Introducing the 2009 Losers

To those of you who bought during the last few years because of a growing family, a desire to lock in a low interest rate for 30 years, newfound affordability, renter's fatigue, or you simply got tired of waiting, congratulations. Whatever the reasons, they were your reasons, and I sincerely hope you're enjoying home ownership.

But to those of you who believed economic "experts" and commission-hungry tea-leaf readers who proclaimed 2009 was "the bottom" and planned to sell in a few years for profit...

WHAT THE HOLY HELL WERE YOU THINKING?

In addition to losers who bought during the bubble, I have documented quite a few 2008 buyers who purchased based on the false assumption that "the worst is over," and then faced total annihilation when they tried to unload just a few years later.

Well now I'm starting to see more 2009 buyers who believed all the bullshit about "the bottom" being in spring 2009 try to sell their "wise investments," only to learn that prices have fallen considerably since their supposed bottom.

Very few people think about it, but because of commissions every seller is 6% underwater from the outset. That means if they hope to break even, home values would have to increase by a minimum of 6% during their ownership. For 2009 buyers operating under the premise that the last two years provided those kinds of gains, they are about to learn a valuable, and painful, lesson about the dangers of listening to those financially dependent on home price increases, instead of common sense and simple math.

That's because home prices on average have dropped by 5.1% since 2009. Welcome to the (totally foreseeable) double dip.

HAIL MARY ASKING PRICE: $429,900
1310 East OCEAN Blvd #803, Long Beach, CA 90802
BEDS: 1
BATHS: 1
SQ. FT.: 960
$/SQ. FT.: $448
VIEW: Catalina, City Lights, City, Coastline, Harbor, Marina, Ocean, Panoramic, Yes, White Water (Wait, it has a view of "Yes"?! Maybe this price isn't that bad after all)
YEAR BUILT: 1984
COMMUNITY: Downtown Area/Alamitos Beach
MLS#: S660918
ON REDFIN: 19 days
HOA FINE: $740 (OUCH)

DOWN PAYMENT: $86,000

MONTHLY NUT: $2,800

INCOME REQUIREMENT: $98,000/year
DESCRIPTION: Sleek and sophisticated luxury high rise with spectacular Ocean views from every room. This home is right on the beach. Ocean views by day and city lights by night. You ll never tire of seeing gorgeous sunsets or graceful sailing ships. Stunning home with modern kitchen and bath. Lots of sunlight spills through the floor to ceiling windows. Open floor plan, great for entertaining. Spacious master bedroom suite with walk in closets. Let the sound of the waves lull you to sleep. There are many amenities including 24 hour concierge, Fitness room and community room, pool, spa, cabana, BBQ area and fire pit. Conveniently located to downtown, shopping, restaurants, parks, museums, theater, Queen Mary, Marina and more!

This fool bought in October 2009 for $420,000 (down from an original asking price of $450,000. He probably thought he was getting a smoking deal) and for whatever reason (oh, I don't know...maybe the obscene $740 HOA fine, the limitations of only one bedroom, or that he simply can't afford that monstrous monthly nut anymore) just 19 months later decided to lay his head on the chopping block--ERRR...put it on the market asking $30,000 more than he paid (anybody want to guess what the sales commissions are? Whoever said "around 30 Grand" wins a key chain).

He has since dropped the price to $430,000 in the hopes of that $10,000 cushion somewhat offseting what is sure to be a sizable hit to his finances...but things aren't looking good.

On a positive note, the views are astounding:

The interior looks largely untouched from the 1984 build date (the dead giveaway is the florescent overhead lights in the kitchen and those gnarly bathroom counters), but you're mostly paying for the view in these types of places anyway.

And more good news: There is a sold comp from a few months ago that sold for $475,000 (but if that comp really was indicative of fair market value, then why would our seller need to reduce his original $450,000 asking price? Hmmm).

And he's also undercutting his competition (another 2009 "bottom" buyer!) by $40,000, although that unit appears to be upgraded with granite, a new bathroom and plantation $hutters.

The overall point is that he's just $9,000 above his 2009 purchase price and there still doesn't appear to be any interest. Which means more price cuts. Which means he is about to be in a world of hurt.

Let's put it this way, with 10% down ($42,000), after $27,000 in commissions and $14,800 in HOA fees, all of that down payment money is now gone. POOF!

If he put 20% down (likely, given how panic-stricken 2009 was), he's now halfway through that money. And every additional price reduction just eats further and further into that former nest egg of his.

Sure, he'll have some equity after 19 months of payments, but not nearly enough to break even on this foolish purchase. The question is not if he will lose a great deal of money on this, but how bad the damage will be.

His biggest challenge will be finding a wealthy, single, retiree who is financially savvy enough to be able to afford this place, but dumb enough to believe there will not be better buying opportunities in the future. Yeah, good luck with that.

However, there are some who say there won't necessarily be any better deals in the future because all of the must-sell inventory has been washed out of the market, the Fed can keep interest rates low and banks can keep supply off the market for as long as it takes, thus keeping supply artificially restrained and prices from falling. And maybe they're right (of course, if they were then we would have never entered the double dip in the first place, but I digress).

