1714 Highland Oaks Dr.

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

“Completely redesigned by daniel deleon design, the subtle, yet tasteful, Asian contemporary elements lend it a zen-like ambiance and the great floor plan is oriented to fully enjoy yard and canyon views. Move from the brand new kitchen into the large great room or spacious dining room. Enjoy the fireplaces or the view from either room. Truly a turn-key home, it boasts a media-ready family room, a master suite, private in-law or guest apartment, all new windows and doors, hardwood floors throughout, large under-ground wine cellar and many other fine features.”

This is a beautiful property and an example of why I’ve fallen in love with parts of Arcadia. Although it was built in the 50s, it’s been completely remodeled and in my opinion look leagues better than any of those mcmansions that have sprung up over the years. It sits up in the hills on the east edge of the Highland community, which I will profile soon. Without any neighbors along the back of the property, it’s probably very private. I like this house and could I afford it, I would probably buy it.

Back to the profile part of things, this is a flip. It was purchased a little over half a year ago for $980k and renovated to its current state. The original structure was half a century old and from the pictures, it seems like it was a complete gut. It’s also the first property I’ve profiled that has an underground wine cellar. If that wasn’t original, the flipper spent a lot of money digging dirt.

Purchase Price $980,000
Purchase Date 08/24/2007
1st Loan $784,000
2nd Loan $98,000
Downpayment $98,000 (10%)

With similar sized homes in the Highland Oaks area renting for $3,000/month, this property is overpriced. Granted, it was completely renovated, but I find it hard to believe it would rent for anymore than a 25% premium (or $3,750/month). A recent sale on 1728 Highland Oaks just up the street sold for $910,000 in February 08. That property had one less bedroom, but was of comparable size in the same community. At $910k, the sale occurred at $379/sq-ft.

$379/sq-ft x 2,788 sqft = $1,056,652
$910,000 (recent comp) / $3,000 (rental) = GRM of 303
1,358,876 (asking price) / $3,000 (rental) = GRM of 453

Admittedly, it would probably be worth a little more than $1,056,652 right now because of the remodeling that was done to the property, but I don’t think it’s $300k+ in renovations. That’s at today’s prices. I would venture to say that a home like this could dip as low as the $900k’s in a few years time.

Thanks to our reader 626chump for alerting me to this property. If you end up going to the open house this weekend, don’t forget to come back on AHB to let us all know how it went. Also, I invite anyone else who attends open house(s) to drop a comment or two about how the market is doing. Since I’m not currently in the market to buy, I’m not evil enough to attend open houses just to make low-ball offers. Although, that will change as the market correction continues.

Have a wonderful weekend 🙂

5674 Huddart Ave

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

It never ceases to amaze me how greedy people can become when they have their eyes and heart fixated on a certain price point. No one told this dreamer that the real estate boom is over and they can no longer expect buyers to put up with ridiculous, unjustified prices. I don’t know what these sellers expect out of this because they sure aren’t getting anyone to bite. Three-quarters a million dollars for this dump!

Purchase Price $245,000
Purchase Date 09/15/00
Loan $171,500
Downpayment $73,500

After holding the property for almost 8 years, these people aren’t flippers. As a matter of fact, they put 30% down when they purchased the property so they are vested in the property. However, greed must have gotten the best of them because after 8 years they’ve listed the house for over triple their original purchase price. Triple!!

This isn’t in the best of areas since it borders north El Monte so location is not a factor. They supposedly remodeled the kitchen, but they probably did a bad job or used cheap materials because even a realtor with half a brain is smart enough to take pictures of a renovated kitchen. There’s nothing in this listing that tells me I should pay more than 3X what they current sellers paid less than 8 years ago.

At 3, 4 and 5% annual appreciation/inflation, this house would be worth…

3% $310,158
4% $335,299
5% $361,976

Instead of the mid-$300k, it’s listed at $749,800! If this doesn’t scream greed, I don’t know what does. This listing is downright insulting to buyers. Even someone not following the market as closely as some of you would agree that it’s insanely overpriced. What an outrage!

1642 N. Santa Anita Ave.

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

By now, almost everyone has heard of the subprime woes and the strain it’s putting on the housing market. On top of that, many housing blog readers and informed investors are also aware of the wave of Alt-A option loans that is ripe to hit the fan over the next few years. If you don’t know what I’m talking about, I suggest you read this post and familiarize yourself with the facts. It’s no surprise that exotic financing played a big part in the creation (and decline) of the current housing crisis, but it never ceases to amaze me how we repeatedly fail to learn from our mistakes.

Adjustable rate mortgages (more commonly known as ARMs) and other option loans are not new to the financial world and were used in previous bubbles, albeit not to the extent of which they were utilized during the current bubble. Interest-only (IO) loans were rare, but not completely unheard of. The lack of a [substantial] downpayment was also present in previous bubbles as well. Yet despite all the signs and known risks of said lending, the bubble participants still gleefully jumped in.

Today’s property depicts how buying at the wrong time at inflated prices is a horrible financial decision. Let’s take a look at the numbers.

Purchase Price $1,140,000
Purchase Date 08/09/1991
Loan $1,115,000
Downpayment $25,000

This seller bought at the height and tail-end of the 1980s boom with just a 2% downpayment. Seventeen years later, the same property is on the market with an asking price of $898,000. I can’t imagine being in the seller’s position. They’ve made hundreds of thousands of dollars in mortgage payments over almost 2 decades and will lose more than just the $242k price difference if they get their asking price. On top of the mortgage (*ahem* rent) that they’ve paid to the bank, they also had to shell out money for maintenance, insurance and property taxes. I won’t even get into the lost income from the money they could have made with the downpayment or the thousands upon thousands of dollars they could have saved if they bought when prices were more in-line with the fundamentals.

Today’s homedebtors will be in an even worse situation than these sellers because these sellers were able to wait out the decline and refinance as interest rates dropped. That allowed them to keep their homes even though they were underwater. This time, interest rates are already so low that there isn’t much room to move. Helicopter Ben’s slashing of the Fed fund rate has failed to lower mortgage rates by much, if any. As we face the oncoming rate resets of the option loans, struggling homedebtors will find themselves cornered and forced to sell at whatever cost. For all the ones who had little to no downpayment, it will be the banks’ lost.

716 Joaquin Rd.

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

Last week we profiled a short sale on this same street for $699k. It’s also a 2bed/1.75 bath single family residence with similar square footage; that makes it a direct comparison to today’s profiled property which is asking for a 10% premium. The sellers aren’t offering anything extra over this comp for the extra $76k and shows how they are still ignoring the market forces.

Purchase Price $343,000
Purchase Date 10/13/2000
Loan $185,000
Downpayment $158,000

These homeowners had a substantial downpayment when they purchased the property before the boom and don’t appear to be flippers, but that doesn’t negate the fact that their house is way over priced. At $534/sq-ft, it’s more expensive than most homes in Arcadia. The structure is clearly dated with no renovations or updates whatsoever. I don’t know about you, but I need more than just fresh paint and new carpet to win me over for a property.

With a 2 bedroom house around the corner renting for just $1,695/month, this property has a GRM of 457! It was purchased less than 8 years ago for just $343k. At 3 and 4 percent annual appreciation/inflation, this property would be worth $434,502 and $594,646 respectively. All things considered, I don’t understand how they can price it at $775k and realistically expect to get a sale at this price. If they do, they should feel really lucky to have found a sucker to bail them out.

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.