Bad haircut in Pasadena

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This house on a lovely tree-canopied lane in Pasadena is back on the market after foreclosure. It’s an especially sad example of the housing bubble’s pointless waste of resources.

It was listed for sale in the summer of 2007, as the market was showing signs of softening. I noticed it then because I was looking for a house about that time and thought the two-bedroom, 1,400 square-foot house on a 6,200 square-foot lot might actually be sold for a reasonable price. Maybe in the high-600s, I thought, because it had sold in 2004 for $637,500, and I figured prices would correct to about ’04 levels plus inflation.

I don’t recall what the house was listed for in 2007, but I think it was in the high 700s. I doubted it would sell at such a high price and would be reduced. I was wrong. In July, 2007, it went for $855,000.

‘Well, the buyer paid a lot,’ I thought to myself then, ‘but if she’s going to stay in the house and enjoy it for many years, so be it. It’s a nice house on a beautiful street. It’s not all about money.’

Then the perfectly livable house was gutted. The new owner wanted to expand the living space into the already small backyard. Maybe to boost the square-footage for a flip?

By May of 2008, the owner threw in the towel and put the house on the market. I don’t recall the price, but think it was in the low 700s. The house was uninhabitable. Demolition had begun on the kitchen and bathroom, then was halted, leaving exposed pipes and studs throughout.

It just didn’t make sense then for anyone to purchase the house anywhere near its list price, because tens of thousands of dollars would have to be spent just to get it approved for occupancy.

The house was foreclosed in December 2008, taken back at auction for $687,048.

The lender didn’t bother with the expansion and completed the kitchen and bathrooms, so the house is livable again. But rather than list it at a low price for a rapid sale, as many banks are doing with foreclosed houses, the house came on the market in April for $728,000.

With no takers, the price was cut recently to $710,000.

Adjusted for inflation, the house’s 2004 sale price would be about $720,000 today.

Meanwhile, in the last two years, hundreds of thousands of dollars were lost by the investor and banks. A lot of construction work was done, but in the end, the house is basically the same size and condition it was in before its 2007 sale, plus an extra 3/4 bath.

As all this running in place was going on, a fine, usable house has been vacant for two years ... and counting.

-- Peter Y. Hong