Tsunami, or Preamble to More Government Intervention?

I used to be in the camp that believed a "tsunami" of foreclosures was about to hit the market, creating an influx of supply and thereby putting significant downward pressure on prices.

But that tsunami never came. And despite month after month of extremely limited (and declining) supply of bank-owned properties, anecdotal evidence would continue to emerge, typically from "a cousin's friend's fiancee's vacuum-repairman's niece," insisting they had it on good authority that banks would start stepping up foreclosures any day now.

And once one bank starts dumping properties on the market, other banks in the cartel will have to follow suit to get ahead of the rapidly declining prices. It'll be a bloodbath!

Yeah. Whatever.

Long ago I gave up on the idea of free markets in this country, and wrote the foreclosure tsunami off as more wishful thinking from buyers (like me) who simply wanted to buy a reasonable house for a reasonable price. A flood of new inventory -- priced to sell -- would certainly do the trick in returning prices to realistic levels, so it made sense for buyers to cling to such a hope. Alas, the government machine was too powerful, and would apparently stop at nothing to keep home prices artificially inflated and out of line with typical household incomes.

But interesting little info nuggets -- not quite hardened fact, but more than just anecdotal -- have popped up recently. To wit:

Calculated Risk: San Diego Surge in Foreclosures

Irvine Housing Blog: BofA to Increase Foreclosure Rate by 600% (hat tip SR)

Breitbart: Foreclosure Rates Surge, Biggest Jump in Five Years

RealtyTrac: March Foreclosures Highest on Record

And this from Redfin:

Long Beach March trends:
Inventory up 8% vs. Feb
Inventory up 9% vs. last year

So, what do you think? Is this the "tidal wave" of market-clearing REOs beginning to crest, or is this just another excuse for the .gov to create another acronym-laden program to keep deadbeats in their (our) homes?

Short Sale Sob Story

1747 East 2ND St, Long Beach, 90802
Wishing Price: $999,000
Beds: 4
Baths: 2.75
Sq. Ft.: 2,550
$/Sq. Ft.: $392
Lot Size: 4,620 Sq. Ft.
Year Built: 1914
MLS#: F1822956
On Redfin: 184 days
Income Requirement: $250,000
Down Payment: $200,000
Monthly Nut: $5,500
Description: Amazing location!! Alamitos Beach south of Broadway just a quick walk to beach and Bixby Park. The home was substantially remodeled and expanded over the last several years and offers unparalleled charm and location. All new copper plumbing and newer dual zone a/c and heating system. Beautiful 4 bedroom 3 bath home in great beach location!!

This has to be one of the ugliest million-dollar houses in Long Beach. It took me a few minutes to figure out this asking price wasn't a typo.

That's because despite claims to the contrary, this is not an "Amazing location!!" Sure, it's just blocks from the sand, but it's down past Esperanza. Even if you wanted to park your car on the street here, you couldn't anyway because this neighborhood is ground zero for cheap, high-density apartments.

Forget bungee jumping or swimming with Great White sharks sans diving cage, if you want to get your adrenaline pumping just walk around this 'hood at night. I've made that mistake before and I'll never make it again.

"El Bee, how dare you! I live in this area and I feel perfectly safe at night. In fact, the toothless, cart-pushing homeless dudes near the Rite-Aid serve as our Neighborhood Watch."

Hey man, good for you that you feel that way. But I have this thing called a sense of self-preservation and especially if I'm spending A MILLION FREAKING DOLLARS, I want to feel as safe as a lil' joey in his momma's pouch at all times.

Anyhow, this idiot purchased in 2005 for $680,000 (which even for the bubble seems outrageous given the marginal neighborhood), and insists the value appreciated by $220,000 during one of the most horrific housing crashes in the history of carbon-based lifeforms.

"So what, El Bee, we see this kind of greed-faced horseshit all the time. Why feature this particular pig?"

