High Up in the Hills

2165 Highland Vista Dr.


Asking Price $899,500 ::: Sq-ft 1,873
Purchased Price $455,000 ::: Lot Size 0.87 acres
Purchased Date 05/23/2001 ::: Beds 2
Days on Redfin 44 ::: Baths 2.25
$/Sq-ft $480 ::: Year Built 1960
20% Downpayment $179,900 ::: Area Highlands
Income Required $224,875/yr ::: Type SFR
Est. Payment* $4,548/month ::: MLS# 22106521

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

New windows, plantation shutters, doors and wood floors, were installed several years ago. The sunny kitchen has recently had manufactured granite counter tops installed as well as a new kitchen sink, double convection ovens and Italian 5-burner gas cooktop.

From the title information, this appears to be an investment property and according to the description noted above, it’s also a flip attempt several years late. I find it odd that the sellers would spend money on new appliances, hardwood floors and granite countertops, but leave the dated kitchen cabinetry. If I were a buyer, I would still classify this as a fixer. The plantation shutters are nice, but most of the rooms still need some work. The property is nice, but dated and could use a refresher. Additionally, instead of worrying about significant home repairs after you move it, it might be wise to consider purchasing a home owners warranty.

Purchase Price $455,000
Purchase Date 05/23/2001
Loan $364,000
Downpayment $91,000 (or 20%)

This was purchased 7 years ago for half of the current asking price. The original listing price from March 2nd, 2008 was $925k and was reduced to $899,500 yesterday. The purchase in 2001 was already showing some symptoms of early-bubble fever. The previous purchase just two years prior in 1999 for $365k meant that the 2001 purchase for $455k gained 11.7%/yr appreciation. Incomes and comparable rents don’t jump 11% a year. Little did we know that 1999-2001 was only the beginning of a massive housing bubble.

If there the bubble did not exist and we applied the 3%, 4% and 5% compound annual appreciation to the 2001 purchase price, this property would be worth approximately $560k, $599k and $640k, respectively. If we use that as a baseline comparison, that means this property is overpriced by over 40%. Surely one can make the argument that this property is worth what buyers are willing to pay for it today and although it may not be $640k, it obviously wasn’t $925k. It’s another classic case of sellers chasing down the market.

Will someone pony up money to buy at the current asking price? Who can put down $180k cash downpayment and support a $720k mortgage at today’s interest rates? Who has good credit? Who has the documented income to secure such a loan? And most importantly, do the people who qualify for all of the above even like this house? Perhaps. Perhaps not.

17 thoughts on “High Up in the Hills”

  1. Most likely this house will sell for 674K in 2011, based on your $599k and 4% compounded for the next three years.

    I looks like a poor house on a good piece of property.

  2. Given the size and location of the lot, this property has great potential. I’m more interested in what the knife catchers will pay before the ‘bottom’.

  3. Hi SBG,

    Did you see the recent headline stating 24% plunge on SoCal median home price?

    Ouch. That got to hurt.


  4. My house hunting experience in recent months shows that the Arcadia market in a decent community only drops about 7%-10% so far from its peak. Yes, even the same house within Arcadia boundary, the price could vary +/-15% depending on its exact location. For example, west side could be at least 10% higher than east side. My brave guess on the overall Arcadia market is that it will drop another 7-10% and then stay there for a few years. Any comments?

  5. AClover,

    Only time can tell. But logic tells me that Arcadia shouldn’t be immuned to sharp fall similar to other communities.

    Give it at least 1-2 more years.

  6. It’s a good idea to look at what caused the housing bubble to determine what the future holds. In this case, the massive bubble was caused by lax lending standards, innovative loan options, growth of the secondary mortgage market and removal of the downpayment requirement. Please see https://www.arcadiahousingblog.com/2008/02/11/what-created-the-housing-bubble/

    Once the fuel that caused the fire is removed, the fire will burn itself out. There’s no water being dumped on it so it’s not an immediate reaction, but the fire will burn out. So far, I haven’t seen any data that supports an argument that Arcadia, or any socal city, will be immune from the market correction.

  7. So I am a novice at this RE thing, but for the past 4 to 5 years, I kept on asking myself, “Who is buying these houses?”.

    I am fairly good with numbers, and would try to figure out how someone could afford buying these houses. In Arcadia, Monrovia, and even Duarte. I came to the conclusion that I was priced out of the market, and probably would be a renter all my life.

    Finally, I discovered that I/O loans and these pay options where enabling this whole fiasco to take place. When I would mention that, “You know eventually, prices have to come down, then what?”.. People would react like I was a heretic, and a complete idiot.

    and then finally the bubble…..

    I am still amazed at how completely bamboozled everyone is, in regards to RE. In fact it actually scares me, because the bottom is a long way down. When you factor in, how many jobs are in the RE industry, how many jobs have been lost and are going to be lost, and the pink elephant in the room, the ever rising price of Oil, i.e. inflation, peak oil, what have you…

    We arent’ in Kansas anymore… this isn’t going to be pretty. Some say, ahhh it will never hit the San Gabriel Valley… Homes is norco and corona are losing 500k plus in regards to last purchase price and current MLS listing… so I figure it will just take longer for that to happen here… maybe not so severe… but..

