May 13, 2007

Real Homes of Genius: Today we Salute Lynwood. 597 Square Feet for $319,000.


You know we are approaching summer in Southern California when the blue jays sing their morning song, the sun sets late in the night, and outrageous priced homes are hitting the market like bugs on your windshield driving in a remote highway. Today we honor Lynwood with our Real Homes of Genius award. For those of you who don’t know, Lynwood is directly north to Compton. This place is a majestically built 1 bedroom and 1 bath palace. This lovely home sprawls out over 597 square feet, if we count the added patio you're up in 600+ range. Smoking deal! Now anyone reading this blog outside of California may be thinking, “$319,000 for 597 square feet sounds a bit expensive.” Not in Southern California where we have a special sunshine tax; any house built within 50 miles of the heart of the city has a yearly tax of $100,000. Similar to the 30 mile zone (TMZ) this applies to all homes in the vicinity. And as you know, we have people making $14,000 buying $720,000 homes so this isn’t so far fetched. In fact, it is a fantastic once in a lifetime deal. Ready to make a deal?

Let us take a trip down memory lane on this place:

Sale History

01/28/2004: $155,000

07/13/2000: $83,000

12/23/1999: $96,310

Say what? So even as recently as 2004 this place sold for $155,000? So in three years this house doubled in price effectively earning the owner $54,666 a year in an area where the yearly family income is approximately $50,000 a year. Why work when you can live in your home? 9 to 5? Forget it, move to Southern California, purchase a home anywhere within the 50 mile radius and ride the appreciation to the vanilla sky!

You may even notice a slight price drop in 1999 to 2000. A 10% drop. There is a school of folks out there that believe prices in Southern California will never drop. Again what we have here proves that theory to be wrong. But the paradigm is different this time the pundits say! Even though this home would rent for $950 a month, we will carry a monthly nut of about $2,400. Totally makes sense, let us sign on the dotted line.

Today we salute you Lynwood with our Real Homes of Genius Award.



Subscribe to Dr. Housing Bubble’s Blog to get more housing content and your full dose of Real Homes of Genius.

19 Comments:

oc_fliptrack said...

Lynwood is where God sticks the hose when LA needs an enema. I worked there for a few weeks shortly after moving to CA. I'd never seen such an ugly place 'till then.

Kevin said...

the garage has more square footage than the house.

Also the pop up canopy could be used for a luxury So-Cal sunshine room. Those crazy people figured out the monopoly on the sunshine and must be compensated appropriately. I mean all we have here on the east coast are gangs and smog...I guess Lynwood doesn't have that stuff....

Adam Smith said...

Don't look now, but $319K buys a brand new 3/2 house in towns like Bakersfield or Sacramento. Of course, those towns also don't enjoy the stellar reputation and crime-free quality of life to be had in cities like Compton or Lynwood.

D.D.Grant said...

Best laugh of the nite out of this. Very cynique. I'd just left a comment on another blog mentioning 2:1 mtg to rent ratio in some regions of US wondering if I was being a bit extreme. But you have renewed my faith.

Err.. how about adding a Bubble Blogroll so we can cross-pollinate.

Regards,
DDG
Home Foreclosures

Dr Housing Bubble said...

oc,

Lynwood is directly North of Compton. Not exactly the best schools or family safe neighborhoods.

Kevin,

The coastal regions are facing gigantic housing bubbles. While we face the sunshine tax the east coast has the proximity to New York or Boston tax.

adam smith,

This revolution happened in the 80s and 90s. Many folks bought out in the boondocks and commuted 2 to 3 hours each way to have their McMansion. Once again, these places boom because of employment in the heart of Southern California. They'll be the first to take a hit as well. The employment base out there won't support much downside.

D.D. Grant,

I've added a blogroll so you can simply click on the link.

lendingmaestro said...

OMG. This is the worst (best) Real Homes of Genius yet!!

Simply unbelievable.

I can buy a nice 20 unit apartment complex in Canfield, OH for 850k. The rental rate for each unit is $600 a month. That's gross rental income of 12,000 a month. That equates to a 17% ROI a year.

speedingpullet said...

So, using my trusty compound interest caluculator, and assuming 5% p.a on the wildly inflated 1999 price ( ;-) ) it comes to a mind-boggling $142,294.
Using the more reasonable 2000 sale price of $80K, the place is now 'worth' $116,789K

I'd give 90K for it - judging by the size and the area its in.

Dr Housing Bubble said...

lendingmaestro,

Ohio has its own issues too. All of a sudden housing isn't the hottest game in town. For example looking at Detroit you can pick up homes for $20,000 to $30,000 but who are you going to rent them to?

speedingpullet,

Why use a calculator when you can use your gut. My gut tells me this house is worth $400,000. Those numbers simply reflect the reality of the economic value of the home and who has time for reality.

