San Diego Housing Bubble News and Analysis

That's not the only Barratt project with problems. Their Magnolia Ranch project at Bressi has been online for 18 months now and they've only sold 13 units out of the 30. One of those is already going into foreclosure.

I asked this before with no responses but is the Grand Del Mar only for resort guests or are memberships available? If so does anyone know how much? Any info on Carmel Valley is appreciated. Thanks....

Just curious. Is this side of CV Poway Unified? It's roughly in the middle of 56.  

selfportrait

----- Sour grapes for everyone!

No, this is Carmel Valley schools. You get there by exiting at Carmel Country Rd., which is only a couple of miles in from I-5, but then have to drive on Del Mar Mesa Rd a couple of miles further east. It is directly across the canyon from Canyon Crest Academy.

Hmmm... I thought the people who'd bought $2 million homes at the peak weren't subject to price pressures or foreclosure risk. It's fascinating to watch this tide go out.

Why would anyone borrow more than $1 million if the interest on the excess over $1 million is not deductible? Is everyone in the wealthiest 1% earning more than 6% on their money net of taxes?

Patient renter in OC

I don't know if it's the beginning of a CV meltdown (I hope it is), but that's a very low (relative to recent sales) price for a 4800 sf house on an acre of useable land. In fact, I'll be quite surprised if that doesn't sell this week for at least the asking price. As long as it doesn't sell for a lot more than that it will be a definite comp killer.

I wouldn't read too much into this one listing. Judging from its location on the map, this is definitely not "mainstream" CV and from the picture, it does not look like it has over one acre of usable land.

Mr. Wrong

From the pictures, it doesn't look like a million $ property. A smart bottom fisher would wait it out.

You're right, Mr. Wrong, it doesn't have an acre of useable land. It doesn't even have an especially big yard, as it turns out.

But as far as it being mainstream CV, while I'd agree that it's not mainstream CV, I'd say that that's because it's more desireable than mainstream CV.

In any case, I still think it'll end up being a lower comp than most recent ones.

You guys will love the listing history on this one. Original purchase in 7/05. First mtg for 1.424, second for 300k. So the homeowner did lose 300k of his own loot. The house has been on the MLS since August of 2006. Realist (which is the tax roll service used by Sandicor) is slow to get updates and has the home still owned by the homeowner and not the bank. However the NOT filed was for an auction date of 11/07 so I bet they had an offer on a short sale, it crashed and burned and the auction was postponed but now happened or will happen tomorrow especially since the listing says it is bank owned.

Anyways no this is not mainstream CV however it is very nice to see this 30% cut from the 2005 sales price. The home will go quick at this price. Not even close to an acre of usable ground as there is a slope that is in the lot. As you said zk it is more desireable in this part of CV and this will help bring down the comps there.

SD Realtor

SDR,

What could be the reason the buyer bought in 7/05 and wanted to sell in 8/06? At 6%, transaction costs would be about $100K. Was this a case of pure speculation or something else? The reason I am asking this is, I see many transactions like this - buying and then trying to sell in 12 -18 months. Surely, they didn't plan on living there just for a year.

what is amazing to me is that land is still be cleared and by Pardee Homes to start a new set of homes/development they plan to build off Camino del Sur. More homes?

BSR it is hard to say. I have said it before and will say it once more, that is, I believe there is a fundamental misunderstanding about buyer behavior on this site. I cannot argue about the fundamental message from many on this site about how much money can be saved by waiting to buy. No argument at all. Yet there were still 25,000 homes sold this year! That does not include FSBO's and perhaps other new home sales right? So what drives all these people? Surely many of them know the market is down and moving downward... so what drove them?

It is not all about the money right? I know many people who bought this year. Many of them are quite successful, intelligent, and understand the market dynamics and direction. The factors that drove them to buying obviously outweighed the depreciation factor.

Don't get me wrong, I am not advocating a strong buyers market or anything like that...

*******

Sorry for the detour... getting back to your question...who knows what the heck happened with Stella. There is another REO nearby on Mesa Norte that is not on the MLS yet and it went REO awhile ago. I posted about this home last spring because the owners tried to avoid foreclosure by transferring slices of title to entities they would start up. It was quite interesting. Eventually they were chased down and lost the home.

As for Stella yeah he closed escrow in 7/05 and put it on the market by 8/06. Was it pure speculation? Perhaps. Hard to say man... Most speculators don't throw down 300k of thier own money though... so for this case my read would be doubtful but that is just a guess.

