Wednesday, December 31, 2008

Blink



Address: 4201 E 3rd St, 90804
Asking Price: $514,900
Year Built: 1922
Size: 2 beds, 1 bath, 1,163 sq. ft.
$/Sq. Ft.: $443
Purchase price: $576,250
Purchase date: 11/6/2008
MLS#: S554980
On Redfin: 41 days
Down Payment: $103,000
Monthly Payment: $2,900
Income Requirement: $147,000
Description: Wow! Must see this great piece of property located on the corner of 3rd and Roswell. Darling 2 bedroom 1 bath with great patios on the side and in back for entertaining! Great open floor plan with lots of windows, hardwood floors and indoor laundry area. Fully tiled bath and and upgraded kitchen. Oversized garage for great storage. This one will be gone before you can blink!

*Blink*

*Blink Blink Blink*

*Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink Blink*


That's odd. The house is still there.

And still ugly as a war wound.

This listing tells you all you need to know about how it feels trying (I'm actually not sure if this qualifies as "trying") to sell a bank-owned property.

I mean, the fake enthusiasm just oozes off the screen. Three "Great"s, three exclamation marks, one "Darling" and a "Wow" to kick things off.

I'm particularly fond of listing descriptions that start with a "Wow!" but I don't see a single photo deserving of that word.



Unless of course, they meant "Wow! That's effing depressing!"



Jesus, those dust bunnies look like they bite!

The description mentions several key selling points, yet the agent failed to provide any photos.

"Oversized garage for great storage"? Prove it.

"and and [sic] upgraded kitchen"? Prove it.

To be fair, photos of the patios were provided (I think), but does this cramped, low-walled set-up look ideal for "entertaining"?





And we're definitely in the shit when the best thing about the bathroom is that it's "fully tiled." I should hope so! That's the informational equivalent of saying pine floors are made of wood.

It doesn't matter anyway, because the agent was too afraid to post a picture of this sure-to-be impressive bathroom. And we all know what that means. Yep, there's no sink, the toilet is a paint bucket, and the tile is grouted with ostrich poop.

The white flag is being waved so hard on this listing that someone's arms are going snap out of their sockets. Everyone involved (especially potential buyers) knows for a fact it will never sell for $514,900.



After all, it has been on the market (in some form) since February with no luck.

The most incredible, and telling, fact about the housing bubble is that this house sold in April 2006 for $749,000. Three-quarters of a million for this colossal piece of shit. Unbelievable.

Given, it's in an absolutely amazing neighborhood, but $644 per square foot? WTF were the buyers thinking? They clearly weren't thinking they could afford ~$4,500 a month in carrying costs because they lost the freaking house.

I would ask WTF the lender was thinking, but this was Spring 2006--they weren't thinking. And it cost them dearly.

Well, actually, that $200,000 loss will cost us taxpayers ultimately. But the past is the past. That loss has long since been written off. The real question is how much of a discount will be required to move this crusty casa.

The answer to that question is, um, a lot.

At this asking price, you would have to throw down $2,900 a month (after coming up with a $103,000 down payment). Surely possible for the more well-heeled Long Beach buyers, but consider that this house, just a few blocks away, is asking just $2,000 in rent:



And this it's a THREE BEDROOM!

So, assuming the bank gets serious about offloading this dust mite domicile and cuts the price to, oh, I dunno, $450,000, a knife-catcher might happily jump in. It's a killer neighborhood and location. But even after that significant $65,000 discount, it still wouldn't pencil out as a good investment.

Why? The primary reason, besides significantly lower nearby rents, is maintenance costs. Given the lack of meaningful photos (and the abysmal photos that were included) I'm betting upon closer inspection it's an absolute, god-awful mess. And clocking in at a sprightly 87 years of age, the need for significant deferred maintenance is guaranteed as well.

Do you see why Long Beach is nowhere near a bottom?

2009 is going to be a long year for crappy bank-owned properties that refuse to price like crappy, bank-owned properties.

Tuesday, December 30, 2008

OMG on MLK: UPDATE

Back from Vegas with a quick update on a property I featured back in April.



To jog your memory, the property was facing a quarter million in equity evaporation if it sold for the then-current asking price of $375,000.





Well, I'm happy to report that after a year languishing on the market...it sold!

Well, sort of.

The house went off the market in September, and in October a sale was posted for $340,000. Without the actual property records, I'm guessing that's the bank taking it back.

Taking it back for $163 per square foot, by the way. OUCHIES.

It hasn't popped back onto the market yet, so who knows how much they'll ask. In this neighborhood, that per square foot price sounds reasonable. But then again, the bank just lost -$280,000 and I imagine they want to recoup at least some of that money.

Work has been crazy--yes, even during Christmas break--so hang tight for resumption of regular updates.

I hope everyone has a safe, exciting New Year's Eve. I, on the other hand, am two weeks into a beard-growing contest, thereby killing any chance of a New Year's make out party. No, seriously, I'm even grossing myself out.

