1518 Highland Oaks Dr.

*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%

On the surface, this looks like any other overpriced listing. There was nothing special that caught my eye except for the rather large price drop in the previous post-bubble downturn. This house was purchased for $660k near the peak of the late 80s boom in 1988 and then sold for $402k just 4 years later in 1992. That’s a quarter-million dollar price drop, but I like to view it as 39% off the 1988 purchase price.

Don’t forget folks, 1992 wasn’t even the bottom yet and by comparison, the current housing crisis easily trumps that one. Will history repeat it self? We shall we, but let’s take a look at the current seller’s situation.

Purchase Price $402,000
Purchase Date 10/16/1992
Loan $202,300
Downpayment $199,700

If the buyer was on a 15-yr fixed mortgage, the house would have been paid off last year. Instead of that, the seller pulled out multiple home equity loans. After all, home prices would increase forever and you can just refinance right?

Purchase Price $402,000 (10/16/92)
Refinanced to $650,000 (04/25/05) — $248k HELOC
Refinanced again to $916,000 (06/21/06) — $266k HELOC
Total HELOC Amount — $514,000

Total debt now is now $916,000 after owning the home for 16 years.

Incredible. Instead of being mortgage free and therefore truly a homeowner who’s immune to the housing crisis today, she now owes close to a million dollars to the bank. From the description and pictures, none of the money was used to renovate or update the house. The choice to pull out over half a million dollars in cash to fund whatever lifestyle she lived for the past few years is a great example of the irrational exuberance that characterizes so many Americans.

With comparable 3bed SFR rentals going for $2,695 and $3,000 per month, it’s no surprise that this listing is over-priced. The GRM for this house would be 445 and 399, respectively – well above the 180-225 range where rent-saver buyers would enter the market.

707 Joaquin Rd.

*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%

“* * SHORT SELL PROPERTY * * SUBJECT TO LENDER APPROVAL * * BEAUTIFUL HOME LOCATED IN THE VILLAGE AREA, PRIVATE CUL-DE-SAC STREET. REMODELED IN 2005. NEW ELECTRICITY WIRING, PLUMBING. A/C. DOUBLE PANE WINDOWS, KITCHEN CABINETS, APPLIANCES. CLOSE TO SHOPPING MALL AND MARKET. SPACIOUS BACKYARD WITH MANY FRIUT TREES.”

Yesterday I spotted a foreclosure on Foreclosure.com just a few block away on Columbia Rd and today I see a short sale in the same community. While two distressed properties don’t mean the world, it does refute many realtors’ arguments about how the high end areas are “immune” to the market crisis. This short sale may or may not go through; we’ll see.

Purchase Price $669,000
Purchase Date 02/28/2005
Loan $535,200
Downpayment $133,800

This buyer put a $133k (2o%) downpayment and is listing the property for $30k above the previous purchase price. It’s unfortunate I couldn’t find anymore information on the loans tied to this property because the seller must have HELOC’d himself into oblivion for this to be a short sale. At $669k, the homedebtor took back the entire 20% downpayment and cashed out $30k+ in equity.

Homes in this neighborhood were going for upwards of a million dollars in the heydays and my guess is that the HELOC was a lot more than just $30k. The description states that the property was renovated in the same year it was purchased so it could be a failed flip by a newb investor. It’s hard to say without more numbers on how much and when the home equity loans were taken.

The previous sale was in May of 2001 for $365,000. If there was no bubble and I factored in the following annual appreciation/inflation rates, the property would be worth…

3% $448,903
4% $480,315
5% $513,592

To be fair, I would tack on an additional $50k-$75k for the renovations done to the property. New plumbing and electrical work isn’t exactly cheap and probably much needed on a 60 year old property. It’s a shame the realtor didn’t show pictures of the inside. Not that I can see the new wires or the pipes, but it would have been nice to see the new kitchen. $699k is a fair price for right now, but it will be much lower in another year or so.

152 W. Norman Ave.

*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%

First and foremost, don’t be fooled by the picture. That’s not the picture of the house for sale – that’s a picture of the house across the street. The are pictures of other homes on the street as well, but I can’t tell if any of them show the actual property for sale. What a horrible listing.

“A very rare opportunity to build a custom luxury mansion in a highly desirable area. It is an excellent location as the neighborhood is surrounded by newly constructed multi-million dollar homes. A beautiful tree-lined street with an enormous lot, the frontage is approximately 100 feet wide. The existing plans reflect building a 7,600 square foot home here. A chance of a lifetime for the opportunity to build a custom, dream home & most certainly, a golden chance for investors. Please call for additional detailed information.”

