Real Homes of Genius: Two For One in Compton. Southern California Housing Bubble Hangover.

15 02 2008

Real Homes of Genius: Two For One in Compton. Southern California Housing Bubble Hangover.

Posted by: in Real-estate news

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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