Maybe the banks and Fannie/Freddie and FHA can indeed keep their massive pools of inventory off the market for years or decades and interest rates will hover under 5% for years to come (they've certainly pulled it off so far).

But suppose just for a moment that they can't pull it off. If interest rates rise by 1 or 2%, or supply increases by 15 or 20% -- or both -- what effect do you think that will have on prices? Until we are in a more normal market with real inventory and serious sellers, nobody -- and I mean NOBODY -- can be confident in their predictions of 2011 (or 2012, 2013, or 2014) being the true bottom (just like they were all wrong in '08, '09, and '10)

Here's the bottom line: If you are buying a place right now because you are confident you will be there for 10 years or longer and your finances and job are reasonably stable, then go for it. The Rent vs. Buy equation has become a no-brainer in most areas by now and these rates are incredible.

But if you think there's even a remote chance that you'll need to sell in the next few years, renting would be the most logical choice (if nothing else than for mobility's sake). Property values have likely seen the last of the big, gut-churning drops, but that is very different than a resumption of gains. And considering you'd be 6% underwater from day one, if you needed to sell in 2013 there's no way you'd get out for break even.

Yes, a home can be an investment, but it is also an expensive consumer good that must be viewed as a liability. If you don't believe me, why don't you ask the seller of this apartment which of the two he believes he bought.

One Foot Out the Door: UPDATE

As I predicted, this deadbeat skipped town and left the bank to deal with the mess.

The bank lent out $560,000 in 2005 for this joint, and is now asking a measly $379,900 -- a nearly $181,000 difference.

Anyway, I imagine the new REO price will entice some buyers.

Or will it?

Unless you've been living in a Chilean mine for the last few weeks (too soon?), you've heard about what some are calling "Foreclosuregate."

From what I understand, banks were wholly ill-prepared for the massive influx of foreclosures starting in 2007 ("Wait a minute. I thought prices only went up and people could 'just refinance' when they had trouble making payments.") and hired any jabroni off the street with a pulse (kind of sounds like their mortgage-issuance strategy too). And under pressure to process this ever-growing pile of foreclosures, these knuckleheads mishandled, fudged, or outright forged a lot of the paperwork.

For some reason the mainstream media is focusing on "illegal" foreclosures, and the prospect that some people were foreclosed on improperly. I assure you, other than a handful of anecdotal examples, THAT NEVER FUCKING HAPPENED.

The overwhelming majority of those being foreclosed on are delinquent and deserve to be kicked the hell out like these self-entitled scumbags (warning, do not read that if you're easily nauseated by victim-mentality deadbeats who expect you to pay their bills). So that's not the issue here.

The issue is: who actually has the right to foreclose?

In a nutshell, the ownership of mortgages (we've all heard of lenders bundling loans and selling them to investors, pension funds, etc.) was tracked electronically by MERS (Mortgage Electronic Registration Systems). So all of that information is there -- don't let anyone blow that out of proportion.

The problem is that in judicial-foreclosure states like Florida, the courts can be quite strict about paperwork requirements and sometimes require more than these electronic records.

Which brings us to title insurance.

Imagine you buy an REO like this one, move in your furniture, and are having a romantic evening with your lady. Luther Vandross, ice cubes in your Rosé, laying on a bear skin rug. You know, romantic.

You're swimming in bliss because in addition to the classy lady at your side, you're no longer a scum-of-the-earth renter, you have in-unit laundry, and the renters downstairs typically turn off their Oakenfold mixes by 1 a.m.

Then there's a knock at the door.

An investment group who bought your mortgage in one of JP Morgan's investment vehicles is claiming ownership of your new abode. Their paperwork shows they are the rightful title owners and this is their apartment.

Then there's another knock at the door.

The deadbeat family who got foreclosed on last year says they were improperly kicked out due to paperwork abnormalities -- completely ignoring the fact they refinanced, bought an Escalade, went to Tahiti, then defaulted on their loan when the going got tough -- and therefore these documentation issues (somehow) prove they are the rightful title owners and this is their apartment.

How excited do you think title insurers are going to be to sort all that shit out in the courts?

Answer: Not very.

Which is why large title insurers such as Old Republic have refused to issue title insurance on any property owned by GMAC or JP Morgan Chase, due to the difficulty establishing who actually owns the right to foreclose.

How many of you bought or plan to buy a home without title insurance?

Exactly.

What an unholy mess.

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



Address: 4649 E 4th St. #16, 90814
Asking Price: $449,000
Year Built: 1985
Size: 2 beds, 2 baths, 1,401 sq. ft.
$/Sq. Ft.: $320
HOA Fee: $390 (!)
Purchase price: $560,000
Purchase date: 10/2005
MLS#: P683862
On Redfin: 10 days
Down Payment: $90,000
Monthly Payment: $2,700
Income Requirement: $128,000
Description: This 2 bedroom & 2 bath gorgeous condo is a must see. Turn key pride of ownership. Foyer entry, to gorgeous distressed wood floors throughout. The entire home has been remodeled with exquisite taste. Chandeliers throughout the home. Mahogany fireplace. New Kenmore appliances. In wall safe. Tumble marble flooring in bedroom and bathroom.

