930 Panorama Dr.

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

“SELLER ARE EASY TO WORK WITH AND WILL ENTERTAIN YOUR OFFER. SELLERS WILL DELIVER THE HOME W/ NEW CARPET IN DEN AT BUYERS REQUEST AND WILL WAX THE ORIGINAL OAK FLOORS ONCE ALL PERSONAL BELONGINGS ARE OUT. SELLER VERY FLEXIBLE ON ALL TERMS AND WILL LEAVE CREDIT IN ESCROW FOR CENTRAL A/C INSTALL.” Translation – We’re desperate for an offer, any offer.

Many people tell me that Arcadia is different in that people here aren’t desperate to unload property because Arcadians didn’t participate in any of that silly bubble mania. I’m repeatedly told that the people here are wealthy enough to not use option loans and/or 100% financing so the news headlines don’t apply here. I’m also told that prices are “holding well” in the lovely peacock city. Riiiight.

Purchase Price $960,000
Purchase Date 12/01/2005
1st Loan $768,000
2nd Loan $192,000
Downpayment $0

Another property purchased during the height of the boom with 100% financing! These people couldn’t even pony up the downpayment, but saw no problem taking out two loans to buy the house. The lenders aren’t any better in their greed to make closing costs, origination fees and whatnot in letting this loan go through. No underwriting plus greedy people plus lax lending standards equals massive bubble mania.

It’s been 27 months since the purchase and these owners want out. Actually, they wanted out over half a year ago after subprime woes reared its ugly head and the markets were crushed under the beginning of the credit crunch. Let’s take a look at their listing price history.

10/29/07 $1,175,000
11/01/07 $1,145,000
11/05/07 $1,120,000
11/27/07 $1,100,000
01/31/08 $1,080,000

I think we all know where this is going. After being on the market for six months, it’s clearly overpriced and headed for yet another price reduction. If they had reduced the price more drastically, it may have sold last summer instead of chasing down the market with these measly ~$20k reductions. Their realtor should have told them that. Oh wait, the realtor is the seller! “Seller is a Licensed Real Estate Agent” This is a classic case of realtors who drank too much of their own kool-aid and shows how knowledgeable they were about the market. This is their profession, yet they fell into the same debt-trap as many others.

You think they would know better. Apparently not.

825 Coronado Dr.

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

“ARCADIA SCHOOL DISTRICT. FACING SOUTH. GORGEOUS HOME LOCATED ON A GREAT STREET IN THE PEACOCK VILLAGE, PRESTIGIOUS AREA, NICE NEIGHBORHOOD. THE HOUSE IS ELEVATED ABOVE THE STREET LEVEL AND HAS GOOD CURB APPEAL. UPGRADED, PERMITTED ADDITION AND PERMITTED PATIO WERE ALL COMPLETED IN 2007, NEW ROOF, NEW KITCHEN CABINETS, COUNTER AND APPLIANCES. .. LOTS OF MORE TO SEE. LIVING AREA IS 1914 S. F. , SPACIOUS, 4 BED RMS, 3 FULL BATH RMS, 2 STES. , GREAT OPEN FLOOR PLAN, VERY BRIGHT & AIRY, REAL HARDWOOD FLOOR THOUGH OUT. CENTRAL AIR. DETACHED 2 CAR GARAGE, PLENTY DRIVEWAY PARKINGS. EXCELLENT LOCATION, EASY ACCESS TO 210 FWY.”

Here we go again with the ALL CAPS SCREAM AT YOUR POTENTIAL BUYERS signature realtor-speak. There has been much discussion among some of our readers lately regarding the realtor’s commission – who pays, how much to pay and why pay at all? Realtors are suppose to help their clients buy or sell a home and act in their best interest, but too often do we see the agents act in their own interest instead.

I’m always leery when interior pictures are missing because common sense tells me if it looks good, the seller would want to show it off. No photos of the inside usually equates to a bad, probably outdated interior. This particular realtor only put up one exterior picture of this property despite the recent renovations. That’s a shame because potential buyers won’t be able to see the seller’s new permitted additions, kitchen and patio.

Purchase Price $733,000
Purchase Date 07/05/2005
1st Loan $533,000
Downpayment $200,000

Listing Price History
March 2nd, 2008 $948,000
March 3rd, 2008 $980,000 (+$32k)

Yesterday we profiled a wishful seller who wanted to make 25% return on investment without doing a single thing to the property. That property, while expensive, was going for $369/sqft. Today we have yet another wishful seller who’s looking for a whopping $512/sqft. On top of that, they actually raised the asking price a day after the house was put on the market.

