Despite all my years in Arcadia, I’ve never been to a race at the Santa Anita Race Track. I hear it’s fun and quite exciting to cheer on your horse all the way to the finish line. The thrill of a race and potential to strike it rich on a lucky bet is more than enough to get your heart pumping. For those trying to sell their home right now, that’s probably the same feeling they’re experiencing except there’s no more potential to make any money for years. With every lowball sales transaction that goes through, the comps in that neighborhood are pulled lower from the previous week and it’s making the sellers very, very nervous.
I made the usual Sunday rounds and saw this race in a cluster of condos within a mile of each other. Traditionally, condos feel the pinch of the market before single family homes and it’s the same this time around. Some of these homes are next to each other on the same street and some are even part of the same development complex.
35 Lucille St. #A – $644k, 3bed/2.5ba, 1551 sqft, $415/sqft, 82 days
33 Alice St. #B – $718k, 3bed/2.5ba, 2084 sqft, $345/sqft, 180 days
40 Alice St. – $488k, 3bed/2.5ba, 1241 sqft, $394/sqft, 32 days
45 Alice St. #J – $478,888, 2bed/2.5ba, 1483 sqft, $323/sqft, 172 days
50 Genoa St. #A – $758k, 3bed/2.5ba, 1865 sqft, $406/sqft, 87 days
42 Genoa St. #B – $758k, 3bed, 2.5ba, 1886 sqft, $402/sqft, 67 days
41 Genoa St. #C – $686k, 3bed/2.25ba, 2144 sqft, $320/sqft, 16 days
28 Fano St. #A – $689k, 3bed/3.5ba, 2350 sqft, $293/sqft, 74 days
153 Fano St. #A – $469k, 3bed/2.5ba, 1240 sqft, $378/sqft, 131 days
598 2nd Ave. #A – $849,950, 3bed/3.5ba, 2297sqft, $370/sqft, 33 days
600 2nd Ave. #A – $799,950, 3bed/2.5ba, 2185sqft, $366/sqft, 33 days
139 El Dorado #A – $858k, 3bed/3.75ba, 2126sqft, $404/sqft, 35 days
141 El Dorado #A – $838k, 3bed/3.5ba, 2034sqft, $412/sqft, 35 days
I’ve listed 13 properties above – which one will buckle and succumb to market forces first? The new construction, vacant homes are most susceptible because their carrying costs are killing them. Their investors’ money is going down the drain with each passing day and they do not have the luxury of holding out. Owner occupied units have more of an emotional factor compared to vacant ones and traditionally hold out longer before reducing prices.
This isn’t a new phenomenon. We’ve seen it in the past and we’ll see it again this time around. Owners do all that they can to keep the asking price as high as they think their house is worth regardless of what the current market is willing to pay for it. The naive action of lying to oneself continues until a comparable home in the neighborhood lowers the price to sell while their house is still sitting without an offer. Only then will the seller budge a little and lower the price to match the comps, except by that time, the comps have shifted even lower from recent sales as potential buyers expect even better deals.
This cycle repeats as the seller chases down the market as his asking price is reduced bit by bit late in the game. If he had only priced it right in the first place, the knife catchers that bought his neighbor’s house would have put an offer in on his place instead. Many make the mistake of listing their home at 2006 prices because they believe it’s worth that much. Well here’s news for them: it was worth that much when crazy people were willing and able to sign up for suicide mortgages. Lenders aren’t giving away free money anymore and buyers are starting to realize that real estate doesn’t always go up after all.
Remember, a house is only worth what buyers are willing to pay. With more and more listings flooding the market each day, the competition gets tougher. During the boom, buyers were racing to make offers in fear that they’ll be priced out forever and in turn drove prices up way beyond fundamental, sustainable means. The market will experience a similar phenomenon as it will soon become a race to the finish with sellers trying to sell their property as fast as they can by lowering prices, offering incentives and pushing for short sales. Whether the banks will approve those short sales is another issue, but one thing is clear – the longer a seller waits to drop the asking price, the longer it will stay on the market. With so much inventory and so few qualified buyers, sellers have to face the reality that their home may not sell for a very long time.
This trend is happening everywhere, so much so that you’d think surely sellers get it by now – the days of demanding a high price and getting it are behind us.
It’s only a matter of time before they’re forced to “get it” and lower their prices. Once that happens, it becomes a domino effect. With all the inventory on the market and buyers holding back, sales volume has already dropped off a cliff and pricing is right behind it.
It’s the same in London. The rental market is booming as cash rich first time buyers sit waiting for vendors nerves to break.
Much of what you say is true….but, most of the for sale signs you see are white families fleeing Arcadia. Tough to swallow, perhaps, but true. Another thing you MUST consider is the fact asian buyers would not buy a thing in December OR until the Chinese New Year began. My wife and I just sold a home in North San Gabriel, just shy of San Marino. As soon as the new year past, tons of buyers flocked in and the place sold, with 6 offers. Granted, the price dropped from six months ago, but we rec’d a fair price. The regular “white man’s” home is Arcadia is history. Teachers, firemen/women, police officers cannot afford a home in Arcadia. The home they SHOULD have been able to afford is being knocked to the ground so a mansion can take its’ place. Take a drive up/down Baldwin Ave on the weekend, or mid-weed for that matter. It has turned into Atlantic Bl or Garfield Bl in Alhambra. NOTHING but traffic. It’s no wonder you see for sale signs, who the heck wants to live in Arcadia anymore?
Thanks for sharing your story Craig. North San Gabriel is a nice area and I’m glad you got out in time. Congrats on the sale!
I do drive up/down Baldwin on the weekends and I must agree, traffic is bad – especially on race days. Although a part of it is from the increase of business, most of it comes from the expansion of the Westfield mall and racetrack. It’s one reason I’m firmly against the further expansion of the mall.
Q4 is traditionally a slow time in the RE market for any demographic because people are busy with the holiday season. I have not heard of or noticed a correlation with Chinese New Year, but perhaps.
Most communities north of Duarte Ave. are holding fairly well against the invasion of the guady McMansions compared to everything south of it. Imho, there are still desirable locations in Arcadia.
You are correct regarding the influx of Asians into Arcadia, but I disagree that “the regular white man’s home is history.” McMansions popped up like wild mushrooms during the boom, but with the credit crunch, things have slowed considerably. As I drive through the streets I see one empty McMansion after another – brand new construction, just sitting there.
Prices will fall back to affordable means for working professionals. The market will take years of decline before these prices are back to fundamentals.
Totally disagree with the comments about “fleeing”, on about a thousand levels. Wow.
Arcadia is no different from any other community that benefited from this run-up in delusional prices.
LA Times: The level of home sales in LA County dropped 50% from year-ago levels. Median sales price of homes sold in Los Angeles County dropped to $458,000 — now down $12,000 in one month, and $92,000 from its August peak. That’s five months. Let me repeat that: sales prices in L.A. have dropped 16.7% in five months. That is a collapse of prices.
It’s not just people “fleeing” Arcadia. Let’s take a look at the bigger picture, here.
I maintain my position that no market will be immune from the price declines. The LA Times report that sales volume dropped 50% is a clear indication of the the market trend.
I suspect that the pain felt by many is much worse than what the MSM reports since many owners are still holding out in hopes of a “Spring Break.” (pun intended)