Yeah, but does it have a chandelier above the toilet like this guy? I didn’t think so.

Er, well, actually, close enough:


And what's up with the sink in this (cluttered, messy) bathroom? Is that another toilet?



It looks like the Stay Puft Marshmallow Man's hemorrhoid pillow:



The most significant aspect of this apartment is the 2002 sales price. $291,000 ($208 per square) seems like a pretty good deal considering the bubble had already been picking up steam by '02. But what the holy hell was our current seller thinking when he determined paying $560,000 just three years later made good financial sense?

20% annual appreciation seemed “normal” to you? Really? Hell, Bernie Madoff couldn't even hit those numbers.

And speaking of bloodsucking leeches, check out these creepy drawer pulls:

Is it just me, or do these bathroom cabinets look like the cheap-o 1985 originals with a half-assed paint job?

Anyhow, I still find it amusing when people compare current asking prices to peak-o-the-bubble prices and conclude it must be a "good deal” because it’s “X% off.”

What they don’t consider is what the property sold for pre-bubble. When we finally hit the bottom, most properties will have fallen (at least) to their pre-bubble prices and considering how much “equity” has been wiped off the face of the planet in such a short amount of time due to this unprecedented, now undeniable housing bubble, people need to use pre-bubble prices as the pricing starting point. Moving backwards from an artificial, reality-defying, Ponzi-scheme-derived sales price to determine "value" is as useless as a kickstand on a tricycle.

This condo is a perfect example. The current asking price of $449,000 is “20% off” the 2005 price of $560,000.

“Wow! What a steal!”

BUT, today’s price is an astounding 54% ABOVE the 2002 price (which isn’t even a “pre-bubble” price--it's two full years into the bubble). Considering most Long Beach condos are selling for 2003 prices and headed lower, is this still a “smokin’ deal?”

It’s all about perspective.




As you can clearly see, this individual picked a REALLY bad time to buy, and an even worse time to sell. If this seller can find a sucker to pay the current asking price of $449,000, the loss to the loanowner will be $137,000--not including the costs of upgrades.

If we’re nice and estimate the seller spent $40,000 on “distressed” (just like the seller!) wood floors and other upgrades (which will be fortunate to fetch $0.50 on the dollar in this highly-competitive, post-“Flip This House” environment), the seller will face a catastrophic loss of nearly $160,000.

Wow, that’s about $40,000 in depreciation for every year of ownership!

But it gets worse. That's because this place has ZERO chance of selling for $449,000. Sure, this large apartment is nicely appointed (bathroom cabinets notwithstanding) and has every amenity you could ever need (pool, inside laundry, two secure parking spots. etc.) but the days of half-a-million-dollar non-beachfront condos are dead like personal responsibility.

Some might point out that the price per square foot isn’t that crazy compared to the neighbors, but the point is the neighbors aren’t selling either!

I think this seller could find a knife catcher if they slashed $65,000 from the demand tonight. They don’t know it yet, but if they accepted $385,000 right now it would be the best thing that ever happened to them. My prediction is they’ll reject such “lowball” “scavenger” offers throughout the year only to discover in winter that the market has completely passed them by. Only then will they realize that $385,000 would have been a phenomenal deal.

But they can't go down to $385,000. Because although they might have enough equity to absorb a $160,000 loss (keep in mind this is not a short sale!), a $225,000 loss is a completely different animal. Which means this will eventually become a short sale.

And given the ever-growing volume of distressed properties lenders must contend with, the bank probably won’t be able to act quickly enough to prevent this from going into foreclosure.

Hell, some of the photos make me think the seller already has one foot out the door:

Gold records stacked neatly along the wall...


Crap in boxes (lit beautifully by that chandelier, by the way) ready to go...


It appears as if they're already waving the white flag. And with a ~$3,400 monthly payment, it's not difficult to see why.

The good news is, once wannabes like this are purged from the market and Long Beach real estate values return to some semblance of reality, you and I will be able to snag swanky little apartments like this for reasonable, affordable prices.

Be patient. We'll get there.

How About a 50% Haircut?

455 East OCEAN Blvd #1104, Long Beach, CA 90802
Beds: 1
Baths: 1
Sq. Ft.: 664
$/Sq. Ft.: $248
Year Built: 1923
Community: Downtown Area/Alamitos Beach
County: Los Angeles
MLS#: P728984
On Redfin: 123 days
Description: Adorable 1 bed 1 bath condo on the 11 floor really cute kitchen, lots of storage, well laid out floor plan for the sq. footage, light and bright, shared balcony with a view of the Marina and the water. Located on the west side of the building overlooking the courtyard and the fountain. MUST SEE!

Ready for the money shot?

Purchase Price (9/2005): $330,000
Current Asking Price: $165,000
_________________
Loss Assuming Sale: $165,000

OUCH.

And considering the HOA fine is $300 per month and there's no parking, it would need another 50% reduction before I'd consider it.

Flipped Off Flipper: UPDATE

The status was "Active" and changed to "Contingent"

I don't buy it. This apartment has been rotting on the MLS at $299,500 since November, and now it suddenly goes contingent after a measly 3% price reduction? I smell horseshit.

