2165 Highland Vista Dr.

*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.

1714 Highland Oaks Dr.

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

“Completely redesigned by daniel deleon design, the subtle, yet tasteful, Asian contemporary elements lend it a zen-like ambiance and the great floor plan is oriented to fully enjoy yard and canyon views. Move from the brand new kitchen into the large great room or spacious dining room. Enjoy the fireplaces or the view from either room. Truly a turn-key home, it boasts a media-ready family room, a master suite, private in-law or guest apartment, all new windows and doors, hardwood floors throughout, large under-ground wine cellar and many other fine features.”

This is a beautiful property and an example of why I’ve fallen in love with parts of Arcadia. Although it was built in the 50s, it’s been completely remodeled and in my opinion look leagues better than any of those mcmansions that have sprung up over the years. It sits up in the hills on the east edge of the Highland community, which I will profile soon. Without any neighbors along the back of the property, it’s probably very private. I like this house and could I afford it, I would probably buy it.

Back to the profile part of things, this is a flip. It was purchased a little over half a year ago for $980k and renovated to its current state. The original structure was half a century old and from the pictures, it seems like it was a complete gut. It’s also the first property I’ve profiled that has an underground wine cellar. If that wasn’t original, the flipper spent a lot of money digging dirt.

Purchase Price $980,000
Purchase Date 08/24/2007
1st Loan $784,000
2nd Loan $98,000
Downpayment $98,000 (10%)

With similar sized homes in the Highland Oaks area renting for $3,000/month, this property is overpriced. Granted, it was completely renovated, but I find it hard to believe it would rent for anymore than a 25% premium (or $3,750/month). A recent sale on 1728 Highland Oaks just up the street sold for $910,000 in February 08. That property had one less bedroom, but was of comparable size in the same community. At $910k, the sale occurred at $379/sq-ft.

$379/sq-ft x 2,788 sqft = $1,056,652
$910,000 (recent comp) / $3,000 (rental) = GRM of 303
1,358,876 (asking price) / $3,000 (rental) = GRM of 453

Admittedly, it would probably be worth a little more than $1,056,652 right now because of the remodeling that was done to the property, but I don’t think it’s $300k+ in renovations. That’s at today’s prices. I would venture to say that a home like this could dip as low as the $900k’s in a few years time.

Thanks to our reader 626chump for alerting me to this property. If you end up going to the open house this weekend, don’t forget to come back on AHB to let us all know how it went. Also, I invite anyone else who attends open house(s) to drop a comment or two about how the market is doing. Since I’m not currently in the market to buy, I’m not evil enough to attend open houses just to make low-ball offers. Although, that will change as the market correction continues.

Have a wonderful weekend 🙂

5674 Huddart Ave

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

It never ceases to amaze me how greedy people can become when they have their eyes and heart fixated on a certain price point. No one told this dreamer that the real estate boom is over and they can no longer expect buyers to put up with ridiculous, unjustified prices. I don’t know what these sellers expect out of this because they sure aren’t getting anyone to bite. Three-quarters a million dollars for this dump!

Purchase Price $245,000
Purchase Date 09/15/00
Loan $171,500
Downpayment $73,500

After holding the property for almost 8 years, these people aren’t flippers. As a matter of fact, they put 30% down when they purchased the property so they are vested in the property. However, greed must have gotten the best of them because after 8 years they’ve listed the house for over triple their original purchase price. Triple!!

This isn’t in the best of areas since it borders north El Monte so location is not a factor. They supposedly remodeled the kitchen, but they probably did a bad job or used cheap materials because even a realtor with half a brain is smart enough to take pictures of a renovated kitchen. There’s nothing in this listing that tells me I should pay more than 3X what they current sellers paid less than 8 years ago.

At 3, 4 and 5% annual appreciation/inflation, this house would be worth…

3% $310,158
4% $335,299
5% $361,976

Instead of the mid-$300k, it’s listed at $749,800! If this doesn’t scream greed, I don’t know what does. This listing is downright insulting to buyers. Even someone not following the market as closely as some of you would agree that it’s insanely overpriced. What an outrage!

1642 N. Santa Anita Ave.

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

By now, almost everyone has heard of the subprime woes and the strain it’s putting on the housing market. On top of that, many housing blog readers and informed investors are also aware of the wave of Alt-A option loans that is ripe to hit the fan over the next few years. If you don’t know what I’m talking about, I suggest you read this post and familiarize yourself with the facts. It’s no surprise that exotic financing played a big part in the creation (and decline) of the current housing crisis, but it never ceases to amaze me how we repeatedly fail to learn from our mistakes.

Adjustable rate mortgages (more commonly known as ARMs) and other option loans are not new to the financial world and were used in previous bubbles, albeit not to the extent of which they were utilized during the current bubble. Interest-only (IO) loans were rare, but not completely unheard of. The lack of a [substantial] downpayment was also present in previous bubbles as well. Yet despite all the signs and known risks of said lending, the bubble participants still gleefully jumped in.

Today’s property depicts how buying at the wrong time at inflated prices is a horrible financial decision. Let’s take a look at the numbers.

Purchase Price $1,140,000
Purchase Date 08/09/1991
Loan $1,115,000
Downpayment $25,000

This seller bought at the height and tail-end of the 1980s boom with just a 2% downpayment. Seventeen years later, the same property is on the market with an asking price of $898,000. I can’t imagine being in the seller’s position. They’ve made hundreds of thousands of dollars in mortgage payments over almost 2 decades and will lose more than just the $242k price difference if they get their asking price. On top of the mortgage (*ahem* rent) that they’ve paid to the bank, they also had to shell out money for maintenance, insurance and property taxes. I won’t even get into the lost income from the money they could have made with the downpayment or the thousands upon thousands of dollars they could have saved if they bought when prices were more in-line with the fundamentals.

Today’s homedebtors will be in an even worse situation than these sellers because these sellers were able to wait out the decline and refinance as interest rates dropped. That allowed them to keep their homes even though they were underwater. This time, interest rates are already so low that there isn’t much room to move. Helicopter Ben’s slashing of the Fed fund rate has failed to lower mortgage rates by much, if any. As we face the oncoming rate resets of the option loans, struggling homedebtors will find themselves cornered and forced to sell at whatever cost. For all the ones who had little to no downpayment, it will be the banks’ lost.

716 Joaquin Rd.

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

Last week we profiled a short sale on this same street for $699k. It’s also a 2bed/1.75 bath single family residence with similar square footage; that makes it a direct comparison to today’s profiled property which is asking for a 10% premium. The sellers aren’t offering anything extra over this comp for the extra $76k and shows how they are still ignoring the market forces.

Purchase Price $343,000
Purchase Date 10/13/2000
Loan $185,000
Downpayment $158,000

These homeowners had a substantial downpayment when they purchased the property before the boom and don’t appear to be flippers, but that doesn’t negate the fact that their house is way over priced. At $534/sq-ft, it’s more expensive than most homes in Arcadia. The structure is clearly dated with no renovations or updates whatsoever. I don’t know about you, but I need more than just fresh paint and new carpet to win me over for a property.

With a 2 bedroom house around the corner renting for just $1,695/month, this property has a GRM of 457! It was purchased less than 8 years ago for just $343k. At 3 and 4 percent annual appreciation/inflation, this property would be worth $434,502 and $594,646 respectively. All things considered, I don’t understand how they can price it at $775k and realistically expect to get a sale at this price. If they do, they should feel really lucky to have found a sucker to bail them out.