Pasadena Big Dippers: January

There continues to be little shortage of heavy reductions to be found around the city, but I found the story behind 581 N Los Robles AVE, a northwest Victorian, to be particularly dire. Its $975,000 asking was cut by $10K last September to no avail. It was reduced yet again to $850,000 on Halloween, but for the sellers, the nightmare would linger. Fast forward to the New Year, and it has again dropped its asking to $600,000. A storied difference of 38.5% in just the last quarter of a year.

the big dipper581 N Los Robles AVE
Old price: $850,000
Reduced to: $600,000 (29.4% reduction)
Beds: 8 / Baths: 3
SQ.FT.: 2,812

1153 Armada DR
Old price: $525,000
Reduced to: $455,000 (13.3% reduction)
Beds: 2 / Baths: 1
SQ.FT.: 911

181 S Marengo AVE #4
Old price: $350,000
Reduced to: $290,000 (17.1% reduction)
Beds: 1 / Baths: 1
SQ.FT.: 717

1335 Virginia RD
Old price: $3,900,000
Reduced to: $3,250,000 (16.7% reduction)
Beds: 3 / Baths: 3.5
SQ.FT.: 4,198

1525 Glen Oaks BLVD
Old price: $4,860,000
Reduced to: $4,150,000 (14.6% reduction)
Beds: 4 / Baths: 3.5
SQ.FT.: 5,100

25 S Grand AVE
Old price: 1,365,000
Reduced to: $1,165,000 (14.6% reduction)
Beds: 2 / Baths: 2.5
SQ.FT.: 2,852

45 S Grand AVE
Old price: $1,725,000
Reduced to: $1,350,000 (21.7% reduction)
Beds: 2 / Baths: 2.5
SQ.FT.: 3,260

photo credit: newwavegurly

  • http://www.estateplanningcareer.com Eric Hundin

    I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

    Eric Hundin

  • http://latimesblogs.latimes.com/laland LALandTimesFan

    Great blog. Funny that you refer to the LAT + LA LAND almost daily, yet you don’t list them in your BLOGS WE LIKE blogroll.

  • http://none housebuying101

    FWIW, The real estate cycle is NOT dead. We have had these ups and downs since Day One. I know because I have lived thru many of them since the 50′s. It was pretty bad in the 70-80′s compared to the 90′s. The current slump is likely to last a whole lot longer for several reasons. You need to understand complicated financial theory and mathematics but I will try to summarize it here for any would-be buyers that think the -20 to -30% discounts you see today are real “bargains”.

    First, in a typical recession induced RE decline, it has been typical to see 20-30% price declines, duh, why do you think the banks used to require a down payment? Because they were prudent lenders and knew the cycles would prevail and they did not wish to see the prices fall below the loan values.

    However, now we are faced with a completely different kind of RE decline, one that was precipitated not by the normal cycles of the economy, but by the transformation of RE from a utilitarian necessity to a speculative “investment”. This transformation was encouraged by the FED/govt through their easy money policies and stealth credit creation via the GSE’s and fueled by the entire RE financial chain of beneficiariies from the RE sales “professional” all the way to the top national mortgage bankers and their Wall St. pals, who divided up these mortgages and sold them off to unsuspecting fools as a safe nearly “guaranteed” insured high-return investment vehicle, so they could reap even more “fees”, (a way to generate money without contributing anything physical to the wealth of the nation).

    As long as everyone believed that if someone sold their house down the street for 2X what you both paid for it 1-4yrs ago, the price of any new/used home was now irrelevant, and when sales persons used scare tactics to push you to buy a house just so they could get a quick commission, the worst side of human nature came to the forefront. Greed ruled, yet everyone was just giddy that they had made a “good” investment in RE at any price, because everyone knows RE prices only go up!

    Then, someone threw a monkey wrench into this legalized and badly needed ponzi scheme, as without this vast wild run-up in home prices we would have had to take a very bad recession or worse after the dot.com bust. Soon it became apparent that the giant minds of Wall St., the huge mortgage brokers and the financial dealers realized that oops, their formulas were not working and that the entire financial system of the US, and likely the world, was in grave jeopardy of total collapse, and this is the worst part…it STILL is!

