Author: SavedbyGrace
March 13, 2008
| Asking Price | $859,000 | ::: | Sq-ft | 3,243 |
| Purchased Price | $1,088,000 | ::: | Lot Size | 7,296 |
| Purchased Date | 11/14/2006 | ::: | Beds | 5 |
| Days on Redfin | 4 | ::: | Baths | 4 |
| $/Sq-ft | $265 | ::: | Year Built | 1991 |
| 20% Downpayment | $171,800 | ::: | Area | Near Monrovia |
| Income Required | $214,750/yr | ::: | Type | SFR |
| Est. Payment* | $4,343/month | ::: | MLS# | 22106998 |
*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?
This REO is just two houses away from the 210 freeway. Other than that, it’s a pretty nice house. I don’t know why Zillow says it’s recently sold for $894,773 10/02/2007.
Maybe that’s when the bank took it back. It takes a couple of months for them to prepare a listing for a REO sale.
SBG, you might want to let the LA Times real estate blog see this. They are all but calling an end to the bubble in this price range – and used Arcadia as an example just the other day.
A tale of two markets: High end holding steady (Mar 12, 2008) http://latimesblogs.latimes.com/laland/
Thanks for the tip Beachy. I left a comment pointing the readers to this site and hopefully that will break some misconceptions about the SGV market.
People need to understand these bubbles takes time to deflate and don’t “pop” like many believe. Markets rise during the boom at different times and in different magnitudes so why wouldn’t they fall at different times?
We are definitely seeing stress in the market and it’s unfortunate that the median price does not reflect it. It is often misleading during the early stages of a bubble because lower end markets are squeezed out sooner so the recorded median sales price goes up. It goes up because the remaining buyers are looking at high price points so naturally, those sales will push the median up. As the bubble continues to deflate, the median price will better reflect the market.
On the bright side, you can ride your bike down the street to Inn-n-Out and avoid the long lines.
I go there with coworkers sometimes when we’re craving for some animal fries. The lines are horrendously long!
[...] at $1,513,915. So it was with only partial surprise, to see the very same property featured on the Arcadia Housing Blog today as an exemplification of lending stupidity. It’s a great blog with a close analytical [...]
I’m a little shocked. I’ve been inside this house often a decade or so ago. Nice house, but the stairs were particularly narrow for the square footage; always thought it was odd. Not worth 850K, more like 600K.
SparkingWater. Can you please tell us how bad the noise from the street or freeway is inside and outside of this house since you have been there many times?