Anyhow, the current list price of $289,500 is just $27,000 more than what this flipper paid for it in June of 2009 -- a far cry from the $62,500 premium he tried to get last summer. Factor in about $17,000 in commissions and we're looking at a razor-thin profit margin.

Oh, but don't forget about the 13 months of carrying costs, including $5,460 in HOA fees, for this unoccupied unit. I think it's safe to say this flipper will absorb a loss in the tens of thousands for his delusional attempt to make real estate riches by "buying at the bottom" of '09.

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


Address: 5200 East ATHERTON St #125, 90815
Asking Price: $299,500
Beds: 2
Baths: 1.75
Sq. Ft.: 1,241
$/Sq. Ft.: $241
Year Built: 1965
MLS#: S581393
On Redfin: 222 days
HOA: $420
Down Payment: $60,000 (20% down)/$12,000 (FHA)
Income Requirement: $86,000
Monthly Nut: $2,000 (20% down)/$2,200 (FHA)
Description: This SPOTLESS and HUGE 1300 sqft 2 bedroom - 2 bathroom 'C' Model has been scrubbed, painted, hardwood floors refinished, ceiling acoustic removed with new skip-trowel finish, new baseboards installed, recessed lighting in kitchen & bath, kitchen cabinets refinished, new faucets, new mirrored closet doors, vertical blinds, stainless steel appliances including cooktop, built in oven, over-cooktop microwave, dishwasher AND new dual-pane windows throughout plus slider door. It even has central air and heat!!! This is one of the nicest, cleanest, most dialed-in properties I have seen! HOA fee includes TONS of STUFF like CABLE-WATER-TRASH-PEST CONTROL-MASTER FIRE INSURANCE-PLUMBING-ELECTRICAL-ON SITE MAINTENANCE PERSON and MORE!!! GARAGE directly UNDER unit & NOBODY BELOW!!! Come and make it yours!!!

Look, I'm fine with rounding up square footage just to make it easier, but this idiot is taking it to new heights. The listing information clearly states it's 1,241 square feet, meaning you can reasonably round up to 1,250. This jackhole for some reason decided rounding up to "1300" was appropriate.

Yes, it's not exactly the height of dishonesty, but it gives you an idea of the type of realtor we're dealing with.

This apartment in the Los Altos area would make a fantastic rental for college students. In fact, when I went to CSULB I lived right down the street and really enjoyed it.

However, the area is lousy with drunk college kids, so I doubt an owner-occupier would be interested in living here.

And although the $420 HOA fine seems outrageous, keep in mind cable, water, trash, and insurance are included. Best of all, on-site maintenance (much like living in a rental apartment) is included. That means this truly is approaching the "hassle-free" living all HOAs promise but never quite live up to.

Plus, given the 1965 build date, that maintenance accessibility might come in handy.

Anyhow, I guess the question is whether $2,000 a month is a reasonable monthly nut for this unit. This flipper sure hopes so.

You see, according to Redfin, Flippy McDumbstain purchased "at the bottom" in June 2009 for $262,500--a massive $117,400 discount off the original 9/2008 asking price. Given that, he probably thought he got a smoking deal.

Nov 02, 2009 - Price Changed $299,500
Oct 01, 2009 - Price Changed $309,500
Oct 01, 2009 - Relisted
Sep 18, 2009 - Delisted
Jul 14, 2009 - Price Changed $324,950
Jul 14, 2009 - Relisted
Jul 10, 2009 - Listed $325,000
Jun 30, 2009 - Sold $262,500
Mar 14, 2009 - Price Changed $325,000
Dec 16, 2008 - Price Changed $350,000
Sep 27, 2008 - Listed $379,900

And so after holding it for a whopping 10 days and calling a cleaning lady, he quickly slapped it on the market for $325,000, hoping to make a nice chunk o' change.

The buying public's response?

Not surprisingly, nobody was interested in paying a $62,500 premium over what he paid just a week and a half earlier. And now, 222 days and $26,000 in price reductions later, he's coming awfully close to just breaking even on his "investment."

It appears he has come to two harsh realizations:

1.) In 2009 the bottom most certainly wasn't in, and
2.) Destitute college students can't afford $2,000 a month in rent

Oops.

In fact, the most expensive rent I've seen in this area is under $1,600 and that's in Marbrisa (i.e. gym, pools, in-unit washer and dryer). That $400 - $600 monthly deficit means that even at $262,500 (which, on paper, seems like an okay deal for a two-bedroom), he grossly overpaid.

Worse yet, in November a nearly identical comp in the same complex sold for $282,500. You really think real estate values have shot up 10% in just four months?

Uh, okay.

As I've said before, flipping in this economic environment is A Man's Sport. It takes real stones.

In the coming months we'll see if this flipper has the minerals to keep his wishing price steady as the market continues to fall, or if he finally capitulates, drops the price, eats a financial loss, and retreats to lick his wounds and reconsider whether he's really cut out for the flipping business.

It's going to be an interesting year.

Mira Malo: FINAL UPDATE

Special thanks to JK for keeping us informed about this property.

Sold on 7/8/2010 - $325,000

Purchased 11/23/2005 - $465,000

Loss - $160,000

And this was not a short sale, meaning that massive hit was taken directly in the pocketbook, in cash. Brutal.