    Almost from nowhere, the system locked up and the govt had to throw in over a $1 Trillion of credit to prevent a total meltdown in early 2007. This worked for a few months and then it was clear the system was indeed failing, banks were failing,(insolvent, bankrupt, you pick a word it means the same thing), the FED had also failed, and so the FED in a state of acute panic lowered the interest rates by an unheard of amount of 0.75% just one week before a scheduled meeting! A week later they reduced rates another 0.50%, for the largest decline in rates ever in a 2wk period.

    The problem with this “fix” is that it can’t fix the problem which is structural in nature, and would require the govt to print 10′s of Trillions of dollars to fix or stabilize it, mayve even more. They are madly trying to hide the true extent of this failure by merging failed institutions to offset the potential $500 Trillion or more exposure that currently exists in the system, which includes more than just your puny RE loans.

    Whether they will be able to engineer a soft landing is not clear, though I doubt it, and I expect a run on the banks before the end of 2008 or 2009, when this happens there will be NO market for RE because banks won’t be able to lend and they won’t want to lend. You will have to sell at whatever price a cash buyer will offer. This has happened before in 1929, and we are in MUCH worse shape now, if we assume only 10% of the $500T is at risk of failing, our exposure is still 5X greater than our entire GDP! (And that assumes a good year with no contractions.)

    What this means is America is basically bankrupt and the dollar will become worthless. what they plan to do at that moment I have no idea, but I assure you it will be done to the benefit of the few wealthy rich at the expense of the middle class and the poor.

    I have seen so many houses for sale in the $1M+ price range it seems almost crazy for a country that has held wages down, and exported so many of the manufacturing and even higher paying ones over seas in the name of corporate profits. Just where are these home buyers working, and doing what, that they can afford such a pricey house?

    I think that this house in Pasadena pretty much summarizes that peoples price expectations are a day late and 50% short of reality. Their house was never worth $1M in the first place, though they felt rich when it was said to be so, and they borrowed wildly against this false appraisal of value, now only to find that they can no longer pay the mortgage, let alone their credit card debt.

    It takes a long time for home owners to realize that prices that were the “market” level only a few months ago are quickly not even remotely close to the new reality where a loan will be based on ability to pay. This means that the majority of homes bought in the last 5-10yrs will see huge readjustments in value (-50 to even -70%*) back to what is more typical for American RE, and sadly many will endure much hardship for foolishly believing that they were RE rich forever. They were in fact, only as rich as you feel when you buy a lotto ticket until the day of the drawing, and then reality sets in.

    This is how your government ensures that everyone will not become a millionaire. Just think about it, if the head of a $billion corporation is just only a millionaire, and so is his gardener, do you think it is rational that everything will be cheap? It just can’t be and so it won’t be, and unfortunately for many they will get an education the hard way. Just as prices rose exponentially to the upside, they will correct just as fast or FASTER to the downside, until the prices meet the real market level of affordability.

    If you are young you can recover, as my old boss lost his home in Mission Viejo in the recession of ’74-’75 and he bought a new house when he finally found a new job. The good news was he paid less for the replacement one that his prior home, and it benefited him in the longer run, so there is some good that will come of it. In the very longer run, over 10-15 yrs. RE will again rise but likely at a much slower rate, as the lessons learned now will bite for a very long time. The winners of this price readjustment will be those who realize it is better to cut losses than to let the losses increase with more time. For those who have a business or income that is not subject to economic downturns, they may be able to ride this out, but in Japan it took over 18 yrs to recover from their RE bubble and it’s not so clear that they will not be in the dumper again soon. (They bought a lot of the US packaged mortgages from Wall St. which are now proving to be practically worthless.)

    Notes:
    *When other assets like stocks crash, they can lose up to 90% of their prior value due to overswings. It happens much faster because stocks are more liquid (usually this is so as it is designed this way, but in reality as during the ’29 crash there were NO buyers at all, until there was forced intervention as I recall. I was at the desk of a stock broker (let’s call him Ferrill Stench) during the peak crash day of 1987, and watched as they REFUSED to answer the phones to take orders, so don’t tell me it’s different this time. Some things never change and human nature is one.)

    RE is much less liquid as you can now see today (except during a bubble, particularly in the final blow-off stage), and of course there is the need to live somewhere and the emotionality of facing the truth, and this always hurts.

    All the best!