2009 is going to be a big year economically, politically, personally, and in just about every other way. Who knows, maybe some of you will step up to the plate and buy your little slice of the American Dream(tm)!

Thursday, December 25, 2008

Wednesday, December 24, 2008

Dumbest. Seller. Ever: UPDATE

Count Chocula over at the Diplomat Dungeon reduced the price for the second time in five weeks.



As per ususal, the price cut is a meaningless gesture considering the WTF asking price, but it at least shows the listing isn't a joke. I was seriously beginning to think the seller died and everyone just forgot about the listing.

But come on, a pathetic 2% reduction in this buyer's market? Why bother?

This guy just doesn't get it. If you want to sell in this dismal market (especially in this neighborhood), you've got to be willing to deal. 6% total reductions in nearly two years isn't going to cut it.

But I guess after 659 days rotting on the MLS, you already knew that.

Sunday, December 21, 2008

Rip Van Winkle Fell the Hell Asleep

Some co-workers and I are participating in a beard-growing contest during winter break. When we come back to the office in a few weeks, our beards will be rated on three criteria: 1) Placement, 2) Creativity, and 3) Overall Toughness.

Frankly, I have no idea how we came up with those categories, but there it is.

Now, I'm not a hairy guy to begin with and my beards tend to look patchier than a hobo's trousers, but today as I admired my five days of stubble I wondered what kind of mountain man masterpiece I could create with months to spare instead of weeks.



And as I pondered the benefits of having that kind of leisure time, I stumbled (stubbled?) upon the famously-bearded Rip Van Winkle trying to sell his condo.



Address: 800 E Ocean #805, 90802
Asking Price: $478,900
Year Built: 1928
Size: 1 bed, 1 bath, 839 sq. ft.
$/Sq. Ft.: $571
HOA Fine: $973 (WTF?!)
MLS#: P571509
On Redfin: 617 days
Description: This beautifully appointed condo home features Ocean Views from every room. It has a large living room, dining area, kitchen, foyer, dressing area / home office, and lots of closet space. Floor to ceiling mirrors in the living and dining rooms reflect the exceptional ocean views. The glamorous kitchen includes a gas range and all appliances. The bathroom includes a full tub with shower, pedestal sink, black and white checkerboard square flooring and lots of built-in storage.

Imagine the beard you could grow during 617 days. And imagine how delusional you'd have to be to reduce your WTF asking price only once during that time!

I mean, you have to be awfully deep into REM to believe a pathetic 2.5% price cut in 617 days is reasonable. Seriously, dude, why bother even listing your place? I'm genuinely curious. You obviously have no intention of selling, so what's the point? Unless the realtor slept with your wife, I don't see why you'd put him through this.



It's as if Rip here put it up for sale in April 2007 when the bubble still seemed intact, and fell the hell asleep for the next 20 months. Now he's woken up in 2008 and sees that home values have dropped by nearly 50% in a year, unemployment is at 8.4% and climbing, credit has seized up, lending standards have constricted, we've entered one of the worst economic eras in our country's history...and promptly rolled over and went back to bed.

I really hope he can hear this up on the 8th floor:

WAKE THE FUCK UP BUDDY! IF YOU DON'T GET SERIOUS ABOUT SELLING VERY SOON, IN ANOTHER TWO YEARS YOU WILL BE LUCKY TO GET HALF OF YOUR CURRENT ASKING PRICE!


In addition to being helmed by a greedtarded seller, the most significant challenge to nabbing a sale is the astounding HOA fine. 973 bones a month?! For a one-bedroom?! In a building perpetually covered in scaffolding? Sweet jumpin' Jesus!

That amount would bring your monthly payment to $3,700. To realistically afford that monthly nut, a buyer's annual income would need to be $137,000. Not to mention the $96,000 down payment (that I'm sure plenty of people have just laying about). Mind you, this is FOR A ONE FREAKIN' BEDROOM APARTMENT!



In addition to nearly $1,000 in HOA fines, it's worth noting this mirrored-mongrel comes with zero kitchen or bathroom upgrades, dreadful community laundry, perpetual building renovation/repair, and two common walls.

Really guy? Only one price reduction? You really need to lower your Ambien dosage.

You readers don't need me to tell you that this apartment is incredibly overpriced. The days on market speak for themselves. Hell, even the Zillow estimate (which are usually wildly optimistic) only values this place at $310,000.



Then you throw in the neighbors asking nearly $100,000 less (or this two-bedroom asking $10,000 less), and it doesn't look good for RVW.

This place is a relic of the insanity, greed, and woefully misguided conventional wisdom of the Great Housing Bubble. Someday we'll all joke about the stragglers left behind who could never quite let go of the fantasy that "real estate always goes up."

Believe me, even years from now as condos are selling at 2001-2002 prices, these true believers will still be out there. Kind of like those Japanese soldiers stuck on remote islands, not realizing (or refusing to believe) that World War II had ended, continuing to fight the war decades after Japan's surrender. To some, denial is more addictive than the best heroin or crack that money can buy.

