English as a Second Language

You know that familiar lie about the importance of buying right now because of the influx of rich foreign investors coming ashore to snap up all the good properties?

Well, I actually think the Kool-Aid drinkers are right about that one. Except the foreigners aren't coming here to buy properties. No, apparently they're here to sell them:

Great Opportunity to live in one of Long Beach's most fine apartment buildings. The 'International Tower' with a view of the Queen Mary, Marina, and the Ocean. This is a true meteropolitian experience.

"meteropolitian"? Two typos in one word?!

Boy, with a listing description like that, I'm shocked some Sony executive hasn't flown in on his G4 to swoop this place up.

Good lord, after 264 days you'd think the six-percenter would spruce the listing up a bit, no? And, oh, I dunno, ADD A FREAKING PHOTO OR TWO. Dude, I shouldn't have to tell you this, but foreigners live in foreign lands--the Internet is a handy tool for them to scope out properties before flying over here to buy them.

Forgetting for a moment that this is a global recession and the dollar, although beaten and bruised, is still doing considerably better than many currencies, why on earth would a rich foreign buyer want to pay half a million clams for a one bedroom?

Further, why wouldn't they just buy the larger two bedroom, also with ocean views (that particular ESL agent refers to it as an "uobstructed" view), for less money?

This building is an unmitigated disaster, folks. At least 18 units for sale and hardly anything moving. The average Days on Market for the building is 108! Overpriced much?

And keep in mind, that 108 average includes five units going on sale during the last 11 days, and doesn't include the units that have been re-listed. For example, #607, our featured property, has technically been on the market since February of 2007! Damn dude! Almost two years?

No amount of Swiss telecom moguls or Taiwanese household electronics magnates are going to save this building. Especially given the increasingly tightening lending standards, it will be a hard sell finding buyers at these prices.

Which means asking prices will inevitably come back down to earth from the 32nd floor. And by "come back down," I mean JUMP OFF THE BALCONY RAIL IN A FIT OF SUICIDAL DESPERATION AND HIT THE ASPHALT FACE-FIRST.

Minty Meltdown

I recently received an e-mail from Redfin that caught my eye--in a good way for a change. This condo gives me hope for the day when hard working Americans can afford a nice property they can be proud of, without becoming permanent debt slaves or facing financial ruination.

Address: 2662 E 2nd St. #F2, 90803
Asking Price: $309,000
Size: 2 beds, 2 baths, 1,275 sq. ft. (built in 1966)
$/Sq. Ft.: $242
HOA Fee: $224
MLS#: P670402
On Redfin: 4 days
Down Payment: $61,800
Monthly Payment: $1,900
Income Requirement: $88,000
Description: Don't miss this beautiful opportunity in the Tiarra Imperial complex in the heart of Bluff Park historical district. Features include: very open and light floorplan, hardwood floors, completely remodeled kitchen with travertine counters, peach travertine flooring, and high end stainless appliances. This unit also boasts a master suite with private bath, INSIDE LAUNDRY, spacious, south facing balcony with city views! Designer appointments throughout! Hurry, this property will not last!

In this neighborhood this close to the ocean, $242 per square foot is a smoking deal. For once a listing agent is correct exclaiming "this property will not last!"

But before Anonymous gets his panties in a bunch, it is worth noting this is a short sale. That means there is little likelihood this price will be approved by the bank. Further, short sale status means it will likely take two months for the bank to reject that price. No need to get too excited.

See how comfortable this cat looks?

She knows as well as anyone that it will be a looooooooooong time before she needs to relocate her litter box.

So, yes, until it actually sells for $309,000 (which would make nearby sellers' heads explode), there isn't much reason to believe true affordability for hard-working families is here. However, my overall point is that this is a sign of good things to come. Remember, it wasn't too long ago that sub-$300 per square foot was considered by perma-bulls to be anomalous outliers. Now $250 per square in Long Beach is as common as crabs in a truck stop brothel.

But the most interesting thing to ponder about this property is HOW it became a short sale.

Consider this: according to Redfin the current seller purchased in 2000 for $177,500 ($139 per square foot!). If you add up the last eight years of ownership, right now she has at least $100,000 in equity, meaning the total outstanding balance on the loan would be around $77,500.

SO JUST HOW IN THE HELL IS THIS A SHORT SALE AT $309,000?! She should be pocketing more than $200,000 and boarding a plane to Barbados!

The most likely answer is that she compulsively refinanced, tacked on massive HELOC (Home Equity Line of Credit) loans to the balance...and blew the money. How can you conclude otherwise?

And assuming that's the reason for the short sale, it means she must have taken out all of her $100,000 in equity, PLUS hundreds of thousands of dollars on top of that. Incredible to think about, no?

With all the talk of subprime and Option ARM loans sending people into distress and foreclosure, it's easy to forget about the stunning number of pre-bubble homeowners who got drunk on HELOC juice and serial refinancing during the real estate frenzy. Not many people are talking about this phenomenon, but it will certainly be a factor in growing distressed properties, and it turn further price decreases.

