interest rates, the elimination of homebuyer incentives, and more foreclosures on the market (and in the pipeline).

Once government attempts to keep home prices inflated (and, ultimately, unaffordable) run out of steam (or political support, or funding) and home values are allowed to return to some semblance of normalcy, sellers like this will regret not taking a big hit earlier. Because that "big hit" will look like what you find in the bottom of a clothes dryer compared to the massive loss incurred as a result of sticking to your guns and demanding a batshit-crazy wishing price in an worsening selling environment.

Peep the listing history:

Feb 03, 2010 - Listed $610,000

Sep 02, 2008 - Sold $601,000 (7.7%/yr)

May 23, 2008 - Price Changed $660,000

Apr 08, 2008 - Listed $695,000

May 26, 1993 - Sold $192,500

This dude probably thought he was getting a smoking deal in September '08 when he negotiated a 15% "discount" from the original $695,000 asking price. I bet he was quite proud of himself for "stealing it" for only $601,000 ($680 per square foot).

Hey, dummy, 15% off of something overvalued by 50% is still overpaying by 35%.

It's the Men's Half-Yearly Sale analogy: Nordstrom gives you a 20% off coupon and you go suit shopping. You find a tough-looking pinstriped Hugo Boss with a $1,000 price tag. After running the numbers you're thrilled to pay only $800. Wow, a $200 savings! I'd be stupid not to buy!

But you didn't do your homework. And you failed to notice the suit was $700 last week. You see, the night before the sale, the price was jacked up by 30%, meaning a suit that used to be $700 with zero discounts just cost you an extra $100 with a coupon. But, that doesn't matter because buying it on sale "felt" like a better deal. After all, the initial asking price of $1,000 was such a big number, $800 by comparison seemed like a more drastic "savings."

Realtors and home sellers similarly rely on Americans' complete inability to do math.

I know plenty of people who use peak pricing as the yardstick, and compare today's prices to that insanely lofty, easy-money-bullshit-fueled number to feel better about overpaying. What they should be doing is starting at pre-bubble pricing and comparing today's asking prices tothat number. If more people did so, they would realize prices have a long way to go before they are in line with traditional home value appreciation.

Back to the property at hand: the lot is tiny but the location is great. The interior, although cramped, looks pretty nice too and the listing description mentions a decent amount of upgrades and goodies.

The solo bathroom is straight out of Scarface, but it's nothing a basic remodel couldn't fix. You know, because you'll have so much spare cash after making that $3,300 monthly payment.

HORF!

However, the backyard patio looks pretty cool:

And with only 883 square feet of living space, I'm sure you'll be spending quite a bit of time out there to offset the terminal claustrophobia.

I particularly like this photo of the junk accumulating the driveway:

For some reason, the first thing that came to mind was this:

What, you don't see it?

From what I can tell, little bungalows like this rent for around $2,000 a month. Let's be generous and say this could rent for $2,200 given the location and interior quality. So now you're paying $1,100 more per month (or $1,600 more if you go FHA) for "pride of ownership." Does that make any kind of sense?

Knowing that the bottom will arrive when the monthly rent approaches the Principal, Interest, Taxes and Insurance (there is debate about how to calculate this. Some say not to consider the tax refund because that money will largely be eaten up by maintenance and ancillary ownership costs. Others, mostly commission-based, suggest factoring in what you'll get back in tax refunds, which lowers the "buy" aspect of the rent vs. buy calculation and just happens to make buying more easily pencil out. I personally think the latter approach is dangerous because of the likelihood taxes, fees, insurance, and ownership costs will increase in the future given the impending state and federal fiscal issues), this asking price is way out of line with reality.

How far out of line? By (roughly) calculating pre- and post-tax monthly payments, in order for this to make sense as a purchase the price needs to be between $450,000 at the low end and$510,000 at the high end.

As you can clearly see, $610,000 for this snuff box is waaaaaaaaaaaaaaaay overpriced.

However, I am confident a knifecatcher will step in long before the asking price drops below $510,000, but I'm just pointing out what it would take to make any kind of financial sense and ensure you're not overpaying.