Goodbye, Million-Dollar Starter Home. Hello, Half-Million-Dollar Teardown

Here’s a scene from the real estate recovery that is everywhere being "signed," "indicated," and "signaled." On a block where the average price of a home is more than $1 million, a property goes for $490,000. 

Say hello to 2481 Louella Ave. a two-bedroom, one-bath palace in a Venice-adjacent neighborhood of Los Angeles. According to Zillow, which deserves some credit for ballpark accuracy in this case, the house is worth $563,000. The average property value on the street is $1.014 million. 

Sold at auction yesterday, 2481 Louella is a dump. The new owner will have to pay for a new roof, a new kitchen, new floors and at least a few new walls and windows. The place is a tetanus factory with shards of broken, rusty everything sticking out everywhere.

The city is demanding that several Escheresque constructions in the back – including what looks like it might have been an efficiency and is rumored to have been where the late owner lived while renting out the main house – be torn down. 

The new owner will not be able to get the same live/rent value as the previous owner, because the lot is zoned R1 (single family). That leaves 624 square feet of luxury living. 

Here’s the auction, recorded surreptitiously after the real estate agent told me to shut off my camera:

 

Did the new owner (the guy in the blue shirt) pay too much, too little, or just right? 

The property last sold in 1986 for a cool $118,000. Coldwell Banker last year tried to lock in a 387 percent gain by listing it at $575,000 then knocked that down to $525,000 before removing the listing. Presuming yesterday’s closing price stands up in court, the property gained 320 percent since its last sale. 

But according to this inflation calculator the price should only be $246,973.14. According to this one it should be a little bit north of $231,476.41. We’re six years into the housing bust, and the days when you could claim there is something special about real estate are well and truly over. I’d also ask whether land value – which is all you’re buying in this case – still means what it used to mean. 

On the other hand, this is quite literally the cheapest house on an expensive block. (By "expensive," I mean "costly by the standards of normal Americans who would not consider a million dollars for three bedrooms a good deal, but more or less reasonable in a city full of end-of-the-empire fools piling up more debt while ignoring all of the Lord’s signs.") 

You could make the case that this anecdote does or does not support the belief that there is rising demand for real estate. The auction was reasonably well attended, but that may have been a function of the unusual circumstance. 

In fact, I’d say it’s the unusual circumstance that made this one instructive: When buyers get the rare chance to do a straightforward purchase, without the mind-beclouding assistance of Realtors, loan officers and taxpayer-funded finance swindles, this is what they’re willing to pay. It’s pretty clear all the auction participants came into this with a half-million-dollar ceiling in mind, and they kept within that limit. 

The guy in the blue shirt will of course hope that we’ve reached the floor of the real estate market. I don’t wish him ill, but I note that we’ve seen enough repenetrated bottoms lately to qualify for a Jerry Sandusky field trip to the Boston Archdiocese.  

Still, it seems like just three years ago, during what was supposed to be the worst part of the recession, that a slightly nicer house than this one, in a much less desirable location, was sold for a million dollars. This auction may be a sign that we’re closer to the floor than we were, but that assumes real estate can’t go below $0.00, and we know that it can

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  • Fist of Etiquette||

    A thing is worth what the next person is willing to pay for it. Apparently it is still desirable to live on Louella Avenue. And Cavanaugh is a wiretapping outlaw.

  • Arf?||

    And an alt-text outlaw. How dare he be so descriptive?

  • Evil Otto||

    A thing is worth what the next person is willing to pay for it.

    What's the next person going to be willing to pay for the Big Mac I just ate?

  • Mr Whipple||

    Poop art is making a come back.

  • Auric Demonocles||

    How much are you willing to pay to stay alive?

  • PJ||

    Your consumed Big Mac is not the same thing as an unconsumed Big Mac.

  • Killazontherun||

    For comparison, this is what half a million will get you in my neighborhood:

    http://www.realtor.com/realest.....3584-55237

  • Mr. FIFY||

    Where's the clothesline with Klan robes drying in the breeze?

    /libtard response

  • Killazontherun||

    Down by the brook where we make the womens wash them on the stones.

  • Mr. FIFY||

    Do you sip mint juleps and tug on your suspenders whilst holding forth with your compatriots on the subject of beating nig'ras?

    For that matter, are monocles fashionable in your area?

  • Killazontherun||

    Highly fashionable. Though my neighbor is a bit of an embarrassment. You don't see it in these pics but he's got several Kenmore appliances and a yacht up on cinder blocks in the front yard. That's why nothing is going for 3 quarters of a million here with him keeping the property value down and all.

  • Mr. FIFY||

    A yacht on cinder blocks? Does it have a Confederate flag painted on it?

  • Killazontherun||

    There are yachts that don't one? At least a righteous Bonnie Blue?