The bright side: At least their FICO score is intact.

So after eight months on the market, how did it finally sell? Well, the nearly 20% in price reductions surely helped. Not to mention it appears they finally put some effort into making it presentable.

BEFORE:


AFTER:

Yeah, not a radical improvement, but it's something. That bamboo wallpaper was nauseating.

You know what's funny? I never even noticed how freaking awesome that big window is until the "flair" was removed.

Anyhow, by waiting way too long to get realistic about the price for this average apartment, I'm convinced the seller left serious money on the table. I was sure it would nab a sale for around $360,000 in December given the comps ($360 per square foot was the going rate back then) so they conceivably cost themselves another $35,000 by pinning their hopes on the wonders of the Super Summer Selling Season(tm).

Yeah, how'd that work out for you?

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

March 31, 2010 - Price Changed $349,500

Including commissions, we're now looking at a $137,000 loss. That's a 30% drop from the peak. And this is still not a short sale, meaning this potato chip enthusiast will eat that loss IN CASH.

The good news is, I think he's finally (mercifully) competitive at this price. Especially given the small window for buyers to double-dip on the state and federal tax credits, a sale at this price (although still too high as far as I'm concerned) wouldn't surprise me.

Then again, this Spring could see an increase in the number of recently thawed hibernators coming out of their caves and also throwing their apartments on the market to take advantage of the "Spring Bounce."

That means tougher competition.

And with a kitchen this hideous, he better prepare to slash the price even further to get ahead of those soon-to-be sellers vying for the same shallow pool of qualified buyers.


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

Mar 13, 2010 - Price Changed $369,500

10 Grand here, 10 Grand there...pretty soon we're talkin' real money!

$465,000 purchase price, $395,000 original list , $25,500 in price reductions, and still not a short sale.

Given that this is still a standard sale, I have to assume the seller put down 20%, or $93,000. That means with this newest price reduction, they are officially in the hole.

Add $22,000 in commissions, 114 fruitless days on market, and the expiration of the first time homebuyer giveaway next month, and this seller is staring down the barrel of a really bad day.

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

Feb 28, 2010 - Price Changed $379,500
Jan 12, 2010 - Price Changed $389,500

In December I said due to the awesome location, I wouldn't be surprised by a sale at around $360,000. Our seller is fast approaching that figure, but I wonder if it's fast enough.

I'll remind you that despite a $465,000 purchase price, at $379,500 this is still not a short sale.

Effing brutal.

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


235 MIRA MAR Ave #4, 90803
Beds: 2
Baths: 1.5
Asking Price: $395,000
Sq. Ft.: 1,018
$/Sq. Ft.: $388
Year Built: 1958
HOA: $203
MLS#: P711997
Source: SoCalMLS
On Redfin: 11 days
Down Payment: $79,000
Income Requirement: $99,000
Monthly Nut: $2,300
Description: Bright top floor unit in very quaint neighborhood. Open living room with unique light fixtures. Gas stove, microwave, hardwood floor in kitchen. Large master with custom mirrored closet. Plenty of closet space & cabinets. Only 1 common wall. Private single car garage with storage and room for an add'l. car in front of garage. Walk to beach & enjoy the sunsets. Close to shopping and entertainment.

You know your apartment sucks when you mention a "mirrored closet" as a selling point.

And speaking of selling points, why not mention those sweet custom-painted kitchen cabinets?

BLECCCCCCCCCCHHHH!

Good lord. And the old-ass tiles just make it worse. At least finish the job like this idiot and put some granite on there!

Our featured seller is in deep, deep shit. He bought in the right location, but he got blatantly ripped off when he did so.

In November 2005, near the peak of the housing bubble, he decided to get into the real estate game and plunked down $465,000 (yes, you read that correctly) for this 2-bedroom/1.5-bath WITH NO LAUNDRY FACILITIES ON THE PREMISES.

I bet when he agreed to pay $465,000 he took a look at the 2001 sales price of $182,000 (assuming he even did that much research) and instead of thinking, "Hmm. That 22% annual appreciation during the last four years doesn't seem right," he imagined also holding it for four years then more than doubling his investment. Piece of cake, right?

Well, four years and one day after purchasing, he put it on the market for $395,000. So much for doubling your money. In fact, after commissions he's staring down the barrel of a $90,000 loss. And that's before negotiations even start.

But a quick look at the sold comps and it's clear that he's more underwater than he realizes. The average price per square foot of condos sold during the last six months is $369. Translation? This apartment at $369 per square should be priced at $375,886--20 Grand below his current wishing price.

Good thing he's got a life boat:

And you thought it was just a super classy coffee table.

Speaking of questionable decorating choices:

Disney's Jungle Cruise right in your own living room! There is plenty of weirdness to go around, but the giant Lay's bag on the wall takes the cake. He must REALLY be into potato chips.

What bothers me is the monthly $203 HOA fee. Curious about the wonderful perks you'll get to enjoy if you buy in this building? Well, here you go:

Amenities: Barbecue

Oh.


With no on-site laundry, just what the hell is your HOA money going toward? Landscaping?

With a 51-year-old building, I would perform some serious due diligence regarding the HOA's finances before considering a purchase.