This property was purchased in the summer of 2005 for $733,000 and was put on the market with some additions and upgrades for a $215,000 premium after two and a half years. That sounds a bit steep and unless they’ve been living with their head in the sand for the past year, they know housing has taken a turn for the worse and isn’t going to rebound anytime soon. Apparently these folks have been living under a rock because they decided to increase the asking price by another $32,000 to $980,000 in this dying RE market.

Other 4/3 single family homes in Arcadia are renting for about $2750, but this home is in the prestigious Peacock Village so let’s say that commands a 20% premium – putting it at $3300/month rent. Applying that to a gross-rent-multiplier of 180 would place this property’s value at $594k or 40% lower than the current asking price. Even if you gave it a higher GRM of say 200 or 220, it would still only be worth $660k or $726k, respectively. Best case scenario, it’s overpriced by about a quarter of a million dollars. Yikes!

This seller and their realtor are clearly at a disconnect with the market and raising the asking price certainly isn’t a good way to get out of this bind. Got any advice for these folks?

525 Campesina Rd.

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

Since I featured Peacock Village in yesterday’s community profile, it’s only fitting that we profile properties in that area this week. Today we have a modern home on the north side of Peacock Village asking for $1.95MM with no known price reductions despite being on the market for over 100 days.

Purchase Price $1,548,500
Purchase Date 7/21/2006
1st Loan $1,000,000
2nd Loan $238,400
Downpayment $310,000

This property was purchased less than 2 years ago and was re-listed for sale after just 17 months of ownership. Since the previous transaction took place in the heydays of 2006, it’s probably safe to assume that the seller was able to get an option loan with a teaser rate payment. The once promising lure of making easy money by just buying a property and waiting a few months for it to appreciate has vanished.

What’s striking to me is that these folks obviously know the housing market is tanking (hence the sale), but they fail to price it at market price. It’s as if simply ignoring the news of 20% declines in LA county, rampant foreclosure and spiraling marking conditions would make buyers see past the ridiculous asking price. If they are somehow able to land a sale at the current price, they stand to make over $280k in just 20 months without doing a single thing. We might as well quit our day jobs and just sell houses to each other for profit if that were to happen. With this absurd mentality, it’s no wonder the state of the market is where it’s at now.

Unfortunately, I wasn’t able to find a comparable rental in Arcadia with 6 bedrooms, but with 4 bedroom SFRs going for around $3200 rent per month, I doubt this house would rent for any more than $4-5k/month. That’s about half of what it would cost to purchase it at its current asking price assuming 20% down on a 30-yr fixed mortgage. I’m curious to see how many more days the seller will sit on this asking price before lowering it.

504 W. Naomi Ave.

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

* * * * * subject is listed for land, the existing old house, plus a newly approved project plan, its more than 7100 sqft. luxious contemporary single family pool dwelling, * * * * * corporate owner motivated due to their carrier plan changes. * * * * * drive by only, * * * * * tenants not aware its on the market for sale. * * * * * absolutely do not disturb, please * * * * * fierce dog may bite at your own risk. * * * * *

This has to be one of the worse descriptions I’ve ever read. He’s obviously never took a grammar class nor believes in using the spell-check option before posting. The only thing that’s missing is the realtor’s special CAPS LOCK and multiple exclamation points!!! I don’t understand the use of multiple asterisks nor what “fierce dog may bite at your own risk” means. Actually, I do understand what he’s trying to say, but it’s very poorly conveyed.

What are they trying to sell here? Half the verbiage is about the approved plans for the monster 7100 sqft McMansion that hasn’t been built, a quarter of is about the existing house and another quarter of it repeatedly warns me not to disturb the occupant. They have yet to notify them that the property is up for sale so I assume these owners want to squeeze every bit of cash flow from these renters as possible. Considering the current market conditions and their ridiculous asking price, they’ll probably need these renters to supplement their current monthly payments.

For the $1.6MM asking price, I would expect to buy the 7100 sqft mansion as described and not this half a century old house in “fair condition.” $1.6MM divided by 7100 sq-ft would yield about $225/sqft which I think is reasonable for a brand new construction. However, instead of getting that, the buyer will get a 57 year-old 3542 sqft house and pay $452/sqft for it. The sellers are dreaming on cloud 9 if they think anyone will pay $1.6MM for this property. If they slash the price by 50%, they might have a good chance of finding a knife catcher.