  • Mr. FIFY||

    And on the Kenmores... well, at least, you have to admit he has good appliances. I'll bet they're painted white, though - most racists buy white-colored washers and refrigerators.

  • Killazontherun||

    Hey, we're quite open minded and tolerant here. You will find in many front yards appliances that are in ivory, alabaster, dover chalk, platinum, and allustrious pearl as well.

  • Mr. FIFY||

    Yeah, yeah... tell it to the SPLC. You live in a hotbed of skinhead vigilante hatemongerisms.

  • Ice Nine||

    You misspelled "lawn jockey".

  • Mr. FIFY||

    A lawn jockey on cinder blocks?

  • Killazontherun||

    The wife made me get rid of our lawn jockey. Said it leered at her on her morning jog.

  • Killazontherun||

    I only mentioned the things that has that bring the value down. He could better take care of the two he keeps in front of his drive though. I wished he would get rid of their gnome overseer. Gnomes!

  • Mr. FIFY||

    Gnomes are notorious racists. I'm surprised Ed Schultz hasn't blown an hour of MSNBC airtime on the subject.

  • Mensan||

    I immediately looked up my neighborhood too. $500K will get you a lot more house around here: http://www.realtor.com/realest.....8771-81217

  • Mr. FIFY||

    An elevator? Sweet.

  • Mensan||

    Also, that house I linked to is way overpriced.It's actually only worth about $250K.

  • Killazontherun||

    Immaculate tone scheme. Someone has a really good eye.

  • Hugh Akston||

    Yes, taupe on taupe. Really bold choice. I bet they had to fight the HOA tooth and nail over that one.

  • Mr. FIFY||

    If I ever hit the big time, I'd move into a HOA-lorded community, just to get kicked out for openly defying their bullshit terms.

    Not trashing the place, mind you... but I'd damned well put up my own mailbox and paint the house the way I want, though.

  • Kreel Sarloo||

    You don't generally get kicked out of an HOA for violating it's rules, you get sued and when you lose they place liens on your house that coast you a shitload of money to get removed so that you can sell the place with clear title.

    And you'll still end up with a house painted their color choice and the correct mailbox.

    Some fights might be worth starting. Starting one with a HOA seems pointless.

    Better to move into a neighborhood with no restrictive covenants or with ones that are to your liking.

  • SKR||

    You should instead plan on buying people off to ascend to power and then gut the HOA rules.

  • Mensan||

    There are houses in this same neighborhood that are comparable to 2481 Louella in size, but in better condition, that are selling for around $25-40k.

  • Jerryskids||

    I'll see your crappy 1999 4300sf 4x4 and raise you a 2004 6800 sf 5x5 - for a cool $115k less.

  • Brutus||

    Beautiful.

  • robc||

    Near me

    Im not in Anchorage, but Im Anchorage adjacent. I couldnt find anything at the proper price in Middletown.

  • ||

    600,000 euros will buy a nice two bedroom flat in my neighborhood.

  • PaganPriestess||

    That much will get you a serious mansion here http://laportecounty.com/homes.....ion=detail

  • Mr Whipple||

    In my neighborhood, rural South Jersey, land goes for $60,000 to $80,000 per acre. A little more for cleared farmland as opposed to wooded, and a little more for commercial than residential. That is, if it is "Pinelands approved". And that's without a subdivision variance.

    The Pinelands Preservation Act pushed land prices through the roof. Now, the state subsidizes the farmers so they won't sell their Pinelands approved land to a developer. It's some kind of bad fucking bad joke.

  • Mr. FIFY||

    That much money, for that cozy little bungalow?*

    Fuck. Who would willingly live in California?

    *obvious tongue-in-cheek description.

  • JW||

    I'm looking at this with a an overpriced DC real estate perspective and even I think these people are full of teh stoopid. Fools, money ,etc.

    Seriously, if this is the cost of living in Cali, you should reassess your priorities.

  • Ken Shultz||

    You get into these situation when there is limited supply.

    You have lots of high paying jobs in West LA, and not a whole lot of decent places to live--unless you want to commute for an hour and a half or more each way every day.

    You're right next to Santa Monica, which is severely supply limited.

    People are used to seeing this in New York City, where living in a decent neighborhood with a decent school will cost you a fortune. Why do people pay those prices?

    Because they can.

    That's what I don't think people understand about what's happening to California. The people on various forms of welfare are doing just fine. But middle class people won't live in those neighborhoods. The wealthy are, by and large, getting along just fine--and they live along the coast in places like Venice. They can afford to pay those prices.

    It's the middle class that's getting the shaft in California. They were the ones buying up properties in Southwest Riverside County and elsewhere.