Thursday, December 18, 2008

Girls, Girls, Girls

Back when I lived in LA, I used to date this girl. Let’s call her Nadia.

Boy, she was something. She was blonde, hot, outgoing, funny, a great kisser, and unafraid to show just the right amount of cleavage. I’m not sure if my mother’s a Long Beach Housing Blog reader, so let’s just say she was outstanding in other ways too. Exhausting might be a better word (I’m talking about her passion for yard work, ma).

We would go out drinking, tear it up in Hollywood, draw the spotlight away from absolutely everyone in attendance, and maul each other like mad when the night was over.

When we were full of booze and out on the town, we were a stellar pair. She was incredible. And expensive.

However, it began to dawn on me that below the surface, this relationship didn’t have much in the way of substance. In fact, outside the realm of bars, clubs, or the bedroom, the relationship didn’t actually exist. There was nothing to talk about, not many common interests or beliefs, and no tangible connection to everyday life. Although we connected on a few levels in a visceral way, the desire to feel connected and fulfilled, to be part of a shared, committed journey, was empty as a keg at a Packers tailgate party.

Today’s property reminds me of Nadia.

Beautiful, flashy, even a bit ostentatious, and when you’re intoxicated and totally caught up in the moment...absolutely perfect.

But when you sober up, begrudgingly crawl out of bed, and unfold last night’s receipts, you wonder if this is where you really want to be long-term. Is there enough value here to keep it going into the long-distant future?



Address: 700 E Ocean #2505, 90802
Asking Price: $859,000
Size: 2 beds, 2 baths, 1,080 sq. ft. (built in 1965)
$/Sq. Ft.: $795
HOA Fee: $615
Purchase price: $620,000
Purchase date: 7/2007
MLS#: P642071
On Redfin: 179 days
Down Payment: $172,000
Monthly Payment: $5,500
Income Requirement: $245,000
Description: Best top of the world view in Long Beach. Rarely sold 05 unit, in Long Beach s prestigious International Tower. Enjoy 270 degree views of Catalina to Newport, Queen Mary, Harbor, City Lights, and directly across Villa Riviera. This contemporary unit has been completely remodeled by an interior designer. The custom made Kitchen, Bathrooms and Showers must been seen to be appreciated. The kitchen enjoys brand new Stainless Steel Kitchen Aid appliances. Every corner of this unit has been upgraded to the last detail, and nothing in the building looks like this. Potential executive rental, or live in the lap of luxury on the 25th floor. 40 foot, wrap around custom tiled balcony, as building includes 24-hour concierge, convenient key-controlled access, fully equipped gym, pool, patio, underground parking and business center. Furnished Contemporary and flat screens throughout unit; all TV s, appliances, hardware, and furniture included; over $50,000 worth.



This place is very impressive. It’s got everything you could possibly need. This ocean-view condo is the equivalent of dating Gisele Bundchen--guaranteed to impress your friends and family.

But having the best looking, most impressive model comes at a cost: $5,500 per month, not to mention $172,000 down.



It may be fun for a while, but what happens when the luster wears off, when a few years go by? You have to ask yourself, are there other fish in the sea offering a better shot at long-term happiness?

Well, Unit #1004, also with an ocean view, has an extra bedroom, more square footage, and is only asking $565,000. Sure, it looks a little older and wayworn compared to #2505, and is obviously not nearly as stunning, but it's almost $300,000 less!

Considering that price difference, buying #1004 is like bagging Heidi Klum: a little older looking and not in the same prime condition as Gisele, but still the score of the century.



This one is not nearly as glamorous or flashy, but it’s still attractive and desirable. Best of all, materialism hasn't run rampant with this one--the monthly payment is a much more manageable $3,800. For essentially the same build and layout as the other model! Score!



Plus, the extra spending cash you'll have every month is likely to keep you smiling for years. Seems like you have more in common with this place on a fundamental level, not just superficial, impress-the-guys ways.

So, which one?

You can go for the flashy one, but it will cost you dearly. And knowing there's nothing you can do to add or improve that hasn't already been there since before you came along could leave you feeling empty and unfulfilled.

And compared to the reduced expense of #1004, you might start to question what you're really getting for your money and time with #2505. Too much of that kind of thinking could make you start to feel empty, like a bamboo-floored warehouse, full of minimalistic features and artifacts only meaningful to a previous investor.

Plus, with #2505, your long-term prospects aren't very good, as the monthly costs might be difficult to keep up with every month for the next 30+ years. If you enter into this kind of relationship right now, it likely won't end well. But at least temporarily you will enjoy bragging rights, right?

Or you can choose the slightly worn model and enjoy a former beauty queen at a discount. By making a smart, mature decision to commit yourself to something more rational, stable, and solid, you are guaranteed to get more day-to-day enjoyment. This one feels “lived in”--not empty and bereft of feeling and warmth.

Plus, while #1004 may not have the immediate WOW factor of #2505, there are significant benefits to slowly investing in the relationship. You are more likely to end up with something you find incredibly attractive and suits your needs and wants better than you--or some interior decorator--could have ever imagined.



