San Diego Housing Bubble News and Analysis

Flippers generally dont put 20% down and live in a home for 2.5 to 3 years. I say he's an unfortunate buyer who got in at the peak rather than a flipper.

Could be considered a "stealth" flipper. This is someone who trades way up with the intent of selling later to make an easy profit. Most folks who buy a house as their residence aren't looking to sell it a couple of years later. A friend of mine in the early 90s was a stealth flipper. He sold a smallhome, and bouth a huge one with a down payment. The market went down, and he then lost all. Then he was assesed by the IRS to pay income tax from the forgiven loan.

Signed,
Ignorant Dipsh_t

It seems like 80% of the buyers are "stealth" flippers.

I don't know what criteria for stealth flipper is. Certainly someone who buys more home than they want, or that they could afford in the long run. Maybe anyone who bought with the intent of turning a profit in the short term (less than 3 years).
The first criteria cannot be determined by analysis.
The second criteria could be, by looking at the buyers income versus loan payment, after the loan resets.
The last criteria is self evident, it someone puts their house up for sale a couple of years after purchasing it, they may be a stealth flipper, provided they don't have a reason for selling, like job move, etc.

Signed,
Ignorant Dipsh_t

I love that term "unfortunate buyer". Is that new on this board ? Should I get my hankerchief out and have a good cry for some opportunistic dufus who thought he'd make a quick $147, 000 only to find he's NOW F**CKED ?
It's people like that who have driven prices up to this astronomical level in San Diego and I have absolutely zero sympathy for them. May they go down in flames and learn a good lesson...poor unfortunate buyer, indeed.
Oh, and by the way, happy St Paddy's Day to all ye unfortunate buyers and yer realtor representatives.

Irish

Had to weigh in on this one. Looking at this scenario in a vacuum, it is a clear loss for the homeowner on this deal. Of course, it's the big picture that really counts. Did this person own property prior to this purchase? How many parcels, where, and for how long? How much money did this person make on real estate over the years?

I find it very short-sighted to conclude this homeowner is -as someone so eloquently stated - f'ed - because it looks like they may take a $150K loss on this particular deal. For all we know, this homeowner may have profited handsomely from prior deals to the extent they still have an excellent net gain.

Jumping to conclusions and viewing these types of situations in a vacuum are two rookie mistakes when it comes to analyzing a particular investor's level of success.

Unfortunate buyer is a euphonism for DUMBSH*T

Did this unit on Van Dyke ever sell? What was the sales price?

The listing agent increased the list price to $675K. Went into Pending after 19 days on the market.

Irish,

I agree with you. I am happy to see housing price is returning to normal. Absolutely no sympathy to those who bought to flip for a profit and couldn't get out in time. See ya at the bottom of the hill, guys.

"The listing agent increased the list price to $675K. Went into Pending after 19 days on the market."
______________________________

Thanks RiU. I'm certainly interested to learn what the sales price was so we can all see the level of "bloodbath" on this deal.

According to a friend who lives in the neighborhood, this home sold for $681K in a few weeks. Not exactly the "bloodbath" that the original post so proudly and excitably proclaims.

Anyone developing an appetite for a little crow?

The San Diego Recorder hasn't gotten it yet. A lot of money for a little 3/1. At least it's an SFR.

Hmm, 45XX Vista St. (the next block over in the neighborhood) is same configuration and slightly larger, listed as sold 3/7/07 for $584K.

double Hmm, go the next block west and you get to Biona Ave.
46XX Biona Ave is a 3/1 and a little larger, listed as sold twice on zillow, once on 1/19/2007 for $509K and then one week later 1/25/07 for $629K. (Maybe that's a foreclosure and REO flip).

The house closed on 4/26/07 for $681K.

I think a small band aid will take care of this "bloodbath"

What amazes me is the apparent glee that some posters derive from trying to find properties where folks have taken a loss. I wonder if they look for stocks that have taken a dive and then go to their message boards to boast how stupid anyone who bought that stock is? I doubt it, but what's the difference? I guess a home is more personal than buying a stock and those who feel priced out can't buy a piece of a house whereas they can buy $500 of MSFT and consider themselves partners with Bill Gates.

