Photo of the Day: Straight to auction

Photo of the Day: An odd sight -- 24 brand new homes, listed as for sale in public auction. You don't see that every day: brand new homes, straight to auction. The homes are in Gardena, the auction is May 10th, starting bids are $498,000.

Photo Credit: Catalisthomes.com

 

Comments

[tew]

These places are worth $500k... in maybe 10 years when inflation has worked about 30% from here for a current dollar value of roughly $380k.

Remember that pre-tax carry w/ 1% property tax and only 1% maintenance is about 9% even at today's low interest rates - after tax about 6%. So that's - at a minimum - gross carry of about $4,500/mo ($54,000/yr) or $3,000/mo ($36,000/yr) after tax (rent) equivalent at $500k. With rough rule of thumb the buyer should have HH gross income minimum $160,000.

[Raughle]

I think there's something wrong with the fourth box down on the right side. It's a slightly different color. ;)

[Laker]

My take is that this home builder is not really in panic to sell. Also they might be delusional and still in some sort of denial. It can serve as a sign that the capitulation is still not here. These tract homes that are really 7 feet from each other with no back yard are indeed town houses. Coupled with the location and the cheap building materials, these are probably worth $200,000-250,000 (2008 devalued dollars). However, there are still plenty of knife catchers and that is what the home builder is seeking to find...I can see how buyers would pay $570,000-$600,000 just because they SAVE $150,000 of the asking(listing) price.

On another note, Peter, I think you should mention the news item of today about the shortage of rice and flour (wheat) products. Costco, sams club and walmart are to limit the amount of rice we can buy....
They were saying that people and companies like restaurants and bakeries are stocking up on these as they see prices sky rocket and trying to minimize losses.
The amazing note here is that they said, this is the first time in the last 60 years that something like this occurs. That is the last time it happened was during WW2. What is going on???
(i know that in any normal country, central banks would fight such wild inflation with high interest rates, but we are doing the opposite....)

[Robbie Fields]

This tract looks like something built with CRA money ... why would the builder go in front and build out the tract with zero sales?

Or did every single "purchaser" walk away from their deposits? Builders do require a deposit, right?

[debrap]

Peter M is exactly right on his description, I have known this area for over 30 years. Most of the area was decent 30 years ago before the gangs, aerospace shutdowns, etc. This builder is out of his mind at $500k. The $700k must be a total crock. You can buy a similar house a mile from Disneyland for less money. Course, in either case, you can sit on an adjacent grid-locked freeway for 15 hours a day.

[Steve]

This is one more auction scam to sucker you in then let you have it, as per some auctions that were covered in this blog. Also, in my opinion Gardena is simply an extension of Compton on a good day. If you are sick of this BS move out of state, I did and it was the best move you can make. Gardena is an over priced crime hole and I know I used live by there for the first 45 years of my life.

[Bob Barker]

The person bidding closest to the estimated retail value, without going over, will win.

I bid one dollar.

[Kyle]

For a bit of irony, try listening to "California Dreaming" while staring at the picture.

Seriously, what is the allure?

[Cdog]

First of all, I will agree with the outrageous prices that the developer is trying to get some sucker to pay. The concern you should have before buying a house here is the soil: http://www.gardenaremediation.com/background.htm
I can't say for sure the homes were on the former Honeywell land, but it's right next to it.

Safety and gang concerns? Like most cities, there are good pockets and bad pockets. This area is just fine. I used to go joggin with a bud for 3+ years at night with never a concern for my safety. The artesia strip has been in redevelopment for the last 15 years and the biggest problem for residents is the worsening traffic condition.

Cdog

[Dave P]

These are actually depressing to look at. When I turn onto my block, how would I recognize which one of these cookie cutters is mine? Even worse, when I have guests over, where shall they park? They crammed as many of these boxes as they could on this street and if you look at the picture all you see is driveways. One side of the street seems to be all red zone.

With four bedrooms to each house, There will probably be 3 cars to each house. This is a single family block that will have parking problems like a block filled with R3 housing. They couldn't splurge and take away two homes on this tract so they could have given everyone a 4500 sf lot? Greedy pigs. $500k should be their wishing price, not thier starting price.

[thecommenter]

These had a contamination problem...

