All posts by TheArcadian

Quick Update- August 2008

Things have not improved. Our buddies are Meryll, once snotty and too important to hang out with us, are now asking for employment applications. That is on top of the phone calls we keep getting from ex-Lehman guys. 

Anyways, this is a great summary of the current housing situation. Enjoy!

Home values plunge in Southern California
Median home price fell 34% in August from last year, sales up 10% during period but many driven by foreclosures.

“Foreclosure activity remains high, credit is still tight, affordability remains strained on the coast and the job market is soft,” Walsh said. “Some expect prices to bottom out soon … That may happen, but history suggests that few of us will time the bottom precisely.”

Foreclosures accounted for almost 46% of all resold properties last month, up from 10% in August 2007 and almost 44% in July. To top of page

Holy cow. Take out the REO sales and normal transactions are at record lows.

Crisis on the Homefront

First of all, I want to apologize to everyone for not blogging the last couple of days. A crisis had erupted at work and we’re all scrambling to keep the company from collapsing.

Some of you know that I work for a real estate development firm. Unlike public giants such as KB Homes or Lennar, my company does not have the ability to bleed money for several months in a row. We own hundreds of acres of land throughout California that are basically worth nothing now. Zero. Zilch. Nada.

I have long predicted that many local developers will be forced to close shop due to this housing crisis and, hey, it looks like I got that forecast right (at least for my company).

Anyways, until things settle down here, I will not have the time to blog on a daily basis. 


**Update** Empty McMansion #2 – SOLD!

Back in February we profiled a series of empty McMansions in Arcadia. Most of them were brand new, big and overpriced. After a total of 217 days on the market, the following McMansion on 8th Street finally sold.

Original listing price: $2,980,000 ($398/sf)

Final sales price on 6/12/08: $2,600,000 ($347/sf)

The 13% price reduction might not seem significant but the new owner saved himself $400,000 by buying in June versus 7 months earlier.

As for the seller, I wonder whether they made any money off this property:

Purchase Price in 2004: $750,000
Construction Cost: $1,500,000 ($200/sf)
6% Agent Commissions: $156,000
Carrying Cost: $186,200 ($3,800/mo x 49 months of ownership)

Total cost to seller: $2,592,200

Total profit to seller: $7,800

I have a feeling that $2.6MM was the break even point for this seller. What are your thoughts?

**Originally profiled on February 28, 2008.

1103 S. 8th Ave.
Arcadia, CA 91006


Asking Price $2,880,000 ::: Sq-ft 7478
Purchased Price $750,000 ::: Lot Size 27,063
Purchased Date 04/19/2004 ::: Beds 7
Days on Redfin 113 ::: Baths 7.5
$/Sq-ft $385 ::: Year Built 2007
20% Downpayment $576,000 ::: Area Near Monrovia
Income Required $720,000/yr ::: Type SFR
Est. Payment* $14,561/month ::: MLS# A07162003

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

Brand New Luxurious Estate at Prestigious location in Tree Street.

Riiight. Since when did 8th Street become a prestigious location? The seller would certainly want potential buyers to think that it’s prestigious when in fact it’s just a 6 blocks away from the Monrovia shooting last month. Let’s see, another house requiring half a million dollars downpayment and still over $14,000/month in mortgage payments for basically an overbuilt McMansion doesn’t sound appealing to me.

Assuming the same $225/sqft in construction costs as we did in yesterday’s profile, this house would have cost our specuvestors $225/sqft x 7478 = approx $1.683MM to build.

$2.88MM (asking price) – 6% commission – $750,000 (purchase price) – $1.683MM (construction costs) – $174,800 (carrying cost at $3800/month x 46 months) = just under $100k profit

Purchase Price $750,000
Purchase Date 04/19/2004
1st Loan $616,000
2nd Loan $77,000
Downpayment $57,000

Listing History
11/7/2007 $2,980,000
2/16/2008 $2,880,000

The mailing address for this property’s seller is on the same street as that from the property profiled yesterday. Do flippers congregate and live in clusters? Lately I’ve been seeing a lot of properties on the market where the seller’s mailing address is just a few blocks away right here in Arcadia. It makes me wonder if they decided to buy and flip property on a whim during a stroll in the neighborhood. The number of McMansions in certain parts of the city is overwhelming and with the reckless market psychology we’ve had in the past few years, it’s understandable how so many people got caught up in the storm.

