Living the California dream in Compton: In a competition to find the smallest “home” we visit a 378 square foot property.
One gut check that you need to do when markets reach this fever pitch in mania, is simply look at the product. People get fully disconnected from value and simply assume that every crap shack is going to sell because every single second a sucker is bred into our economy. There is now a blind consensus that prices will not drop. And if they drop, it will be a tiny drop. What is telling however is that virtually all large US metros are seeing price increases. This is a nationwide trend despite house humping beer belly cheerleaders acting as if it is only happening in their tiny niche market. So the euphoria is running rampant across all areas. This brings back the idea of decoupling. The markets are as coupled as an old Taco Tuesday baby boomer couple that is building up heart disease on a massive cruise ship. There is too much bubble psychology in the current environment. Have people already forgotten that the unexpected tends to happen (just look at our President!). Yet people just forget about Black Swans and keep on trucking forward taking on mega risk. Let me show you what is happening in Compton.
Straight Outta Compton
At one point in our Real Homes of Genius series, we were attempting to find the smallest house possible in Southern California. A reader sent this example in and I think we have a new winner:
558 W Compton Blvd
Compton, CA 90220
1 bedroom, 1 bath, 378 square feet
“OPPORTUNITY KNOCKS !!! NEED CASH OFFER. .. .ONE BEDROOM HOME. .. . NEED TLC, ,. .. INVESTORS !!! BRING YOUR CONTRACTORS AND HANDYMAN . .. . SOLD “AS IS “. .. .. .. .. .”
Now I know you are itching to purchase this place. “Dr. Housing Bubble, I’m calling my agent right now! This place with 20% down is totally making sense via my rental parity calculations and Taco Tuesday logic.” This place is 378 square feet and just look at the beauty here. The ad is very subtle with saying “need TLC” and that you should bring your contractor and handyman. How much for this place? $179,000. In Detroit you can get something like this for $1,000:
So far, there hasn’t been someone diving in on the Compton home:
Someone has had the interest in selling this place since November of last year. I pulled up the Google Street View and you flat out have a cop car in the picture:
Yes, looks like the area is definitely in gentrification mode. All this needs is a Whole Foods and you are suddenly able to talk like a house horny pitch person. And by the way, that Google Street View is from December of 2016.
People are absolutely delusional at this point. They assume that they can lock in for the next 30 years as if change isn’t accelerating. And many work in industries that are one step away from being automated out or cut completely. Yet they have a crystal ball that allows them to buy a crap shack and assume the past is a perfect road map to the future. But if you are really honest, the recent past shows a mega housing bubble bursting because people paid too much for homes and took on too much debt – and again, most of the foreclosures came from traditional 30-year fixed rate mortgages.
Who is ready to turn this place into a hipster flip?Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information