Community Profile – Peacock Village

This will be the first of several community profiles showcasing different areas in the city of Arcadia. The idea is to provide a general overview of distinct communities so that readers who are not familiar with the area have a better understanding of these places. While this has been on my to-do list for weeks, the credit goes to IrvineRenter over at IHB for coming up with this great idea. Without further adieu, our first community profile will be Peacock Village.

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Peacock Village is bounded by Michillinda Avenue to the west, Baldwin Avenue to the east, Huntington Drive to the south and Colorado Street to the north. There’s a small area just west of Baldwin (north of the race track) that I also consider as part of this community.

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Peacock Village is one of the older parts of Arcadia. A large piece of the land was bought by Scottish immigrant Hugo Reid in the mid-1800s and Hugo Reid Drive & Hugo Reid Park are named after this early resident. As you can see from the map, Peacock Village backs right up to the Arboretum of Los Angeles county. This is where the many peafowl reside, hence the name Peacock Village.

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The peacocks are left to roam free in the surround neighborhoods and they frequently leave the boundaries of the Arboretum and enter the surrounding streets. Even as I drove through the neighborhood this past weekend I was stopped by many who park their pretty selves smack-dab in the middle of the road. These beautiful, yet stubborn creatures are the symbol of Arcadia.

One of the features that speaks to me is the tranquility of the neighborhood. The community is separated from the 210 freeway by Colorado Blvd and two high walls plus ample trees to remove the residential area from the road as much as possible. Although it is next to the racetrack, arboretum, Westfield mall and 210 freeway, it was astoundingly quiet on a Saturday afternoon. I didn’t do a drive-by with a muscle car or a Harley-Davidson, but I felt like the hum of my engine was the loudest thing for miles.

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Many of the streets are curved and less grid-like than the rest of Arcadia, yet the structure of the community resembles more of the new OC developments with its carefully planned entrances and exits. There are 4 in/outlets off Colorado between Michillinda & Baldwin and 3 in/outlets off Huntington Drive. There are several more off Michillinda and just one exit to Baldwin. Some of the streets are only outlets that denies entrance to the community through the means of tire spikes. This restricts unnecessary traffic flow into the community that may come from the mall, racetrack or arboretum. It works well too because I frequently found myself accidentally exiting only to circle around to find a way back in.

The roads are often lined with giant, old trees that cast a big canopy over the wide streets. The lots are not the biggest offered in Arcadia, but they are a bit larger than many others in the rest of the city.

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On top of that, I often see peacocks in the front lawn of many homes. They bring a wonderful sense of nature into this little suburban neighborhood. Wouldn’t that be a lovely thing to wake up to on a lazy weekend morning?

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To its west side there is Hugo Reid Elementary School and Park. A typical Saturday afternoon consists of an all-American little league game complete with hotdogs and cheering family members. The tot-lot next to the field was clean and well maintained. There was also a medium sized open grassy area beyond the outfield, several tennis courts and what looked like a small batting cage. This park speaks well to the family-friendliness of the neighborhood.

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During my drive through the area I saw mainly older, but well maintained homes with clean-cut, landscaped yards. The were many traditional ranch homes as well as several contemporary and colonial style homes. Most of the homes were sized to fit the lot and I was happy to see only a handful of newer McMansions.

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If I have showcased your house and you would like the picture removed, just leave a comment or send me an email and I will take the picture down. I chose these homes because they represent the neighborhood and are probably homes that stood out to me. Here are some more for your viewing pleasure.

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It is neighborhoods like this that draw me to the city of Arcadia. This is a beautiful, clean and serene community that clearly depicts pride of ownership. I find this neighborhood very family friendly and would consider a purchase here myself. If you live in this neighborhood, I congratulate you on your purchase and thank you for doing your part to maintain the beauty of its character.

Inventory and Market Report – 3/15/08

Zip Codes: 91006, 91007market_icon.jpg

Current Market Listings as of March 15, 2008
Properties for Sale: 257 (+57)*
Median Listing Price: $769,000 (+1.4%)*

Weekly Foreclosure Update*
Properties in Foreclosure: 15 (+1)
Properties in Pre-Foreclosure: 72 (+8)
*+/- is compared to previous week’s data.

Although there is no shortage of data and reports showing that Souther California’s median home prices have dropped at record rates, there will still be the occasional piece proclaiming a strong market in desirable cities. Thanks to our AHB reader, Beachy, I was pointed to an article on the L.A. Land blog stating just that: A tale of two markets: High end holding steady. Peter Vile’s writes an excellent blog and I’m not trying to challenge his data (it’s the same numbers I use).

Peter reports that Arcadia’s median sales price is up from last year and my weekly Trulia chart also reflects this:

Median Sales Price for Homes in Arcadia
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He then poses a question that I’m sure all of us have contemplated:

Will prices inevitably fall in the higher-priced areas, or will they hold their value? The short answer is, I don’t know. My gut is that prices will eventually decline in pricier neighborhoods, but won’t fall anywhere near as far as they will in cheaper areas. But I haven’t seen this movie before.

A very respectable answer to his own question. I, on the other hand, am willing to reach out there and say yes; even homes on the higher end of the spectrum will face declines comparable to their sub-$500k neighbors (percentage-wise).

Drawing from the same data used in the above chart, we can see that the volume of home sales have dropped off significantly since 2007:

Number of Home Sales in Arcadia, CA

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I have always maintained that a decrease in transactions and increase of inventory will precede any major drop in sales prices. Sacramento, San Diego, the Inland Empire and even Orange County have all gone through this in the last 12 months.

