Tuesday, September 30, 2008

West Ocean Two Auction Results

A reader in the Volk You, Buddy comments provided a link to a September 10 Wall Street Journal article describing the auction results for West Ocean Two. Good looking out, anon!

Some of you have been asking for information on these towers (and AQUA), so I thought it deserved to be featured on the front page of the blog.

CLICK HERE FOR ARTICLE




My comments/rant:

I'm legitimately worried about your mental well-being if you willingly pay $700-$900 a month in HOA fines. Ooh, but it has a conference room!

FAIL.

A friend's co-worker recently bought a 1 bed/1 bath ocean view unit for $350k. Sweet deal, right? Sure, as long as you don't count the additional $250,000 (over the life of the loan) in non-deductible HOA fees. I don't know about you, but it's difficult to write $700 checks and not "count" that money.

They reel people in with the hook that "it's 50% off the original asking price!" Dude, that "original asking price" was conceived on Fantasy Island, based on straw buyers, outright fraud, builders holding back inventory to create false demand, and idiot knife catchers with no access to newspapers setting ridiculous, untenable "comps." Who is falling for that cheaper-than-last-year-so-it-must-be-a-bargain crap? (Plenty, apparently.)

And how do you know they're not just making last year's price up to make it seem like a better deal? Pretty tough to check on those things, isn't it? But I suppose desperate builders, loan owners, and realtors are all perfectly honest with prospective buyers, right? RIGHT?

I mean, what good is 50% off if the original asking price was marked up by 200% to begin with? Is a $15 pack of gum a "steal" if 7-11 was asking $40 for it the week before? No, dummy, you just paid $15 for a freaking pack of gum!!

Don't get me wrong: Those towers are sweet as hell. An ocean-facing, newly constructed unit in that building? Fuhghedaboudit. But I think paying $600,000 (factoring in HOA) for a one-bedroom in downtown Long Beach is for suckers. Plain and simple.

By the way, 1 bedrooms in AQUA (city views) rent for $1,600. Whoops! Somebody's paying more than double to "own" a 1-bedroom in West Ocean Two.

Auction buyers, I suggest you get a tetanus shot. That falling knife you just caught looks rusty.

Saturday, September 27, 2008

Volk You, Buddy!



Address: 3057 Volk Ave, 90808
Asking Price: $649,000
Year Built: 1954
Size: 3 beds, 3 baths, 1,900 sq. ft.
$/Sq. Ft.: $342
Purchase price: N/A
Purchase date: N/A
MLS#: P654927
On Redfin: 21 days
Down Payment: $129,800
Monthly Payment: $4,000
Income Requirement: $162,000
Description: This home is a great opportunity for the Rancho buyer who desires the clean modern architecture of Cliff May combined with extra living space and storage areas. Set on one of the largest lots in the tract - 6200 sqft - this home features 1527 sqft in the main house and a permitted casita of approximately 400 sqft. Upgrades to the home are numerous: separate indoor laundry room, 240 amp electrical service, air conditionaing in both the main house and casita, separate water heaters for the master bath and casita, and an intercom system. Located on one the nicest streets in the tract, this property is a short walk to the lakes, paths, wildlife and nature center of 800 acre El Dorado Park. This home is by far the best value in the Ranchos.

“Conditionaing”?

I’ve never featured this area of Long Beach before, but today I decided it is worth exploring. This development, what many call “Rancho,” is bordered by Lakewood and Hawaiian Gardens, adjacent to El Dorado park, and is by all outward appearances a nice, clean, middle class community. The median household income is around $74,675, which is about 20 grand higher per year than the rest of the state.

The reason I decided to focus on this area, which couldn’t be further from where I want to buy (but I can certainly see the appeal for families), is because there are some interesting things happening here. And by “interesting” I mean “delusional idiots who foolishly price like it’s the summer of 2005.” You know, interesting.

Before we get too far into this listing, let’s reiterate some pertinent information from the description: This is a 1527 square foot, 2 bedroom 2 bath house we’re talking about here. Yes, there is a diminutive 400 square foot studio (“Is this a casita for Ants?!) in the back yard--which I doubt is fit for adult habitation--but it’s a bit disingenuous to list this as a “1,900 square foot 3 bed/3 bath.”

And don’t try to tell me that casita is the equivalent of a back-house and could be a source of rental income. At 400 squares? NINJA loan, please.

So, back to the main house. It’s obviously unoccupied, which draws attention to the weird staging. The furniture is sparse, small, and doesn’t even fill up the rooms. I mean, they are asking a wallet-nuking $650k for this place and they couldn’t even provide proper staging?



Speaking of $650,000, please take a gander at the kitchen and tell me it’s what you pictured in a house asking almost TWICE the median Southern California home price.



