Author: SavedbyGrace
February 4, 2008
***Update*** This listing was modified today to include a slightly lower asking price of $679,000. You think the realtor/seller saw our profile and decided they need to do something to move this property? The direction is correct; the magnitude is not sufficient.
| Asking Price | $699,900 | ::: | Sq-ft | 1,492 |
| Purchased Price | $825,000 | ::: | Lot Size | 8,900 |
| Purchased Date | 08/29/2006 | ::: | Beds | 3 |
| Days on Redfin | 139 | ::: | Baths | 2 |
| $/Sq-ft | $469 | ::: | Year Built | 1965 |
| 20% Downpayment | $139,980 | ::: | Area | Near Monrovia |
| Income Required | $174,975/yr | ::: | Type | SFR |
| Est. Payment* | $3,539/month | ::: | MLS# | 22099204 |
*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%
This is a case of irrational exuberance and greed.
Let’s take a look at the sales history.
Previous Sale
June 02, 1989 $360,000
Purchased on August 19, 2004 $750,000
Down payment – $0
1st Loan – $600,000
2nd Loan – $150,000
Refinance on August 29, 2006 $825,000
Withdrew $75,000 in cash
These folks bought on 100% financing in 2004 for $750k. It was most likely an option loan that reseted 2 years later, at which time they decided to refinance the property again at the re-appraised value of $825k. In the meantime, they pulled out $75,000 from the ATM on the side of the house and probably bought a new luxury car and a big screen tv. Fast forward to 14 months later, it’s October 2007 and they realized the market was going to hell and they could not afford the payments anymore so they put it on the market.
Initial Listing
October 29, 2007 $729,900
Reduced Price
January 11, 2008 $699,900
I didn’t see two separate loans for the refinance so the owner squatter was somehow able to find a lender to take on the entire $825,000. Even in the heydays of nilly willy no-doc, non-existent underwriting bubble mania, I can’t see a bank stupid enough to make a loan for the entire amount. Perhaps greed got the best of everyone involved who was expecting further unjustified growth of the bubble. Since this was purchased on 100%, it would be considered a short sale and subject to bank approval. If the sellers get their asking price, the bank stands to lose $125,100 or 15%. Even with a price reduction, the listing has been on the market for 139 days.
In the meantime, these “owners” came out winners because they cashed out on $75,000 and walked away with nothing more than a dinged credit score. Assuming the lender is still float, how many more of these bad loans do you think they can absorb before they go under?
Things aren’t looking so peachy anymore.
Hi Grace,
I was wondering how much the *total* monthly payment is, when one includes property taxes, maintenance, HOA, etc.?
Is there a rough rule-of-thumb for Arcadia’s housing market? That would be useful to know, when deciding between rent vs. buy.
Thanks!
The total monthly cost of ownership would be higher.
$3539 Mortgage Payment @6.5%
$145.81 Homeowners Insurance @0.25%
$145.81 Private Mortgage Ins @0.25%
$0 HOAs and fees (assume none)
$583.25 Property Taxes @1%
$583.25 Maintenance @1%
$306.21 Lost Income from Downpayment @3.5%
—————————————
$5303.33 Ownership Cash Cost (monthly)
——————————————————–
$906.70 Monthly Tax Savings 25% (interest paid + prop tax)
—————————————
Total Cost of Ownership = $5303.33 – $906.70 = $4396.63
There is some amount of equity gained with each month’s mortgage payment over the course of the loan, but I don’t know a good way to calculate that. I would assume about $400/month give or take. So the true cost of ownership is around $4000/month for this property.
Arcadia is not special and the general rule-of-thumb in rent vs. buy is the same for every market. It’s time to buy when the true cost of homeownership is less than or equal to rental cost of comparable homes in the area. In addition, it’s generally recommended that buyers spend no more than 30-35% of their income on housing (rent or buy). The purchased price of the house should be no more than 4X annual gross income.
A quick look on Craigslist gives me rental rates of $2500-$2800/month for similar properties (3bed/2ba, SFR) in zipcodes 91006/91007. From the above calculations, it does not make sense to buy at this asking price.
Congratulations, Grace:
Thanks for starting this blog for Acadia.
Currently working in Monrovia, I love to visit your website.
All of the best
Conservative-Ultra
Thanks for the words of encouragement and I’m glad you enjoy the posts. I write for my readers and this is as much my website as it is yours as I hope to build a community and forum for all things SGV.
I frequent the Monrovia restaurants from time to time with my coworkers. Cafe Opera, Kiku sushi, the Monrovian and Chang Thai Bistro is pretty good. If you want Chinese food though, I suggest you head over to Arcadia.
Hi, Grace:
It seems that you are very familiar with the surroundings.
With a friend, I once visited a Italian resturant in the downtown Monrovia area. The waitress was very agressive and pushy. That really made me very uncomfortable.
You are absolutely right for saving 50% of the salary each month. Pretty soon, you can buy any decent house with ALL CASH.
I bought a tiny house with all cash a few years ago in SGV. The unique benifit:sleeping soundly every night.
Keep up good blogging. Thanks.