Real Homes of Genius: Pasadena Home and Bring Your Own Bulldozer. Flipping Homes in the Worst Housing Market in a Century. Granite Countertop Redux.
If you thought flipping homes was over, think again. If you thought HGTV inspired granite countertops were a thing of dreams, it is time to open your eyes once again. The California housing bubble mentality is back and it is bringing back the gold rush housing mentality. It is tunnel focused and it fails to see the Alt-A and option ARM tsunami knocking on the door waiting to crest in 2010. The shadow inventory is so lucrative, that you have ex-Wells Fargo senior executives throwing parties in homes instead of showing the home to potential clients. But today, we have a fantastic blast from the past.
A reader sent in a home that I covered in Pasadena back in November of 2008. Covering over 120+ Real Homes of Genius in Southern California, I had to put my thinking cap on. Once I clicked on the link I immediately remembered, “bring your own bulldozer.â€
Some real estate ads are crafted with the words of an elementary school poem. This home when it was listed the first time had some crafty wording that left many of us speechless. I saved some of the wording from the original ad:
“Bank approved sale pueblo with potential and amazing short sale / foreclosure opportunity to craft your own southwest environment in development hot north /west pasadena one of two side by side properties now available.â€
Yes, you would think that a home in “Southwest†Pasadena would be like a home in the blazing Arizona desert. But the ad gets more brazen:
“Both have been lovingly and completely gutted and now stand as good-to-go exterior shells ready for your creative touch, or byob (bring your own bulldozer) large lot, school in close proximity spectacular mountain views.â€
Here are the original images of how real estate professionals “lovingly†gut a home:
Now for a Real Home of Genius this had it all. An ad full of hyperbole, a massive previous mortgage, and an aspiring flip. This home did not sell quickly:
Price Reduced: 04/09/08 — $479,000 to $450,000
Price Reduced: 04/26/08 — $450,000 to $375,000
Price Reduced: 05/01/08 — $375,000 to $360,000
Price Reduced: 05/24/08 — $360,000 to $279,000
Price Reduced: 06/22/08 — $279,000 to $249,000
Price Reduced: 07/17/08 — $249,000 to $239,000
Price Reduced: 10/24/08 — $239,000 to $219,000
Price Increased: 11/03/08 — $219,000 to $230,000
It looks like the home eventually sold for $164,000 in July of this year. The home sold at the peak for:
08/23/2006: $522,000
So you might think that would be the end of the story. Well this home now has a Southwest feel:
Excellent work. What is your estimate of how much money went into this rehab? I can just imagine the Flip This House graphic running across the screen. The home has been listed for 5 days on the MLS. Here is the new ad:
“Charming Spanish Bungalow, 3 /BR 2/ Bath, completely updated, New central AC, electrical, plumbing, cabinetry, designer quality. Open floorplan, light & bright, El Fresco deck, large satillo tiled patio. Stainless steel appliances, tumbled limestone, granite, Minutes to The Rose Bowl and Brookside Country Club, views of Mount Wilson & San Gabriel Mountains, large yard.â€
Someone clearly brought their own bulldozer. What is the current list price? $389,000. There is one tiny impediment. The similar home next door is a foreclosure:
Whoops! Looks like someone needs to bring another bulldozer.
Now imagine buying the remodeled home and having to live next to construction. Plus, what do you think is going to happen to your comp price when the home sells for $139,000? Will it sell for that price? Probably. To who? Another aspiring flipper. But will the numbers break even. This home sold at the peak for:
Sold 06/16/2006:Â Â $460,000
The only problem, homes are selling on this street but for lower prices. Let us take a look at some next door neighbors:
The remodeled home is listed at $389,000 with 3 bedrooms and 2 baths with 1,340 square feet. The other two comps right next door have this data:
If we use the first home, we arrive at a square foot price of $282. The current home is being sold for $290 per square foot. Not so bad right? Well the home that recently sold for $250,000 is 3 bedrooms and 2 baths and is on 1,283 square feet. The question is, what is the condition of the place? This area of Pasadena has one of the lowest median prices at $419,000. This region is a prime candidate for Alt-A and option ARM problems. It doesn’t fall in the elite part of Pasadena and it isn’t cheap enough like the Inland Empire to make sense for a cash flow investor. You would lose money each month.
So whoever buys this place, needs to gear up for construction on the neighbor’s home or worse, it sitting empty. Also, expect a hit on the comp simply because of the foreclosure resale. Simply looking at the square foot of recent comps is nonsense. Just because prices have fallen by a lot doesn’t mean that homes are now cheap. You have to take everything on a case by case basis. How are incomes in this area? Is this a good area? The name of a city is not enough. Think of Palo Alto and East Palo Alto. And when you think of Pasadena just say, “I need more bulldozer.”
Today we salute you Pasadena with our Real Homes of Genius Award.
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13 Responses to “Real Homes of Genius: Pasadena Home and Bring Your Own Bulldozer. Flipping Homes in the Worst Housing Market in a Century. Granite Countertop Redux.”