The very act of flipping is going to cause some major problems because flipped properties sit empty. It generates no income yet have reoccurring monthly costs until the property is sold. Every month it sits on the market casts a larger financial anvil on the investors. This particular home has been on the market for almost 4 months with just one 3% price reduction.

If you made $720k/yr, is this a house you’d be willing to pay $14k/month to live in? In an area just a few blocks from recent gang-related shootings? I think not. With the higher interest rates and tighter lending standards, most people won’t qualify for a loan this size. The ones who do have documented income to qualify and enough cash for a $500k downpayment will probably not want to live here.

Things aren’t looking good for these sellers.

Tale of Two Properties

Today we have two properties that could not be more different. One is a 69 year old “sold as-is” home located in the Northern hills of Arcadia. It isn’t a flattering place but you supposedly get a “Great city light view”.

The second property is a typical 5,100sf McMansion located near Longden and Baldwin Ave. It boasts of granite counter tops, grand staircases and even a guest house.

They both share one thing: the sellers are stuck in 2006 pricing and hoping to make hundreds of thousands of dollars after a few years of ownership.

2215 Cielo
Arcadia, CA 91006

Price: $1,470,000 ($471/sf)

  • Beds: 4
  • Baths: 2.25
  • Sq. Ft.: 3,124
  • Lot Size: 0.28 Acres

Sales History
Dec 13, 1995 $430,000 ($137/sf)
Mar 13, 2003 $665,000 6.2%/yr ($212/sf)

After 5 years of ownership, the owner is currently listing the property for $805,000 more than what he/she paid for it. Did the “city view” get a lot better over the last couple of years?

732 W Lemon Ave.
Arcadia, CA 91007

Price: $1,988,888 ($390/sf)

  • Beds: 6
  • Baths: 5.5
  • Sq. Ft.: 5,100
  • Lot Size: 0.47 Acres

This seller bought the McMansion in 2005 for $1,690,000 and has relisted it for nearly $2,000,000. $2MM is easy to stomach when there’s no 20% down payment requirement and you’re on a interest-only mortgage plan. Now take away all that and your buyer pool is quite limited. If I had $400,000 for a down payment, I can think of several dozen homes I’d rather buy than to sink it into this monstrosity that doesn’t even offer proper landscaping:

Sales History
Oct 07, 1988 $154,000
Mar 27, 2002 $508,000
Sep 30, 2005 $1,690,000 ($331/sf)

Currently listing for $1,988,888 ($390/sf)

There is absolutely nothing wrong with trying to maximize your profits when selling a home. You would be crazy to argue otherwise. Unfortunately, what we see here are uninformed sellers stuck in yester-year’s pricing and the Realtor is going along with it. A quick look on Redfin will reveal grander McMansions being sold for under $1.8MM so $1.988 for the one above isn’t even within kife-catching territory.

$1.8MM McMansion near Monrovia

1235 Magnolia Ct.
Arcadia, CA 91006

Price: $1,800,000 ($418/sf)

  • Beds: 5
  • Baths: 4.5
  • Sq. Ft.: 4,304
  • Lot Size: 10,729 Sq. Ft.

This McMansion is part of a new 5-home cul-de-sac located East of 10th Ave. and near the Monrovia borderline:

It is so far from the other McMansion neighborhoods that these 4,000+ square foot properties look completely out of place:

During the height of the bubble, flippers and developers realized that anything they put on the market would sell. Everything from raw land, fixer-uppers to overbuilt McMansions could all be sold at a premium. Since buyers were not required to make a 20% down payment, getting into a new home was easy and effortless.

Since the listing shows this property as a “new construction” built in 2007, I suspect that it’s been on the market for some time now. Developers typically try to sell the home before construction is completed to reduce carrying costs (e.g. taxes, interest and maintenance).

If I recall, a couple of large McMansions near Longden and Baldwin Ave. sold for around $1.8MM earlier this year. If that’s the case, would you spend the same amount to live near Monrovia and a much older neighborhood?

Sales Comps:
370 Walnut Ave. – $1,789,000

417 W. Norman Ave. – $1,480,000

July 2008 Home Sales

Below are the July 2008 home sales figures for Arcadia and a couple surrounding cities.



ARCADIA 76 $633,000 -9.57%
TEMPLE CITY 35 $550,000 -8.18%
MONROVIA 37 $488,000 -9.96%
PASADENA 117 $510,000 -23.52%
13 $750,000 -11.76%
SAN MARINO 14 $1,191,500 -22.38%


**Edit: Added Sierra Madre**

SIERRA MADRE 8 $800,000 -17.95%