Real Homes of Genius: Two For One in Compton. Southern California Housing Bubble Hangover.
For all the bashing against hope in politics, the same cynics are the one’s pushing and pumping Orwellian type housing programs like “Hope Now” and “Project Lifeline.” Remember how the White House first said no bailout? Then they proceed to enact the Hope Now Alliance which started off on the great footing with the President giving the wrong number on TV. Since this was the equivalent of spitting into the ocean, they now decided to enact Project Lifeline which is essentially the mortgage moratorium that Senator Clinton was proposing except for a short time horizon! The only difference with Project Lifeline is that we now accept that we are all sub-prime since this also covers prime and Alt-A mortgages. I would argue that thinking the government can somehow stop the correction in housing requires more than hope, it requires an incredible leap of faith.
In Southern California the bottom has essentially fallen out (again) as we discussed in great detail in our previous post looking at the Southern California housing numbers and recent sales. Doesn’t it seem like we hit the supposed “bottom” every month? When we are dealing with a moving target, we have to put on our running shoes since we have further to go. I predicted the housing decline to the actual quarter by simply following housing sales trends, price trends, and the general market psychology of consumers. Once we hit the peak, it was much easier to forecast what would happen especially after the credit crunch in August of 2007. As the media is “astounded” by the recent price trends all we need to do is look at income surveys and a few Real Homes of Genius.
Since I’m in a giving mood, I decided to do a special two for one Real Home of Genius today since it has been awhile since we looked at any RHOG. Many of you dear readers are not from California and have a hard time wrapping your head around what is currently going on. Surely many of you given the current housing crisis must assume that some lower to middle income cities in the Los Angeles region must have already correct. Not so. What we are seeing is a litany of homes that are still hitting the market with absurd valuations. Compton is a prime example. What many don’t realize that many “starter” homes in this Los Angeles city were selling for $500,000. If we really want to see the excesses of the housing bubble we need to go to the lower income areas. Look at Cleveland or Detroit. The incredible financial irresponsibility and destruction of neighborhoods by fly by night mortgage shops and a hungry and corrupt Wall Street will have decade long repercussions. This will not disappear overnight. So today we salute you Compton with our Real Homes of Genius Award.
You know, I think I’m going to put together a new real estate agent DVD kit. The first step will be for people to go online, go on eBay, and buy a freaking decent digital camera! You can get a great camera for under $200. You are selling a home, in this case a $425,000 3 bedroom 2 bath home in a deeply depressed market, and you can’t even upload a quality image? So you say the MLS doesn’t allow quality photos. Download a free photo editing program and change the compression. This isn’t financial engineering. We aren’t talking about collateralized debt obligations or mortgage backed securities. Oh wait! Yes we are! Bwahahaha. I’ve been looking at a few homes out of state for investment purposes and I have seen so many Wall Street firms owning these places. Clearly they do not practice what they preached since they financed areas site unseen. This home has been on the market for nearly 4 months with very low interest. In fact, this short sale has shown no pricing action. Price drops are absent which leads us to believe that many lenders are so busy, they simply cannot deal on a case by case basis with their workload. Welcome to another unintended consequence of the housing decline, lender apathy. Take a look at the sales history on this place:
Sale History
02/23/2007: $485,000
12/07/2005: $329,000
06/01/2004: $249,000
They’ll be lucky to sell this place at $249,000. And speaking of homes in the $200,000 range, let us move on to our next Real Home of Genius.
I love this depth of perception photography. If you really didn’t know any better, you would expect Robin Leach to pop out and ask you for an interview. This home is actually in the running for one of the smallest ever Real Home of Genius. This place is a 1 bedroom 1 bath home on get this, 452 square feet! So when you take that into consideration, the $198,000 price tag isn’t exactly a great deal. But it is a much better deal from the previous sales price:
Recent sale
Sold 01/03/2008: $289,872
Say what? Someone actually closed escrow on this place last month for $289,872 and now only one month later is selling for $198,000? So we have nearly a $100,000 drop in one month. At that rate, a 31 percent monthly loss, this home will be free by the end of the year. I love how the ad tells us that this is a major fixer and the “value” is in the land. Didn’t everyone get the memo? All cities in Southern California are equally valuable simply because they are in the golden state. You really wonder how many places like this throughout the state were sold on lax lending standards with would be investors popping up everywhere. If you think raising caps or “pausing” foreclosures as if this were some Xbox video game is going to help, I hate to tell you but unless the government mandates that all employers start paying their employees $150,000 per year we have a major correction going on. Unfortunately there is this thing called a recession looming and employers typically do not give out $100,000 raises during these times. But we will get Wal-Mart and Target vouchers for $600 come May. Even I had my doubts about seeing 50 percent reductions in California but I am seeing more and more and even some popping up in so-called prime areas. This home had a 30+ percent haircut in one month.
Today we salute you Compton with our Real Home of Genius Award.
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12 Responses to “Real Homes of Genius: Two For One in Compton. Southern California Housing Bubble Hangover.”