Well, the reason is because even if this place sold for its million-dollar price tag, it would still be a short sale.

That means this fool hit up the Housing ATM for HUNDREDS OF THOUSANDS OF DOLLARS, lived the high life for a few years, and now expects the bank (i.e. you and me) to eat a shit sandwich while he walks away with a slightly dented credit score and no tax liability for the forgiven debt.

Fuck yeah! Awesome! Sign me up!

Uh, P.S., after 184 days on market, there is no shot in hell this place will sell for $999,000. I don't give a crap how much of that HELOC money went into this "substantially remodeled and expanded" dump (and by the way shitbird, if it's so impressive why not include, oh, I dunno, A FUCKING PICTURE?!) this price is way out of line with local prices, local rents, local incomes, and reality. A million dollars is a straight up Mario Brothers pipe dream.

Which means only one thing: Gaming the interminable government system of HAMP, HAFA, HARP, HEAP, HERB, HARK, HANK, HOOF and FASB (the accounting rules that allow banks to keep non-performing loans off their balance sheets, thereby incentivizing said banks not to foreclose) for a year or two and living rent-free, saving a small down payment so he can re-enter the housing market with a government-backed FHA no-skin-in-the-game loan, and eventually sticking taxpayers with the tab racked up by his greed and ignorance.

What a country.

A $440,000 Starter Home: UPDATE(S)

The price was "$439,900" and changed to "$415,000"
The price was "$415,000" and changed to "$439,900"

Dude, what is this realtor smoking?

Until the listing price starts with a "3", this dermoid cyst is just going to rot and rot and rot.

And now the interior photos have been removed?! This used home salesman is on a roll! With marketing skills like that, I'm sure you'll have it sold in no time!

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I'm back from Park City, trying to regain my bearings. Have your Long Beach Housing Blog withdrawals subsided?

I'd like to thank Yikesboy for sending in today's property.

Address: 1384 QUINCY Ave, 90804
Asking Price: $439,900
Purchase Price: $540,000 (11/2005)
Beds: 2
Baths: 1
Sq. Ft.: 672 (!)
$/Sq. Ft.: $655
Lot Size: 3,526 Sq. Ft.
Year Built: 1938
MLS#: S10019372
On Redfin: 2 days
Down Payment: $88,000 (20%)/$18,000 (FHA)
Income Requirement: $126,000
Monthly Nut: $2,400 (20%)/$2,800 (FHA)
Description: 1384 Quincy Ave offers the perfect opportunity to own a great starter home on a large 3500 sq ft lot in a quiet residential neighborhood. The large gated back yard affords plenty of room for dining al fresco as well as play space for family and pets. Inside you will find a nice, cozy 2 bedroom, 1 bathroom home with many of the original features of this 1938 bungalow. Guest quarters off of the garage offer extra space to expand your living (buyer to verify permit). .. use your imagination and enjoy this rare opportunity! There is still time for the Home Buyers Tax Credit so don't hesitate to make an appointment and call this home!

If this is what passes as a "great starter home" these days, then I'm not going to bother getting off the blocks. I'll rent forever before I slap down $440,000 for 672 dingy square feet in this neighborhood.

I mean, just how warped have things become that a matchbox home miles from the ocean, asking nearly half a million dollars, is considered a "starter home?" Does that make any kind of freaking sense?

To reasonably afford this dumpy "starter home," a family just starting out has to pull in at least $126,000 per year.

That's is more than three times the median income in this zip code.

THREE TIMES!

Does this tiny, cramped 72-year-old shoebox really look like a property that the top 10% of Long Beach earners would be interested in?


Really?

Studio apartments have more square footage than this thing!

"But El Bee, the listing says 'Guest quarters off of the garage offer extra space to expand your living [whatever the fuck 'expand your living' is supposed to mean].'"

Uh, that's great (and judging by the interior of the main house, I'm sure the guest quarters are wildly impressive) but the seller--who I'll remind you is asking $440,000--can't even be bothered to verify the authenticity of the permits! What a joke!