    There are only a few places in LA County that are up to middle class standards, and middle class people just can't afford to live there anymore.

  • Mr. FIFY||

    Perhaps Obama can wave His Magic Appendages and "change" this situation?

  • Ken Shultz||

    Everybody that wants to understand what's happening in California should read this interview with an old-school Democrat...

    "Basically, if you don't own a piece of Facebook or Google and you haven't robbed a bank and don't have rich parents, then your chances of being able to buy a house or raise a family in the Bay Area or in most of coastal California is pretty weak," says Mr. Kotkin.

    ...

    California is turning into a two-and-a-half-class society. On top are the "entrenched incumbents" who inherited their wealth or came to California early and made their money. Then there's a shrunken middle class of public employees and, miles below, a permanent welfare class. As it stands today, about 40% of Californians don't pay any income tax and a quarter are on Medicaid.

    It's "a very scary political dynamic," he says. "One day somebody's going to put on the ballot, let's take every penny over $100,000 a year, and you'll get it through because there's no real restraint. What you've done by exempting people from paying taxes is that they feel no responsibility. That's certainly a big part of it.

    And the welfare recipients, he emphasizes, "aren't leaving. Why would they? They get much better benefits in California or New York than if they go to Texas. In Texas the expectation is that people work."

    ----Wall Street Journal

    http://professional.wsj.com/ar.....56966.html

  • Mr. FIFY||

    I'd love to see all the non-poor move out of California, just to watch it collapse.

  • Ken Shultz||

    We have so much going on there.

    San Diego is just about the most important center of the biotech industry. Despite what you may have heard, Hollywood is still the capital of the entertainment industry--there's tons of high paying jobs there. Let's not forget Silicon Valley, which seems to blow up every ten years just to come back stronger. And that doesn't even mention the ag industry, including everything from the Napa Valley to Fresno.

    The big money is entrenched. It isn't going anywhere anytime soon. If Wall Street managed to maintain despite all the leftist politics of New York state and New York City, then the big money centers of California aren't going anywhere...

    It's the middle class family people. The married couple with a kid or two that together make less than $100,000 a year. A married couple making $80,000 a year ought to be able to finance a nice life for themselves and their children.

    That may no longer be possible in LA County--unless you're commuting from Palmdale.

    And Jerry Brown's solution is to raise taxes?! Bye, bye middle class California. Might as well move to Phoenix or Utah.

  • Mr. FIFY||

    Oh, it could change... if Barry & Co. get their wishes, The Evil Rich would be paying 90% on every dollar.

    Then again, if Brown jacks up the tax rate high enough, how many rich people will stay in Cali?

  • Ken Shultz||

    It's basically turning LA into something like New York City, where the housing is so bad--people think bad housing is normal.

    One of the reasons I never tried heroin was because I was afraid I'd end up living in some tiny dump that looks like the average apartment in New York City.

    This is what we've been reduced to.

    People who make high salaries will pay ridiculous rents or ridiculous prices for a house--just to live in a decent neighborhood--when there aren't very many decent neighborhoods left.

    Some wonder why so many people signed on to subprime loans and commuted from the Inland Empire? As if home ownership were somehow irrational, but consider the other options! Even after the bubble burs, $500,000 for a dump--in a SEMI-decent neighborhood.

    (Venice is still pretty dangerous.)

  • Drake||

    Yes - I graduated from USC with an MBA in 1994 and lots of local job opportunities. I immediately left LA and California. I was engaged and saw no pathway there to a decent middle-class life for my family. LA was fun for a few years, but it's no place to raise a family.

  • H. Protagonist||

    Indeed. My wife and I pull down north of $150k, have a 2-year-old, and are planning for another. Where are we living? With my mother-in-law, in the house she bought in 1994.

    Why? Because there's not a chance in hell that I'm going to send my children to a LAUSD school, and any of the houses in good districts near my wife's work (South Pasadena) or my work (El Segundo) are still priced through the stratosphere (not to mention the tenuous nature of employment in this town). Better to pay cheap rent, save for private school, and plan the ultimate escape from this cesspool.

  • Mr. FIFY||

    Why do you hate the children in the LAUSD?

    /libsnark

  • Ken Shultz||

    "Nearly four million more people have left the Golden State in the last two decades than have come from other states. This is a sharp reversal from the 1980s, when 100,000 more Americans were settling in California each year than were leaving. According to Mr. Kotkin, most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families."

    Ibidem

  • Ted S.||

    Those people are being replaced by Mexicans. (Well, other immigrants too, most likely.)

  • Ken Shultz||

    You're right, we do need more immigration.

  • juris imprudent||

    There are only a few places in LA County that are up to middle class standards

    As my friend refers to it - Palmtucky - is in LA County.