Overall, because the neighborhood is excellent a 10% discount will probably be enough to garner a sale. I'm not saying that it won't decline further in value, but with interest rates at record lows (again), a sale at around $360,000 wouldn't shock me.

But that's something like a $120,000 loss. Given that this is not (yet) a short sale, we have to assume he had a monster down payment in 2005.

Key word: had.

A Pitiless Promenade Pulverizing

133 The Promenade #103, Long Beach, CA 90802


Purchased 3/2007 - $800,000 ($509 psft)

Sold on 7/9/2010 - $330,000 ($210 psft)

Loss - $490,000

Oh how the mighty have fallen. After nearly two years spent chasing the market down, ostensibly hoping for "things to get back to normal," pinning hopes on "green shoots" and the elusive arrival of "the bottom," the bank finally accepted the truth. I think $330,000 is a good price for 1,500 square feet of brand new construction, but I have a feeling the bank views that massive, absolutely mind-boggling 60% loss a bit differently.

What an utter disaster.

The Tax Credits End, Let The Anxiety Begin

1901 East OCEAN Blvd #205, Long Beach, CA 90802
Asking Price: $705,000
Peak Purchase Price: $725,000
Beds: 2
Baths: 2.5
Sq. Ft.: 1,883
$/Sq. Ft.: $374
Community: Downtown Area/Alamitos Beach
MLS#: P734338
Source: CARETS
On Redfin: 35 days
HOA Fine: $444
20% Down Payment: $141,000 (20%)/$28,200 (FHA)
Income Requirement: $161,000 (Mortgage/3.5X)
Monthly Nut: $4,200 (conventional)/$4,900 (FHA)
Description: Here is your opportunity to own in the exclusive Park Regency complex along Ocean Blvd. This stunning complex is a real gem with an incredible courtyard and exterior finshes and details!This premiere 2bed+Den corner location affords stunning ocean and park views and is the largest floor plan in the complex!The interior of the home offers beautiful slate floors, custom crown molding, open and functional kitchen, newer appliances, custom window shutters throughout, full home theater, fireplace in the living room and more!This open floor plan is full of natural light and is sure to impress along with offering a oversized master suite with sitting area, large living room and formal dining room!Complex offers a clubhouse, spa and is secured along with closed circuit TV surveillance as well!2 side by side underground parking spaces and additional storage!

"Finshes"?

This dummy bought promptly at the peak of the bubble and has somehow convinced himself there was no crash.

Nope, never happened. Didn't take place. Just something the librul media made up. Everything's just hunky dory, and I can get out of this for pretty much break even. Yep, annnnnnnnnnny minute now...

So, this delusion-deluged soul is asking $705,000, a paltry $20,000 discount from his purchase price three years ago. Never mind the last three years have seen the most devastating housing crash in the history of the USA, where $Trillions in net worth and home equity evaporated -- but not for this guy, no way. You see, he's special.

And by the way, his asking price is just under FHA limits so technically you could get a(n essentially) no-money-down FHA loan and avoid putting substantial skin in the game. Of course, your payment would shoot from $4,200 a month to $4,900, but at least you'd have the option of moonwalking away when the value of your apartment inevitably drops and you find yourself perilously upside-down.

In the context of a free pass to walk if the going gets tough, it's difficult to argue paying a higher monthly nut isn't worth it.

If you look at the sale history, the 1997 buyer (who bought just after the trough of the last housing crash) made a nice chunk of chance during his nine-and-a-half years of ownership:

May 10, 2010 - Listed $705,000
Mar 21, 2007 - Sold $725,000 (+11.8%/yr)
Oct 24, 1997 - Sold $255,000 (+9.3%/yr)
Jul 28, 1995 - Sold $209,000

A nice, solid 12% appreciation per annum. Well played, sir.

Unfortunately for our seller he failed to see that paying nearly half-a-million bucks more than the previous owner was a big red flag of a speculative, unsustainable bubble. Unless this apartment suddenly doubled in size and was transported to the beach side of Ocean Blvd., there is no economic justification for four walls and a roof appreciating an average of $50,000 per year.


So what you're seeing here is a seller desperately clinging to the misguided notion that he didn't overpay and deserves peak pricing for his "wise" investment.

The good news for our embattled seller is a sold comp appears to justify his asking price: Unit #203, also with an ocean view, sold in May for $695,000. Going by that comp, he and his agent (the same agent who sold Unit #203, by the way) aren't that far off.

Or are they?

Because there appear to be some subtle differences between the units. For example, the kitchens.

You can get with this (Unit #203):

Or you can get with that (#205):

I think you'll get with this, 'cuz this is where it's at.

But they're both pretty nice inside, so let's just assume they're apples-to-apples.

In that case, why is our featured unit still on the market?

Maybe because that May buyer was a complete fool and the vast majority of buyers have noticed how much cheaper it is to rent luxury condos on Ocean Blvd? After all, this loaded condo with an ocean view is only asking $2,683 (a precise asking rent typically indicates an investor trying to cover his monthly nut) -- a massive $2,100 monthly savings!

And you get to live here:


Nice!