Look at those cheap, nasty fluorescent lights! Yuck! You just know there are countless dead bugs decomposing on the other side of those yellowing, dated plastic covers. And nice Home Depot bargain bin cabinets with NO HARDWARE. Not very “Modern/Hi-Tech” as your listing information so boldly lies—ERRR, claims.

And I can’t quite tell from the photos but some of those appliances look very outdated. Add to that the old countertops, and the (fantasy) buyer has a major renovation on their hands from day one. I mean, I thought realtors coined the phrase, “Kitchens sell houses!"

You know what else sells houses? Bathrooms. Out of three bathrooms to choose from, you know how many pictures were provided?

Whoever guessed ZERO, come on down and claim your prize!



Anytime bathroom or kitchen photos have been withheld, it’s a reliable bet that there’s a very specific reason. In other words, they are likely scary and decrepit. So, instead of bathrooms, we get what the realtor obviously believes are the “best,” most representative pictures to snag a buyer. To wit:



And here it is again.



And again?



Really? The lawnless backyard is the best aspect of the house? So good in fact that you had to show three different angles of the same thing?

This pricing makes no sense. It is simultaneously the most expensive AND the least upgraded house in the neighborhood. This is going to sound crazy, so bear with me, but I think this person might be, well, greedy.

I know! I know! That sounds so nuts! I mean, everybody knows greed plays no part in real estate. Maybe there's oil buried beneath the house?

Cliff May designs may be popular (get it?), but it doesn't take Nostradamus to predict this place will NEVER sell for $650,000. Who knows, maybe ol' Cliff pulled a John Delorean and stowed kilos of coke in the walls of each house he designed. That's about the only way to justify this Delusual asking price.

Judging by the lack of available records, I have a feeling most Rancho sellers are empty nesters trying to extract as much as they can before they retire, but waited too long to pick up a newspaper. They will pay dearly for their unfortunate timing and will get stomped by market fundamentals the longer they fight the new realities.

It’s a good thing the (first of many) stimulus package temporarily increased the conforming loan limit, because assuming you could come up with a 20% down payment of $129,800, you would still be way over the $417,000 limit and would need a jumbo loan. In case you haven’t heard, Wells Fargo just hit the panic button on jumbo loans and is now pricing in risk to the tune of 9%!

Which begs the following questions:

1) How quickly do you think other banks are going to follow suit?
2) How many pairs of trousers will be soiled when sellers of luxury houses get wind of this and desperately chop prices to meet the conforming limits?
3) When luxury houses are priced to get under conforming limits, what do you think
that’s going to do to the prices of decidedly non-luxury average abodes like this one?

Rising interest rates are going to absolutely CRUSH prices. Not to mention rising unemployment (people without incomes don’t buy houses) and continued foreclosure activity from the $300 Billion in Option ARM loans coming down the pike.

Although I certainly don't think we're entering the second Great Depression, housing is going to be in serious trouble for years and years. With Fannie and Freddie being pretty much the only remaining mortgage writers, buyers have to meet their rigid income requirements.

Unlike when there were all sorts of wacky sleight-of-hand loans that practically eliminated any affordability hurdles, this New World Lending Order will ultimately determine how much houses cost. It's not what you can afford to pay, it's what somebody is willing to loan you.

This rare subset of eligible buyers, assuming they made $100,000 annually ($25k more than the median income for this zip code!), would still be priced out of an average house like this. In fact, to afford this mediocre pad (which admittedly does have a lot of potential) F&F would require them to magically come up with another $60,000 per year in income before they would qualify for a loan.

To put it another way, if our new buyers made $100,000, the most they could afford to pay for a house is $400,000--and even that's stretching it by assuming no other debt load. $400k is the magic number where debt-to-income meets strict lending requirements. This house asking $650,000 suddenly starts lopping off $100,000 at a time to find an eligible buyer.

Does that help to explain why house prices are going to continue to be systematically dismantled during the ensuing years?

Side Note: This is really strange. I asked my mom about Rancho because the home I lived in for the first year of my life was somewhere in that area. My folks bought a Cliff May model in 1975 for a whopping $75k. She says it was and is a nice area with very small homes.

She couldn't believe some of the asking prices--especially considering this is a tract for working families, not Rockefellers. Just browse the nearby listings. Completely original, run-down shit shacks are commanding more than half a million. It appears as if this whole neighborhood is a few fries short of a Happy Meal.

Anyhow, this is where it gets weird: Our place was on the same street and literally seven houses down from today's featured property! Crazy, right?

Judging by the nearby comps, if my folks had held onto their little bungalow until today it would have appreciated nearly $500,000!

Thursday, September 25, 2008

WaMu is Toast: UPDATE

I really, really, really hope you heeded my advice and took anything over $100,000 out of WaMu.

If you're under those FDIC-insured limits, you're fine. The FDIC already found a buyer for the deposits (JP Morgan), so don't panic.

I have money in several WaMu accounts and I'm not sweating it (well, I'm kind of sweating it--this is big freaking news!). Remember, the FDIC still has money--which may not be the case a few months from now.