SD Realtor

Hmmm... I thought the people who'd bought $2 million homes at the peak weren't subject to price pressures or foreclosure risk. It's fascinating to watch this tide go out.

Why would anyone borrow more than $1 million if the interest on the excess over $1 million is not deductible? Is everyone in the wealthiest 1% earning more than 6% on their money net of taxes?

Patient renter in OC

Poor decision makers (my euphenism for financial idiots) come in all shapes,sizes, and financial backgrounds. I would say traditionally in the past people who bought $2million+ homes usually don't need to "borrow" to buy.

Once "nice" thing about all the relaxed lending that happened in recent times  is that you actually had people that stretched to pay $2million for homes. Seems like another case of trying to keep up with the Jones.

selfportrait

----- Sour grapes for everyone!

SDR,

What could be the reason the buyer bought in 7/05 and wanted to sell in 8/06? At 6%, transaction costs would be about $100K. Was this a case of pure speculation or something else? The reason I am asking this is, I see many transactions like this - buying and then trying to sell in 12 -18 months. Surely, they didn't plan on living there just for a year.

Actually, this sort of thing happened TWICE on my street, with both buyers buying in 2006.

The first buyer overbid in a multiple offer situation (in 2006 !) for a home and paid close to $1.15 million for a home, spent another $100k in remodeling..Then 3 months later, they turn around and sells it at a loss for $1.1 million. At least it has an ocean view (sort of) compared to....

Couple number two spent $1.1 million on a home that has no ocean view in the same complex with the same sqft. Was sold by the "antique" wood floor, etc,etc. Spent also $100k in upgrades...3 months later, it's back on the market listed for $1.05-1.15 million.

I'm finding out lots of people make their biggest financial decisions when it couldn't be possibly any worse time to do it.

Couple #1 was having marriage problems and thought buying a home and living together would help. The stress of a new home purchase and all the hoops they had to jump through to remodel didn't help. The marriage ended in a divorce 3 months later, and they had to sell the home at a loss.

Couple #2 again overpaid on the home, probably a FTB. I haven't talked to this neighbor to figure out what happened, they're a quiet asian couple that keep to themselves...But my hunch is a FTB that overstretched and underestimated the total cost of ownership. 1 months after they buy, both couples show up in brand new Bimmers, and start a $100k makeover in the home. Anyway, it's 3 months since they moved in, and they put it back on the market. It's definitely not a flip attempt, as their asking price (with a ridiculous $100k spread) won't cover their total cost of the intial purchase plus all the remodeling they've been doing. Never see husband and wife going out together, always separate. My guess would be possibly the home was purchased with the hope to add some stability to a family too. But that's just a guess.

Why do so many couples make their biggest financial decisions when their personal life are at distress? When my wife and I bought our place, we felt such a big purchase was enough stress by itself. Dealing with issues here and there, fixing up the place and making it the way we wanted without blowing budgets was enough for us who normally don't fight to get on each other's nerves... I can't imagine how two people not on good standing would be able to do it.

selfportrait

----- Sour grapes for everyone!

You got to love a 2 year old house with not a lick of landscaping on the entire property.

Can you say 'flip'?

Like I said, not many flippers come in with 300k cash.

I would be willing to bet this was not a flip.

SD Realtor

Couple #1 was having marriage problems and thought buying a home and living together would help.

I had this hunch based on a couple of empirical observations. Interesting to see another data point. I think some wives in difficult marriages grasp at homebuying (or having a baby) as a cementing factor. Looks like it usually fails (and if anything, contributes to accelerating the fracture). On the other hand, I have also observed some good marriages fall apart after buying an unaffordable home and the resulting financial distress from it.

I think the correlation between housing bubble and its impact on marriages would make a fine subject for a few Ph. Ds in Sociology!

@SD Realtor

Well then, who the heck buys a $1.5 million house and then leaves it with a dirt lot for 2 years? Maybe they should have held some of the downpayment money in reserve for landscaping?

There's no way I'd buy a 2 year old house for far in excess of a million dollars when it has zero landscaping. You're looking at at least $50k post purchase just to put in grass, shrubs and irrigation.

