Up for sale is a million dollar home located blocks from Monrovia and the gang shooting area months earlier. But that aside, if safety isn’t your top concern, then this property seems to be promising:

316 Laurel Ave
Arcadia, CA 91006

Listing Price: $1,085,000

• BEDS: 4
• BATHS: 4.5
• SQ. FT.: 3,201
• $/SQ. FT.: $339
• LOT SIZE: 6,350 Sq. Ft.

A typical overbuilt cookie cutter home. It was upgraded in 2001 and according to the seller,

There are so many Amenities that I can’t list them all. You must come and see the home for yourself. Furniture negotiable.

Sure, you get a lot of living space. But for $1,000,000+ I’d expect some privacy too. Check out the backyard; you can almost shakes hands with your neighbor from window to window!

Sales History

11/1990 $670,000
05/2001 $555,000
10/2006 $1,080,000

Listing History
Jan 11, 2008 $1,150,000
Apr 19, 2008 $1,085,000 (-$65,000, -5.6%)

So wait, all the “upgrades” were actually done by the previous owner and now this guy wants nearly double the 2001 sales price? It’s going to take more than a measly 5.6% price reduction to get rid of this home and the owner knows it. The listing description says it all:

Attention all Guests! Seller is giving away 3 days/2 nights vacations, with 26 different destinations to choose from. This is not a raffle. No purchase necessary. Just come and take a look at the property.

So how can they afford to give away free vacations to all visitors? Sounds too good to be true, right? You’ve probably guessed it from the title but I believe the sellers are just “giving away” vacations normally offered by Timeshares. All the recipient has to do is sit through a 2-3 hour sales pitch and be pressured and ridiculed into buying a share of a vacation home.

In the end, you’re given a voucher for a “free vacation” which includes blackout dates and restrictions that usually isn’t worth your time figuring out.

This seller actually put a $200,000+ downpayment on his home. How much do you think he will get back after months of depreciation, 6% commissions and the inevitable price reductions?

Perhaps I will stop by this weekend and insist on getting my 2-night vacation with no strings attached.

300 N. Altura Rd.
Arcadia, CA 91007

*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%

This is a For Sale by Owner listing (FSBO). Seeing as how the listing price is exactly what the seller bought it for 8 months earlier, I’m not surprised. With agent commissions costing up to 6%, can you afford to lose $83,940 over 8 months?

The listing description is even more intersting:

ASSUMABLE LOAN AT 5.375%% INTEREST ONLY FOR 9.5 YEARS; $3050/MO!! Exquisite and spacious Lower Rancho family home is on a quiet, tree-lined street in one of …

As an added incentive, you can take over the seller’s 10-year Interest Only mortgage. While I don’t think this type of mortgage is necessarily bad, it’s just a reflection of what buyers would do to “afford” a million dollar home.

This property is located in the Peacock Village community and despite the lack of photos, I’d be surprised if it wasn’t a nice home. But is it worth $1,399,000? I pulled up comparable properties also located on Altura Rd.

500 N. Altura Rd.
2,670sf
15,978sf lot
Purchased in 1987 for $418,000

400 N. Altura Rd.
2,685sf
16,220sf lot
Purchased in 1987 for $350,000

Applying the standard appreciation table, we get the following:

$418,000 after 21 years:

3% $777,603
4% $952,525
5% $1,164,532
6% $1,421,017

$350,000 after 21 years:

3% $651,103
4% $797,568
5% $975,086
6% $1,189,847

Both of these homes are a bit bigger than our current property so if it was worth $350,000 in 1987, I would have to apply a 7% annual appreciation on it to break the $1,400,000 value.

*** Update on 1511 Hyland Ave. ***

We profiled this property back on April 21st. At the time, it was an REO listing for nearly $1,700,000 ($485/sf). Now it is back on the market with an updated pricing of $1,580,000 ($451/sf) and a modified description:

• No mention of REO status
• New photos
• Properly staged for viewing
• Description with proper spelling, grammar and NO ANNOYING CAPITALIZATIONS.

Although it’s still overpriced, $120,000 off the original asking price is a small start (-7%). Another $300,000 decline and we’re looking at a 25% peak-to-bottom price correction. We’re nearly a third of the way there and this housing crisis will play out at least another 3-4 years. This will always be a $1MM+ home but nothing about it would compel me to spend over $1.5MM for it.

Although the new photographs are impressive, a drive-by shot isn’t as inspiring.

I must give props to the new listing agent. It has a proper description, professional photos and tastefully staged. I would have no problem with paying my agent a 3% commission if he/she did all this work for me.

***Old Post Below***

1511 Hyland Ave.

*Estimated monthly payment assume 20% down, 30-yr fixed @ 6.50%

Many often wonder if the high end of the market is immune from the market downturn. So far, subprime has done its share of damage to California and as expected, it hasn’t affected certain markets much. Subprime isn’t really a problem in Arcadia. In markets such as these, Alt-A & even prime ARMs (as well as other option loans) are the thorns in this area. Today’s property is a REO up in the Highlands.

Purchase History
Date 01/07/2005
$1,500,000
Date 01/15/2003
$700,000

Asking Price April 2008
1,698,800

I see activity on both 3/14/05 (2 months after purchase) and 8/17/06 (1 1/2 years from purchase), but the price information is only listed as N/A. For the asking price to be $198,800 above the previous sale price the seller must have pulled some serious cash out from a HELOC since January of 2005. There were some major renovations made to the property which probably means it was a failed flip.

If the sellers used a 2/28 ARM, the loan would have reset in Q1 of 2007. That’s precisely when the credit crunch started to rear its ugly head and the flippers probably stopped paying a few months thereafter. The foreclosure process can take a long time. It can take anywhere from 9 months to a year from the time the owner stops paying their mortgage payment till the day the property gets re-listed for sale by the bank.

Since both high and low end markets experienced enormous gains during the boom due to unjustified speculation, both will likely incur a similar correction back to a sustainable market. The participation in HELOC abuse is not contained within certain market segments. Condominium and townhome owners were just as eager to tape into their equity as SFR owners. This was evident in the widespread use of “free money” during recent years as homedebtors were enabled by greedy bankers to refinance themselves into oblivion.

The bank will lose money if the cannot sell the property for what they paid a couple years ago. With home prices tumbling all across the nation, I find it hard to believe they can find a sucker to buy this for $1.7MM. The sale in 2003 went for just $700,000. That seller made out with a whopping 47%/yr appreciation when the property was sold for $1.5MM 2 years later. Now if that isn’t a massive bubble, I don’t know what is.

Since 2003 was already well into the bubble, I would venture to say that this property would drop back down to 2003-2004 prices in a few years when the correction draws close to the bottom. It’s a nice house, but not $1.7MM nice.