Dr Housing Bubble said...

All,

Countrywide announcing the role out of a 50 year sub-prime mortgage. Crazy Bubble Land Logic Article Here

Bwahahah! Oh me oh my is this getting insane. Keep on driving, no bubble in SoCal.

squints said...

$950 is pretty generous in terms of the rent you'd get for that dump...

Nice job on the site redesign.

Adam Smith said...

Countrywide announcing the role out of a 50 year sub-prime mortgage. Crazy Bubble Land Logic Article Here

50 years? Hmmm, before the Nikkei housing bubble in Japan burst in the 1990's, the lenders rolled out multi-generation 90-100 year loans! Basically, buyers were committing not just themselves, but their offspring, to a century of payments just to own a piece of the "Japanese Dream".

Of course, the Nikkei bubble burst, and prices dropped to just a fraction of peak prices, leaving borrowers up-side down to pay on an asset that was worthless (worth less)...

Maybe we have some room to go before we get that bad, but no doubt CountryWide is quite willing to let consumers place a noose around their necks, allowing them to commit entire lifespans to paying down THEIR mortgage!

Don't be surprised to see a resurgence of debtor's prisons, too...

Dr Housing Bubble said...

squints,

$950 is generous but hey, I'm a giving guy. After all they are including the patio set.

adam smith,

I remember bringing this point up one year ago and I was hammered with:

The U.S. is not Japan
The U.S. has limited land
The U.S. has different demographics
The U.S. blah blah

As a matter of fact, the U.S. has more land in relation to Japan therefore land should be cheaper. The U.S. is not Japan, in fact Japan has a higher cost of living and higher per capita income.

The U.S. has different demographics in the sense that we have an aging population and somehow I doubt they want to be paying a mortgage until they are 100 years old. Then we have the much quoted "California is growing..." argument. Well yes we are growing but with lower-income migrants! They need affordable housing not Jessie Ventura sized McMansions with Plasma TVs.

Is our dirt better than Japan's? What makes us different from economic rules that other industrialized countries face? We are different but economics play out very similarly. Think we can't have declining housing prices? Just watch.

speedingpullet said...

Piff-Paff, Dr HB -

I think you seriously underestimating the 'land value' of this place.

I'd happily buy it for $500K ** - as long as I can tear it down and build a 12-unit 'Executive' condo building in its place.

South Central needs more executive condos.



(** although, be warned, monkeys will be flying out of my a$$ before that happens) ;-)

Lost Cause said...

Lynwood has the highest concentration of carbon monoxide of any city. That has to be worth something.

Lost Cause said...

A few miles away, this house is worth $600,000. That is real genius!

lendingmaestro said...

Ohio does have its problems, but if less people can afford to buy homes then more people will be renting. These people can't afford to move to more expensive places. There are a lot of nice areas in Ohio that are cheap. If you visit there you'll still see white high school kids working at McDonald's. Many places in the midwest can be purchased and rented for a good ROI.

Of course there is a lot more to being a landlord than people realize, but it can still produce great income streams.

Westside Bubble said...

A bargain compared with this one on Culver Blvd.!

Anonymous said...

You know, I have been reading this blog for quite a while, and while I generally love it, I do get tired of the pasttime of dumping on poor people's neighborhoods (re: a neighbhorhood dominated by blacks and/or mexicans). A lot of the descriptions of these neighborhoods given in the "real homes of genius" are excessively negative and rely upon stereotypes of what minority communities are like.

I'm not into political correctness at all, but as a person that grew up in working class neighborhoods like those being lambasted here, I feel that these are inaccurate descriptions and characterizations being made by people that probably don't know these neighborhoods, other than what they see on TV.

And also, there are real homes of genius in affluent neighborhoods, as well. I.e., 800K for post-WII GI homes in Sherman Oaks. I would appreciate hearing about those, too. No need to dump on the ghetto all the time.

Dr Housing Bubble said...

anon,

I must say the Dear Doctor may be a minority himself. It could also be the case that I grew up near these areas. In addition, guess who is hurt the most by unaffordable housing? Minorities. Plus, 90 percent of the country is looking at these homes and will be thinking “$500,000 for 500 square feet” and this person is in a poor person’s neighborhood? Who else is addressing this issue? Not anyone in the mainstream media.

I appreciate your comment but I’m calling it like I see it. In addition, you can find many blogs and mainstream articles firing off about affluent areas looking at the wealthy and how overly priced the homes in their area have gotten, that is not the niche I am looking at. The main thesis of Real Homes of Genius is looking at poorer/middle class areas in Southern California and how unaffordable housing is in the said area. Poor and middle class areas in the Midwest also exist except their housing prices are $50,000 for a home, not $500,000.