SDR, interesting comments on the misunderstandings of buyer behaviors. People on this site are too rational imho. Too much analysis based on hard numbers not nearly enough on human psychology. To understand the market dynamics you need to realize the decision to buy a house for most families are at least 50% driven by emotions. This is why housing can get really overvalued and stay overvalued for a long time. The flip side of course is when the tide finally turns, it can overshoot on the downside as well, again driven more by emotions than the fundamentals. However, unlike other investments and assets, home is highly personal. Most people buy it as a place to live rather than as a speculation. People won't sell unless they absolutely have to. This is why housing cycle tends to drag on for years. You need to be really patient in order to wait it out.

Mr. Wrong

Cookie cutter tract house with small usable lot.... Even though it's over >4000 sqfts, it's still way overpriced.

I won't look at it until it returns to price below $750s range.

Mr. Wrong.

I completely agree with you. Well put.

Cookie cutter tract house with small usable lot.... Even though it's over >4000 sqfts, it's still way overpriced.

I won't look at it until it returns to price below $750s range.

Cool, more supply for people that are looking :) Just kidding.

selfportrait

----- Sour grapes for everyone!

I won't look at it until it returns to price below $750s range.

You want to start a bidding war now, masayako? :) Barring any kind of disasters, natural or manmade, I doubt price will ever drop to that low. That kindof percentage decline is unlikely to happen in CV imho. Tract homes or not, I think CV has established itself as one of the best areas in San Diego over the years mainly due to its location and schools.

With that said, I do think prices in CV will eventually decline. However, the decline will be relatively small and perhaps with most of the decline happening towards the end of the cycle. So the real decision for people waiting to buy CV is: is this worth the wait?

Also keep in mind that price may not decline much in nominal terms due to inflation. Most people on this board think home prices in 1998 are reasonable. Prices in CV have probably doubled since then. If you also happen to believe 2012 will be the bottom and assuming prices stay flat until that time, then prices have only doubled in 14 years, which comes to an annualized appreciation of just under 5.1%, quite reasonable given the current inflation numbers, don't you think?

Mr. Wrong

"Cookie cutter tract house with small usable lot.... Even though it's over 4000 sqfts, it's still way overpriced.

I won't look at it until it returns to price below $750s range. "

Masakayo I do not believe it will ever get there. They already have 3 offers and I know of a 4th being written tonite. I also have heard that there has been alot of traffic.

The home right near it on Mesa Norte which is 5500 is not on the MLS yet as the lender is still pricing it. It will most likely fetch between 1.7-2M. Still a reduction compared to the 2.2+M it sold for.

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meandale - I don't know who buys a home and leaves it like it is, but again, most flippers do not expose 300k cash unless it belongs to someone else..Back to the age old argument...if you can get someone to loan ya the money without recourse why in the world would you not do that? So I don't know who did it, but I would bet that it was not a flipper.

Also the home on Mesa Norte that went for 2.2M and change is an REO. He only had 200k into it. From what I have found out about the owner he was definitely not a flipper but that home is very close by to Mesa Norte and it has not even hit the MLS yet and has had substantial activity on it.

*********

Mr Wrong you have pretty keen insights. I guess my point is that I do not ever claim to understand any behavior of any buyer at all except that they are all different. As you pointed out many are indeed driven by emotion and I would venture to guess more then the 50% number. However as many who post here simply cannot even begin to fathom how people would ever buy in a market like this, many who do buy cannot even begin to fathom ever renting a home. That cost is not an issue for them regardless of the fact that they are not independently wealthy. Am I saying either party is right or wrong? Well not really but for me personally I tend to fall on the side of people here simply because I am not as wealthy as I want to be. Yet I think you touched on an important point that this site is based on hard numbers more and psychology less. There is nothing wrong with that at all except expectation levels of market movement are not adjusted because logic does not account for that. Logic dictates that there should NOT BE 25,000 homes sold if everyone looked at this as only a financial issue. BTW 25K is a piss poor year right?

There is no right or wrong here at all. Yet, I think ....well like you said Mr Wrong, you need patience to wait it out... and in some cases the price levels people think may occur for some homes may indeed not occur.

Please don't confuse this with an endorsement to buy now or anything like that.

SD Realtor

The analysis on this site may very well be rational, but the people here are definitely emotional. Otherwise SDR would not need to sign every other posts with the following line:

Please don't confuse this with an endorsement to buy now or anything like that.

Kindof sad.