REUTERS: WaMu is largest U.S. bank failure

By Elinor Comlay and Jonathan Stempel

Washington Mutual Inc was closed by the U.S. government in by far the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion.

Thursday's seizure and sale is the latest historic step in U.S. government attempts to clean up a banking industry littered with toxic mortgage debt. Negotiations over a $700 billion bailout of the entire financial system stalled in Washington on Thursday.

Washington Mutual, the largest U.S. savings and loan, has been one of the lenders hardest hit by the nation's housing bust and credit crisis, and had already suffered from soaring mortgage losses.

Washington Mutual was shut by the federal Office of Thrift Supervision, and the Federal Deposit Insurance Corp was named receiver. This followed $16.7 billion of deposit outflows at the Seattle-based thrift since Sept 15, the OTS said.

"With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," the OTS said.

Customers should expect business as usual on Friday, and all depositors are fully protected, the FDIC said.


CLICK HERE FOR THE FULL ARTICLE

Confidence is Key: UPDATE



Last time we featured this property, I encouraged the seller to stay strong. With so many negative nellys out there, it's so easy for sellers in Long Beach (which, as you know, is a World Class Citytm like San Francisco, Paris, or New York) to feel pressure to lower the prices.

I say DON'T DO IT! Sellers don't owe buyers anything, and certainly shouldn't be lowering prices to "lure" buyers! If they're just too ignorant to realize the snowflake uniqueness of your house, then you should just wait until a sophisticated buyer with taste and appreciation for high-class abodes flies in on his private jet.



On September 4th I said:

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

I believe!

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

Well, no bidding war started, so it's obvious the extremely wealthy foreign buyers were delayed at Hong Kong airport. My guess is that all of those cash-stuffed suitcases exceeded the weight limit for the private jet. So until they can sort that out, we're stuck with those low-life Long Beach buyers. What a bunch of mongrels to not see what a steal $1.75 million is.


Anyhow, the seller (against my advice) lowered the price by -$150,000 for a new, bargain bin asking price of $1,599,000. Man, you should have held out.

At $1.59 mil you're only going to attract total white trash with domestic cars and clothes that weren't purchased at Neiman Marcus. Yuck! You want that kind of shady element in a house you so lovingly flipped?! I mean, to afford your new way-too-generous asking price, they only need to make $400,000 a year. Gross!



I hope you're happy. Because you didn't wait for all of those wealthy Russian oil barons (who feel more at home with Long Beach's crime, mediocre schools, and 100-year-old construction) to snap up your house for over asking price, the new broke-ass hillbilly buyers are going to pull up in front of your house like cousin Eddie from National Lampoon's Christmas Vacation.

NOT SAFE FOR WORK VIDEO

But, before that happens, you still have a chance to raise the price to above $2 million. Once the trillion dollar Banker Buddy Bailout is approved, housing will be instantly saved, lenders will resume handing out million dollar checks to poor people, and prices of luxury resorts like yours will skyrocket!!!!1!! Don't miss out on this once in a lifetime opportunity!!!! Won't last!!!1!

Wednesday, September 24, 2008

Finished Before It Begins: UPDATE

It appears as if our lackadaisical seller over at 1130 E. 1st St. finally decided to get off his ass and try to sell his apartment.


As you may remember, I berated the seller and their six-percenter for their obvious lack of effort, most ably demonstrated by their half-assed pictures and total lack of staging.



Well, two weeks ago they finally figured out the formula to selling in a rapidly declining market (i.e. Drop the price, dumbass) and sliced off an astounding $40,000. That represents a two-month total reduction of 50 grand for those of you counting at home. Now we're getting somewhere!

Keep in mind, this place was purchased a scant 22 months ago for $415,000. Un-effing-believable. And now our unelected Treasury Secretary wants total immunity in wasting our tax money to bail out banks idiotic enough to believe this cramped, outdated shit pile was worth upwards of $400k.

It makes me want to vomit shards of glass.

Anyhow, let's revisit the numbers and see if the odds of a sale have measurably improved:

Address: 1130 E 1st St #301, 90802
Asking Price: $249,000
Year Built: 1959
Size: 2 beds, 2 baths, 977 sq. ft.
New $/Sq. Ft.: $255 (from $306)
HOA Fine: $287
Purchase price: $415,000
Purchase date: 1/2007
MLS#: P648286
On Redfin: 63 days
New Down Payment: $49,800 (from $60k)
New Monthly Payment: $1,800 (from $2,100)
New Income Requirement: $62,000 (from $75,000)
Description: Unit was remodled two years ago. All new flooring, kitchen appliances,paint and lots of nice up grades. Front Corner, top floor. Great view of the city, the Queen Mary is visable from in front of unit. Two, assigned underground parking spaces, come with this unit. Short sale.

"No deal, Howie!"

