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Column: How real estate bidding wars fuel inequality

The three-bedroom, one-bathroom home was listed at $1.2 million.

It sold out within a week, at more than double that price.

For $2.5 million.

In Southern California’s insane housing market — in which legions of people are homeless while people with tons of cash fight epic bidding wars — we all know the homes that are falling apart. sell above the listing price. (Check out the Times’ big SoCal house hunt.)

But I think we have now, officially, reached a level of absurdity. I have nothing against buyer or seller here. More power for them. But this is a case of unleashed capitalism, and it speaks to a culture that keeps putting more distance between the haves and the have-nots.

When I first saw the ad in the Pasadena Outlook touting the $2.5 million deal in South Pasadena, I thought it was a misprint.

“$1.3 MILLION ABOVE ASKING PRICE,” the ad read.

I called the sales agent, Ruth T. Mayeda, who works in Coldwell Banker’s office in San Marino and has been in the business for over 20 years. She said homes in the area have sold for a few hundred thousand dollars above asking, and sometimes even more.

“But I think it could be a record,” Mayeda said.

Ed Afsharian, his office manager, told me he was not surprised.

“It’s not a negotiation anymore,” Afsharian said. “It’s a competition.”

People spend a day at Garfield Park in South Pasadena. Homes in the area have sold for a few hundred thousand dollars above asking — sometimes even more, a sales agent says.

(Wally Skalij/Los Angeles Times)

Not for every ad. Some homes stay on the market for months. Some don’t sell until the price drops.

But a common tactic for creating a feeding frenzy is to price a house at the bottom of the scale. Mayeda said she did not use this strategy, although other agents told me they believed the home was undervalued at $1,198,000. Mayeda said she checked “comps,” or comparable prices, for similar homes in the neighborhood and set what she considered a fair price for the 1,922-square-foot home with a detached garage for two cars.

Judging by the listing brochure, the house was nice, but had an outdated kitchen and only one bathroom. In South Pasadena, however, which has a low inventory of homes on the market, people are paying more than the house.

South Pasadena has a retro small town vibe. The public schools are some of the best in the area, the crime rate is low, people can walk around, and the Metro Gold Line runs through town.

But again, there are deep fractures in the foundation when a beautiful community with good public schools is so rare that an open house becomes a mosh pit for big players.

People enjoy the outdoors in Garfield Park near a home that sold for $2.5 million.

Mortgage rates are climbing, but “we haven’t seen a drop in selling prices or demand due to the rate adjustment,” according to a Coldwell Banker branch manager. Above, Garfield Park in South Pasadena.

(Wally Skalij/Los Angeles Times)

Mayeda said more than 400 people came to view the property she listed, which was freshly painted, landscaped and staged. About 60 offers were made, many of them in cash, without financing.

Mortgage rates are going up, but that’s not a consideration for people who can dip into deep pockets and keep upping the ante.

“We haven’t seen a decline in selling prices or demand due to the rate adjustment,” said Lori Ramirez, who manages Coldwell Banker’s Pasadena and La Cañada Flintridge offices.

Mayeda said eight of the bids were for $2 million or more, and the winning bid of $2.5 million, all in cash, provided a good return on a modest investment made 40 years ago.

The seller, an octogenarian who asked me not to mention his name, bought the house in 1983 for $155,000. He told me he sent his children to public schools and kept the house as a rental property. He said he stayed away and trusted Mayeda’s price-listing instincts.

Shoppers along Mission Street in South Pasadena.

The seller of the $2.5 million home, an octogenarian, bought the property in 1983 for $155,000. Above, shoppers along Mission Street in South Pasadena.

(Wally Skalij/Los Angeles Times)

“I was very surprised,” he told me of the winning bid.

According to property records, the house was purchased through a family trust. The house is still vacant and the buyers have not responded to my calls and messages.

Mark McLaughlin, longtime real estate executive, former president of Compass in California, said baby boomers and their parents are sitting on a mountain of assets, including real estate, that will be passed down for years to come.

“My parents’ people are controlling the age of $13 trillion in wealth,” McLaughlin said, and it’s “going to start trickling down to my kids’ generation, so mom and dad will be like, ‘We’ll help you buy this house, all in cash. ‘ ”

If that’s true, what are the implications for a community and its schools when you’re not in the running for a house if you don’t have an ocean of liquid assets?

So far, at least, “we haven’t really seen any real change in the population demographic here,” said South Pasadena Unified School District superintendent Geoff Yantz. The city has a large apartment stock, which balances student income levels, and the ethnic breakdown is relatively stable, with Asian, White, and Latino populations between 25% and 30% each.

Yantz said the property tax escalation is going to the state rather than the school district, and he said the district has seen its funding shrink since new formulas began pumping larger sums into schools. disadvantaged communities. But this loss is partially offset by donations of about $1 million a year collected by the South Pasadena Educational Fund.

Emilia Aldana is a real estate agent, public school parent, and executive vice president of the Education Fund. She said that for her and other locals, cultural, ethnic and economic diversity was worth fighting for.

People who can afford to win bidding wars and profit from schools have an obligation to preserve those values, she said: ‘You can’t just drop your kids off and go on your merry way .”

Selma Hepp, an economist at real estate analytics firm CoreLogic, said the $2.5 million sale would likely have a ripple effect.

“Now you have a new model,” she said, “so the next listing in the neighborhood is automatically measured against the $2.5 million.”

Clearly, this economy and this housing market works for a tiny minority and defeats the teeming majority. And yet those at the top couldn’t survive without the teachers, nurses, nannies and retail clerks who are constantly being pushed to places where the schools aren’t as good, commuting can be a killer, and even then the cost of housing is a burden.

The official state response to the housing crisis for decades has been weak, often because legislative reforms have been met with opposition from landlords who have largely benefited from federal, state and local tax and zoning policies. local. Several new housing proposals are on fire in Sacramento, and we’ll see how it goes.

Is there a way to apply some sort of fee on cash house purchases of, say, $2 million or more?

This is probably just wishful thinking, and this too, but here goes:

Anyone who becomes a millionaire by simply buying a house at the right time and selling it at an even better time deserves what happens to them. But at the time of the sale, let’s charge the seller a small equity tax and funnel that money into housing for the workforce and better schools in every neighborhood.

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Los Angeles Times

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