All posts by TheArcadian

Misc. Post

Update on Sale Prices

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Here is a list of some properties we profiled the last 3 months. Some have been sold and many are still… not!

35 W. Norman – Listed: $1,338,000, Sold for: $1,100,000

31 Woodlan Ln – Listed: $1,724,980, Sold for: $1,667,500 after 350+ DOM.

750 Arcadia Ave – Listed: $558,000, Sold for: $540,000

707 Joanquin Rd– Listed: $699,000, Now listing for $829,00 ~WTF

930 Panorama – Listed: $1,175,000 , Now listing for $998,000 (270 DOM)

1642 N. Santa Anita – Listed: $928,000, Now listing for $878,000

Most of the listing we profiled since January are still on the market, unsold and reflecting multiple price reductions. Many of the listings have been “refreshed” by the listing agent so the “days on market” figure is actually lower than it is.

In addition to the existing re-sale listing, we’re seeing more REOs and shortsales coming onto the market. As this article from The New York Times state, even Prime mortgages are seeing a spike n foreclosure activity.

foreclosures_in_prime.gif

Oh look here – It seems like California is leading the way again in distressed properties.

Inventory

Inventory & Market Report – 5/31/08

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Zip Codes: 91006, 91007market_icon.jpg

Current Market Listings as of May 31st, 2008*
Properties for Sale: 243 (+13)
Median Listing Price: $759,900 (-1.15%)

Weekly Foreclosure Update*
Properties in Foreclosure: 25 (0%)
Properties in Pre-Foreclosure: 75 (+9)
*+/- is compared to previous week’s data.

Changing landscape for Realtors

Apparently, we’re not the only ones that think the average Realtor’s job description is about to change. Jeff Jarvis writes an excellent article on why this is so in Realtors, Prepare to Lose Your 6 Percent.

The only reason — only reason — that Realtors could hold onto their high commission for such little value and work is that they kept information away from the marketplace, making it inefficient.

Despite the changing role of Realtors, I still believe real estate professionals are invaluable in the selling and buying process. I see many FSBO (for sale by owner) listing which could really use some help. It just so happens we came across this photo today to reinforce that idea:

signfinal2individual.jpg

Property and foreclosure numbers obtained from U.S. Census, ZipRealty, Trulia, Yahoo Real Estate and Foreclosure.com. Market listings and price data obtained from DataQuick News.

Property Profiles

Another $1.2MM for land

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68 W. Longden
Arcadia, CA 91007

68wlongden.jpg

Asking Price $1,248,888 ::: Sq-ft 1,937
Purchased Price N/A ::: Lot Size 0.45 acres
Purchased Date N/A ::: Beds 3
Days on Redfin 2 ::: Baths 2.25
$/Sq-ft $645 ::: Year Built 1938
20% Downpayment $249,777 ::: Area Santa Anita
Income Required $312,222 ::: Type SFR
Est. Payment* $6,314/month ::: MLS# 22110727

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

This property is very similar to the 1219 S. 6th Ave. that I profiled 2 days ago. They both sit on large lots (0.45 – 0.61 acres), have comparable square footage (~1,900), very old (60+ years) and both listings hint that you’re better off demolishing the existing structure and building a new one. To top it all off, both properties are listing for $618+ per square foot.

Assuming the structure itself is worth nothing, does the listing price of $1,248,888 justify the cost for this sub-1/2 acre lot? If you look at the aerial map, the property is surrounded by half a dozen or more 3,000 – 4,000sf McMansions. Can you spot them?

mcmansions_galore.png

It could be that I’m not the target audience for these types of properties but it looks like $1.2MM buys you very little. Permits, financing costs, architectural fees and the construction of a new three to four thousand square feet home will put you near or at the $2,000,000 mark. Even in this inflated market, $2MM can buy you a very nice existing home, not just in Arcadia, but in the Highland or Peacock Village communities.

$940k – 240 Vanquero Rd., 0.4 acres
$1,358,876 – 1714 Highland Oaks Dr., 0.28 acres, 2,788sf
$1,580,000 – 1249 Oakhaven Rd., 0.35 acres, 3,700sf, Private gated community (Whispering Pines Estate)

I could go on and list a dozen more properties but I’m sure you get the point. So what’s your favorite property for under $2MM in Arcadia?

Property Profiles

$1.2MM for Land. Are you a sucker?

