Author: TheArcadian
May 24, 2008
333 Eldorado St. #A
Arcadia, CA 91006
| Asking Price | $859,000 | ::: | Sq-ft | 2,578 |
| Purchased Price | $357,000 | ::: | Lot Size | Attached Condo |
| Purchased Date | 5/17/1999 | ::: | Beds | 3 |
| Days on Redfin | 2 | ::: | Baths | 2.75 |
| $/Sq-ft | $333 | ::: | Year Built | 1998 |
| 20% Downpayment | $171,800 | ::: | Area | East Arcadia |
| Income Required | $214,750 | ::: | Type | PUD/Townhome |
| Est. Payment* | $4,343/month | ::: | MLS# | 22110608 |
*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%
This property is part of a cluster of 5 attached and detached PUDs. When we first saw its photo and location, our first thought was ‘hey, theses types of homes were selling around $300k during the late 90s’. Sure enough, this property was first purchased in 1999 for $357,000. Applying the standard appreciation table, we get the following of what this home should be worth:
3% – $465,804 ($180 per sf)
4% – $508,122 ($197 per sf)
5% – $553,824 ($214 per sf)
Now before you argue that anything under $300 per sf is unrealistic, consider that a $88,178 price reduction will bring this property down to $299 per sf; just a mere 10.2% drop in value. In a market where the median sales price is expected to drop at least another 10% in the next year, I don’t think anyone will even consider this property for $859,000. Personally, I think that is a conservative number and 20% over the next 12 months seems more realistic. Don’t forget, this is a national housing crisis and as long as the bad news keeps circulating through the media, potential buyers will choose to stay on the sidelines.
If you look at the listing, this 5-unit cluster comes packaged with a $200 homeowner’s association fee; bringing your total monthly payment to $4,543. As one reader pointed out yesterday, why would someone lock themselves into this financial commitment when they can rent an equivalent property just 2 blocks away for $2,950?
Return on Investment
The seller purchased the property for $357,000 and hopes to make a $522,000 profit after living in it for 9 years. That averages out to a 15% annual appreciation rate over that time period. As is the nature of a bubble (i.e. stocks or real estate), most of that appreciation actually occurred during the last 3 years.
Fortunately for this seller, they bought at a good time and despite where prices are going, they should survive the housing crisis fairly well. I say should because we know way too many people who used their home’s equity as an ATM and have racked up hundreds of thousands of dollars in debt against the property. Let’s hope this seller isn’t one of them!
look at the Financing Information for this listing, it says:
* Terms: Cash to New Loan
Does this mean this owner has taken out a lot of cash through refinancing like many other homeowners during housing bubble period?
nobailout,
I think “Cash to New Loan” is just a way of another way of describing a typical mortgage financing. When you get a new loan to pay off the current lender, the excess cash will go to the seller.
I haven’t seen this phrase used often though.
I just ran across this blog after spending most of my time at Ben Jone’s blog, The Housing Bubble. It’s nice to see one for my old hometown of Arcadia, CA.
I didn’t see any comments about the effect of money from overseas will continue to have on property values. Chinese and other asians will pay a hefty premium for the school district and just being an asian neighborhood.
Also, all the talk about about overbuilt lots and PUD’s ignores the fact that many from overeas don’t care about large yards; if anything, it’s a major pain and better to build living space or pave over.
Finally, many of the empty houses around town will just sit as many overseas investors can afford to keep them in inventory. The mentality of many is if it isn’t sold for a loss, then it’s not a loss, despite taxes, maintenance and lost return on tied up cash.
That’s not to say that Arcadia won’t see significant drops in RE prices, but don’t underestimate the effect of cheap (stupid) money from overseas (basically being recycled back to the States).
I agree. I have been tracking foreclosures in the SGV and many overpriced REOs are still being gobbled up fast (usually within 1 week) of availability, for the most part by Chinese buyers or agents intending to market to recent immigrants from the PRC. A fixer upper in Alhambra on 5th St. and Mission recently went for $350K, and it was a real fixer upper, with the windows boarded up or broken. However, soaring fuel prices have put a big wet blanket over the global economy, especially the US/EU, basically about 70% of China/India’s business. The effects of a further slowing global economy caused by record fuel prices on the demand from wealthy Chinese buyers for SGV housing remains to be seen.
I have read on more than one occasion that foreign money will support current prices or at the very least mitigate drastic price drops. The problem I find with this theory is that if this were true, then wouldn’t there have been a spike in home values in Arcadia prior to this bubble? It appears to me that foreigners would have engaged in bidding wars in the past to inflate home values above and beyond what was considered affordable for Americans who wished to live in area. However, history doesn’t appear to support this idea. I understand that the failing dollar plays a role in today’s market, but I find it hard to believe that foreign immigrants alone will sustaing current market conditions in Arcadia. Does anyone care to elaborate?
Return on Investment is the ratio of capital earned or lost in relation to the amount of capital invested on certain project. The amount of capital earned or lost is termed as profit or interest, while the investment is termed as capital, principal or asset.
The wealthy Asian money myth I see is still perpetuated.
OK some money from Asian makes it’s way here. But it’s hardly “wealthy” people and the idea they dont care about “taxes, maintenance and lost return on tied up cash.” is ludicris. How many investors do you know sustain or can sustain negative cash flow indefinitely?
Additionaly if someone is truly wealthy they are NOT going to be buying SFR in places like Alhambra or even Arcadia. Where they ARE buying is Beverly Hills/Westside, Palos Verdes, Hawaii, New York. And they are buying properties exceeding $2MM.
Quite frankly the foreign money buying run of the mill overpriced crap in the SGV is stupid money exploited by their countrymen on the ground here in the US. I know several Chinese who refuses to buy in places like Arcadia, San Marino, etc. BECAUSE there are too many Chinese.
These are people of significant wealth who know a good investment is based on location and demand. The San Marinos, Arcadias, Walnuts, etc. for better or worse really only have Asian buyers and that limits the upside.
I might add a realtor friend told me Paris is seeing many Chinese coming in and buying properties costing more than $2MM in the city and chateau in the surrounding areas which are cheap considering what you get.
All in all the housing market in Arcadia will suffer like the rest of the region and I would not be surprised to see prices 20% LOWER by the end of next year. Once prices bottom you won’t see increase for years. So if you buy today….you will be selling in 2013 for the same price.
WPT,
You have not seen a “spike in home values” in Arcadia in recent years? Values have gone up by about 300% in the last 10 years. If that’s not a spike, then what’s your definition of “spike”?
Ellie,
There are many Chinese run business being operated in the SGV with seed money from overseas. You want to do business and exploit your connections, you have to live in the community. If you have a Chinese business and want to network and expand, this is where you want to be, not on the Westside and the Palisades. You move to the Westside and the Palisaes after you sell your business and want to slow down.
Puckhead,
Yes there has been a spike in the last 8 years or so. When I say “past history”, I am referring to the period before the present housing bubble. It is my position that the massive appreciations we have witnessed were supported from lax lending, speculative investments, and the assumption that housing will always appreciate. My point was that the current situation was not brought on or supported by foreign money and that “past history” doesn’t suggest that this has ever happened.