Sure, there are some blemishes and areas that need work--and it's still going to cost you--but it's nothing compared to the exorbitant expenses of trying to manage a top (floor) model.

Hell, if you invest enough time and energy, what you call home can look as good--or better--than the flashy, over-the top model that really doesn’t have much to offer outside of impressing your friends or looking good in pictures.

Some might point out this very low maintenance unit asking $369,000. But unit #1502 doesn't have any decent pictures, which is code-word for "great personality." Looking for a perfect match on the internet can certainly have its drawbacks.

However, when discussing your future in decades, not days, it would be a terrible mistake to not check out all of your options before you commit.

Saturday, December 13, 2008

"Keep Your Opinions to Yourself"

Anonymous strikes again:

"Hey retard.....this property just closed for $365,000 I dont [sic] see that as a problem do you? Maybe you should focus on combing the MLS for typos and keep your other opinions to yourself."

You seem awfully angry, little buddy. And yet you return every day to keep that anger alive. I assure you, it's not worth the stress. Be honest: How many times a day did you keep checking for my response to your comment?

BE HONEST.

Of course I don’t have a problem with someone putting this seller out of their misery. Why would I? Knife-catchers are the only thing keeping this economy together!

You seem to be chalking this sale up as some kind of victory, but for whom?

Obviously not the seller, who lost $20,000, plus $23,000 in commissions and $20-$30,000 in upgrades and maintenance, not to mention four years of grossly inflated carrying costs. My OPINION was that they would lose money, and they did.

So, is it a victory for the new buyer? If they can afford the payment, can hang on to their job, and don’t mind bleeding equity for the next few years (and flat appreciation after that), then sure, I guess overpaying for this property is a victory. My OPINION is that they will lose equity in the coming years, and they will (and probably already have).

But unless you’re the buyer or listing agent (actually, that might explain it) what’s YOUR stake in this? This sale can’t possibly be a victory for you because I frequently acknowledge on this site that some properties are selling--even in this abysmal market. “AH-HA! IN YOUR FACE, EL BEE! I TOTALLY CONCUR WITH YOUR VIEWS!”

So, help me out here…what’s the point of your comment? I openly welcome differing viewpoints on the housing market when they are respectful and insightful (yours, on the other hand, is neither respectful, insightful, nor even an actual opinion as far as I can tell), but you have failed spectacularly in providing anything substantive for debate. You obviously have a distaste for my opinions, but you have failed to provide even one that you disagree with.

What I hear from you is: “A condo sold. Stop blogging.”

You're adorable.

And so you know, Skippy, the entire point of a personal blog is to NOT keep my opinions to myself. You must be new to this whole interwebs thing.

And if anonymously reading my opinions and analysis bothers you so much, why are you adding my blog to your Favorites, reading every single day, and following my featured properties like a hawk? Come to think of it, you getting so angry that you can't even spit out a coherent or worthwhile viewpoint is actually a victory for me and my readers. You're the entertainment, pal. You're the fool.

A little advice: They have this thing called a “mouse” and you can “click” to whatever “website” you like. Maybe you should religiously follow a site that soothes your soul, instead of one that creates stress. Like www.cuteoverload.com/, for example.

And by the way, you never answered my question about why short sales “don't count” as comps. We’re still waiting to be enlightened. Chop chop.

Friday, December 12, 2008

Arigato: UPDATE III

Somebody got the memo! Our favorite eyesore—ERRR, “Mysterioursly [sic] private and breathtaking” beauty dropped the price for the second time in 22 days.

And the agent seems particularly proud of the seller’s abject failure—ERRRR, generosity. To wit: "MAJOR PRICE REDUCTION ONE MILLION DOLLARS!"

In some circles, lopping off a million dollars from the original asking price would signify a desire to get serious about selling or at least a willingness to negotiate. I’m not in that circle.

No, considering the original asking price was a trust fund-busting $3,250,000, all the million-dollar reduction makes me think is, “A good start for a petulant, greed-faced ignoramus.”

In fact, I’d be willing to bet you see a price increase in spring of 2009. If they were truly serious about selling, then how do you explain the 438 days it took to finally scalp a million clams from the asking price?

Slow learners?

Nah, I’m sticking with petulant, greed-faced ignoramus.

But if I’m wrong and these latest price reductions do indeed signify a sudden, legitimate desire to accept reality and do what it takes to offload their ailing Asian-inspired albatross, then welcome to the real world, pal!

Wednesday, December 10, 2008

The Two Ls of Real Estate



Address: 35 Linden Ave #204, 90802
Asking Price: $295,000
Year Built: 1987
Size: 2 beds, 2 baths, 1,031 sq. ft.
$/Sq. Ft.: $286
HOA Fee: $285
Purchase price: $240,000
Purchase date: 11/2008
MLS#: S556668
On Redfin: 1 day
Down Payment: $59,000
Monthly Payment: $1,900
Income Requirement: $84,000
Description: LOCATION LOCATION! This 2 bedroom 2 bath condo is close to everything. It is within walking distance to the Marina, the Aquarium, Pine St. and the East Village. The condo has been updated with graite counter tops in kitchen and newer cabinets. Beautiful tile flooring is in kitchen and living room. Large living room with a fireplace. The building is secured and the subterranean parking is secured. Don't miss this great oppuritunity to own a condo in this great area and at a great price.

