San Diego Housing Bubble News and Analysis

And another one at $256/sqft in Lake Forest.

24872 STEM AVENUE, Lake Forest, CA 92630
5bd/3ba
MLS: P561928
2500 sqft, $640,000
DOM: 92 days
ZEstimate: $757,000

These are actual listings and actual prices. How much more proof does one need that there is a serious correction starting right now? All these people bought more than they could chew with money they didn't have and now they have to get rid of these homes!

Sheesh! That's nothing. In my current part of the world in Texas, it is $75-/sqft limestone brick homes with large yards, sorrounded by a sea of super-green meadows, audobon-like paradise of birds on century-old trees, and super-bright blue skies with crystal white puffs of clouds. The recent rains brought an explosion of marigolds everywhere. Truly mother nature presented itself here, not a little piece of Disneyland. Now I know what "big sky" means.

Same in North Carolina add to that we have pleasant albeit humid summers (this year's humidity is yet to hit ... very late this year, last year I was sweating like a pig by now) dry (low humidity) and mild winters, a great job market from IT/research in raleigh or banking in Charlotte and very very affordable housing.
However our rains have brought nothing but wild flowers and frogs.
Cool.
Cow_tipping.

I'm confused about the first one?

"Buyer has bought low and can afford to kill the market"

Contrasts with

"Short sale" and "perhaps he refinanced a few times and now wants to get rid of all his debt problems"

The listing price is irrelevant in a short sale situation. They could be desparate to get out and put it on very very low to create a bidding frenzy to get the highest offer possible on the table in a very short period of time to see whether the bank will go for it. When the house closes for that price you will have a meaningful data point. Right now its meaningless.

sdrealtor, I doubt there will be any bidding frenzy on this property. Can you clarify why the listing price is irrelevant? If it's irrelevant why have they even listed it at that price?

In a short sale situation, the property is put on the market at a price that is irrelevant because it does not matter what the seller accepts as they have no ability to accept an offer below their loan. The bank decides.

Here is an example. 100%Buyer pays $1M for house which drops to $900K. Buyer had 100% financing and now has been hit by a reset of his option arm and cant afford payments. 100%Buyer puts house on the market for $750K and you say WOOOOOHOOO!!! The market just dropped 25% from the peak! Someone walks in and says not only will I pay you $750K, I'll outbid the other 3 offers you have and will pay you $800K! 100%Buyer says great and submits the offer to the lender. Lenders says Go pound sand loser! Lender forecloses on property and puts it on the market somewhere between $850K and $900K.

Does that make sense?

One more thing. I just did some quick research. Its listed at 650K right now not 600K. Debt on it looks like about 750K. Zillow put it at about $800 FWIW which frankly isny much. Recent comps are 650k to 700K for 1500 sq ft homes down the street. Would you expect a bank to approve a 600K sale?

thanks for clarifying that sdrealtor, but the bottom line is will the lender get a bid that is satisfactory to them? There are other properties that are in the $250/sqft-$275/sqft range that are not short sales and more of them are showing up slowly.

I would agree with sdr in that the listing prices are only the first shoe that falls.

Need to see what the property actually sells for. That's the second shoe that needs to drop.

(Did I get that right sdr?)

But Kev, thanks much for providing these examples. What web site are you using to view them? Is it available to non-RE folks and without subscription? It helps to see real world examples of a declining market. I need to show them to my wife to get her to believe me.

Indeed, the lower asking prices show a market that's declining. Its just a very slow decline so far and its zipcode/neighborhood specific. The hot locations are holding up pretty well from what the realtors on the site are indicating.

HiggyBaby

sdrealtor,
I was just wondering, if the lender forecloses and then puts it on market for ~100K more, why would'nt the seller do the same. Also according to Ramsey's commentary couple of weeks ago foreclosure costs for the lender is around 5-10% (I don't remember exactly, but the agent cost itself would be atleast 3%. So why would the lender go through the trouble of foreclosing. Is'nt it in their interest to accept a short sale unless the short sale is > say 15% of what they can sell for.
I'm guessing the best scenario for the lender is for the owner to keep making the payments. So my bet is that they would try to keep the owner solvent and squeeze all interest out of them over the years.

The lender will only accept a short sale if they dont believe they can do better based upon the comps. The decisions made by the lenders are often convaluted ones made by young MBA's with no idea as to what is happening on the streets. When they turn one down, sometimes they win and sometimes they lose.

The price the property is offered while attempting a short sale is often arbitrarily low in a desparate attempt to get a quick offer acceptable to the lender through a bidding war. The seller doesnt have the luxury of time while the lender does. The lendeers dont want to dump properties for a couple reasons. First and foremost they are looking to mitigate their losses. Second, if they sell cheap they create a lower market level that they could easily be selling a couple more into.

SDR you called it 100%.

The results of the foreclosure this weekend seem to validate the lenders behavior as well. We have already seen plenty of evidence of short sales nd REOs posted on line and lenders not being very negotiable at all with the pricing and nixing many offers IN the advertised price range. It all depends on what the loss mitigation department thinks. As we saw this weekend, the foreclosure auction lifted alot of homes from the REO departments these lenders have AND at pretty good prices. SDR called it perfectly, the low advertised price is an attempt to stimulate a bidding war.

SD Realtor

The funny thing is that I heard most of the lenders are pissed. The fees they paid the auction company were steep and it does not seem to be a big win for them. Check the Foreclosure Auction frenzy thread for more...

Heck yeah! The auction company is STOKED. They pocketed 5% per tranny, probably are TOTALLY indemnified on each transaction, and I would bet that even if the transaction crashes and burns the auction company still gets some sort of fee per transaction... It wouldn't surprise me if there was also alot of up front monies just to hold the auction, advertising, etc... That of course is speculative on my part.

Piggingtonians I am sure, have no tears to shed to see the lenders get bent over the barstool a little bit by someone else for a change.

SD Realtor

On top of that, the 5% might only have been a marketing fee with separate commissions payable to the auction company. they were offering 1% broker coops so who knows how much the auction compnay got on top of the 5%.

looks like still no interested parties after a month on the market. I guess the idea of creating a bidding frenzy just didn't pan out! LOL!