  • juris imprudent||

    Dammit, KS beat me to the punch on that one.

    I'm always amazed when I look at the stats and see we're right on the cusp of the top 10% of income earners nationally, and yet we live a very middle class lifestyle in Tijuana Norté.

  • Drake||

    http://www.weichert.com/419510.....ew=gallery

    On 3 acres in farm country, NYC commute is doable but I wouldn't. Morristown / Parsippany area is an easy commute.

  • Auric Demonocles||

    We're getting cracked down by the spam filter but Tim can reuse the same alt-text for every picture in an article? Some animals are more equal than others...

  • Ken Shultz||

    I don't think you're getting hit by the spam filter...

    The software they're using just doesn't like pasted punctuation.

    Look at all the stuff I pasted--you just have to go through and manually replace every pasted quotation mark and every pasted apostrophe.

    Cavanaugh isn't the IT department around here, anyway. Why complain about him?

  • robc||

    Pasted punctuation isnt the problem. Pasted smart quote punctuation is. Copy from sites that use real quotes and problem solved.

  • Evil Otto||

    Or paste it into a text editor that can stultify the smart quotes, and copy it from there to the comment box.

  • Auric Demonocles||

    Isn't it obvious why I was complaining about Tim? I want funny alt-text.

  • ||

    Ken is allergic to funny.

  • Ken Shultz||

    I'm fucking hilarious.

  • juris imprudent||

    a Jerry Sandusky field trip to the Boston Archdiocese

    Talk about a rim-shot line.

  • Rob||

    I found this quaint $500K single family home near where I work: http://www.trulia.com/property.....d-MI-48642

    4 bedroom, 3 1/2 baths, 20 Acres, Pond

    However, it is located relatively close to a major chemical factory, and your Children may develop extra limbs (might be a plus for a forward thinking transhumanist families).

  • BoscoH||

    Elephant in the room here... What happens when interest rates work back up to 7% for a mortgage? Psychologically, the selling prices of these properties are basically "infinity" for most people. Bottom line is mortgage payment and taxes.

    Tim failed to notice that most of these bidders are pros working for flip operations, which act as high return (but risky) investment funds for wealthy people who are disillusioned with Wall Street and have run out of innovative ideas to back. Nothing wrong with it, but there is mad research behind these bids. I bet at the end of the day, every bidder that showed up did $2K worth of research on that property.

  • Obese American||

    Why would rates go up to 7%? Wages are 2/3rds of inflation, IIRC, and they're pretty flat.

    So either people start making more money which causes inflation to go up (along with nominal wealth), or they don't and rates stay low.

    Of course, the feds are completely schizophrenic by pumping billions into federal spending, while at the same time trying to buy every Treasury bond they can to keep rates down. Something's got to give, and my guess is that the Fed's ability to keep buying bonds will run out before the economy turns.

  • Brett L||

    Jesus. They still want $110/sq ft out by me for golf course properties. I don't get the attraction of having flying hazards and people wandering past your rear windows.

  • Mr Whipple||

    Location, location, location.

  • ||

    Wow. A million bucks would get you 40 acres on a hilltop overlooking a lake and one hell-of-a-house in my neighborhood. I am looking at buying the 40 acres as it is adjacent to me and I dont want anyone building there. I would rather have the neighbors I have, which is none.

  • ||

    Oh, and for what I am seeing in the article, I would offer 40K. It aint worth a penny more, and probably worth a lot less.

  • PaganPriestess||

    No shit. It needs major work just to be habitable.

  • ||

    It needs a TARDIS.

  • PaganPriestess||

    Every home needs a TARDIS...when the local gov gets too greedy or nosy, you can just leave the city, state, country or planet any time you like.

  • cthorm||

    Until last July I lived less than a mile from this dump. Do note that Louella is just behind Costco, so I'm sure it's noisy as all hell. We sold our 1500sqft 3 br/2a for about $700k, and it was nicely updated from 1948 construction, on a better street than Louella. For less than $600k we bought a 2600 sqft 5 br/4ba 3-storey house in a ridiculously kid-friendly area of Orange County. I hate LA.

  • SKR||

    In 1987 Venice was a shithole. Since then, Venice has been populated with a shitload of million dollar plus homes. That of course is going to have a profound effect on the value of Venice adjacent properties well in excess of what inflation would have.

  • CE||

    Ummm... is this supposed to be an example showing that housing has still not recovered? $490K for a 600 square foot dump is bubble pricing, even in California. (Sure, it may have gone for $700K in the actual bubble of '05-'06, but it's not a price that any sane, sober person would ever pay. You can find plenty of much larger much nicer homes in better neighborhoods for $600K within an hour of LA.)

  • benji||

    Try reading the entry next time and you'll see Tim is arguing it's still inflated.

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