“Graite” counter tops? Did he misspell “granite” or fail miserably trying to spell “great” phonetically?

“Oppuritunity”?

Ugh, what a mess.

And by the way, how inept do you have to be as a listing agent that you botch the most oft-repeated cliche from the Realtor’s Guide to Selling Used Junk, “Location, Location, Location”?

Pathetic.



Perspective: this two-bedroom apartment sold for a heart valve-rupturing $400,000 at the height of bubble madness in the summer of 2005. Yes, this place.

Just a few weeks ago on November 19, it was purchased (probably at auction) for $240,000. Assuming the current wannabe flipper is the lender, they already kissed off $160,000 taking it back.



If the lender can successfully flip it for their desired $295,000, they will recover about $37,000 after commissions. Hey, better than nothing.

But, as usual, the question becomes Will they find a buyer at their (quite optimistic) asking price?

Let’s explore the qualities of this (desperately-needed) buyer:

*He or she rakes in $84,000 in household income (almost three times the median income of $33,506! Ballers!).

*He or she has to come to the table with $59,000 in cold, hard cash for a down payment.

*He or she has to be really enthusiastic about shelling out $285 per month in HOA fees, despite the absence of a pool or fitness center.

*He or she is super excited about living in an area where they wouldn’t want their significant other to walk down the street alone at night.

*He or she is way pumped about paying $1,900 a month--which is more than equivalent rent--for two shared walls and balcony view of, um, another building.




Seems like a piece of cake, right? I bet those buyers are beating down the realtor's office door!

But I sure hope those mystery buyers don’t read this blog, because they might not be too thrilled to learn this place sold in 2000, pre-bubble, for $150,000. Yep, 150k.

If you apply the 20% annual appreciation this place enjoyed from 2000 to 2005 (I know, ridiculous, but bear with me), the current asking price still represents a late 2003/early 2004 rollback.

BUT, if you factor out that absurd bubble appreciation and apply a more realistic appreciation rate of 4% since 2000, you end up with a current value of $213,000.

And what do you know! That number, which yields a $1,500 payment, is consistent with local rents!

Even giving this seller an early Christmas present and applying a 5% annual appreciation yields $233,000.

These people are way off if they think they’re going to recover so much as a single dollar bill when this is all said and done.

And please click on the Redfin link for this property and scroll to the bottom. Check out the What’s the Market Like for Condos section on the left. There is a $100,000+ gap between what downtown condos list for and what they end up selling for. Is there a better Greed Gauge in the world than that little baby?

Insanely, the list price line is on the uptick for December!

Is there any economic indicator—any!—that leads you to believe this devastating trend will suddenly reverse?

In conclusion, I don't have much faith in their ability to nab $295,000. I guess it is possible to find a knife-catcher fresh off the turnip truck, but that fool better saddle up with a cashier's check for at least $258,000. Anything less than that amount would result in further losses (can you believe this little apartment has wreaked such financial destruction?).

Frankly, I'm convinced further losses are inevitable, but I wish them the best.

Tuesday, December 9, 2008

A New Price Per Square Foot Record: UPDATE

Everybody hop into the Way Back Machine, because I have an update on a Long Beach Housing Blog classic!

In one of the very first posts on this blog (man, I can't believe it's almost been a year) I featured a property with the most outrageous price per square foot in Long Beach.

Well, browsing through Redfin I stumbled upon the property again...still decomposing on the market. Kind of lonely out there, eh guy?

Interestingly, a few things have changed since the glory days of January, namely:

1) It is now suddenly a "fixer-upper"
2) The price has been reduced by -$1,505,000 for a new asking price of $2,995,000
3) That discount translates to a new price per square foot of $936, which forfeits the record for highest price per square
4) The days on market have stacked up to a mind-blowing 416 days
5) This beautiful photo has been added:




Cool ladder.

Do you want to hear the strangest part about this 416-day saga?

The place went on the market for $4.5 million before it was even built! Here, look at this picture from back in the day and focus on the left hand side:



That's right, folks. THE FINISHED PRODUCT IS 1.5 MILLION DOLLARS CHEAPER THAN THE BARE STUDS WE HAD IN JANUARY.

My, how times have changed.

Here's the good news: They bought the land for $930,000 in 2005. Pretty good deal for being on the sand. So long as they didn't spend more than $2 million on demolition and construction, they might break even.

Assuming construction costs were $150 per square foot (this was 2005 after all), they likely spent about half a million. Regarding carrying costs, if they put 10% down they've been shelling out around $4,400 a month (factoring in tax deductions) since January of '05. That's around $206,800 total.