Mr. Wrong

Mr. Wong,
I totally agree with you about buyer psycology. I have no idea why about half the people buying homes are right now except to say that they want it. We are not a society built on self denial. I think it would be really interesting if the relators released a survey about buyer reasons for buying. You know, Moving up, sizing down, better schools, etc. I really want to see how many really check the suposid savior box, foreign buyer with too much money. This may be true in NY, or Miami, Hell even La Jolla and Downtown will have some of these. But Muhammad and all his oil billions isnt looking into buying a 2/1 800sqft 20 year old condo in Santee.
I disagree with you about Carmel Valley. I think it will get hit, and hard. It wont be like the IE. BUT it will suffer, just not yet. I dont even think 2008. I am thinking 2011. Here is why. That is 6-12 months after all the PRIME option-arms start hitting their stride. The last recession was felt for about 3 years, (ala 2000-2003). For some reason, that feels about right to me. So call it 2008-2010. Incomes wont have been going up much, jobs will be stagnant, and interest rates really dont have much more that they can go down from today. All of a sudden people who really havnt been getting ahead will feel the pain of subprime today. It will be an all new "crisis" that no one could foresee. We arent going into a depression IMHO, that is stupid scare tatics used to sell news. But a 2-3 bear market to work off the excesses of the largest comodity binge in history seems quite normal.
I back that up with an factoid gleaned from a link on this page to the SF Chronicle (ill look to find it). A buyer of a $1000000 home needs an income about $200000/yr to support the monthy payment. With an interest only, it is only $95000/yr. That is a great income, but not enough to buy a million dollar morgage. The idea was buy now, get into a house in CV before you were priced out, and then refinance when your income went up. No inceased buying power (recessions happen) along with that kinda morgage no longer being available, and you have CV's subprime. Is it gonna be as bad as the 2007 hit poor fokes took? Doubt it, there is alot more demand there, just not at those prices. But to say that we will inflate our way out of this mess ANYWHERE in SoCal reads to me like the forcasts of price appreciation in 2007 by the NAR. You cant just say it is different here.

One thought on the type of person who would put $300K into a $2MM home then walk away - a bubble industry person who earned commission - like a MORTGAGE BROKER. Extremely high income the last few years but recently many of them have lost thier jobs or at least commissions. They should have read Pigginton. Lets hear a piggy cheer for the brokers' bleeding. Those jerks made money by making it WAY to easy for people to buy homes. (Sarcasm intentional).

Mr. Wrong, yes, many posters here are emmotionally invested in the "rightness" of thier bearish predictions even if the predictions are based on reasonable objective analysis. And the piggers tend to attack those who contradict the party line - even though some versions are extreme (c'mon piggers - forget about a 60% price cut accross the board in nominal dollar terms - it will never happen. "The system" - congress, wall street, the Fed, and voters - will not allow it to happen - who ever is waiting for that outcome will be waiting forever or until thier naivete wears off).

Piggington is not a professional investors board, it is more like a dog fight and the crowd has already picked the winning dog. The bleeding (and the cheering) will continue. Interfere with schadenfruede on this board at your own peril.

I wanted to clarify what I just said. I am not saying MrWong is saying the NAR motto. What I am saying is that these option ARMs are gonna force must sell inventory onto the market. This must sell is gonna go for a larger drop than just a few percent. This is where the "It isnt different here" is coming from, must sells hurting the market. I dont mean to be harsh to MrWong. I had trouble disputing his numbers cept to say that 5-6% Yr over yr appreciation for housing seems high. If I can make that in a tax advantaged leveraged home, why ever buy a bond again?
-20% feels better to me. Million dollar morgage, reduced to 800k, with low interest rates and 3-4 years of wage inflation is going to be alot more doable by a large enough segment of the population to justify the premiums of CV. But I can be wrong, I did just discuss that I really dont have a grasp on buyer psycology. Plus we do agree that these declines will happen at in a few years, not this year. A lot can happen "in a few years".

SD Realtor,

It seems hard to believe that 25000 homes sold in 2007, but then that is basically 2000 a month. Somehow that sounds different. Also, how many sold in the last six months? I know that is traditionally the slow time, but that is also the time when a 0% down subprime jumbo loan wasnt available to anyone with a pulse. 2007 started out fine, it was the last 3 months that really took it in the ass. If housing had limped along like it had in the first three months, how many talking heads would be calling down the thunder on anyone who dared to challenge their mastery of the real estate market? Alot more than there are now trying to deflect criticism about the "now is the time to buy" mantra. I guess the thing to remember is that realestate never goes to zero, it is the momentum that counts. Am I wrong?