Are you beginning to notice how many Long Beach properties are sitting unsold at $250 per square foot? I bet you misguided housing bulls never thought you'd see the day. And I bet you're a little nervous that $250 per square foot is only the beginning of the decline.

And for those of you who got it dead wrong by dumbly insisting "Now is a great time to buy"tm, potentially costing yourselves and others tens of thousands of dollars, the price collapse is going to get worse. Much, much worse.

Because $250 per square foot in the face of stagnating incomes, increasing job losses, time-bomb loans resetting next year, and incredibly strict lending requirements, doesn't have a Sno-cone's chance in Hades of sticking. Especially for sellers like this who are too afraid to post pictures of the decrepit kitchens.

In this zip code, in this neighborhood, in this condition, with a $287 HOA fee (with no discernible amenities, mind you), even $200 per square foot would be an absolute miracle sent via FedEx from heaven. And if you have any doubt about that, just take another gander at the bathroom:



Perhaps I might be on to something?

Monday, September 22, 2008

Misquoted

This "realtor" has a "quotation mark" problem:


Address: 24 3rd Place, 90802
Asking Price: $289,000
Year Built: 1953
Size: 1 bed, 1 bath, 739 sq. ft.
$/Sq. Ft.: $391
HOA Fine: $200
Purchase price: $359,000 (!)
Purchase date: 9/2005
MLS#: S08134941
On Redfin: 3 days
Down Payment: $57,800
Monthly Payment: $2,000
Income Requirement: $72,250
Description: Rare opportunity to buy "on teh beach" condo via a Short Sale. One bedroom (easily fits king size bed) with one bathroom which includes corian counter top. The unit features 739 square feet of living space which feels much larger, entry way, separate dining room, kitchen "With a View", complex laundry room, complex storage room for bikes, blades, beach gear and all else to fit hyour lifestyle. Low monthly HOAs. This unit is not only located "on the beach" but it is also close to "Everything" in Long Beach including Convention Center and Shoreline Village. This is a must see home!

This “old ass” apartment is not in fact “on teh beach” as the description so boldly (falsely) claims. The building is technically “on teh beach,” but there is a considerable “difference” between an “ocean facing” unit and a “street facing” one.

I am actually “warming up” to the idea of living in a 1 bedroom—so long as it has “ocean views.” As far as “investments” go, looking at the sand is a pretty good bet—despite the “proximity premium.” However, this particular place is “severely overpriced” at $289,000. Mostly because it’s “on the street” and “totally unimpressive” with its "lack of upgrades," “horrendous kitchen" and “Tijuana Timber” bathroom cabinetry.




$391 per square foot is "a joke without a punchline" and is indicative of “mental instability.” Again, perhaps you can climb up “on your stove” and crane your neck out the window to enjoy the “kitchen With a View,” but without the ability to actually see the ocean without "scaling your ancient appliances" there is absolutely no way to “justify” this insane asking price.

The agent claims this place will fit “hyour lifestyle,” but my lifestyle doesn’t involve paying $2,000 a month for a place with a “complex laundry room.” I also could not rationalize “buying” this tiny apartment when I could “rent” for nearly “half” that. The “listing” doesn’t “mention” the “parking situation” but the information is conspicuously absent. For a place in a “parking-heavy” area of Long Beach, this seems like an “important” thing to ”mention.”

In addition to the “laundry and parking situations,” I cannot “fathom” paying $202 a month in HOA fines for a place with “no pool” or “gym.”


As you can see, this outdated shoebox was “purchased” for $359,000 near the “peak” of the “housing bubble”—making a sale of this lint trap a “losing proposition” to the tune of -$69,000 plus commissions in just “three years.” That “represents” a 25% "haircut" from the 2005 price. That’s “gotta hurt.”

And of course that is “assuming” the bank “approves” the short sale. As we know by now, short sales are a “complete waste of time” and I’m not “holding my breath.”

You will also “notice” that this dust bin was "purchased" for less than $100,000 just “eight years ago.” I nearly “shit myself” when I saw that 31.9% annual appreciation figure. “Housing bubble,” anyone?

Dec 20, 1996 - $50,000
Dec 28, 2000 - $98,500 (18.4%/yr appreciation)
Sep 01, 2005 - $359,000 (31.9%/yr appreciation)

If we are “extremely generous” and calculate a 4% “appreciation rate” since 2000, “present value” is $134,804. That “price” is consistent with “fundamentals” such as “local incomes” and “rental parity.”

The “good news” is that within the first three days on the market, the price has been “slashed” by -$20,000, indicating an acknowledgement that this place is “doomed” anywhere near its current asking price. Keep dropping this aggressively, idiots, and you "might" just snag a rube “flush with cash.”

But given the “recent economic woes" don’t “quote me on that.”

Thursday, September 18, 2008

Older Than Dirt

Wow. What a gem.