As far as the actual property goes, I'm tempted to submit an offer. Seriously. I really like this place.

I drove by today and I could totally see myself living there. Obviously I would need to change some things upon purchase. Namely, the atomic booger paint scheme in the kitchen:

HORFF!!

Not to mention filling the nail holes made by all those frames (take it easy, lady. I realize you're a big fan of Aaron Brothers, but relax. Actually, I might have an idea where all that HELOC money went).



Other than the mint-colored kitchen and Yoda's bathroom, I'm pretty impressed. It's spacious, in a killer neighborhood, has in-unit laundry, a comparatively reasonable HOA, and I love the floors and plantation shutters.



The downsides are that it has two shared walls and only one parking spot. But overall this would be a really nice place to live. I guess the question is whether or not the bank has any intention of letting it go for such a seductive price.

Considering a unit one upstairs sold in August for $451,000, I very seriously doubt it. Methinks the $309,000 asking price is nothing more than an attempt to create a bidding war.

But considering what the top-floor unit sold for, and what nearby units are listed for, if you listed at $390,000 you would still be competitive and could eliminate the need for a short sale.

Or would it elminate the need?

I'm open to your ideas, but I suspect the HELOC-abuse is much worse than it appears. Unless there was a sale during the peak for $500,000 that didn't show up on Redfin, that's the only logical explanation.

UPDATE: An astute reader pointed out that Redfin is already reporting the condo is "Off the Market." My suspicion is that the seller was trying to get a loan modification and threatened to short sell it for way below comps as a means of leverage. That's pure speculation, but given the overall fishiness of this listing, it wouldn't surprise me.

Will Consider Sale

A vast majority of properties selling in Long Beach are at, or below, 2004 pricing. This is consistent with national price declines as well.

Before I go any further, does anyone out there disagree with that?

Anyone?

Okay, just making sure we're all on the same page (read: planet earth).

So, within the context of that premise, I'd like to highlight a particularly delusional Long Beach seller who believes the Great Housing Crash never happened, and that he is immune from the reality of 2004 pricing.



Address: 2425 E 5th St #1, 90804
Asking Price: $349,126
Size: 2 beds, 1 bath, 840 sq. ft. (built in 1971)
$/Sq. Ft.: $416
HOA Fee: $120
MLS#: P664704
On Redfin: 51 days
Down Payment: $70,000
Monthly Payment: $2,100
Income Requirement: $100,000
Description: NEWLY REMODELED - READY TO MOVE IN NOW 2 BEDROOM CONDO, new kitchen & bathroomwith beautiful tile floors, Kohler Executive Chef sink, Kenmore convection oven and cooktop, new butcher block counter tops, dishwasher & venthood, new cherry hardwood floors throughout, recessed lighting, new interior doors, new double glazed windows, new double patio doors, new crown molding-base boards-door & window casing, doggy door, patio, laundry hookups, floor to ceiling mirrored closet doors, private garage with storage & Kayak racks behind remote controlled gated parking lot, low HOA dues $120, Condo located 5 short blocks to the beach on quiet 1 block long street.

Kayak racks? Huh? Well, I hope you like kayaking because they can't be used for anything else. After all, they're Kayak racks.



Other than the cheap cabinets and awful countertops in the tiny kitchen, this is a very nice remodel. Well done with attention to detail. I mean, check out the cool doggie door:



Nice touch.

Only one shared wall, french doors into the patio, indoor laundry hookups, nice hardwoods, incredibly low HOA...this is a nice apartment.

The problem, as is common with Long Beach sellers, is the price. This place is just too small, and the economy too damaged, to command $416 per square foot. For an individual or couple to reasonably afford this place, the household income would have to be $100,000 per year. Not unheard of for a couple in Southern California, but consider that the median income for this zip code is just over half that amount.



That means the median Long Beach family is priced out of this 840 square foot apartment. In fact, the median family would be shelling out 6.5 times their annual income to (literally) squeeze into this place.

I dare anyone to claim this is an above median property in a prime area. Dare you.

I know everyone got used to $300,000-$350,000 as "the norm" for condo prices, but when provided with a little perspective about how unaffordable these prices are, you start to see how far down prices still have to fall.

So, it's abundantly clear that this apartment is overpriced. Forgetting the cramped quarters, the so-so neighborhood (bums sifting through recycling bins are common in this area), the ground-floor level, and the solo garage spot, the most damning information is the fact that it sold for $250,000 in 2004.



Yep. Despite the ironclad fact that most Long Beach properties (especially less desirable properties in less desirable 'hoods) are selling for 2004 prices, this numbnuts thinks his property appreciated 10% per year during the last four years--AND HASN'T LOST A SINGLE DOLLAR OF VALUE DURING THE WORST HOUSING MELTDOWN IN THE HISTORY OF THE WORLD.

Wake up, pal.

Not even the most delusional perma-bull would argue those upgrades are worth $100,000.