1528 N. Santa Anita Ave.

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

During the heydays of the RE boom it was next to impossible to find something in the Highlands for under $1MM. Today we have a listing on the slopes of Santa Anita Avenue for $888k. It’s an older property, but the interior has been redone with new flooring, windows and a brand new kitchen, but the owner decided to remodel only one of the two bathrooms. The professional landscaping is nicely done, but exterior improvements typically only get about half of the return on investment.

This is a nice house in a nice area, but there are some drawbacks. It’s located on Santa Anita which is a high traffic street and therefore rendering the front yard practically useless. At first glance it seemed like a good deal, but at $507/sqft, it’s anything but one. Yesterday we profiled a REO that’s asking for $265/sqft. Granted this property is in a better area than that, it’s currently priced at nearly double the $/sqft.

The owner sat on this property for 54 years and although they will still make money on the sale, they would have made much more if the property came on the market say 2 years ago. Houses similar to this were selling for $400-$500k back in the early 2000s. With all the bad news (or good news, depending on how you look at it) in the market lately, it’s not completely unrealistic to see prices fall back to 2002 levels.

307 E. Colorado Blvd.

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

Today’s profile is a prime example of how stupid lending practices create massive bubbles and thus massive losses. In this case, the bank takes the hit and the squatters get a dinged credit score. This was purchased in late 2006 with 100% financing for $1.088MM or $229,000 over its current asking price. Since this is a banked owned REO, the buyers probably stopped making payments 9 months to a year ago. They probably bought it as a flip, but saw the credit woes in the spring of 2007 and just decided to call it quits.

Purchase Price $1,088,000
Purchase Date 11/14/2006
1st Loan $850,000
2nd Loan $238,000
Downpayment $0

The second mortgage bagholder has suffered a 100% loss on this $238,000 loan. Can you see why the secondary mortgage industry is completely wiped out? How many of these 100% losses can a bank take before it goes under? When greed overpowers sound financial decisions, stupid ensues and people lose money.

This listing refers to the Highland area, but it’s actually just north of the 210 freeway between 2nd and 4th street. It’s actually borderline Monrovia. Being so close to the freeway, I would also imagine the noise to be quite loud during the silence of the night.

It is REOs like this that will inevitably pull the market down faster than you can spell foreclosure. With each bank-owned property that’s listed at lower and lower asking prices, the surround comps are forced to follow suite until the wave of price reductions make its way across the southland and find an equilibrium. If we are still in the early stages of the correction and already seeing $265/sqft from the bank, what will prices be like when we finally hit bottom in a few years? $250/sqft? $225/sqft? $200/sqft? Under $200/sqft?

1800 Lee Ave.

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

“Brand New home in a quiet cul-de-sac, great curb appeal, 4 spacious bedroom suits, (two upstairs, two downstairs), 4.5 baths, family room overlooking backyard, upstairs tatami room and 2nd family room (or den), high ceiling, grand entry, kitchen with two refrigerators and all stainless steel applicance, butler pantry, bamboo floors throughout, finished garage can be used as gym, two A/C units, Arcadia schools, A must see!”

Last week we wrapped up our mini-series on Empty McMansions. Just a week later I see yet another brand new 2008 construction up for sale. This one is a 5000 sqft monster asking for a mere $1,658,000 in this bustling RE market. Interestingly enough, this new construction is of a different style and looks nothing like the other Spanish-Mediterranean style homes that have become so common for these types of projects.

I’ve been looking at the picture for a few minutes now and cannot figure out how a car is suppose to get in and out of that garage. In the description it says “finished garage can be used as a gym” so if it’s not convenient for vehicles to be parked in the so called garage, why even call it a garage? Just call it a gym and put in a real wall instead of a garage door. From the overhead view on Redfin, the lot is an odd triangle shape and the framing of the house appears to be built out almost to the edge.

The asking price is $1,658,000 for this new construction. A buyer purchasing this would need almost a third of a million dollars for a 20% downpayment and make over $400,000/yr to pay carrying costs of roughly $12,000/month that include the mortgage payment, insurance, maintenance and property tax.  What percentage of the population is able and willing to take on this property at the current asking price? Who is this seller fooling? Potential buyers or himself?