Please, someone explain to me how purchasing 1901 Ocean, given the anxiety a new owner would suffer over the likelihood of further price declines, is worth that kind of premium over renting that luxury unit.

Maybe it hasn't sold because of the cheaper competition in the building? This unit (again, listed by the same realtor) is asking $599,000.

Now, to be fair it does not have an ocean view. But is an ocean view really worth an extra $106,000? Frankly, I think so, but in order to truly answer that question you first have to determine whether a non-ocean view is worth $599,000 in the first place. Given the 43 days on market with no interest, I'd say no.

Or maybe it hasn't sold because in the absence of the expired Federal tax credit and the soon-to-be-expired State credit, $705,000 just seems too rich for buyers' blood?

I think this is the most likely scenario. The expiration of the tax credits makes this a whole new ballgame. In my opinion much of the demand has already been pulled forward and we're finally about to see what the housing market really looks like without a bulk of the artificial support (other than FHA loans and record-low rates).

If sales drop like I think they will during the next few months, another tax credit is pretty much ensured. And maybe it'll be $12,000 this time. Or why not $15,000? With Obama asking for $50 Billion in state-aid (I love how the WaPo characterized it as "pleading" for money. And wait, why more funds? I thought that's what the stimulus was for) and Freddie Mac/Fannie Mae requiring up to a $Trillion taxpayer dollars (yes, with a T) to keep the lights on, at this point it's just Monopoly money anyway.

The government has shown it will stop at nothing to prop up housing, and after dumping truckloads of cash into these reflation efforts, I don't expect it to suddenly change course any time soon.

Who's excited for the next round of free ponies?

Mira Malo: UPDATE III

March 31, 2010 - Price Changed $349,500

Including commissions, we're now looking at a $137,000 loss. That's a 30% drop from the peak. And this is still not a short sale, meaning this potato chip enthusiast will eat that loss IN CASH.

The good news is, I think he's finally (mercifully) competitive at this price. Especially given the small window for buyers to double-dip on the state and federal tax credits, a sale at this price (although still too high as far as I'm concerned) wouldn't surprise me.

Then again, this Spring could see an increase in the number of recently thawed hibernators coming out of their caves and also throwing their apartments on the market to take advantage of the "Spring Bounce."

That means tougher competition.

And with a kitchen this hideous, he better prepare to slash the price even further to get ahead of those soon-to-be sellers vying for the same shallow pool of qualified buyers.


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

Mar 13, 2010 - Price Changed $369,500

10 Grand here, 10 Grand there...pretty soon we're talkin' real money!

$465,000 purchase price, $395,000 original list , $25,500 in price reductions, and still not a short sale.

Given that this is still a standard sale, I have to assume the seller put down 20%, or $93,000. That means with this newest price reduction, they are officially in the hole.

Add $22,000 in commissions, 114 fruitless days on market, and the expiration of the first time homebuyer giveaway next month, and this seller is staring down the barrel of a really bad day.

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

Feb 28, 2010 - Price Changed $379,500
Jan 12, 2010 - Price Changed $389,500

In December I said due to the awesome location, I wouldn't be surprised by a sale at around $360,000. Our seller is fast approaching that figure, but I wonder if it's fast enough.

I'll remind you that despite a $465,000 purchase price, at $379,500 this is still not a short sale.

Effing brutal.

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


235 MIRA MAR Ave #4, 90803
Beds: 2
Baths: 1.5
Asking Price: $395,000
Sq. Ft.: 1,018
$/Sq. Ft.: $388
Year Built: 1958
HOA: $203
MLS#: P711997
Source: SoCalMLS
On Redfin: 11 days
Down Payment: $79,000
Income Requirement: $99,000
Monthly Nut: $2,300
Description: Bright top floor unit in very quaint neighborhood. Open living room with unique light fixtures. Gas stove, microwave, hardwood floor in kitchen. Large master with custom mirrored closet. Plenty of closet space & cabinets. Only 1 common wall. Private single car garage with storage and room for an add'l. car in front of garage. Walk to beach & enjoy the sunsets. Close to shopping and entertainment.

You know your apartment sucks when you mention a "mirrored closet" as a selling point.

And speaking of selling points, why not mention those sweet custom-painted kitchen cabinets?

BLECCCCCCCCCCHHHH!

Good lord. And the old-ass tiles just make it worse. At least finish the job like this idiot and put some granite on there!

Our featured seller is in deep, deep shit. He bought in the right location, but he got blatantly ripped off when he did so.

In November 2005, near the peak of the housing bubble, he decided to get into the real estate game and plunked down $465,000 (yes, you read that correctly) for this 2-bedroom/1.5-bath WITH NO LAUNDRY FACILITIES ON THE PREMISES.

I bet when he agreed to pay $465,000 he took a look at the 2001 sales price of $182,000 (assuming he even did that much research) and instead of thinking, "Hmm. That 22% annual appreciation during the last four years doesn't seem right," he imagined also holding it for four years then more than doubling his investment. Piece of cake, right?

Well, four years and one day after purchasing, he put it on the market for $395,000. So much for doubling your money. In fact, after commissions he's staring down the barrel of a $90,000 loss. And that's before negotiations even start.

