A $2 million game of Chicken

$1.95
$2.5
$2.3
$1.9
$1.85
$2.3

If you want a single family home big enough for a family of more than two adults you better come with $1.9 mil in your pocket. The prices noted above are the current SFH listings on Zillow. I noticed that 714 Redwood is noted as only “13 days on Zillow” Uhhh that flip has been on market since December. It’s taken multiple (useless) price cuts from the original $1.995 down to $1.952. It’s nice, it’s new but ladies and gentleman the market is telling the flipper that it’s not a $2 mil home (also a shitty location). I can imagine with that many days on market they have seen offers of $1.7-$1.8 but that means the flipper will probably take a loss (He paid $1.565) Let’s say he dropped $65k in labor and materials and he’s borrowing at 15% (~$20k/month). I put his cost basis around $1.7mil. Honestly with prices for materials this year I would guess he’s in for more than $1.7. He is relying on the age-old investment strategy of hope.

721 W Pine Ave is also notable because Dickie is also sniffing some hopium. It’s a tiny tear-down on a 9000 square foot lot priced at $1.854 down from $1.9 mil. The owner has a tax assessment of $384K. The IRS is sitting patiently waiting to be the big winner in this deal (and Dickie). Let’s give Dickie a little lesson on economics and how rising interest rates are aimed at stifling frivolous investment. If it’s expensive to borrow (~7%) then an investor will think twice about their “investment” in a real estate deal that will take 2.5 years to come to fruition. Especially when even moderately sized homes between 2500 and 3000 sqft are not selling. When I can make 4.5% risk free, there is no good reason to take on that level of risk. J Powell and his rising interest rates are doing their job.

At some point someone is going to cave. It could be the flipper, it could be someone that has already moved out of state that just wants to get it sold. Someone is going to sell at at under $800/square foot. All of these stale listings can’t all turn into rentals which has been the latest shell game for over-priced homes. Don’t even get me started on the current rental prices.

This is a shit show and it’s far from over. Grab some popcorn because things are close to becoming really interesting.

A little catching up

Work is hectic and despite the time of year it looks like everyone is fighting to get their listing out and sold in the new year. We continue to see the price of dirt escalate.  Looks like $900kish is the new tear-down price. From my personal experience this is up ~$100-$150K since we were looking last spring. For most people the math only works if you are a developer and have a pocket full of contractors you keep busy. $900K plus $200-$300K and 12 months of your life and 12 months of carrying costs. Or you can just buy the $1.3 mil home and maybe spend $50-$75k. The flippers are out in force. The boo radley house on Acacia and Hillcrest looks almost done. Goes to show you what a good flipper can do in less than six months. From my experience it will take that long to line up a contractor and if you need permits add six-nine months to the time-table. 

228 W Oak at $1.2???? WTF? Big lot, 1400 sqft but apparently Kirk Brown didn’t think it was worthy of photography. We all know what that means.  So it’s your $1.2 mil plus $200K. 

336 Valley St at $1.375 mil. Another listing priced with hope and a prayer. Listed by Andrew Adam at Palm Beach. Big House on a big lot.  Don’t know who the buyer for that house is. I think I put Andrew Adam on blast for being stupid in a previous post.  What does he care, maybe it sells for $1.1 mi, he still gets $27,500 in commission. 

526 Whiting at $1.5mil. Listed by Karen Sellers. A Big House on a big lot on a prime street in El Segundo. Seems pricey but locals know about Whiting. It’s got lots of positives. 

I can’t remember what the count was last time I looked but according to zillow there are 8 SFH in or dancing with foreclosure. Living paycheck to paycheck is a bitch. 

Did Dan Christian found a buyer for 625 Center St?

I first wrote about 625 Center St back in September. On a recent drive through town I noticed the for sale sign was still up. Zillow calls it 200 days but the for-sale sign was up for months during construction. 

Well after about a year of advertising this house for sale Dan looks to have a fish on the hook. 

I’m anxious to see where the dust settled. 

Goes to show you what the appetite is for $2 million dollar homes is in El Segundo. 

227 W Oak Ave, El Segundo, CA 90245 – 2 beds/1 bath

Sometimes you just have to say What the fuck?

$995k for a teardown on 6700 sqft lot. 

Maybe I’m wrong. Some developer thinks he can throw a couple hundred grand at this and still make a good return before the tide goes out. Maybe the tide will never go out. Property will increase forever. 