“Unfortunately there is this thing called a recession looming and employers typically do not give out $100,000 raises during these times. But we will get Wal-Mart and Target vouchers for $600 come May.”
Ha Ha. Love it. I’ll take the raise please. It’s funny my hubby said the same thing. Why give out checks at all? People might not spend them. Just sent out Wal-Mart gift cards. (Make mine Tarjay please)
Someone didn’t get the memo all right, or they heard the oil sheik living next door wanted to expand and put in a pool. Who knows. Maybe every other home in that neighborhood is worth half a mil in reality and someone will want to buy it as a tear-down. My friend lives in Conn and the prices are/were based on tear-down, almost exclusively. Without a movie taken going along the street, hard to say what’s up there.
Anyway, where we live we never got a bubble, so if you want to talk to a good friend of mine about investment properties, an RE who is deadly honest, let me know. I’m just putting together an update to an employment site for our local MDA, and I cannot believe how many jobs are open in my county. We are hungry for engineers, accountants and all kinds of professionals here. I feel reassured by the slow steady, rational growth of this place. It’s a quiet place. May we not live in interesting times.
Today’s real home of genius reminded me of a (sort-of) positive effect the housing bubble has had here. A few weeks ago I was visiting my freinds Stereo Shop bussiness located In sowf centrul for last 20 + yrs. He survived the LA Riots (remember those) and years of drug pushers, lazy low lifes, and dalily bullets flying through the air. Today, the property across the street on which a liquor store resides, plus another unit, is for sale for $2M. Homes in the zipcode had been selling for over $500K over the past several years. He works long ours and it no longer bothers him to be in neighborhood late into the night. There are no more bullets, no loiterers, graffiti, etc. He or I would have never predicted that 10 years ago. There is a revitalization happening in the inner city, liek the “Old bank District” for example. Seems like the poor have been priced-out, and the old owners have cashed-out to escape the inner city scourge. He says soon the rail-line will run from exposition park, all the way to the beach in Santa Monica, and that whole corridor is seeing investment and growth. He has lived in Culver City since I met him, and I was surprised to learn he just recently moved back into his Dad’s old house in exposition park area. He made a bunch on his equity of course, and inherited his dad’s place. 15 yrs ago the move would have been to SELL the LA house he inherited, and stay in suburb, today different story. I guess the lower-income folks have been pushed eastward into Riverside county, and north east into Palmdirt??
Ahhhhhh Compton. There is nothing like the scent of fresh gunpowder in the air along with the intense feeling of waking up knowing you made it another day in one of the worst cities this country has to offer. Compton is so desperate for resident’s that a friend told me they offer to put up half of your mortgage if you live in the home 15 years. I guess they are willing to gamble on the fact that you will not be alive in 15 years. Buying a 400,000$ home in Compton is absurd, unless you are a Crack Dealer and the home comes with clients.
@CompaJD No kidding, I’d rather pay $300,000 in Riverside than $400,000 in Compton.
I’m thinking that $289,000 sale in January is probably some straw buyer/fraud scenario.
I’m beginning to wonder if Americans can run a democratic republic any more. Not only is the house over priced, and small and ugly, Compton has an astronomical crime rate. How could any bank finance such a deal right in the middle of the credit crisis? I think so many low IQ people have immigrated into the US during the last 30 years that we are beginning to look like a third world country. But that’s really what are leaders want isn’t it?
Hey Emmi – where are you located? It sounds brilliant!
The city I live in is Syracuse NY. The site I’m in the middle of updating is hooked to the link on my name for this post. About 25% of the open jobs are missing from the current system, which is what I am trying to remedy.
You have to LIKE 4 seasons, but it is such an easy place to live from all other aspects, traffic, cost of living, good schools, diverse economy, excessive resources, etc. We missed the dot com bubble too. Markets are made up of people and a mentality and the mentality here is more cautious than average, I guess. I could go on and on with stats, but I’m already OT here. Drunk the koolaid… who me?
$289,872
not an even number + ultra short turnaround=
Bank probably bought it back from itself for the loan balance. I’m seeing plenty of these.
I’m still seeing a lot of denial in the Socal area in both the ridiculous asking prices of homes currently on the market and through general small talk with homeowners, friends, family and coworkers. It’s as if simply blocking it out would make it go away.
In any case, I’d be too scared to live in Compton. =T
There’s still a lot of denial in the Socal area. It’s evident in the asking prices of homes currently on the market and consistent with my day-to-day conversations around the office. It’s as if simply ignoring the facts will make it disappear.
Hey Doc,
Plenty of R.H.O.G. in Compton, but Long Beach ain’t no slouch either. Check out this gem:
http://www.redfin.com/stingray/do/printable-listing?listing-id=1456738
Yikes.
I’ve noticed a disturbing trend in a lot of properties: An enormous, brand-new flat-screen TV in the middle of an otherwise filthy, sparsely decorated dump.
Priorities, I guess.
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