But a quick look at the sold comps and it's clear that he's more underwater than he realizes. The average price per square foot of condos sold during the last six months is $369. Translation? This apartment at $369 per square should be priced at $375,886--20 Grand below his current wishing price.

Good thing he's got a life boat:

And you thought it was just a super classy coffee table.

Speaking of questionable decorating choices:

Disney's Jungle Cruise right in your own living room! There is plenty of weirdness to go around, but the giant Lay's bag on the wall takes the cake. He must REALLY be into potato chips.

What bothers me is the monthly $203 HOA fee. Curious about the wonderful perks you'll get to enjoy if you buy in this building? Well, here you go:

Amenities: Barbecue

Oh.


With no on-site laundry, just what the hell is your HOA money going toward? Landscaping?

With a 51-year-old building, I would perform some serious due diligence regarding the HOA's finances before considering a purchase.

Overall, because the neighborhood is excellent a 10% discount will probably be enough to garner a sale. I'm not saying that it won't decline further in value, but with interest rates at record lows (again), a sale at around $360,000 wouldn't shock me.

But that's something like a $120,000 loss. Given that this is not (yet) a short sale, we have to assume he had a monster down payment in 2005.

Key word: had.

Mira Malo: UPDATE II

Mar 13, 2010 - Price Changed $369,500

10 Grand here, 10 Grand there...pretty soon we're talkin' real money!

$465,000 purchase price, $395,000 original list , $25,500 in price reductions, and still not a short sale.

Given that this is still a standard sale, I have to assume the seller put down 20%, or $93,000. That means with this newest price reduction, they are officially in the hole.

Add $22,000 in commissions, 114 fruitless days on market, and the expiration of the first time homebuyer giveaway next month, and this seller is staring down the barrel of a really bad day.

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

Feb 28, 2010 - Price Changed $379,500
Jan 12, 2010 - Price Changed $389,500

In December I said due to the awesome location, I wouldn't be surprised by a sale at around $360,000. Our seller is fast approaching that figure, but I wonder if it's fast enough.

I'll remind you that despite a $465,000 purchase price, at $379,500 this is still not a short sale.

Effing brutal.

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


235 MIRA MAR Ave #4, 90803
Beds: 2
Baths: 1.5
Asking Price: $395,000
Sq. Ft.: 1,018
$/Sq. Ft.: $388
Year Built: 1958
HOA: $203
MLS#: P711997
Source: SoCalMLS
On Redfin: 11 days
Down Payment: $79,000
Income Requirement: $99,000
Monthly Nut: $2,300
Description: Bright top floor unit in very quaint neighborhood. Open living room with unique light fixtures. Gas stove, microwave, hardwood floor in kitchen. Large master with custom mirrored closet. Plenty of closet space & cabinets. Only 1 common wall. Private single car garage with storage and room for an add'l. car in front of garage. Walk to beach & enjoy the sunsets. Close to shopping and entertainment.

You know your apartment sucks when you mention a "mirrored closet" as a selling point.

And speaking of selling points, why not mention those sweet custom-painted kitchen cabinets?

BLECCCCCCCCCCHHHH!

Good lord. And the old-ass tiles just make it worse. At least finish the job like this idiot and put some granite on there!

Our featured seller is in deep, deep shit. He bought in the right location, but he got blatantly ripped off when he did so.

In November 2005, near the peak of the housing bubble, he decided to get into the real estate game and plunked down $465,000 (yes, you read that correctly) for this 2-bedroom/1.5-bath WITH NO LAUNDRY FACILITIES ON THE PREMISES.

I bet when he agreed to pay $465,000 he took a look at the 2001 sales price of $182,000 (assuming he even did that much research) and instead of thinking, "Hmm. That 22% annual appreciation during the last four years doesn't seem right," he imagined also holding it for four years then more than doubling his investment. Piece of cake, right?

Well, four years and one day after purchasing, he put it on the market for $395,000. So much for doubling your money. In fact, after commissions he's staring down the barrel of a $90,000 loss. And that's before negotiations even start.

But a quick look at the sold comps and it's clear that he's more underwater than he realizes. The average price per square foot of condos sold during the last six months is $369. Translation? This apartment at $369 per square should be priced at $375,886--20 Grand below his current wishing price.

Good thing he's got a life boat:

And you thought it was just a super classy coffee table.

Speaking of questionable decorating choices:

Disney's Jungle Cruise right in your own living room! There is plenty of weirdness to go around, but the giant Lay's bag on the wall takes the cake. He must REALLY be into potato chips.

What bothers me is the monthly $203 HOA fee. Curious about the wonderful perks you'll get to enjoy if you buy in this building? Well, here you go:

Amenities: Barbecue

Oh.


With no on-site laundry, just what the hell is your HOA money going toward? Landscaping?

With a 51-year-old building, I would perform some serious due diligence regarding the HOA's finances before considering a purchase.

Overall, because the neighborhood is excellent a 10% discount will probably be enough to garner a sale. I'm not saying that it won't decline further in value, but with interest rates at record lows (again), a sale at around $360,000 wouldn't shock me.

But that's something like a $120,000 loss. Given that this is not (yet) a short sale, we have to assume he had a monster down payment in 2005.

Key word: had.