Overpriced Pasadena Condo

On my way to work I often pass by this particular condominium complex that should be the poster child for our housing bubble. The complex has 19 units, and about 6 months ago at least 5 of those units were for sale all at the same time. I am not sure if any of those sold. However, at least one of those units is still on the market and is the subject of this blog post.

Unit #2 has been on the market for quite a long time. It is a 1200 sf, 2 bedroom, 3 bath condo that is currently listed for 659,900$. Now if that didn't jolt you, the kicker is the 445$ monthly HOA fee. Keep in mind that there are no amenities other than perhaps the landscaping.

Assuming a 30 year, 5% interest rate mortgage and a 10% down payment, the mortgage would be 3200$ per month, but add in property tax and that crazy HOA fee and suddenly it is 4300$. According to the flyer, they would also be willing to lease this unit for 2500$ per month, which includes utilities. The monthly rent price is therefore roughly half the total monthly price of ownership, because insurance and utilities would have to be added to that 4300$ figure.

According to Zillow (which I know is not always the most reliable resource), the current value of the unit is 485,000$. This figure is in my opinion still overpriced, but is at least somewhat in the range of the rental price. To truly match the rent I figure a 340,000$ sale price, which is basically half of the current price of 659,000$.

However, even if the condo was priced at 200,000$, I would still be hesitant to make a purchase because of that HOA fee. Either the association is very poorly managed, or there is something very wrong with the building. I cannot figure out why on earth the fees are so high. For a condo in the area, the fees are typically around 200$ with no amenities.

Zillow also states that the last sale was in 2004 for 525,000$. It also looks like a fair amount of upgrades were put in place, because they are advertising travertine tile and stainless steel appliances (note in the flyer that they don't even know how to spell travertine). Given that purchase price and all of the money that was poured into this condo, I can see why they are holding on to such a delusional price. I wonder if they had unloaded it for much less a year ago that in end they might not have ended up hemorrhaging as much money away.

Lake at Walnut

Standard Pacific Homes has been building a lurxury condominium complex called 'Lake at Walnut' in Pasadena for the past several years. I have had a love/hate relationship with Lake at Walnut. First, I hate them for causing severe traffic headaches on the way to my favorite restaurant, Mediterranean Cafe. However, I love them for providing me with loads of amusement over the last year or two. Early 2009 they will be having their second grand opening. The first Grand Opening was unfortunately cancelled by the city of Pasadena for safety reasons, they were behind schedule but they went ahead anyway with tours even though the building was still undergoing major construction. I know this because I have been on the interest list since the beginning. 

The model I have been "interested" in is a 1200 sf 1 Bedroom, 1.5 Bathroom Townhome that at the first grand opening started at 530k. That is 440$ per square foot! For the second grand opening they claim that prices will drop to the mid to high 400's. This still seems very high. I am curious as to how they are going to sell these, because the model I was interested in is the second smallest plan out of 11, the larger units are closer to a million. 

The salespeople now pitch the Lake at Walnut as a hip urban community for young people. However, they require a 20% downpayment, which makes a lot of sense given the recent fallout in the housing market, but 20% of the cheapest model is around 100k. What young hip people are going to be able to fork over that kind of downpayment? FHA loans which require a much smaller 3% downpayment are not available until a complex reaches 60% occupancy. They are stuck in a Catch 22. The only way out that I see is to lower prices, but 530k to say 475k is a drop in the bucket.

As extravagent as this place sounds, it was actually originally pitched as a conservative and affordable alternative to the Prado just down the block. The Prado had much smaller units for almost double the price. The HOA fees were around 1000$ a month because the amenities included a pool, a movie theater, an over the top communal kitchen for throwing parties, consierge services, etc... I later found some irony that the salesperson at the Late at Walnut that I was speaking with revealed that she had purchased a unit at the Prado.

However, the biggest irony is that Standard Pacific Homes, the builders of Lake at Walnut, began construction  about a year ago on another luxery condo complex about a mile away called the Dalton. This place is over the top with penthouses that have rooftop balconies and more. And don't get me started on the Cinema Lofts next store which are 500 sf lofts for 370k, that unbelievably people have actually purchased. 

It is a little sad to see Pasadena change over the years. For decades to come the housing bubble will leave a scar on Pasadena with all of these rediculous complexes. Hopefully they won't end up abandoned and leave some real scars.

The housing market

Because the UCLA game is too painful to watch I figure I might as well write a real post. The housing market is a topic that is on my mind all of the time, and inevitably ends up in lots of my conversations, and even a few arguments! For years my wife and I have been saving to buy a house. We are trying to do it the old fashioned way, saving for a 20% down payment, making sure that the payments will not exceed 28% of our gross income and that our total debt obligations will not exceed 36%. Furthermore we want to be able to do it with only one income so that when we have kids they will be able to have a parent stay in the home. After a long wait we have been excited to watch home prices move toward normal levels so that we can partake in what generations' of Americans have been able to do, own a home. Unfortunately our leaders keep trying to place roadblocks in our path. Recently I read about a plan to use Fannie and Freddie to offer 4.5% fixed interest loans to homeowners. Do they not understand that house prices ballooned because of artificially low interest rates and an artificial supply of credit? It seems that they are poised to repeat mistakes made just a few years ago. It is unbelievable that they have this misconception that solving our economic crisis involves propping up bubble era home prices, and allowing people with poor credit to stay in homes that they never should have been capable of purchasing in the first place. They are right on the point that the housing market needs to "stabilize" before we can have an economic recovery. They are just very wrong in their definition of "stabilization". The housing market will stabilize when people like my wife and I are able to buy a home. That is when housing prices return to normal. I can't remember where I read this little quip, but I like it: "The one law that the President can 't veto is the law supply and demand." Thankfully even with all of the government interference the best they can do is delay the inevitable, there are simply too many houses, prices must go down. Meanwhile we will reluctantly wait on the sidelines.