Address: 1540 Temple, 90804
Asking Price: $319,000
Year Built: 1920
Size: 3 beds, 2 baths, 1,472 sq. ft.
$/Sq. Ft.: $217
Purchase price: $472,500
Purchase date: 11/2007
MLS#: P639927
On Redfin: 109 days
Down Payment: $63,800
Monthly Payment: $1,900
Income Requirement: $79,750
Description: PRICE REDUCTION!!! Recently remodeled 3 bedroom, 2 bath home on a corner lot. Open floor plan. School in the next block. Detached garage. Corporate owned.

The listing information lists the STYLE as “Ranch.” What are you ranching over there, pardner? Mounds of dirt?



“School in the next block”? Um, try FIFTEEN FEET AWAY. I guess that’s handy if your kids happen to go to that school, but even so, why on earth would you want to live spitting distance from a schoolyard?



And I’m unsure what they mean by “corporate owned.” Public information on the property indicates a more apt description is “Countrywide owned.”

Could you imagine if this truly was "corporate owned" and this POS dirt farm belonged to Hewlett Packard or Xerox and they leased it out to executives when in town for training seminars? HAHAHAHA! You could write a sitcom about these pasty white HR managers flying in from Dubuque with the full assurances from corporate HQ that they and their family will be staying in “corporate owned” lodging. Philip Baumgardner, with his white short-sleeved dress shirt tucked into his tan Dockers, along with his toe-headed family get dropped off by the Town Car in front of this place.

"Uh, Geraldine, do you suppose this is a mistake?"

Then you could have scenes of them meeting all of their new "wacky" neighbors. Classic! Wait, I’d better stop revealing too much—I don’t want you to steal my “Must See TV” goldmine.

The most interesting aspect of this dump is the January 2007 purchase price. Yep, you read that correctly: $730,000. Setting aside the obvious fraud involved with that transaction, you’ll notice those lucky owners didn’t even last 10 months with the crushing debt load and it went back to the Countrywide for $472,500.

Now they’re trying to offload this mess for $319,900, representing a -35% discount from the sales price just 10 months ago, and a whopping -55% haircut from the January 2007 price.

You don’t need me to tell you that this dung box ain’t going anywhere so long as they’re asking $319k. To afford this place, assuming you could find someone with the testicular fortitude to live in this ‘hood, a buyer would need to make $80,000! That's more than TWICE the median income. What, you’re going to tell me this is an above median luxury home?

Given the dirt yard(s), the poor condition of the 88-year-old house, the location on the street, the undesirable neighborhood, and the proximity related to the noisy, busy school, they’d be extremely lucky to get $190,000 for this supremely undesirable property when this is all said and done. 190k would almost align with local incomes, rent vs. buy calculations, and a generous 4% annual appreciation since 2003. And frankly, I think $190k for this dump is being extremely optimistic.

I would also like to point out that between 11/2003 and 1/2007—a span of just over three years and five transactions--this house resulted in a total of $570,000 in profits to various flippers.

Nov 26, 2003 - $160,000
Feb 11, 2004 - $215,000
Aug 24, 2004 - $300,000
Nov 19, 2004 - $325,000
Mar 13, 2006 - $570,000
Jan 12, 2007 - $730,000
Nov 07, 2007 - $472,500


That doesn’t factor in the various commissions paid to appraisers, realtors on both sides of the transaction, lenders, and investment bankers. Isn’t that insane? Everybody got a piece of this piece of shit. All said and done, this house probably generated close to a million dollars, simply by virtue of being sold and re-sold to California residents. Like a twisted, expensive game of musical chairs.

And now the needle is off the record, the music has abrubtly stopped, and our entire financial system, reliant upon expectations of this magical Ponzi scheme of selling overpriced houses to each other for perpetuity, is imploding right before our eyes.

Dirt ranchers may be the only survivors.

Wednesday, September 17, 2008

Long Beach Housing Blog's 100th Post!


Address: 1775 Ohio Ave #105, 90804
Asking Price: $217,500
Year Built: 1993
Size: 3 beds, 2 baths, 1,225 sq. ft.
$/Sq. Ft.: $178
HOA Fine: $353
Purchase price: $418,500 (!)
Purchase date: 5/2006
MLS#: P655706
On Redfin: 6 days
Down Payment: $43,500
Monthly Payment: $1,746
Income Requirement: $54,375
Description: This is a very desirable 3 BEDROOM condo within a great complex with an nice open floor plan. This is a true 3 bedroom, 2 bathroom condo with over 1200+ square feet that is move-in condition. Large kitchen that opens to living area, seperate dining room, master-suite with huge closets, central air and heating, etc. Huge oversized private patio. This is the best priced 3 bedroom condo in Long Beach. Won't Last!



You know the tides of the real estate market have turned when your price per square foot is HALF the monthly HOA fee!