As I'm sure you've already figured out, I think this property insanely overpriced. Just an insulting, open-handed slap to first-time buyers.

But the seller's idiotic wishing price isn't all that surprising when you consider what kind of person we're dealing with. Check out what our seller paid:

Nov 21, 2005 - Sold $540,000 (119.4%/yr)
Jun 21, 2005 - Sold $389,000

So, not only was he stupid enough to pay $540,000 ($804 per square foot!) in November 2005, but he did it just five months after someone paid $389,000.

WTF?

You're telling me there was nothing fishy about a 119% annualized return? I don't see granite, I don't see nice tile...hell, I don't even see a matching fridge!

Anyhow, assuming he could get his ridiculous $440,000 asking price, and considering this is not (yet) a short sale, he stands to lose -$126,000 including commissions.

But that's assuming a brain-damaged buyer comes along and finds this to be an exceptional bargain. Don't worry, seller, I'm sure that mush-mouthed imbecile will come along soon.

Just hang in there, Tiger.

The Pinhead Premium

Asking Price: $499,000
640 ORIZABA Ave, Long Beach, CA 90814
Beds: 3
Baths: 1.75
Sq. Ft.: 1,564
$/Sq. Ft.: $319
Lot Size: 4,350 Sq. Ft.
Year Built: 1912
MLS#: 12136163
On Redfin: 19 days
Income Requirement: $114,000 (mortgage/3.5)
Down Payment: $100,000
Monthly Nut: $2,700
Description: STANDARD SALE. ABSOLUTE MOVE-IN CONDITION 3 BED. /2 BATH. THE PROPERTY FEATURES FIREPLACE IN LARGE LIVING ROOM, NEWER MAPLE KITCHEN AND GRANITE COUNTER TOPS, NEWER WINDOWS, NEW INTERIOR PAINT, TRAVERTINE FLOOR IN FOYER, AND HARDWOOD FLOOR THROUGHOUT LIVING, DINING AND BEDROOMS. INSIDE LAUNDRY AREA AND FAU/CENTRAL AIR.

PLEASE STOP YELLING AT ME!

This place was purchased in 2003 for $437,500, and the loanowner made it EXACTLY five years (hmmm...five-year Option ARM, anyone?) before trouble started. Knowing he couldn't afford the full payment anymore (or ever), he desperately tried to get out from under his obligation in February 2008.

After two years and 11 days of extend and pretend can-kicking and gaming the system (aka living rent-free while the bank dragged its heels), the bank finally took it back for $424,000 -- essentially the '04 price.

Just three weeks after taking it back, the lender slapped it on the MLS (it's funny how banks don't seem to be in any sort of hurry as long as a property stays off the books, but as soon as they take it back they suddenly snap into action)...with a $95,000 premium attached.

WTF?

They've since lowered the price to $499,000, which isn't crazy compared to some of the garbage that's selling these days, but that's still a chunk of change.

With all of the recent happy talk about "V-shaped recoveries" and good times being here again, it's easy to forget we're still muddling through the disastrous results of the Great Housing Bubble. You know, the bubble? Remember?

Here's a refresher course:

May 29, 2003 - Sold (Public Records) $437,500 (22.3%/yr)
Mar 09, 2001 - Sold (Public Records) $280,000 (262.4%/yr!)
Sep 13, 2000 - Sold (Public Records) $150,000

Ponzi-tastic!

Anyhow, this house is pretty sweet. It's on a reasonably sized lot in an okay neighborhood (a little too close to 7th for my taste), has a back yard, and looks crisp and clean on the inside.




I'm just trying to figure out why the bank thinks it will get such a hefty premium over what they paid (and nobody else was willing to pay) at auction.

Oh, who the hell knows. It'll probably be in escrow by the time I publish this.

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.


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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.

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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.

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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.