Here is another seller that is going to do well:

55XX Del Cerro Blvd
Purchased 8/23/99 for $340K
Listed 4/6/07 $945K

The sellers agreed to an offer with a contingency after just a few days being on the market.

It's kind of hard to tell what happened. The 2004 sale doesn't show up in the MLS so there's no way to know what condition it was in at that time.

Not counting carrying costs a $681k sale price just barely breaks even after the costs of sale. Unless the seller spent money on repairs or upgrades in the interim - which is probably only a 50-50 proposition at most - they probably only lost about $65,000 in the difference between the PITI resulting from their ARMS and the market rents.

$65,000 isn't much money. Most people can clear that in 6 months. Maybe a little longer.

Ozzie - the folks that take joy in others losses in this context, in my opinion, are attempting to offset and obscure the fact that many, many others have made incredible sums of money in a short period of time. It makes them feel better about "missing the boat".

RiU - excellent example of folks who are cashing in HUGE in a mere 8 years. Wow.

Bugs - your projected $65K loss is based on nothing but speculation - akin to the speculation that the originator of this thread was operating under when proclaiming this deal was a "bloodbath". You can speculate as you wish and attempt to spin this deal any way you desire - no matter, without some cold, hard facts in support there is simply no way to characterize this deal as a "bloodbath". And that is my only reason for chiming in on this thread - to point out that the thread was initiated with a screaming, sensational and inflammatory headline that now appears to have fizzled into a "uh...never mind."

These threads are all too common here. There was one about 2-3 weeks ago concerning a La Costa property and it had the same type of title where the home was selling pre-2004 prices or whatever. I did a tax search and the home hadn't even sold in 2004. The owner was going to make a great profit for a 10 or 15 year holding period. The thread quickly ended when it was apparent that it was just a lie to begin with.

Here is another example in Tierrasanta:

Purchased 11/07/90 $370k
Listed 3/22/07 1,150,875
Reduced $985k

Accepted offer after 23 days on the market.

Everybody who bought in the 90s made a ton of money. What's your point Realtor?

The relevant question is whether these people were able to resist the lure of the HELOC.

Not everybody who bought in the 90s made a ton of money. Some people who bought as late as 2005 made money.

The two examples I gave the sellers will be just fine. Good thing they are selling now or they would be in trouble. According to some the market will be at mid 90s prices by 2010.

My point is nobody knows for sure what a buyer is willing to pay even in today’s “blood bath” market. Sellers need to be smart about the list price and buyers better think long term. The market could crash or it might not be as bad as some think. Anything can happen.

I think your "Point" is that, "Everything is fine, folks. No downturn here."

Anyone who purchased in the 90s and did not make a bunch of money is either an idiot who paid WAYYYY too much or the unluckiest guy in SD who somehow mananaged to find the one property or area that didn't double.

Your examples so far have been not furthered the RE discussion in any way. Are there a few people still getting top dollar? Yep. Are there lots of people with lots of equity? Yep. Are these people going to be able to stop the snowball from rolling downhill? Nope.

No that is not my point. If you can read I posted "My point is nobody knows for sure what a buyer is willing to pay even in today’s “blood bath” market. Sellers need to be smart about the list price and buyers better think long term. The market could crash or it might not be as bad as some think. Anything can happen." Sure reads "Everything is fine, folks. No downturn here."

I have told people they should wait to purchase and watch the market. Some people for whatever reason want to still buy a home now and some are waiting.

Maybe I should have agreed that the seller in Kensington was taking a "blood bath" to further the RE discussion.