I'm sure there is plenty of room to play with those numbers, and I guarantee there were unexpected costs up the wazoo, but the overall point is they are going to make a profit if this place sells for it's current asking price of $2,995,000.

That's awesome!

Except for the simple, possibly overlooked, slightly pesky, tiny little itty bitty fact that

IT'S NEVER GOING TO HAPPEN, SHITHEAD!

I mean, look at this poor sucker, languishing on the market for a brutally painful 656 days.



Wait, WTF? Take another look at that photo. Nice photoshop skillz, numbskull. That strange creation of yours makes me want to double my tsunami insurance.

"AHHHH! MY HOUSE THAT I PAID $3,629,000 FOR IS TOTALLY SUBMERGED IN FILTHY LONG BEACH WATER! HELLLLP!! WHEN THE REALTOR TOLD ME IT WAS 'ON THE WATER' I DIDN'T THINK HE MEANT LITERALLY ON THE FUCKING WATER!!!"

Anyhow. Best of luck to all of you high-priced wonders on the sand (or in the ocean being swallowed up by high tide, as the case may be). I'm sure your Chinese shipping magnate or Russian oil-garch will soon arrive to rescue you from your debt-traps.

Just keep holding on for a few (hundred) more days!

Saturday, December 6, 2008

It was Nice Knowing You, $200 Per Square Foot



Address: 837 E. Ocean Unit #??, 90802
Asking Price: $234,500
Size: 2 beds, 1 baths, 1,206 sq. ft. (built in ??)
$/Sq. Ft.: $194
HOA Fee: ??
Purchase price: $389,534
Purchase date: 3/2008
MLS#: 08-333463
On Redfin: 1 day
Down Payment: $47,000
Monthly Payment: $1,500 (assuming $200 HOA)
Income Requirement: $67,000
Description: Bank-owned property in prime Long Beach location move-in condition 2 bdrm, 1 bth with great open floor plan. Kitchen opens to living room and dining area with nice front porch. In heart of downtown only 4 units in charming building.

This listing is utterly useless. We don’t know about the parking situation, air conditioning, HOA fee, how old the building is, the unit number, or whether there are laundry machines in the unit, let alone on the premises.

Thankfully, Redfin comes through with some information that speaks volumes.

Specifically, during the peak of the housing bubble, in late 2006, this condo sold for an astounding $525,000. Incredible. In March of 2008, it went back to the bank for $389,534. After months with no success attracting a buyer, today the bank is begging on the street, tin cup in hand, for a $234,500 miracle.

Thursday’s downtown property was asking $247 per square foot 1.5 miles from the ocean, but this seller is asking below $200 per square for a property 150 yards from the ocean.

Plus, this large condo features a (mildly) upgraded bathroom and kitchen. And after squinting at the pictures, it appears to have nice-looking hardwood floors and new windows (pertinent information you might want to include when trying to sell a property, dumbass).





Mind you, this place is street-level (vagrants and traffic noise, oh boy!), right next to a gas station, and likely doesn’t have parking--but it still must strike fear into the heart of fellow peak buyers. I mean, that’s a 55% price collapse from just two years ago!

Oofa!

Worse, the bank knows it still won’t sell at this price because there is ample evidence of Waving the White Flag. In addition to the piss-poor listing, just check out some of these photos:







Nice effort, dummy. Or do the toy cars you didn't bother to clean up represent being "freeway close"?

Thursday, December 4, 2008

Downtown Dive-Bombing

Back from Atlanta, ready to blog!

You know, the most rewarding part about the housing collapse is the demise of some of the most ill-conceived conventional wisdom we were bombarded with (often with a quite condescending tone) for years.

For example, during the bubble, buyers and sellers gladly accepted the premise that small, entry-level condos in so-so areas were “worth” $350,000. As absurd as that would have sounded in, say 2002, by 2005, it suddenly became Truth. They said some form of "That's just what condos cost now." Any disagreement or suggestion these “values” were seriously misaligned with fundamentals or common sense was widely ridiculed.

In conjunction with their blind acceptance of REIC (Real Estate Industrial Complex) lies of “a new paradigm” of economics to support such prices indefinitely, hardly anybody expressed concern that $350,000 was in some cases EIGHT TIMES the median household income! Insanely, this substantial 350k sum wasn’t even referring to a starter house for a family with two incomes—this was for a sub-1000 foot apartment!

Another related misconception was believing $300 per square foot was a reasonable figure. Maybe it just seemed like a nice, round number, but you wouldn’t believe the static I used to encounter in 2007 when I predicted Long Beach would soon see sub-$250 per square foot.

Blasphemy! Bitter renter! Priced-out punter!

Browsing through Long Beach properties, it’s inescapably clear that we crossed the $300 per square foot psychological barrier long ago. Anyone still snowing themselves into believing $300/square is a valid measure of today’s condo values is sadly mistaken.

