| Asking Price | $900,000 | ::: | Sq-ft | 1,632 |
| Purchased Price | $616,000 | ::: | Lot Size | 10,031 |
| Purchased Date | 12/11/2003 | ::: | Beds | 3 |
| Days on Redfin | 118 | ::: | Baths | 2 |
| $/Sq-ft | $551 | ::: | Year Built | 1956 |
| 20% Downpayment | $180,000 | ::: | Area | Highlands |
| Income Required | $225,000/yr | ::: | Type | SFR |
| Est. Payment* | $4,550/month | ::: | MLS# | 22103393 |
*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%
Sometimes I wonder if a seller is serious about selling their property. Even after being on the market for 4 months, they have refused to lower the asking price. What are they waiting for? Do they think they simply haven’t come across a buyer who likes their home? There’s a buyer for every home in every market – at the right price. Apparently, $900,000 is not the right price for this particular property.
Purchase Price $615,454
Purchase Date 12/11/2003
Loan $462,000
Downpayment $153,454 (25%)
With other 3 bedroom SFRs like this and this in the north Arcadia area renting for $3000/month, this property is overpriced. If someone puts down the $180k 20% downpayment, the monthly payment is still 50% more than the comparable rentals in the area.
$900,000 asking price / $3,000 rental comparison = 300 GRM
By extension, if you assume the 300 gross rent multiplier is 50% more than the “right” GRM for a desirable such as the Highlands, that would mean that the appropriate GRM in that neighborhood is a 200. Of course, there’s no hard rule on the use of the gross rent multiplier, but I would say that 200 sounds about right. Rent-savers and investors probably won’t jump in until we reach GRMs of 150-180.
The previous purchase in 1993 was at $362,000. That was about halfway through the 1990s real estate correction which lasted a total of 7 years. This property most likely dipped down to the low $300k in the mid-90s and the made its way back up to the million dollar mark during this recent bubble. How much this home will eventually sell for is anyone guess. If they don’t lower their asking price, buyers will simply overlook the property and the owners will end up chasing down the market like so many others we have seen.
Perhaps they should read about how to sell a house in this market.
Where is Arcadia’s escrow price in terms of year’s roll back? I guess it must be between 2003-2004 for the time being? That means a knife catcher will probably catch this knife at around $650k-700k.
This listing is really at WTF price just to make the owner feel good and rich.
Here is some reality check from http://www.bubbleinfo.com/
So again I am a rookie at all this stuff… but factoring in the credit crisis, doesn’t it all come down to income.
So Arcadia is a very nice area, Go Apaches!, but it isn’t Beverly Hills. So lets say that the average income for homeowners in Arcadia is in the 95th percentile… Which, and I am fat thumbing here is about 90k to 120k a year. So if we take the high number 120k and times it by 30% which is within the federal guidelines we get $36000 or the monthly payment of $3000 bucks. Which means, this house is overpriced by 300k to 400k, or someone that has saved up a bunch of money… ohhh wait those type of people don’t exist.
I know my numbers aren’t spot on, but my point is that the person that fits the 95th percentile of income profile wants to buy this house, but the house is way overpriced.
Fast forward 3 mos, then 6 mos, and then 12 mos, and this house will be in the 600k range if not lower. I might be way off, but I am at least in the ball park.
MTB,
My thoughts exactly. I always felt the bubble formed because house prices were growing faster than incomes. Those exotic loans were allowing people to “purchase” homes that were much greater than one could afford via conventional means. I feel every place will feel the bubble burst, its just a matter of time. Of course I wish it would happen sooner rather than later since I want to have a place of my own.
MTB, that’s just silly. Why would someone want to pay $3,000 a month for a house when they can pay $5,000 and say they live in a MILLION dollar home? The bragging rights alone is worth the $300-400k premium.
🙂
I know my income did not double over the last 3 years. After working hard to save up for a decent downpayment, we are rewarded with enough money to comfortably purchase a rundown condo in Arcadia.
626chump,
Totally agree, I have been tearing my hair out, beating myself up, watching home prices going up and up. In 2003… I thought they were a bit high, but that just means I will have to make more money. Even when I made 15% to 20% gains in income year over year, I wasn’t keeping up. At first, I thought maybe all those real estate peeps are right, but my grandfather lived through the GD, and his motto… “always plan for everything going wrong, and I mean everything going wrong, and if it makes sense then….” So I stood on the sidelines…
Now it is a waiting game… I go to open houses, and think about the profile of the person that the house is supposedly priced at or “marketed” at… There is a house on Longley way, that is asking 900k… and I have an internal price at 450k to 600k. I sort of feel like making a offer…
love to see that house profiled, east of el monte
Even in this market the seller wants a 46% return on his home after owning it for just 4 years. Although I don’t blame him for wanting to cash out those “gains”, his listing price is reflective of how out of touch people are with current market conditions.
This is a race to the bottom and the smart ones have already sold and are waiting on the sidelines.
I have to dig up my data, but I don’t believe we’re in 2003-2004 territory yet. Arcadia median prices continued to rise into 06 and 07 so we’re probably just into 2005 prices.
February 2008 median price of SOLD homes was down 20.6% YOY to $647k. That’s around 2005 prices.
Wow you made 15-20% gains in income year over year?! Let me know where to apply haha 🙂
Did you mean 271 Longley Way to the west of El Monte? I did a profile on that property last month https://www.arcadiahousingblog.com/2008/03/10/a-long-way-to-go/ The links expired, but the same house has been re-listed on Redfin yet again.
Holy synergy batman….
That is the house… and my math is about right on that one, although it looks like I am on the high side with it.
I got two promotions in the same year, and I was working at one of the fastest growing companies in the SGV area at the time. It was soon bought and moved to Burbank… any guesses.. and I am no longer there.
Anyway, I like that house because the area it is in, I have never walked through it or anything, but I am guessing that they need the rent to cover their I/O loan, and that would help them wait out the market…. they dont’ know that when the market comes out of the turn… you will be starting at 50% of the current price… it will take 10 to 12 years to return to 2006 levels….
Not to burst your bubble (pun intended), but 95th percentile nationwide is over $160K nowadays. 80th percentile is probably $85-90K. Median income in 91006 is more like $58K (http://www.zipskinny.com/index.php?zip=91006), and approximately 25% of folks in 91006 earn $100K or more. But your analysis still holds, just on a smaller margin.
One other comment that I have… is….
How is Arcadia/Monrovia as community going to fare through all the things headed our way…?
The RE meltdown and the end of cheap oil or peak oil if you will…
With the price of oil toping $115 today, I have come to the conclusion that we are on the crazy train…
Corntrollio,
Thanks for the data and the link.
My numbers were off, but if you are in the top 90% of income in a community, and the price of a decent house is 6 to 7 times your income… something is way wrong.
That just shows how out of whack everything still is. During the peak of the bubble, LA county as a whole had price-to-income ratios upwards of 10-11 and Arcadia was in the same ballpark. Surely you have folks in the 90th or 95th percentile that make $160k/yr, but that 10% of the population cannot sustain the over-valued market of the entire city.
Corntrollio – Thanks for the link to Zipskinny 🙂