In San Diego, we have Real Homes of Genius at the high end, too:
http://wcvarones.blogspot.com/2009/09/condo-speculators-unclear-on-concept.html
I saw another flip in the Sherman Oaks Hills. Don’t know what happened to it as it was taken off the market awhile back after being listed at $850k (I think) and then reduced to $800k.
http://www.redfin.com/CA/Sherman-Oaks/3909-Longview-Valley-Rd-91423/home/4863960
http://3909longviewvalleyrd.com/
Housing construction and sales also are a big sector of the economy, currently about 6 percent of GDP. With the rise in unemployment rates and inability of the helpless borrowers to repay the loans, mortgage delinquencies are on the rise.
Read More: http://www.housingnewslive.com/us-housing-news-articles.php
Flippers are everywhere, My Husband and I started looking for at home in the SF Valley one year ago. We really are not actively searching anymore but on occasion I will go look at something promising. Almost every house i have looked at in the last four months has been a flip. If you looking to buy under 500,000 you will run into many flips. These houses are nice large and in decent communities. I can not imagine what they are spending to fix them up or what they paid for them but they are getting many overbids, go see these houses on a weekend and there in barely enough room to look around the house there are so many people. The Agent I work with is getting between 15 to 20 offers on all these properties. Another agent I know is working with investors who are buying in bulk and flipping. These also are decent homes in decent neighborhood. The neighborhood most first time buyer, young family’s can afford. Seems the banks are have no problem selling these at discount to investors but us good people on the ground are being squeezed out. If you have cash and can flip the SF valley is on fire. Oh and on a personal note to the guy flipping all over Northridge . The bathroom vanity with the gold sink seriously really tacky!
What about this one, also in Pasadena which is listed for $499k after selling in June( I guess at auction) for $237k at a price I could have afforded. It seems immoral to me that these flippers are denying hard-working people like myself a chance to buy a home in a decent neighborhood
the current listing is on Redfin
http://www.redfin.com/CA/Pasadena/1860-N-Summit-Ave-91103/home/12111982
but check out the activity between 2005 and 2009 on Property Shark. Could someone explain what has been going on?
There is only one way to describe the current market flippers: Greater Fools. It really doesn’t matter how stupid they are, it only matters that there is at least one soul who is stupider. That is of course until that one becomes none. It’s what happened during the great housing bubble and bust. We’ve seen this picture before and know that it ends tragically.
That all being said, flippers do serve a valuable service. For any market to function, there has to be both willing buyers and sellers who establish a market value. A year ago, the housing market was frozen. At least now, the transactions are creating a valuation basis. The current market value really is what people are willing to pay. But that doesn’t mean that the price will be going up from here (IMHO). Good luck to all you risk takers!
This week’s James Howard Kunster blog absolutely cuts to the bone. Enjoy: http://kunstler.com/blog/2009/09/reality-receding.html#more
Be brave Comrades!
Dr. H, I found the houses 🙂 You didn’t even mention that there’s a house recently sold down the block. It sold for around $550k in 2006. Wonder when the resident will stop paying the mortgage on that, and when the bank will start foreclosure?
The need to pass a law to make it illegal to withold properties from the market if you received TARP or other bailout money.
And where is the Obama admin. on all these flippers and bank hold-outs?
Interesting article summarizing just how much the fed has put in to this mess. http://www.oftwominds.com/blogsept09/speculative-housing09-09.html?ref=patrick.net This is going to start getting very interesting in the next year or two.
@rdrserg
“No collapse until after mid-term elections next year.” BA
http://seekingalpha.com/article/110613-the-federal-reserve-and-the-velocity-of-money
Velocity of money is now the lowest since the previous great depression. As long as there are flipees there will be flipers. Everyone trying to stash loot before the tsunami hits. The players know it’s a game, but they think they can cash out in time–some do, some don’t.
Brilliant!
Wow–great job on the fixup. Though it’s hard to see how they spent $185K on the rehab. (Obviously they didn’t.) That’s also what concerns me.
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The person who bought this place apparently put labor, care, and thought into it. And materials. They employed someone, themselves or others. They did something genuinely productive here, as opposed to just buying it, holding it, and trying to dump it at a more inflated price.
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The question now is: how much is the labor, creativity, vision worth? What I think we’re saying is: Not all that much. And that concerns me.
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This is the worm that our entire economy is going to turn on. The value of real, productive activity and outcomes. We don’t have any precedent, back to the 1970s, for considering this. Since then, Monopoly money has run everything, and real productive activity has been sidelined in favor of casino games.
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Doc is right. So long as there is another piece of crap next door or down the road that will sell for cheaper, how much is this house worth? We wait for the market to go down, for the hot air and realty crack to vent out…. But we don’t know how to assess the actual value of a truly sweet cottage, reclaimed from a pile of crap by an excellent person or team of people.
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I am of the opinion that it is a valuable thing to have people who will take hard-luck cases (houses, people, animals, whatever) and rehabilitate them. In my view this is one of the most dignified, valuable, essential services anyone can perform.
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The question is, how much dollar value does “the market” put on that? What remains to be seen is the downstream consequences of valuing this skilled and visionary labor at a much lower rate than, say, a ZIP code.
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rose
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PS–I think we need a Flip Spectrum with degrees of Flippiness to distinguish actual zero-effort flipping from genuine efforts to rehab and make a fair profit.
Doc,
Keep up the good work…
Your one of the few searchlights in the darkness.
Thanks
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