A Fiesta into a Ferrari
This is especially true in less desirable areas of Long Beach. Naples, Belmont Shore, and Belmont Heights sellers have a remote possibility of getting out with their financial livelihood intact, but everyone else is pretty much done like a Thanksgiving turkey.
This seller, with 6 years of ownership in a good area of Bluff Heights is in a position to get out with at least some equity. However, by asking nearly $900,000, they are going to learn very quickly that their house isn’t as special as they think it is. $577 per square foot is a joke. An atrocious, greed-infected, self-indulgent sense of entitlement is on full display for all of us to see.
Lucky us.
Address: 366 Orizaba Ave, 90814
Asking Price: $899,800
Year Built: 1918
Size: 2 beds, 2 baths, 1560 sq. ft.
$/Sq. Ft.: $577
Purchase price: $423,000
Purchase date: 7/2002
MLS#: P642589
On Redfin: 4 days (at this price, it will sell in another 4,000 days)
Down Payment: $89,980
Monthly Payment: $6,000
Income Requirement: $225,000
Description: Beautifully restored 1918 Craftsman Bungalow in the historic Bluff Heights neighborhood of Long Beach. Living and dining room combination with a working fireplace,skylight, and original hardwoods. Guest bath completely redone with marble and slate, a pedestal sink,custom ligthing and glass shower divider. Guest bedroom is spacious. Master suite includes high end custom cabinetry,ceramic tile floors, indonesian rock walk-in shower and separate tub, and designer glass tile wall with vessel sink. Dream eat-in kitchen/great room with slate flooring, newer cabinets,granite counters and large center island and pantry. Sliders from the kitchen open up to a peaceful backyard deck overlooking the yard and koi pond. The house has been painted a soothing palate of designer colors, has custom window coverings, and has been landscaped front and back. New roof installed 3 years ago. Nothing left to do except move in and enjoy!!
This brand new listing was purchased for $423,000 just six short years ago. Yes, the upgrades look awesome, but does it look $476,800 awesome? Hell, that’s fifty grand more than the original asking price! Maybe it’s really expensive to install custom “lighthing” (whatever that is).
These fools actually believe the house appreciated nearly 20% per year during the last six. WHAT??!!
It’s also worth noting that the median income in this zip code is $49,073 annually. The income required to afford this house is $225,000 per year. Sure, this can't be called a "starter home," but it is most assuredly still a median home (the upper end of it). How can a tiny 2 bedroom, 2 bath, 1,500 square foot house (not on the sand) qualify as anything else? Oh, it’s got an “indonesian rock” shower, you say?
Big effing deal. You can put a spoiler and a set of 22" spinners on your '83 Ford Fiesta, but that doesn't mean it's suddenly going to be in the Ferrari section of the AutoTrader.
The foolish, misguided seller's decision to buy the most expensive materials possible has absolutely no effect on the house’s resale “value” in a declining market.
Whatever he/she paid per gallon for that “soothing palate” of paint will add only a fractional amount to the eventual sales price. The days of Flip This House, Property Ladder and assorted housing porn, where dullards put in a new bathtub and granite and magically “earn” hundreds of thousands in “equity,” are over.
Especially given the low per-square-foot cost of construction these days (lots of people need work, and apparently the competition is fierce), why wouldn’t a prospective buyer swoop up a fixer-upper a year from now for a third of this insane asking price, upgrade it similarly--but to his or her individual tastes--and save themselves HUNDREDS OF THOUSANDS OF DOLLARS?
At best, this is an upper-end median property, but this is no luxury Belmont Shore home justifying nearly a million dollars. I mean, really, someone pulling in a quarter of a mil per year is going to seek this property out?
At the current price, the monthly carrying costs are around six thous—GACK! COUGH!!@Nfhio*88&^--sorry, I just choked on my Pop Tart.
So, um, ahem, six large per month in carrying costs. It wouldn’t rent for $6,000 per month if it had two more houses stacked on top of it. At most, this house rents for $2,700. That’s a $3,300 negative monthly cash flow. When it costs considerably less than half to rent the same exact home, not even the most brain-damaged buyer is going to give this mossy missy a second look.