  8. I agree that no city will be immuned from the current RE slow-down. It is just how bad it will get. I guess what I tried to say was that Arcadia will be affected less than other cities (14%-20% vs 30%-40%) in this cycle.

    If someone can provide some historical data for the previous cycle (90s) with Zip code vs drop percentage, it would be quite informative and helpful. My agent said that San Marino only dropped about 10% total in previous cycle. If that is true, 20% for Arcadia should be in the ballpark.

  9. I probably would be a little bit more agressive, but I agree with the 20% range..

    Of course, that is if everything stays the same. I am a big fan of Itulip.com and other economic blogs, and try to figure out what that means at the local level for me.

    I think the Colorado Commons project in Monrovia is going to get interesting, and then they are starting another project that is similiar just down the street. Driving through Arc/Mon lately was funny, but the laughter has started to turn… into something similiar to fear. (Myrtle, has a lot of vacant stores)

    Why fear? Because of “Unintended Consequences”

  10. I think places like Arcadia and other parts of the SGV aren’t showing up much in this 24% because of the loans used. So far, the declines we’re seeing is a result of the subprime explosion. It’s hard to find loan data to verify this, but Arcadia probably has more Alt-A loans than subprime and that could be why we’re seeing the delay in price corrections. The majority of the Alt-A loans haven’t reseted yet and once those go off, I think we’ll see that reflected in the local market.

  11. Someone at work yesterday told me that their friend just bought a house to flip. I almost fell out of my chair. America is in for a rude awakening and it’s not going to be pretty. I think (and hope) that a by-product of this housing correction will be a shift in mentality about finances and consumerism. Many have been living life through debt and the house of cards have finally tumbled.

    IrvineRenter’s post on here sums it up well http://www.irvinehousingblog.com/blog/comments/southern-californias-cultural-pathology/

  12. AClover – I see your point, but I look at it from the flip side of it. Why do you think Arcadia will be affected less than other cities in this cycle?

    I’ve looked long and hard for Arcadia specific information for the past few decades and couldn’t find any. If anyone has access to this please please send me the information so I can run some analyses on it. This site doesn’t make money and I don’t feel like paying for it 😉

    You’re entitled to do as you wish so I can’t stop you from believing what you wish, but I personally won’t take any word that comes from a realtor as more than a grain of salt. In any case, let’s assume your realtor’s info is correct in that Arcadia dropped 20% in the previous cycle. If that were true, that is consistent with the drop that the rest of Los Angeles County experienced (19.5% peak to bottom over 7 years). https://www.arcadiahousingblog.com/wp-content/uploads/2008/04/lacounty_medianprice_82-07.jpg

    As you can see, the bubble is MUCH bigger this time around and I can’t find any supporting data that tells me prices will hold up better in Arcadia than in other socal cities. Incomes certainly have not doubled over the last few years and I’m still seeing much lower rent comparisons when I do property profiles.

    TheArcadian has reported last month that Arcadia home sales have dropped 28% and median price of homes sold dropped 20% from this time last year. The data says that prices have ALREADY dropped 20% and I certainly don’t think now is the “bottom.” With the oncoming loan resets, foreclosures and pent-up volume in the next few years – I just simply don’t see how or why Arcadia would be at the bottom now.

  13. Good for you. I try to do the same thing reading CalculatedRisk and the more I read, the more scared i get. Housing is just one part of the debacle and if things are really as bad as I think they are, then we have a lot more to worry about than just a 35-50% housing market correction.

  14. One big difference between buyers today and bubble-buyers is that today most buyers know we are in a bubble. And buyers are faced with the reality a 10-20% down payment with a 30-year fixed loan. Ouch, where is that teaser rate and kickback for a Hummer when you need it?

    In the past buying a home felt like free money or a huge mistake if you didn’t get in on the action; now you almost feel like in idiot buying at these high prices.

    Unfortunately, some people still have there head in a cloud or they trust realtors. Anyway, as pointed out by a trusted realtor, this home has a “Italian 5-burner gas cooktop” so it has to be worth the money.

  15. I need to find my data on Arcadia median prices from 1999-2007. I don’t have the exact numbers right now, but it was about 2-2.5X factor. The city’s median home values in the 1999/2000 were in the low $300k and by early 2007 it was at $815k. That’s a pretty big percentage increase to me, but perhaps it’s still less than what the rest of LA county experience.

    So…LA county on a whole may drop 50% and Arcadia might only drop 40%. I’ll buy that 😉

  16. I never quite understood why one would advertise a cooktop and many other silly things that realtors like to point out about properties. It just makes me wonder what’s wrong with the house if that’s the best thing the agent could say. You’re advertising as a “prime feature” something that costs between $300 and $800 for a house that costs $900K. Are people really that gullible?

Comments are closed.