Today’s featured property should serve as a warning to sellers and real estate professionals who are still clinging to conventional wisdom from the bubble. These widely discredited beliefs (“Subprime is contained,” “California is different,” “Long Beach has old money,” "Home values never go down," "You can always refinance," “They’re not building any more land,” and recently, "It can't go any lower," and "The bottom is here" etc.) are dead and gone—no matter how badly some need them to remain true.

This should also serve as a warning shot fired over the bow of those who believe their street is "immune" from the activity in downtown and this won’t affect prices in their "special" neighborhood.



Address: 838 Pine Ave #118, 90803
Asking Price: $230,000
Size: 2 beds, 2 baths, 930 sq. ft. (built in 1998)
$/Sq. Ft.: $247
HOA Fee: $200
Purchase price: N/A
Purchase date: N/A
MLS#: I08105550
On Redfin: 135 days
Down Payment: $46,000
Monthly Payment: $ 1,500 (calculated with 6% interest rate in light of the government’s temporary success in lowering rates)
Income Requirement: $65,000
Description: Beautiful condo with hardwood floors and granite countertops. Seller will leave furniture for buyer if they like. This is a short sale-subject to lender's discretion on commission, terms, and conditions. Very secure building. Unit features two tandem parking spaces. Rooftop has amazing views of the ocean and the city. Very close to the hot, urban night life of Long Beach. This is the ideal location! Great home for anyone-starter home, a nice area to retire to or do the city living!

What we have here is a smallish, newer-construction condo with two parking spots, in-unit laundry, air conditioning, granite counters, hardwoods, a balcony, and a comparatively reasonable HOA fee…asking $247 per square foot.



Uh oh, sellers. This doesn't bode well for you.

A $1,500 total monthly payment is awfully close to equivalent rent, and if you could find a renter willing to live this far from the ocean you’d be in pretty good shape.

The “short sales don’t count” people will say this price will likely not be approved by the lender. Ultimately, they may be correct.

However, they would be missing the big picture: REGARDLESS OF WHETHER IT ACTUALLY SELLS FOR $247 PER SQUARE, TODAY THIS IS WHAT’S REQUIRED TO ATTRACT BUYERS. THIS IS WHERE WE ARE IN LONG BEACH NOW, PERIOD.

When this property appeared on the market in July, the asking price was $400,000, or $430 per square foot. The seller, like so many fools still desperately clinging to stupid beliefs about home values based on nothing more than wishful thinking and irrelevant philosophies from the bubble days, learned a very harsh lesson. And now it's begging for a sale after 43% in discounts.



My feeling is that a year from now, we will view $250 per square as we regard $300+ per square foot today: a quaint, but long forgotten relic of the past. Like Playboy bunnies with pubic hair or shoes with zippers on the side.

Two years from now, as we approach the bottom in Southern California, we could very well feel the same nostalgia about $200 per square foot in desirable areas of Long Beach. Don’t believe me?

What if I told you we already shot below that threshold last month in some LB zip codes? That’s right, in 90813 (the zip of this downtown condo) the square foot price dipped below $200 last month!

And there’s no end in sight for the price declines. There is just too much inventory on the market, and even more waiting in the wings for "things to get better." If you haven’t already sold your place, it is more than likely too late. Those calling a mulligan on 2008 and hanging their hat on a recovery in 2009 are, well, fucked.

It’s difficult enough to compete with distressed properties in today’s environment, but what happens when banks undercut nearby sellers by $100,000 like this one did?

To quote Clubber Lang in Rocky III:

“PAIN.”



Rest assured the government will do everything in its power to reduce the pain and artificially inflate home prices, but it can’t inflate incomes. Now that voodoo lending to any mammal with a pulse is no longer here to propagate rampant speculation, home values are determined strictly by what lenders are willing to lend.

And now that the high from snorting lines of powdered Housing Kool-Aid has worn off, lenders and government entities of only resort (Fannie and Freddie) are reverting to that old standby for determining loan worthiness: Income.

With the economy bleeding jobs like an anemic with a shotgun wound, qualifying income has become much more elusive. Regardless of government intervention in the credit markets and interest rate policy, employment (i.e. income) will ultimately determine how bad this housing crash gets and how quickly we can begin our recovery.

Unless the government brings back zero-down, interest-only Option ARMs or creates high-paying jobs out of thin air, their efforts will be in vain and will only result in a further delay of the necessary--and inevitable--return to fundamentals.

Monday, December 1, 2008

“A ‘Distinquished’ Beauty”

This pricing strategy comes to us straight from the Plaxico Burris School of Poor Decision Making.



Address: 2601 E Ocean Blvd #608, 90803
Asking Price: $399,900
Size: 1 beds, 1 baths, 672 sq. ft. (built in 1973)
$/Sq. Ft.: $595
HOA Fee: $290
Purchase price: $230,000
Purchase date: May 24, 2002
MLS#: P622255
On Redfin: 292 days (!)
Down Payment: $80,000
Monthly Payment: $2,600
Income Requirement: $114,000
Description: Priced well below comps for you to make an offer!! Welcome to the Versailles! A distinquished Long Beach beauty! Steps from the Sand, the Long Beach Museum of Art, Downtown Attractions, Belmont Shore and Freeway Access. This one bedroom Oasis offers the finest in Uptown living at the Beach with Designer touches throughout. Newly upgraded bathroom with the Impressive Textiles, Freshly Painted, East facing Beach views from both the Living Room and Bedroom balconies, walk in closet, Parking, Pet Friendly community and much more!!! Community Ammenitites plentiful.

