The Benefits of Bottom Buying

Address: 1334 E 1st St #1, 90802
Asking Price: $349,000
Year Built: 1955
Size: 2 bed, 2 bath, 1,030 sq. ft.
$/Sq. Ft.: $339
HOA: $226
Purchase Price: $70,000
Purchase Date: 5/1996
MLS#: P691855
On Redfin: 5 days
Down Payment: $70,000
Monthly Payment: $2,100
Income Requirement: $100,000
Description: Absolutely stunning Alamitos Beach home located just 1 block from the sand!This incredibly remodeled home offers a gorgeous new kitchen w/ granite counter tops,stainless gas appliances,new dark wood cabinetry w/custom pulls,recessed lighting,new tiled kitchen floors and more!The rest of the home offers impeccable upgrades that include remodeled bathrooms with granite counter top and custom bowl sink,crown molding,recessed lighting,designer paint,newer carpet,wood floors in the dining rooom,dual paned vinyl windows,tiled bathroom floors, all of which are immaculately maintained!This corner unit has walls of windows and only 1 common wall with oversized bedrooms and a nice sized living room to entertain.With low HOA's,direct access from your private garage with additional parking space and a newly remodeled complex with new roof,electric,dual paned vinyl windows,new light fixtures,new front doors,new paint and redone plumbing this is sure to impress and will not last long at this price!

Man, they were so close! If you ignore the lack of spaces after each puncuation mark (quite a challenge, mind you), there is only one typo: "rooom." Ah well.

But the realtor knows a little something about marketing because the kitchen shot is the main photo in the listing, as opposed to, say, this shot of the exterior:

Oofa. Mudfence ugly if you ask me, but eye of the beholder and all of that, right?

This seller bought at the bottom of the last housing downturn and held througout the duration of the Great Housing Bubble. For once, the sales history doesn't document the irrational exuberance of the bubble. Just the opposite: it provides an interesting (and likely prescient) illustration of a bubble bust! Check it:

Sep 25, 1990 - Sold $125,000 PEAK
May 27, 1993 - Sold $114,177 LOSS -3.3%/yr
Oct 20, 1993 - Sold $90,000 LOSS -44.9%/yr
Oct 25, 1995 - Sold $82,248 LOSS -4.4%/yr
May 08, 1996 - Sold $70,000 BOTTOM -26.0%/yr (ouch)
Jun 19, 2009 - Listed $349,000 OH, HI!

Crazy, right? That's probably how sales histories are going to look for the next 5-10 years if the government keeps the misguided "soft landing" policy intact. A slow ride to the inevitable return to basic fundamentals.

Anyhow, the real question is: does this guy deserve a $290,000 windfall for holding this property for 13 years?


That's up to the market to decide, but one look at the Median Condo Values and it doesn't look likely:

Alamitos Beach: $220,000; $265 per square
Downtown: $239,999; $304 per square
90802: $259,000; $322 per square
Long Beach: $234,950; $261 per square

This seller, by asking $339 per square, isn't that far off. Given the quality of the interior and proximity to the ocean, a 10% reduction might be enough to be competitive with nearby sellers and find an impatient Super Summer Selling Season chump. He obviously has a big enough profit cushion to do it.

Unfortunately, looking at recent sales, there doesn't appear to be a big market for $350,000 condos in this 'hood:

$230,000 1273 E 1st St Apt 1E Sold on Apr 10, 2009
0.07 miles 2 bd / 1 ba 878 Sq. Ft.

$217,611 1250 E Ocean Blvd Apt 406 Sold on Jun 02, 2009
0.12 miles 2 bd / 2 ba 1,103 Sq. Ft.

$307,500 1605 E 2nd St Apt 306 Sold on Jun 09, 2009
0.17 miles 2 bd / 2 ba 800 Sq. Ft.

$305,000 1605 E 2nd St Apt 305 Sold on May 29, 2009
0.17 miles 2 bd / 2 ba 800 Sq. Ft.

$299,000 1200 E Ocean Blvd Apt 78 Sold on Feb 27, 2009
0.17 miles 2 bd / 2 ba 1,202 Sq. Ft.

$260,000 275 Esperanza Ave Apt 301 Sold on Jun 09, 2009
0.24 miles 2 bd / 2 ba 1,073 Sq. Ft.

I removed properties that were too small or lacked a second bath, as well as a few Ocean Blvd. luxury units that are obviously not comparables, but it's easy to see that NOTHING has sold for $350,000 this year.

Hey guy, you made a wise move by buying at the bottom of the last bubble, but don't start thinking you're some real estate impresario. After all, if you were truly a savvy investor, you would have jumped ship in 2007 when the market started to turn.

Two years, as many bullet-sweating sellers will tell you, has changed everything. If you, like most Long Beach sellers, coddle the misguided belief that your place is "special," you're going to learn quite quickly how easy it can be to have your profit margin cut in half by a thousand market-chasing cuts.

My fear is you will hold out for the price you "deserve" rather than accept whatever price you can get. Come on, dude! I'm pulling for you! Smarten up and do whatever it takes to get this thing sold (and enjoy your pallet of cold, hard cash).

UPDATE: "Accepting Backup Offers." That was fast. It will be interesting to see what he accepted.