As the original gleeful poster of this inflammatory headline I must say a couple of things.
It's nothing personal, but I was indeed very happy to see this f@#ked buyer taking a "bloodbath" because it's a sign that the market is finally returning to its fundamentals. This crazy bubble is over and the market is returning to sanity. Yippppeeee! What is the matter with that ?
You all can imagine my horror when I saw the "tickler" price of $595k being withdrawn and then upped to $675k. My guess that this was a marketing ploy to generate a mini-frenzy. It seemed to do the trick, since the recorded sales price is $681k. I remain astonished at the stupidity of this new buyer who rescued this very lucky flipper. It lends credance to the old saw that there is always a greater fool.
To those of you who were offended by my glee and inflammatory headline, I apologize insofar as it may have been premature. I hope you're all happy that your precious, teetering real-estate bubble is still alive and well in Kensington...at least for a while longer. But if you've got eyes in your head and if you have learned anything from our very sage Rich, surely you see that this is not the time to be paying top-dollar for real-estate ? For God's sake rent a similar place in the same neighborhood until the prices come down to reality, as they surely will. It will save you hundreds of thousands of $$$ over the longterm.
Irish

rish

Yes you were premature.
There are stupid people but sometimes people just make mistakes.

I have to admit that I too feel a certain "glee" at watching the bubble burst, mostly because I've been calling it since 2001 and I hate to be wrong.

Has anyone researched this kensington transaction? Who was the realtor? This almost sounds like someone with that "Jannae(sp?) Magic". Straw buyer or large cash back perhaps?

Yes, I may be grasping at straws (no pun intended), but I hate to think the market is rebounding already.

Generally speaking, a 1990 purchase was underwater here for 6 or 7 years and didn't break even again until 1997 or so. Really, it was probably later than that after accounting for the effects of inflation on the dollar. A 1990 dollar was worth more at the time than a 1996 dollar.

Those buyers didn't have to book their losses so some of them probably didn't think of themselves as losers, but those losses were there during the mid-90s whether they booked them or not. The ended up okay since then, but only because they stuck with a loser until the market turned. They all would have been a lot farther ahead had they made their purchases in 1995 or 1996.

And therein lies "the point". You make your money when you buy, not when you sell; and buying at a high point of a known cycle is no way to call yourself a genius or to get ahead. If money is the thing, those 1990 dollars could have been put to much better use, just the same as the 2006 dollars could - for the most part - have been put to better use than buying RE.

If a buyer doesn't care about the money that's fine. We should not be characterizing those purchases in terms of financial acumen but instead attribute it to them fulfilling their emotional needs. This here's America, it doesn't always have to be about the money.

As for bloodbaths, I wouldn't have expected Kensington to be a big loser yet. On a geographic basis and all other things being equal a declining price trend will work its way from the outskirts in toward the employment centers, and (locally) from the east to the west. The reverse is true for increasing markets. Kensington is still close to employment so it's day will come a little later than someplace like Escondido or San Marcos or Chula Vista. That doesn't mean it won't happen or that when it does decline that decline won't make up for lost time. We're just not there yet, that's all.

If we assume the aftermath of the unprecedented spike that preceded it won't have equally unprecedented consequences - and that is an assumption that may prove unfounded - then a person who buys now might indeed recover their position at some point in the future. But I wouldn't say that the prospects of merely recovering their position after 5 or 6 years (and paying extra for their housing during the process) would economically justify a purchase right now given the current market conditions.

If it is about the money, then wishful thinking shouldn't be part of your equation. In either direction.

I have to admit that I too feel a certain "glee" at watching the bubble burst, mostly because I've been calling it since 2001 and I hate to be wrong.

Hate to say this, but you were already wrong. The RE bubble about doubled from 2001 levels and began bursting in 2005.

No offense, I sold one of my rental properties in 2001 to avoid being overextended in real estate myself. I was wrong as well (but hedged my bets by holding onto another property).

The new owner of Van Dyke took out two loans for a total of $612850.00.

Here are some homes in North Park that closed escrow recently:

Purchased 12/3/01 $235K
Sold 3/22/07 $615K

Purchased 10/10/03 $475K
Sold 3/2/07 $615K

Purchased 11/25/02 $595K
Sold 5/3/07 $865K

I bet they were all straw buyers.

Most people purcahse a home based on emotions. If you dont want to deal with peoples emotions deal in units or commercial property.