With a $1,746 (pre-tax benefit) mortgage payment, this three-bedroom condo would be an okay deal for an owner-occupant (assuming you want to live right on PCH in a shady part of town). Most notably, two–bedroom units in this complex rent for around $1750, so you could potentially have a cash-flow positive investment (assuming you can find reliable renters who want to live right on PCH in a shady part of town).




It’s worth noting this mediocre, non-upgraded apartment sold for a mind-blowing $418,500 just two years ago. Now, trying to keep up with the bombardment of foreclosures and short sales on the MLS (not to mention the carnage within the same building), this poor sap is desperately begging for a paltry $217,500.

SWEET JUMPIN' JESUS.

The current asking price represents a $200,000 loss from the last purchase price and a 50% haircut once commissions are factored in. That’s gotta hurt!


Is it any wonder banks, investment houses, insurers, and even our own government sponsored entities Freddie Mac and Fannie Mae are going t*ts up at such a rapid pace?

Assuming this family made the median household income for this zip code ($35,063), that means a bank lent them money at nearly TWELVE FUCKING TIMES THEIR ANNUAL INCOME!

Even if we are to believe the former owners made twice the median household income, making them Rockefellers in comparison to their neighbors, that is still SIX TIMES INCOME!

I guess six times income isn't a problem if you don't have a car payment, a car insurance payment, or pay for gas. Also not a biggie if you don't eat groceries, use electricity, buy clothing, have a cell phone, or a social life. Six times income is also totally doable if you don't have children, credit card debt, student loan payments, or pay child support.

Enough of the bailouts already! It's obvious these banks absolutely, irrefutably, without any doubt in my mind, deserve to lose every. frigging. penny.

It simply amazes me that nobody, at any point during this transaction, from the (fraudulent) appraisal on to the stinky loan being repackaged and sold off to some clueless, faceless investors, stopped to think that something was amiss here.

I mean, don’t banks essentially manage risk for a living? Where were they?

I know I’m very bearish on this site, but the last few weeks have convinced me that it’s going to be much, much worse than anyone imagined. Assuming any of these Hail Mary actions by the Fed (“Ben, what do we do? Another huge bank is going bankrupt from writing bad loans to people who had no business buying a house!” “Hell, I don’t know—throw hundreds of billions of taxpayer dollars at it and hope everything works out.”) somehow miraculously stabilize the housing market, by the time that happens a U.S. dollar will be worth less than an Algebra II flash card.

The most terrifying thing about this whole mess is the appearance that nobody—I mean nobody—seems to have any idea what the hell is going on or what the hell to do about what they don’t know is going on. You have McCain making an inexplicably out of touch claim that “the fundamentals of our economy are strong” (and don’t give me that garbage about "he really meant the American workers are strong." Puh-lease), Treasury Secretary Hank Paulson pulling a Baghdad Bob by saying we can remain confident in the "soundness and resilience in the American financial system" despite the obvious carnage around him, and Senator Harry Reid straight up ADMITTING nobody knows what the hell to do.

I mean, can’t somebody at least pretend they’re doing more than just writing checks with our money and simply praying for the best? Can't someone in a position of power at least make some kind of effort to persuade us they have a basic understanding of economic principles?

These are scary times folks. Frankly, the idea of buying a house is no longer a priority for me. The word to live by during the next few years will be Survival.

WaMu is Toast

The death knell for Washington Mutual is finally ringing. Their credit rating was recently reduced to "junk" status and the Fed is desperately searching for a buyer:

http://www.nypost.com/seven/09172008/business/feds_try_to_find_a_buyer_for_wamu_129499.htm

If you have more than the FDIC insured limits ($100,000) in any bank--especially WaMu--rectify that immediately. WaMu has too much toxic crap on their books and I seriously doubt they will find a buyer in time to avoid a government takeover.

It's tempting to take my CD out of there given the bad news, but I don't think there's much point. But it's fully insured by the federal government and in this environment a truly "safe" bank is hard to come by. Plus, the FDIC still has money to cover our deposits. That may not be the case after a few more large banks fail and I'd rather have my money with one of the FIRST banks to go under than the last:

http://news.yahoo.com/s/ap/20080916/ap_on_bi_ge/bank_deposits_safety

I'm sure you kids already know all of this because you're smart enough to read this blog (I'm kidding. Sort of), but please spread the word about FDIC limits.

It's worth noting that when IndyMac went belly-up, a lot of people--unaware of the FDIC limits--lost at least half of anything over $100,000 (it's also notable that IndyMac was not even on the FDIC's troubled bank watch list when it went t*ts up). Just want to make sure my readers are all protected.


Sunday, September 14, 2008

See no Evil, Hear no Evil, Speak no Evil

A reader suggested I feature today's property and I am glad he/she did. In case you were starting to believe sanity was creeping back into Long Beach real estate, this specimen of delusion will change all of that.

You see, greed still rules the day. And this delusual "seller" (I use quotation marks because judging by the avarice-induced asking price, it's abundantly clear this flipper has no intention of ever selling) wants to party like it's 2005.