Expect at least a 10% price cut within the next four weeks.
Don't get me wrong, this is a NICE house, but this much larger, highly upgraded 3 bedroom house down the street is renting out for $3,100 a month.
http://losangeles.craigslist.org/lgb/apa/721862351.html
3131 Corto Place (Broadway/ Redondo in Historic Bluff Heights) Ready for move-in now. Entirely Remodeled 3 bedroom Beach Home with Expansive and Lush Grounds just steps from Ocean Bluffs - Must see to appreciate. Southern exposure (ocean direction with peek-a-boo view of Long Beach Fantasy Island) with large windows throughout two story structure. 2 exquisite bathrooms with overhead "rain" showerheads. You can be the envy of your friends with the oversized modern clawfoot tub. Central Heating and Air-conditioning, Crown Molding, Formal Dining Room, Large Island Kitchen with Viking Stove, Dual Drawer Dishwasher, Dual Sinks; Old Growth Red Oak Wood Floors and Matching Ceramic Tile Flooring Throughout. Convenient Upstairs laundry. Large Wood Deck and stamped concrete patio & walkways for strolling grounds. Large Buddha Statue, Three-tier Water fountain, fruit trees, mature queen-anne palm trees adorn the expansive rear yard surrounded by bamboo- LOT if over 8000 sqft. A well kept home with Gardener Service included. No smoking. Pets open to apply. $3100/ month + $3200 deposit. One year lease minimum. Leave contact information with Sergio at 562-618-4153 to view and apply. Working on property today for a bit - call me first to make sure I am there but come on down (SAT or Sunday) Single Guest house on premises is occupied by one respectful professional individual. Seldom home and is away for 3 months at present. HOME built in 1919, new electrical and plumbing, new drywall throughout with insulated walls and laminate windows for added insulation.
For shits and giggles, let’s look at the current asking price from an investor’s standpoint. That means someone wants to buy it and rent it out for a profit--which is the gold standard for determining whether a real estate investment is a sound one.
Knife catchers might start sniffing around after a $200,000 price reduction (but even then, we’re still looking at $448 a square. Funny, I don’t see the ocean out of the front windows) but even then it’s not going to sell. Here’s why:
Forgetting for a moment that the most recent sale in this neighborhood was a 3 bed/1 bath let go for $451,000; even if our featured bungalow was priced at $699,800, the monthly carrying costs still pencil out at around $4,700 per month. If you could find renters willing to part with $2,700 (it would have to be a very small, very wealthy family), you'd be going in the hole two Gs a month).
If the price drops to 300k to $599,800 ($384 per square foot is beyond Irvine prices by the way), the monthly nut is approximately $4,000. Only pissing away $1,300 a month. But hey, you're building equity, right? Well, actually you'll be burning equity every month because you bought a depreciating asset. You have to factor in those costs as well.
Even at $499,800 ($288/sq. ft.), you’re still writing a $3,300 check 12 times a year.
Still not at rental parity are we? Close but no cigar.
While this house would most assuredly find a knife catcher at half a mil, all available data suggests it will continue to lose value during the next few years. The combination of equity burn and $7,200 a year in negative rental cashflow will put the hurt on the new buyer--even with a $300,000 discount. I hope you really like pedestal sinks, because if you buy today you’ll be stuck in this house for decades before you could sell and break even.
Even if an investor picked this place up for the 2002 price of $423,000 (meaning the upgrades were essentially thrown in for free), it would begin to resemble a good investment.
Nice neighborhood, nice house, but terrible timing. Two years ago there would have been a frenzied bidding war for a house like this, but now there’s simply no market—especially given the less expensive alternatives.
I'll keep an eye on this property for signs of distress, but judging by the astronomical price tag and the listing description the seller is convinced this is the most special house in Long Beach and deserves to get top dollar. After all, there's a Koi pond!
So, as the months roll by and buyers "fail to recognize the uniqueness and specialness" of this heavily-lipsticked pig, they will grudgingly pull the For Sale sign out of the dirt, quietly take the listing off the MLS, and wait for the day when house prices go up again.
They're going to be waiting a long, long time.
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