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1219 S. 6th Ave.
Arcadia, CA 91006

1219s6th.jpg

Asking Price $1,200,000 ::: Sq-ft 1,942
Purchased Price $1,230,000 ::: Lot Size 0.61 acres
Purchased Date 2/21/2007 ::: Beds 3
Days on Redfin 166 ::: Baths 2
$/Sq-ft $618 ::: Year Built 1941
20% Downpayment $240,000 ::: Area Near Monrovia
Income Required $300,000 ::: Type SFR
Est. Payment* $6,067/month ::: MLS# S515166

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

Remember this property that we profiled 3 months ago? Back then it was listed for $1,392,000 and unsold after 75 days on the market. It is now listing for less than the purchase price and the lender is most likely keeping an eye our on this sale due to their foolish 100% financing.

The seller had originally purchased this property for $1,230,000 back in 2007 and got the City to approve plans for an 8,000sf home to be built.

1219s6th_2.jpg

I have no doubts that the owner was expecting to hit it big when he originally listed this home for $1,850,000. Today, he will be lucky to walk away with a short-sale and intact credit.

Listing history

Date Price
Dec 12, 2007 $1,850,000
Dec 18, 2007 $1,392,000
Feb 29, 2008 $940,000
Mar 09, 2008 $1,200,000

Are you a sucker?

Take a look at the price bump from $940,000 to $1,200,000. This is neither a typo on my part or the listing agent. If you scan through the Redfin listings, many properties have actually had their listing price increased during the last 2-3 months. Although we can’t say for sure, it is my suspicion that local Realtors are expecting a strong Summer sell-off as students graduate, empty nesters relocate and young professionals start property hunting. Perhaps the Realtors are also trying to create a sense of urgency by reminding suckers – sorry, I meant buyers – that they need to purchase soon or risk being priced out forever.

It is probably a combination of both scenarios as sellers refuse to face the reality of our housing crisis. This Summer is important because it will get the ball really rolling in terms of price reductions and REO sales. I know many of you have been waiting for a long time to buy a home in Arcadia and your patience will be justified as we slowly witness the unraveling of this housing bubble. Personally, I’ve been waiting for 3 years and it has already paid off in terms of what my money could buy in 2005 versus today.

Analysis

Tips for a buyer’s market. Part 1

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We are entering a housing market that will be very different compared to the last 5 years. During the run-up of prices leading to our housing bubble, sellers had the luxury of rejecting offers because there were a dozen more offers on the table. As a buyer, you were expected to be ready and increase your offer if a higher bid came in.

Not surprisingly, this led to a buying frenzy as buyers feared that they would be priced out of the market. People didn’t think twice about overpaying for a home because agents and lenders fed them the false hope of annual double digit appreciation. Zero-down, zero doc, 105% financing and interest-only payments made buying quick and effortless. Sellers were able to milk every penny of “equity” from their homes.

Times sure have changed.

As a buyer, the rules are now changing in your favor as properties sit on the market for 300 to 400+ days and multiple prices reductions become the norm. See the following condo conversion:Price reductions for 535 W DUARTE Rd #11:

Date Price May 03, 2007 $485,000 Aug 09, 2007 $479,000 Sep 12, 2007 $469,000 Oct 26, 2007 $459,000
Feb 06, 2008 $448,000
May 09, 2008 $438,000

So what can you do take advantage of this turning market?

1) Do your research first

Sites like NeighborCity.com, Refin.com and ZipRealty.com provide a near-comprehensive list of homes currently for sale. Many sites can refer you to an agent or broker who will provide their services after you’ve drawn up a short-list of potential homes.Through these brokers, you have room to negotiate their fees by getting up to 2/3 of their usual 3% commission back. If you don’t want the cash, then have the broker agree to a lower commission rate and take the difference back in a lower purchase price. The choice is yours

2) Make your first offer and go down from there

Let’s face it, we are facing a record-high inventory of unsold homes and the urgency to secure a home with a higher offer is a thing of the past. When the seller tells you they have more interested buyers waiting in line, I suggest you wait a few days before calling back with a lower offer. Chances are, they will panic and come down on the price. Trust me, if there was another “better” offer on the table, the home would’ve already been sold. This is not a housing market where sellers can afford to be picky.

Whether you go with the fundamentals of affordability, GRM or comparable sales, decide on what you will pay for a specific home and start from there. It can be 10, 15 or even 20% off the asking price. It doesn’t matter if the seller is facing financial distress, underwater on their loan or even on the brink of foreclosure. Remember, always counter with a lower offer in increments of your choice (e.g. $2,000, $5,000 or, heck, $10,000).