I mean, who doesn't want to relive those days?

You know, the days when $500 in new bathroom tile translated to $4,300 in added value. Those glory days when installing $5,000 worth of stainless steel appliances earned you $10,000 in equity. Those days in the sun when you could buy a property, hold it for less than a year, and pocket hundreds of thousands of dollars for doing absolutely nothing.

But, unfortunately, our f**ked flipper decided to kick off that '05-themed celebration in fall of 2007, when the housing market was already tanking. And he carried on the 2005 theme party with the bubble-era asking price, asking 20 to 40% more than nearby homes. Oops.



Address: 655 Ultimo Ave, 90814
Asking Price: $999,500
Size: 3 beds, 3.5 baths, 2,100 sq. ft.
Year Built: 1959
$/Sq. Ft.: $476
Purchase price: $575,000
Purchase date: 10/2007
MLS#: P626435
On Redfin: 188 days
Down Payment: $199,900
Monthly Payment (Principle, Interest, Insurance, Taxes): $6,000Income Requirement: $250,000
Description: A MUST SEE, RARE TO FIND THIS NEW A HOME, WITH THE HIGHEST QUALITY OF WORKMANSHIP AND STYLE WITH INTEGRITY. PRICED TO SELL... This MidCentury Ranch offers LARGE YARD, and a seamless interface of indoor-outdoor lifestyle with unmatched elegance and open-space of modern architecture perfect for the casual entertainer. It is newly finished with 3 bd (EACH WITH A BATHROOM), 3.5 bath, and enhanced by a complete restoration using the highest qualities of: custom cabinetry, exotic wood floors, appliances and fixtures, stylishly appointments, plus new services and utilities, pl, el, heat/air, windows, etc.. It is situated on a large Lot in Alamitos Hts. perfect for access to commuting highways 605,22,405.. and conveniently locating for just a short walk to schools, parks, golf crse, shopping, restaurants and Long Beach State. LIKE NEW with MidCentury authenticity

I mean, is this place a converted bomb shelter? The exterior is so 1950s Cuba!



This is an interesting area of Long Beach that I have not featured on RE in the LBC before. Property values in this neighborhood have remained sticky and it appears there have been very few foreclosures (so far). I don't know much about the area other than it's pretty expensive for what you get (square footage, and location-wise). In fact, there is no real consensus on what neighborhood this is officially called. This listing agent refers to it as Alamitos Heights, but it's on the other side of the lagoon and actually closer to the Marina. Anyone know if this area has a particular nickname?



ANYHOW, this is a prime example of someone who genuinely believes their neighborhood is special. Totally immune from market forces and the bloodletting all around them. So, they slap an offensive price on a so-so property and spend their days being appalled that "bottom feeders" fail to appreciate how unique this particular neighborhood, out of every nice Long Beach neighborhood, truly is (Note: A vast majority of homes for sale in this area are well over 120 days on market--this moron isn't the only one drinking the Kool Aid).

To give you an idea of the level of idiocy (and possibly brain damage) we are dealing with here, please turn your attention to the pricing action during the last excruciating, sweat-inducing, gut-wrenching 188 days:

Mar 10, 2008 - $1,199,000
Apr 17, 2008 - $1,095,000
Jun 30, 2008 - $999,000
Aug 09, 2008 - $999,500

So, as you can see, they started out in March '08 asking a cool 1.2 mil, and lopped off almost 10% after only five weeks on the market.

Then, when the alleged Spring Bounce(tm) failed to materialize, in June they lopped off another $96,000.

As the Supposed Summer Selling Season(tm), led by those droves of wealthy Hong Kong residents we kept hearing about, passed them by with no activity, they decided to get serious about attracting a buyer by increasing the price by $500.

Sure, why not?



It appears this house went back to the bank for $721,885 in August 2007, and the flipper scooped it up two months later for $575,000. This flipper, like many knife-catching fools jumping into the market right now, believed he was getting a smoking deal at the bottom of the market. And you know what? On the face of it, 575k actually is a pretty good deal considering the nearby comps (however, given the laundry list of upgrades and renovations, I suspect this place was a wreck--calling into question just how good this deal was).

But this dumb-dumb had watched too many episodes of Flip This House, Designed to Sell, and other assorted real estate porn, and let dollar signs convince him his "smoking deal" could magically transform into a SuperLotto jackpot.

Yes, folks, for holding this property 10 months, slapping some flooring down, replacing the windows, repainting, and carting in some new appliances, this idiot expects you to believe he deserves $425,000 for his efforts.

You sir, have some massive brass balls.

And to be fair, the craftsmanship and quality of materials is top notch. I love the bathroom cabinetry, I like the patio tile, the hardwood floors look good, and I'm into the unique architectural elements.




However, the kitchen is awful, the staging decorations are weird, pretentious and off-putting, and what the holy hell is going on with that living room?