This realtor gets 2 points for not writing in ALL CAPS and using the annoying exclamation points!!! But I’m going to deduct 100 points for lying through her teeth. This is a 59 year old house next to the drainage ditch asking for $1,075/sq-ft. If stating that this is “most certainly, a golden chance for investors” isn’t a lie, I don’t know what is. These sellers are obviously looking for an even bigger knife-catcher to bail them out.

Purchase Price $1,350,000
Purchase Date 01/04/2008
Loan $1,080,000
Downpayment $270,000

Let’s look at some rental comparisons. With other 3bed, 2bath SFRs in Arcadia like this and this renting for $2000/month, this property is wayyy over-priced. The numbers are so out of whack I had to check it twice because I couldn’t believe my eyes.

Asking Price $1,888,000
Rental Equiv $2,000
GRM 944
$2,000 x 180 GRM = $360k
$2,000 x 200 GRM = $400k
$2,000 x 225 GRM = $450k
$2,000 x 250 GRM = $500k

For $1,888,000 you’d think you’d be buying the custom home in the description – not the lot with the old house on it. These sellers are attempting to make $538k in 3 months; that’s over $6,000/day. This is absurd. There are no other words to describe it.

As the housing correction continues, inventory will increase and more properties will stay on the market without a transaction. Deceiving realtors often take a listing off MLS and Redfin, only to re-list right away in order to reset the days-on-market counter. This particular listing has been re-listed so many times I’ve lost count, but the interesting thing is that the asking price remains changed throughout the entire process. Incredible.

Some realtors do it more than others, but apparently this one didn’t bother. As a result of that, these properties have been on the market for over 400 days. And while there have been many price modifications, the current asking price hasn’t changed all that much from their initial listings back in 2006.

519 S. Fifth Ave #B

517 S. Fifth Ave #A & 513 S. Fifth Ave #C

All three of these properties are 3bed/2.5baths with 2002 sq-ft so they are cookie-cutter clones of each other. The detached townhouse product was very popular with builders during the boom because it maximized profit on a relatively small parcel. At the same time, it offered a home that appealed to buyers because it doesn’t share any walls with neighbors. These were a hit with many Asian buyers who weren’t accustomed to having a yard anyways.

These builders/investors were late to the game and now they can’t unload these properties. You would think after being on the market for well over a year, they would succumb to their senses and lower the price to get a sale. Apparently, they didn’t get the memo and the asking price goes up and down and up and down. I don’t understand their logic whatsoever.

519 #B is on its 16th asking price – currently at $769k.

517 #A is on its 13th asking price – currently at $729k and 513 #C is on its 15th asking price – also for $729k

455 days on the market and the best they could come up with is $70k off the original listing price. Goodluck finding a buyer willing to pay $729k for townhome. With a $146k 20% downpayment, it’s still $3,686/month at 6.5% fixed for 30 years. Add in the HOA fees, property taxes, maintenance and insurance and you’re looking at $5,000 in monthly carrying costs for a stucco box on a postage stamp sized lot.

Thanks, but no thanks.

1025 W. Huntington Dr. #K

*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%

This is the cheapest property on the market in Arcadia today. At $228,000 and $197/sqft it looks like a steal, but looks can be deceiving. The $1,153/month mortgage payment is very affordable; admittedly you’d have to put down $45k, but it’s not an outrageous amount. Then I look at the description to find out that you have to pay a mind-boggling $780/month to lease the land. In addition to that, there’s a $184/month HOA fee that bumps the monthly carrying costs to $2,117 excluding taxes, insurance, maintenance etc. For that price you can rent a 3bed/2bath SFR and still have $167 leftover to pay for the utilities. It’s also the equivalent of buying a $380k property with the same $45k downpayment at the same interest rate.

Sales History

Date	Price
Aug 14, 1996	$55,000
Jul 17, 2000	$152,000
Sep 07, 2000	$145,000
May 21, 2004	$200,000
Oct 28, 2005	$220,000

This was purchased on the high in 2005 and these sellers are still listing it above their purchase price. Obviously they didn’t read my letter in yesterday’s post. There must be something magical in “breaking even” on a bad investment. The psychological impact of it is so great that many choose to ignore the facts and live in their own alternate world until they’re forced back into reality. By then, it’s usually too late.

To top it all off, this is an awful property. I can’t find one redeeming quality that would make me want to buy it. It’s on a big street with heavy traffic and has a non-permitted addition. It’s also fairly small and dated with just one parking spot. Even as a renter, I wouldn’t want to live there.

Remember, this actually isn’t the cheapest property on the market today. The horrific $780/month lease for the land coupled with the homeowners association fee effectively puts this condo at about $380k. These sellers are on a hunt to find a knife-catcher to bail them out so beware. Don’t be fooled.

Have a great weekend 🙂