Your thoughts?
These are just 2 of a dozen tips I have out together. Although we are far from reaching the bottom of the market, it doesn’t hurt to prepare yourself for the right buying opportunity.

Inventory

Inventory & Market Report – 5/24/08

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Zip Codes: 91006, 91007market_icon.jpg

Current Market Listings as of May 24th, 2008*
Properties for Sale: 230 (+10)
Median Listing Price: $768,880 (0%)

Weekly Foreclosure Update*
Properties in Foreclosure: 25 (0%)
Properties in Pre-Foreclosure: 66 (-3)
*+/- is compared to previous week’s data.

REOs Crashing the  Party
Yesterday I wrote about how we will start seeing more homes going for under $300 per square foot after this housing crisis plays itself out. Foreclosures will lead the way in dragging down home prices and we have a prime example right here:

250 E Floral Ave
Arcadia, CA 91006

250efloralave.jpg

This is an REO currently listing for $459,900 ($282 per sf.).

  • 1,628sf
  • 2 bedrooms
  • 1.75 bath
  • 5,989sf lot

It was bought in 2005 for a whopping $630,000 ($387 per sf.). Aside from speculation, I can’t see anybody purchasing this home for a penny over $400,000. If we go with the standard appreciation calculation, then even $400k is asking too much:

2001 purchase price: $258,000

Apply 7 years of appreciation:
3% – $317,307 ($195 per sf.)
4% – $339,510 ($208 per sf.)
5% – $363,031 ($223 per sf.)

It is no wonder this home went into foreclosure! The lender is taking a minimum $171,000 loss on this property and they only have themselves to blame. Although some knife catcher may come in and purchase the REO for over $459k, the listing price alone is enough to further drag down the neighborhood’s value.

Despite what some people may say, I don’t see wealthy Asian immigrants snapping up homes fast enough in this area to maintain our current bubble prices.

Property and foreclosure numbers obtained from U.S. Census, ZipRealty, Trulia, Yahoo Real Estate and Foreclosure.com. Market listings and price data obtained from DataQuick News.

Misc. Post

A PUD I’d rather rent.

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333 Eldorado St. #A
Arcadia, CA 91006

333eldorado.jpg

Asking Price $859,000 ::: Sq-ft 2,578
Purchased Price $357,000 ::: Lot Size Attached Condo
Purchased Date 5/17/1999 ::: Beds 3
Days on Redfin 2 ::: Baths 2.75
$/Sq-ft $333 ::: Year Built 1998
20% Downpayment $171,800 ::: Area East Arcadia
Income Required $214,750 ::: Type PUD/Townhome
Est. Payment* $4,343/month ::: MLS# 22110608

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

This property is part of a cluster of 5 attached and detached PUDs. When we first saw its photo and location, our first thought was ‘hey, theses types of homes were selling around $300k during the late 90s’. Sure enough, this property was first purchased in 1999 for $357,000. Applying the standard appreciation table, we get the following of what this home should be worth:

3% – $465,804 ($180 per sf)
4% – $508,122 ($197 per sf)
5% – $553,824 ($214 per sf)

Now before you argue that anything under $300 per sf is unrealistic, consider that a $88,178 price reduction will bring this property down to $299 per sf; just a mere 10.2% drop in value. In a market where the median sales price is expected to drop at least another 10% in the next year, I don’t think anyone will even consider this property for $859,000. Personally, I think that is a conservative number and 20% over the next 12 months seems more realistic. Don’t forget, this is a national housing crisis and as long as the bad news keeps circulating through the media, potential buyers will choose to stay on the sidelines.

If you look at the listing, this 5-unit cluster comes packaged with a $200 homeowner’s association fee; bringing your total monthly payment to $4,543. As one reader pointed out yesterday, why would someone lock themselves into this financial commitment when they can rent an equivalent property just 2 blocks away for $2,950?

Return on Investment

The seller purchased the property for $357,000 and hopes to make a $522,000 profit after living in it for 9 years. That averages out to a 15% annual appreciation rate over that time period. As is the nature of a bubble (i.e. stocks or real estate), most of that appreciation actually occurred during the last 3 years.

Fortunately for this seller, they bought at a good time and despite where prices are going, they should survive the housing crisis fairly well. I say should because we know way too many people who used their home’s equity as an ATM and have racked up hundreds of thousands of dollars in debt against the property. Let’s hope this seller isn’t one of them!