Author: SavedbyGrace
April 17, 2008
| Asking Price | $1,399,000 | ::: | Sq-ft | 2,129 |
| Purchased Price | $1,180,000 | ::: | Lot Size | 0.97acres |
| Purchased Date | 9/1/2006 | ::: | Beds | 2 |
| Days on Redfin | 125 | ::: | Baths | 2.25 |
| $/Sq-ft | $657 | ::: | Year Built | 1959 |
| 20% Downpayment | $279,800 | ::: | Area | Highlands |
| Income Required | $349,750/yr | ::: | Type | SFR |
| Est. Payment* | $7,073/month | ::: | MLS# | 22103235 |
*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%
A view from above – that’s what this property offers. It’s a spectacular view and I’m sure the sellers enjoy it, but they should really take a step back and take a look around the current real estate market. This is a classic case of how buying at the wrong time can really hurt you. Apparently having to take on two mortgages at over a million dollars didn’t deter these folks from buying. I wonder if they bought because they assumed they would be “priced out forever” if they didn’t.
Purchase Price $1,180,000
Purchase Date 09/01/2006
1st Loan $944,000
2nd Loan $118,000
Downpayment $118,000 (10%)
The conditions in which someone can comfortably afford this home is outrageous. How many people/families can put down $280k cash downpayment, have an annual gross income of $350k and afford monthly mortgage payments of over $7,000 excluding insurance, taxes and maintenance? I personally only know of one family who can afford a house at this price, but I may just be running in the wrong circle of acquaintances.
I include those values on each property profile to provide some perspective on how realistic these prices are once you remove the contributing factors to the housing bubble. People were able “afford” crazy bubble prices when there was a secondary mortgage market to lend out cheap money at artificially low interest rates. They were also able to get away with lying on their application about their income in order to secure the required loan(s). On top of that, buyers weren’t even required to bring the traditional 20% admission fee. When you combine all of the above with greed, it becomes the Grand Canyon of bubbles.
Now that all the dust has settled and banks realize people can’t honor the contracts they’ve signed and repay the adjusted mortgage payments, the market forces are reacting to make those necessary adjustments. Without the avenues by which to purchase this home for cheap, the market value of property will drop to sustainable levels.
This is a nice home with a huge lot up in the hills with a view, but that doesn’t justify the outrageous $657/sqft asking price. The sellers bought on the high in late summer of 2006 and hoped for the double-digit appreciation to continue. Now that the market turned sour, they are looking to get out and are demanding to make $135k after 6% commission. Buyers who can actually afford a $1.4MM home are expecting more than this property has to offer and others who are looking for a home of this caliber are turned away by the asking price. No wonder it’s been on the market for 125 days!
Here’s some mid-week humor…
2164 Canyon fits the primary profile for foreclosure or simply walking away. The owners may still deny it, but this is the cold reality. Please tag this one and follow it for a while.
Here’s Mish’s nice note on this:
Walking Away: The Next Mortgage Crisis
http://globaleconomicanalysis.blogspot.com/2008/04/walking-away-next-mortgage-crisis.html
Subprime was just the beginning. Walking Away is picking up steam. California is the poster child. There is little Fannie or Freddie can do about it either.
Over the next several months, we’re going to be subjected to a chorus of hand-wringing about the moral turpitude of people who walk away from their mortgages and pronouncements like last month’s warning from Treasury Secretary Henry Paulson that people should honor their mortgage obligations.
If you are in agony over a pending decision to walk away, just remember, your moral obligation is not to Paulson or your lender, nor is there any patriotic duty to bankrupt yourself for benefit of others. Please don’t blow your life savings, tap your IRA, or use credit card debt to forestall the inevitable. Your moral obligation is to yourself and your family. If it makes economic sense to walk, then walk.
A good article of why not to buy right now:
http://patrick.net/housing/contrib/NotTimetoBuy.html
I wonder if the price of Arcadia median price will go back to the 350k to 450k level?
Arcadia median in 400K level was 2Q/2002. Now we are back to 600K level, which was 2Q/2004. I guess 500K level which was summer/2003 will be reached by the end of 2008.
I found these two websites very useful to collect historical data: http://www.dqnews.com/ and http://www.city-data.com/
Thanks AClover! Those are useful sites!
Hey Hey,
Another great post… to be honest with you, that is a awesome looking house, but then you read and find out it is two bedrooms.
Are you kidding me?
I think that this house may be in the 600k club…
This is a sort of out there question, but I was having a few beers last night at the 4th Dimensions in Monrovia.
When and where is the snapping point?
What do you mean when you say snapping point? I think we’ll see faster and more drastic changes in the Arcadia landscape in the coming year than we did last year because of the reseting Alt-A loans.
Terribly overpriced. Some people may be able to afford $1 million+ homes in Arcadia who are move-up buyers, assuming they can sell their own home in this market. I don’t think a move-up buyer would buy a 2-bedroom home, though. This home is completely unaffordable to the entry level buyer. And even as a move-up buyer, assuming a purchase price of $1.3 million, there’s still 1.25% property tax tacked on to that the new buyer would be shackled with.
Houses up in the hills in Arcadia are never meant for 1st time buyer that can only come up with 20% down. The more likely buyer is a long time home owner that has substantial equity in their existing house that they can roll over or a very wealthy buyer. But first time buyers in Arcadia? Please look further down the hill.
Puckhead: I’m under the impression that most readers here are not long time homeowners with a lot of equity under their belts.
You’re probably right. I could be way off, but I don’t think there are too many long time owners who have lots of equity because even the long time owners have a tendency to pull out HELOCs that eat away at their equity. The folks who have lots of equity are the ones who have stayed put in their home for 20-30+ years.
I agree that this home may not be for 1st time buyers either, but it’s still insanely overpriced. Although, I wouldn’t go so far as to say that homes in the Highlands are “never meant” 1st time home owners.
Can anyone provide me link to where I can find the loan information for properties?
The loan info is available through public county records. Some paid services (like netronline and homeinfomax) gather the information for easy access but they usually charge a monthly or per-access fee.
HELLOOOOOOOOOOOOOOOOOOOOOOOO!
2 Frigging Bedrooms? 2 Frigging Bathrooms?
This is NOT a family home but a bachelor pad and how many bachelors want to drop $1.4M to live in Arcadia?
2/2 !!!! That has to be a misprint!
How did these folks save enough to buy in the first place? They cannot be that bright.
I wonder if they bought because they assumed they would be “priced out forever” if they didn’t.
Probably. I can hear the pitch now:
“REAL ESTATE ARMAGEDDON IS COMING!!!!!
DON’T BE LEFT BEHIND!!!!!”