This is my favorite way to spend a weekend day. It's free, somewhat educational, and fun. We were in South Pasadena this past Sunday and went to four open houses in the area. If you are familiar with South Pasadena, you know that it is generally more desireable and more expensive than much of Pasadena. I expected the prices to be out of our range, and unfortunately, I was correct. Nonetheless, the houses were not as expensive as I expected.
We pulled up to a street where we saw five different open house signs. Seriously, one corner. We went to four of the five open houses. Here are our observations.
We followed the first signs into a townhouse community. We found that two townhouses next door to one another were both hosting open houses. The first one has more modern upgrades, but still needed some work to bring it truly up to date. They both featured a large, high ceiling living room, modest kitchen, attached garage, upstairs deck, and private front patio. They were both two bedrooms, but convertible into three. Each was 1,700 square feet. The address of the complex is 1200 Indiana Ave. Feel free to look it up on Zillow of search it out on ZipRealty. The first was asking $619k, and the next $599k.
As we walked into the first open house, I commented to the realtor, "wow, two open houses right next door to each other, huh?" "Yea, but this one's better," he was quick to reply. Maybe he meant it in a joking manner, but you could tell he was a little defensive about the apparent glut of properties for sale in this modest community. In fact, there are three for sale out of sixteen total units. The third one is asking $632,500. It was not hosting an open house, so I'm not sure what makes it so special that the owners think they can charge that much more than the other two. They are all the same size and layout.
Our thoughts: They were nice townhouses, but wildly overpriced. I wouldn't consider anything over $500k for either of them. Even then, I'm not sure it would be worth it. They both needed some work, most notably the reconversion of two bedrooms into three.
The next place we saw was just a block away. The ZipRealty MLS# is W606384. As we approached this single family house, which appeared fairly large from the outside, I whispered, "what's your guess?" My Fiancee guessed a little over a million. I said $1.2 million. The property was much more impressive inside than the curb appeal indicated. There were views from both the master bedroom and the living room. There was both a family room with a large built in bar, and a separate den that would make a perfect office or spare room. It was spacious, and flowed beautifully throughout. If I had taken the entire self tour before making my guess or seeing the price, I would have aimed even higher. The asking price was $998,000. Yes, it's well outside of my price range, but it's quite a bit more affordable than I expected. Is it overpriced like everything else? I don't think this one is. This has been on the market for two weeks. I think it will be sold close to asking price pretty soon.
The last one we went to was up in the hills. I had never been up those roads and was surprised at how far into the hills this particular road went. It was a strange area. Nice views, and some nice homes. However, several were under repair, and some were simply in disrepair. There were also two vacant lots for sale.
The house we saw can be found on ZipRealty using the MLS# 12077590. It is over 2,900 square feet of living space, five bedrooms and three baths. It sits on over 10,000 square feet of land, but a chunk of that land is hillside, not the most usable land. The flier showed a reduction of $400k. It was listed at $1,050,000. That's a 27% reduction! It has been on the market for over five months, and I don't see it selling at that price.
My observations:
It is clear that inventory is through the roof. There were other lookiloos like us, but few who appeared serious. Some sellers don't yet realize that they cannot get last year's prices, but many are still holding out hope. One of the townhouses in the complex that we first visited was sold in October 2005 for $665,000. I'm sure it could not be sold for that much today. It's the same size, age and dimensions as the other three that are sitting for $599k, $619k, and $632k have been on the market for 69, 11 and 83 days respectively. The three selling today know about that sale, and are hoping to get around that much. I don't see it happening.
Whether or not we will see price reductions depends on how motivated the seller is. I believe the two single family houses that we saw were motivated sellers. The first one is an elderly widow who is moving into a smaller place without so many steps. She has lived there for over 30 years. They raised a family there, and I'm sure the house is paid for. She is not trying to make a big profit, just sell it and move on. The second house probably was not a highly motivated seller initially, thus the original overpricing. However, five months later, and they appear to have become highly motivated. They'll need to come down another couple hundred thousand for a quick sale.
Very interesting post! I truly hope the house market continues to soften as many are predicting. The great house hunt for us is probably going to start in January.
I am hoping that we are just seeing the beginning of the housing bubble burst, and the market is ripe for the picken by next spring/summer! I guess only time will tell, but it looks for most buyers are feeling the same and sitting on the sideline until it does!
Posted by: Medicated Money | October 02, 2006 at 04:57 PM
Easy solution is to move to Oregon. You'd save on airfare for the annual raft trip and be living in relative luxury for less money.
Four years ago, I attended my ten year high school reunion at the Saint Francis Hotel in San Francisco. Of the people we spoke to, there was only one other homeowner (and the sisters co-owned). At the time, we had four Oregon properties.
Today we have five and at current market value there is a considerable amount of equity there.
I can't see that a market correction of 10, even 20 percent will suddenly open the market to the first time buyer in Southern California as alluded to in the previous comment.
So, think outside the box. What is wrong with buying your first property as an investment in a different state? While some markets are slowing, others are going gangbusters. Take the tax advantage (consult your accountant) and gain equity over time…
Posted by: Charles Turner | October 03, 2006 at 06:31 PM
My sister tried to sell her home on Penn St. in Pasadena beginning in December 05 and had it on the market until April. Not one offer, only a couple of lookers. They just installed a $30,000 kitchen to update it, the house is 2bed/1bath, 1 car garage, nice yard, hardwood floors, typical 1920's architecture, in good condition, and they had it on for $559K I think. I've looked on Zillow and their's shows up valued lower than many of the others, yet the buyers just aren't there.
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