There's no way in holy hell this place would fetch $2,100 a month in rent. Maybe in Belmont Shore, but not here. So, clearly this price is all wrong. But what do you expect from someone so ignorant to the realities of the new housing era? This property is doomed to rot on the market, unless a knife-catcher descends from heaven to bleed cash for the next few years and be stuck in cramped quarters while doing it.

But forget all that. Here's my favorite part of the listing:

LEASE INFORMATION
Will Consider Sale

Oh really? Good thing you're considering selling it, considering you're selling it.

Back From the East Coast with a Quickie: UPDATE

A quick update of a quickie post:

Here is the original post:



Address: 207 E Broadway #301, 90802
Asking Price: $553,000
Size: 1 beds, 2 baths, 1310 sq. ft. (built in 1925)
$/Sq. Ft.: $422
HOA Fee: $327
MLS#: S537137
On Redfin: 153 days
Down Payment: $110,600
Monthly Payment: $3,700
Income Requirement: $158,000
Description: SHORT SALE APPROVED AT $553,000!

Well, considering it was priced $4,000 cheaper for 150 days AND STILL FAILED TO GARNER ANY BUYING INTEREST...best of luck with that!

* * * * * * *

As I suspected would happen, that approved short sale price didn't attract a buyer. The new pricing is indicative of serious capitulation, as the short sale asking price has been reduced by a mammoth $103,000 trying to nab a buyer. That's a helluva haircut!

Here is the updated listing information:

Address: 207 E Broadway #301, 90802
Asking Price: $450,000
Size: 1 beds, 2 baths, 1310 sq. ft. (built in 1925)
$/Sq. Ft.: $324
HOA Fee: $327
MLS#: S537137
On Redfin: 197 days
New Down Payment: $85,000
New Monthly Payment: $2,700
New Income Requirement: $121,000
Description: Gorgeous south and west facing corner unit loft in the Historic Insurance Exchange Building! True loft living with open loft layout, exposed ceilings, gorgeous blond wood floors and floor to celing windows with city views! Unique floorplan, over 1300 square foot footprint with 1.5 baths, master bath with dual vanity, jacuzzi tub and two person shower. Enjoy additional square footage and privacy from the custom built-out sleeping loft. Central AC and heat, private storage room, secured parking, gourmet kitchen with granite countertops and viking appliances. One of a kind loft in one of the most well designed and sought-after loft conversions downtown.

"celing"?

Despite that typo, I'm thankful they finally bothered to provide a listing description. And a really good one, too! Bravo, bravo!



This loft is about as cool as they come. I'm legitimately impressed. We aren't treated to photos of the bathrooms (uh-oh) but the upgrading work looks new. Assuming the bathrooms aren't disastrous, all you need is some sleek, modern furniture and you're set.

And check out those phantom stairs!

Someone told me those rail-less stairs aren't compliant with building codes (good luck navigating those things after a night of downtown boozing), but damn they look awesome!

And speaking of downtown boozing, if this economic downturn persists well into 2009, I'm wondering if we're going to see an upsurge in downtown criminal activity. It's possible that Long Beach's commendable efforts to clean up downtown and make it a nightlife hot spot will be gradually erased as the unemployment rate climbs and state budget woes create cuts in services to the poor.

I hope that's not the case, but it's something to consider when checking out downtown properties and thinking of long-term values. And considering many downtown properties are (still) woefully overpriced and have yet to see the full force of equity destruction experienced in other Long Beach areas, crime will have a tangible effect on further price declines.

As far as this property goes, I don't know if the bank actually agreed to this greatly reduced short sale price but I fear that it's still not enough to find a buyer in this economic environment. This place would make a great spot for a young, high-income childless couple, or a young, very wealthy single professional, but outside of those specific criteria I can't see much of a market for this place (I mean, that's more of a "sleeping platform" than a "bedroom"--not very practical).

I guess the question is whether that very small, very rare, very wealthy subset of potential buyers that could comfortably afford this place will believe it's worth $450,000. I somehow doubt it.

Betty's Bunker: UPDATE

Hat tip to the eagle-eyed Morekaos in the Irvine Housing Blog Forums who noticed the ghoulish Betty's Bunker just dropped its price to $650,000.



If you recall, in the original post I included some guesses as to where the architectural inspiration stemmed from:







For those keeping score at home, the price reductions have progressed as follows:

Oct 05, 2008 Listed $1,035,000
Nov 19, 2008 Price Changed $739,000
Dec 22, 2008 Price Changed $650,000

A total of $385,000 in price reductions in just TWO MONTHS! Delusion didn't last long with these folks.

And by the way, the new asking price is $190,000 cheaper than the least expensive nearby property. This thing must be a real shit hole.

You'll notice they added "Priced accordingly to reflect condition. Property needs upgrading" to the description, likely an attempt to lower expectations in response to the projectile vomiting they've encountered when showing the property.

Anyone think this will see sub-$200 per square foot before it's all over?