Will Arcadia be any different? We have experienced incredible double-digit appreciation numbers over the last 3 years. I don’t find it hard to believe that a national real estate, credit and economy crisis will reverse those gains.

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

Excuse Me?

504 W. Naomi Ave.

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Asking Price $1,600,000 ::: Sq-ft 3,542
Purchased Price $533,000 ::: Lot Size 0.44 acres
Purchased Date 01/07/1993 ::: Beds 3
Days on Redfin 16 ::: Baths 2
$/Sq-ft $452 ::: Year Built 1951
20% Downpayment $320,000 ::: Area Baldwin
Income Required $400,000/yr ::: Type SFR
Est. Payment* $8,089/month ::: MLS# A08030241

*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.

Under $900k in the Highlands

1528 N. Santa Anita Ave.

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Asking Price $888,000 ::: Sq-ft 1,751
Purchased Price ::: Lot Size 8,800
Purchased Date 1954 ::: Beds 2bed+den
Days on Redfin 7 ::: Baths 2
$/Sq-ft $507 ::: Year Built 1954
20% Downpayment $177,600 ::: Area Highland
Income Required $222,000/yr ::: Type SFR
Est. Payment* $4,490/month ::: MLS# A08034464

*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.

REO on Colorado for $265/sqft

307 E. Colorado Blvd.

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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?

Empty McMansion #7

1800 Lee Ave.

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Asking Price $1,658,000 ::: Sq-ft 5,000
Purchased Price $758,000 ::: Lot Size 10,500
Purchased Date 10/21/2005 ::: Beds 4
Days on Redfin 3 ::: Baths 4.5
$/Sq-ft $332 ::: Year Built 2008
20% Downpayment $331,600 ::: Area Santa Anita
Income Required $414,500/yr ::: Type SFR
Est. Payment* $8,383/month ::: MLS# W08035337

*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?

The Foreigner Rescue Scenario

Many have used what I like to call the ‘foreigner-rescue-scenario’ as the primary reason why Arcadia and other cities in the San Gabriel Valley will be essentially immune from the housing crash. I happen to disagree and would be remiss if I simply dismissed it without a closer examination.

When kool-aid drinkers state that prices will remain at these elevated levels because of foreigner involvement, they are making several assumptions. These include:

  1. Foreigners make up a fairly large percentage of the demographic
  2. Foreigners are able to purchase these overpriced properties
  3. Foreigners are willing to purchase these overpriced properties

Let’s take this one at a time. From the recent new business developments and general observations in the city’s changes, these foreigners are mostly Asians. According to the 2000 US Census, Asians made up 45.4% of Arcadia residents and out of that 45.4%, about ¾ of them are of Chinese decent. That is not to say other ethnicities aren’t involved, but since the Chinese own the largest piece of the foreigners-in-Arcadia pie, they will be the race of interest for this discussion.

Although the census reported that the median family income in 2000 was around $66k/yr, it doesn’t account for the any of foreign money that have been brought in from the countries of the far east. Since it’s almost impossible to obtain data on how much money we’re talking about, it’s difficult to gauge its effect. However, for this rescue scenario to be effective there must be enough foreigners to carry the entire weight of the cities properties. Since the Chinese only make up one-third of the total population, it doesn’t appear this conglomerate of dim-sum eaters and rice-rocker drivers have enough power to pull everyone through. And even if that is the case, it would require each and every one of them to be fairly wealthy to make that happen. Is it realistic to assume that all Chinese residents in Arcadia are rich? I think not and that conveniently leads to my second point.

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Even if these foreigners make up the majority of the population, they must be financially able to hold up the current market prices. People buy property in one of two ways. You can either purchase it in cash or take out a loan and pay a mortgage. I don’t know too many people with a million US dollars in cash, but I might just have a circle of poor acquaintances. Generally speaking, the majority of buyers (even Asian buyers) have a mortgage of some sort. With the crunchy credit crunch and tightening lending standards means borrowers must have some sort of downpayment and documented income to take out a loan. Fully documented income for a $800k loan would require a $200k/yr AGI. Even if the family income increased by 3%/year for inflation, it would only be $83/yr in 2008 and would finance a loan of about $350k. Many say there’s lots of Chinese money that isn’t taxed or recorded that can be used. Well, that would pose its own problem since the dirty money from China/Taiwan/Hong Kong isn’t documented, it leaves the only other option of putting down a larger cash downpayment.

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So that brings me to the third point – foreigners must be willing to purchase these properties. Are these Asians willing to put down large downpayment and/or make large mortgage payments on what is now widely known to be a depreciating asset for years to come? I can’t answer for them, but if I had wads of cash on hand I certainly won’t be putting it into the housing market any time soon. These people aren’t dumb. Asians are typically frugal, hardworking people and they can be quite the bargain hunters. Many bought because of the good Arcadia schools so their kids can have better opportunities than they did, but assuming that these people will buy property regardless of falling home prices and market trends is absolutely ridiculous.

Yes, the good schools and proximity to Asian businesses and friends is a plus, but the Chinese buyers that bought during the boom were also investors and fellow kool-aid drinkers. They too were promised never ending price appreciation and saw exactly that for the past few years. Now that things don’t look so good anymore, do you think they will simply ignore the pent up volume, price declines, housing crash news and continue to purchase property? I think not.

This has ended up to be a fairly lengthy post. Let’s recap. The ‘foreigner-rescue-scenario’ could be a reason why housing prices in Arcadia will not fall significantly regardless of widespread foreclosure, increasing volume and falling prices across the southland if and only if there are enough rich foreigners willing AND able to purchase the majority of many distressed properties that will come on the market over the next few years.

Personally, I don’t see that happening. Do you?