Quick question: Just what exactly does “distinquished” mean? Is that when you vanquish your rival in a distinct manner?

This listing also reminds me of a girl with a perfect body I used to date. Every time I saw her approaching in a low-cut top, I looked gratefully to the sky and proclaimed to the Lord, “Amenitities!” (sorry, that was bad).

The Strange Capitalization and shpelling choices aside, this is an awfully nice little apartment. However, the ultimate question is whether there are any economic fundamentals that can justify a $399,900 asking price for this cramped one-bedroom.

The answer, in short, is NO.



A few noteworthy items about this tiny 672 square footer:

1) It was purchased by this seller six-and-a-half years ago for $230,000 ($238 per square foot).
2) The current asking price of $399,900 has remained unchanged since July, despite enduring a terrible Summer Selling Season
(tm) and one of the worst credit crises in our nation’s history.

This tells us a few things about the seller. First, home skillet sincerely expects you to believe this shoebox appreciated 10% per year since his purchase. Yes, that's including the last two years of the housing crash, during which 20-30% of Long Beach equity has been completely wiped out.

Well, buddy, as the esteemed Steve Perry would say, “Don’t Stop Believin’!”



Second, due to the seller’s failure to meaningfully reduce the price during the last 292 days (we were treated to a paltry 9% haircut during that time), he has unquestionably joined the ranks of the Greedtarded.

It’s worth noting that at one point this May, the price briefly flirted with $324,900. This attempt to drum up interest must have worked, because just a scant 40 days later the price was increased to an outrageous and obviously greed-headed $399,900, where the sellers have convinced themselves it belongs permanently.

This (sort of) ocean-view apartment, settled in a killer location, in a seemingly well-maintained building, sold for $150,000 pre-bubble ($223 per square). If we apply a generous 5% annual appreciation, this place should be valued at around $233,000 ($346 psf).

That price would correspond to a $66,000 annual income, a $1,600 monthly payment, and would come awfully close to equivalent rent. That's starting to make a helluva lot more sense. Given, that price won't be seen for quite a while, but that's what it will take to make any kind of investment sense.

Within that context, the current $595 per square foot (not to mention $653 when first listed) is a joke that apparently only the seller gets. I mean $595 per square foot for two common walls, community laundry, one garage spot, and no gym??

To paraphrase an alien visiting from outer space: TAKE ME TO YOUR DEALER.

Because you must be smoking some incredibly good stuff.



The Delusual thinking probably goes something like this:

“We were clever enough to buy in 2002—before the bubble really got blowing—meaning we are wise, prudent real estate investors. Our place is special—so special that we posted each photo twice in the listing. And we, of all people, should know what our ‘distinquished’ broom closet is worth. $595 for a one-bedroom ‘Oasis,’ according to our informed, brilliant estimation, is a great deal. The price stays put until someone with an intellect and financial acumen comparable to our own recognizes the value in paying $2,600 a month for a one-bedroom apartment.”



These people will either give up or rent it out and absorb the negative monthly cash flow. Becuase they sure as hell ain't selling it at this price.

I don’t pretend to know their situation but they likely have a decent amount of equity (unless they took out big HELOCs to fund those disgusting "upgrades") and it’s clear from their supremely idiotic pricing strategy that they have no intention or desire to actually part with this property.

292 days on market is an awfully long time to live with your head buried in the sand. At some point everyone needs to come up for air, and when they do it will become immediately apparent that the bright, sun-slapped skies they fondly remember have been replaced by dark, menacing thunderclouds portending doom, destruction and financial mayhem for sellers of tiny properties who continue to believe their "special" place is exempt from the carnage.

Bad Start to the Week

Tanta, one of the co-authors of Calculated Risk, has passed away from ovarian cancer.

For those of you who don't read Calculated Risk--you're blowing it. Get over there right now and start learning.

I can't begin to explain the wealth of knowledge I've gained from that blog, and although I can't recall how I stumbled upon it in the first place, my life and understanding of economics and real estate has benefited greatly from doing so.

It was (and is) such an honor to be linked to CalculatedRisk--especially since I didn't have that many posts under my belt at the time. They apparently liked something about my writing and added me to their blogroll, which was an enormous motivator to keep writing. And yes, they link to LOTS of other blogs, but I still exude a sense of pride and accomplishment and feel honored.

There are many other great economics blogs out there (some I haven't even discovered yet), but CR is the best. It's the bible of economic understanding as far as I'm concerned.

Thank you Tanta for your generosity and all the elucidation you have given us. Your wit and ability to simplify the complex will be greatly missed, and you will leave incredibly large shoes to fill.

-el bee