From a ProQuest search of the LA Times, article from 12/13/2003:
"Cal-Coast Homes, which built a shopping center on West Artesia Boulevard, was finishing model homes for a residential project next door when tests found large amounts of polychlorinated biphenyls, or PCBs, throughout the site. Honeywell, Inc., which had operated a manufacturing plant on the land, is now under orders from the state to clean up the toxic mess. It maintains it did not know the developer planned to build housing. Local environmentalists say the state should have done more rigorous inspections before permitting the land to be redeveloped."

How about $125,000???

[MyLessThanPrimeBeef]

This would make a great self-referencing, narcissistic, art-house Indie movie: A once proud Hollywood film company that has sunk to the nadir of straight-to-video production, decides, after numerous failures and while real estate is still hot, to re-coup their earlier losses, to re-claim fame, and at the same time utilizing their expertise and lessons learned, by getting into straight-to-auction home production.

A nice sequel, as sequels are mandatory for those whose greed makes up for their lack of creativity, their lack of artistic integrity and who yearn for a little distraction in their rich, idle lives, would be for our hero to get into the food business, specializing in straight-to-class-A-sewer fare.

[FromHouseFlipperToBurgerFlipper,]

"For a bit of irony, try listening to "California Dreaming" while staring at the picture."

Try listening to the laugh on Gorillaz's "Feel Good Inc.".

[sfvrealestate]

To me, the most shocking element of this development isn't the sameness or that they're all going up for auction, it's the tiny, tiny lots! A normal-size lot with a backyard is 5500+ sf. I agree that on that amount of land, these homes are way overpriced.

[Laker]

anonymous wrote: "...shockg, lefty! another great opportunity for you two! buy the whole lot and we'll be BEGGING to buy them from you at twice the price by Christmas!!..."

anonymous, I think i made a typo. You probably meant HALF.

[RZ]

$498K is the starting price. Are you kidding me??? Try $298K and then maybe - maybe - we could talk.

[A Scanner Darkly]

I added up the off-the-cuff valuations stated herein and it came to an average of $216,100. I then used a multiple of 1.849 (I saw a gorgeous home 424 Via La Selva in the HW Riveria in Torrance listed for $1.849 mill; not exactly scientific bit what is in this crazy mkt) of those valuations and came up with a value of $399,569. Anyhow, it's rumored that Kim Il Jong will be bidding utilizing cash derived from the "plutonium 4 cognac" trade.

[1]

Any idea how this "auction" turned out?

[shoobyus]

Sorry, I have to correct some of the statements made thus far. I have seen these homes myself twice so I know have a pretty good idea. In terms of quality, they are nicely built homes, not luxurious, but nice. They are typical of most tract homes built today: small lot, not much space between homes. They do have a small back and side yard contrary to several of the comments above. There are 2 floor plans: a 3 bedroom and a 4 bedroom with estimated list prices from $690-745k. The neighborhood is not Beverly Hills, but it's not ghetto either. It is not any more dangerously than other urban areas. It's super covenient: across the street from Marukai supermarket, 1 block from 99 Ranch Market, a bunch of Japanese and Korean restaurants in walking distance, less than 5 min to 405 and 110.

Now whether you guys like it or not, I think the market value of these homes are around $600-650k based on comparative sales. For your info, market value is defined as the price that a willing buyer and willing seller, neither under duress, would agree to today after proper marketing. It is not what you think the home will be worth when the market hits bottom. I don't know where in LA you guys expect to buy a similar home today for $200-300k, not even in Compton. You all have unrealistic expectations of the housing market, but for good reason, home prices have gone ridiculously high the last few years and you have the right to be angry. Yes, prices will continue to drop, but not to that extent.

Given all that, I'm still not going to bid on these homes for other reasons. The terms that the builder set are very restrictive: undisclosed reserve price, 25 days to close escrow, 5% buyer's premium (that's on top of your winning bid). I prefer to buy on my terms since it is a buyer's market.

If you think about it from the builder's perspective, they have nothing to lose. This is a brilliant strategy to sell many homes very quickly, at a high price, under their terms. Whatever isn't sold at the auction, they would sell through traditional sales. If you were the builder, you would do the same thing. My guess is they will sell some of these homes at the auction at around $600k, assuming it meets the reserve price. We shall see in 2 weeks.