I just don’t see the logic. 

I rant into a friend and longtime resident today and as usual we got to chatting about real estate and he mentioned the development at the old school site on Imperial. The plan is for those ~2500 sqft homes to price around $1.6. Maybe they will come with white noise machines to drown out the airport. 

227 W Oak Ave, El Segundo, CA 90245 – 2 beds/1 bath

All cash buyers dominate Florida and Midwest: The significant number of all cash buyers continues to add strain to families looking to buy.

I can see it in El Segundo as well. Anything under or close to $1 mill gets scooped up and flipped. 

All cash buyers dominate Florida and Midwest: The significant number of all cash buyers continues to add strain to families looking to buy.

December 18th Update.

My schedule has been a bit hectic but there have been a few new listings pop up. There’s nothing that screams logical about listing your home in early December. The home at 849 Sheldon listed at $899K and “coming soon” (read as for-sale but I don’t want to mess with open houses) is in default on their mortgage.
The power of the internet is scary. In just one click I can find out that you are behind the eightball and need to sell.

Sold in 1996 for $258K a new loan for $620K was taken out in 2005 and even with a couple hundred in equity the home owner is in default? So sell your shelter and get $250k and do what with it? You can’t afford to even buy the home you just sold and rents in the area will be substantially higher than the mortgage you haven’t been able to keep up with. 

The problem with these sub-million dollar homes is that investor money comes in and swoops it up for a flip.  Even if they drop $100k they are bound to make another $100k if they act quickly.

Right down the street at 917 Sheldon we have a new tiny house for sale at $899K. It looks to be a nice, old home that needs some TLC and because of the size of the lot is ripe for a flip.

We’ll see if this Santa/Trump rally can keep feeling like they are happy and that the world (all of sudden) is fine.

225 W Sycamore Ave, El Segundo, CA 90245 | Zillow

Bill Ruane should change his company name to Bill’s Fishing Expeditions. 

On my drive today I came across another Bill Ruane for sale sign on a home that isn’t listed on the MLS. 

Someone scooped up this home Off Market in June 2016 for $850K. That’s basically the price of dirt because the house is only 800 sq ft but sits on a 6700 sq ft lot. 

Looks like some developer/flipper decided that holding onto it for three and a half months was long enough to either warrant a profit or cut bait.  

225 W Sycamore Ave, El Segundo, CA 90245 | Zillow

‘Flip or Flop’ stars Tarek, Christina El Moussa under fire after complaints about their flipping classes

Another canary? Or just two idiot flippers trying to sell to the greater fool. 

‘Flip or Flop’ stars Tarek, Christina El Moussa under fire after complaints about their flipping classes

36 Encanto Dr, Rolling Hills Estates, CA 90274 – 3 beds/3 baths

I saw this add in the El Segundo Herald for Alex Abad. It seemed almost insulting that he would list this next to the overpriced crap shacks that are listed in town. 

The price per square footage at $845 is for a completely remodeled home on 18,000 square feet of land with a pool. While idiots are fighting over 3500 square foot lots in El Segundo, a short drive up the hill and you get a GIANT piece of property and a completely remodeled home. Granted, most of the 18,000 square feet is a hill that would take a ton of engineers and a shit-ton of money to build on, but it’s land. 

If you look at the price history you can see that someone got a fair price at $880k exactly one year ago. 

I know PV isn’t for everyone but it shows the kind of bullshit that’s going on in El Segundo. Airplanes, Chevron, poop smell and with all of that there is no discount. Shit is fucked up in El Segundo

36 Encanto Dr, Rolling Hills Estates, CA 90274 – 3 beds/3 baths

657 West Acacia Ave, El Segundo, CA 90245 – 3 beds/2 baths

Sold like a champ at $663/sq ft. $840k

This was probably one of the few true listings in the past six months. It’s a dump, it’s been sitting unoccupied for years. It’s sold as-is. I wouldn’t call it a tear down, but it’s pretty close. 

I’m not a fan of Acacia because of it’s proximity to the runway but I have come to realize that there’s really no audible difference in noise from Acacia to Palm on the west side of town. The noise is incessant. 

The property changed hands 18 months ago at $719k. Looks like someone decided it was wise to cut bait and walked away with maybe $80k .

Let’s see if they can HGTV this flip before the tide goes out.

657 West Acacia Ave, El Segundo, CA 90245 – 3 beds/2 baths