The main problem with this horrendously overpriced flip is that it's late 2008, and top-of-the-line upgrades fetch only a fraction of their initial cost. If this seller bought in 2004 and sold in 2005, it's likely any money put into the flip could have been doubled. But, as the late, great Biggie Smalls once said, "Things done changed."

Now that lending has dried up and money finally means something again, NOBODY is looking for this level of "unmatched elegance." How do I know this? Let's just say I have 188 little birdies whispering in my ear.

And while I can appreciate the "seamless interface of indoor-outdoor lifestyle," the fact is that tightening lending standards and significantly increased down payment requirements will further alienate potential buyers from a place like this.

My favorite photo of the entire listing is the Denial Monkeys on prominent display. This pretty much sums it all up for this flopped flip:


See no Reality.
Hear no Reality.
Speak no Reality.

Monday, September 8, 2008

Disappearing Acts: UPDATE

A reader asked for some MLS numbers for the Long Beach properties featured on Dr. Housing Bubble Blog last week.

Dr. HB was kind enough to get those to me. Here are the two remaining active listings:

R804042

R808109

Yikes.

Friday, September 5, 2008

Wanna Bet? UPDATE

Today we’re going to take a ride in the Way Back Machine and visit a rat hole featured what seems like ages ago.


Address: 1182 E. 9th Street, 90813
Asking Price: $199,000
Size: 2 beds, 1 baths, 600 sq. ft.
Year Built: 1923
$/Sq. Ft.: $333
Purchase price: $285,000
Purchase date: 7/2005
MLS#: S499815
On Redfin: 196 days
New Down Payment: $39,800
New Monthly Payment (Principle, Interest, Insurance, Taxes): $1,283
New Income Requirement: $50,000
Description: WOW $$$$$ HUGE PRICE REDUCTION... TRUE PRIDE OF OWNERSHIP ON THIS ONE!!! CHARMING HISTORIC BUNGALOW (1923). THIS BEAUTIFULLY UPGRADED 2 BEDROOM HOME FEATURES: REFINISHED HARDWOOD FLOORS, NEW TILE FLOORING,NEW PAINT INSIDE & OUT, ORIGINAL HISTORIC DECOR, ATTACHED GARAGE AND BAMBOO-SCREENED BACKYARD. NO MELLO-ROOS OR ASSOCIATION DUES! JUST A FEW BLOCKS FROM THE BEACH AND DOWNTOWN!

They tried to pull a little sleight of hand with the days on market, but this third-world hovel has been begging since late 2007! It's been a long year, eh?




What do you think, could you rent this place for $1,300? Unusable garage, 85-years-old, dirt field behind the house, a paltry 600 square feet, terrible neighborhood, burglar bars, security doors…I very much doubt it. Let’s face it, this is basically tenement housing.

However, this recent price reduction signifies they finally get it. The party is over and any remaining optimism is dead and buried. Remember, the original asking price for this “beautifully upgraded” compost pile was in excess of $315,000!

Just for perspective, the current asking price of $199,000 represents a 40% discount from the 2005 purchase price!

Holy housing meltdown, Batman!


Sadly, this infected wound still requires further price cuts if it hopes to sell. I mean, just check out the competition asking a mere $129,000.



That place is no prize either, but its rock-bottom price ought to make our seller at 1182 9th St. consider stocking up on adult diapers.

Back in February, I said:

The willful ignorance of Long Beach sellers will get them through a few more months of insane pricing strategies but as inventory stacks up, sales decline, the Spring Bounce never materializes, the "Stimulus Plan" fails to make a dent, and the only people selling are those who chop prices significantly to meet the dismal economic realities, LB sellers will eventually give in to the same grim reality that their Phoenix brethren have painfully accepted.

I am going to make a prediction: This rat hole will not sell at $300,000, $250,000, or $200,000. In my estimation, this little gem won't so much as get a backup offer for anything more than $150,000. You may think that's a dramatic position, but I'll put my money where my mouth is: I'll put $1,000 on it. Any takers?


Needless to say, nobody took me up on the offer. Not even the True Believer realtors and commission-heads that used to spew invective comments on this site (but still read every week—Hi!) were willing to back up their sunshine and rainbow opinions about the state of the market. Because deep down they knew I was right.

And here we are, at the end of the Supposed Summer Selling Season(tm), asking $199,000 and this dump is still languishing on the MLS. That means more pricing pain is on the way.

And if you disagree and believe "Now is a great time to buy"(tm) then by all means, put your down payment money where your delusional mouth is. I can guarantee you'll end up losing an awful lot more than $1,000.

Thursday, September 4, 2008

Confidence is Key

Atta boy.




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

Boo-ya!

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



Bam!

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

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



Nailed it!

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


I believe!

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



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

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

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

Disappearing Acts

Dr. Housing Bubble has an article today about the massive amounts of equity evaporating in the world of Long Beach real estate.

Brutal.