San Diego Housing Bubble News and Analysis

Considering that house is worth well over $1,000,000 just who is looking for a bailout? I'd be happy to write a check for $900k today to take care of the liens and give the current owners some walking around cash. And speaking of neighbors, there are two on the market right now within a couple hundred feet of them asking between $1.5 and $1.7 million. If you think a NOD on a $700k loan for a property worth at least $1.3 million automatically reduces the value of every property in the 'hood then you know nothing about real estate.

How much would the house rent out for?

"asking between $1.5 and $1.7 million" Yes, asking price. Not the same as sales price. I wonder how money was pulled out those homes in "equity" too?

"If you think a NOD on a $700k loan for a property worth at least $1.3 million automatically reduces the value of every property in the 'hood then you know nothing about real estate."

I guess we'll find out won't we when that property goes through the foreclosure process. You do know that HELOC is not non-recourse right?

"Considering that house is worth well over $1,000,000 just who is looking for a bailout? I'd be happy to write a check for $900k today to take care of the liens and give the current owners some walking around cash."

Yes, go do that. You can pay for their vacations, hummers, and escalades they undoubetdly purchased with the HELOC money. I don't know about you, but I don't funding other people's lifestyles. When you buy it, make sure that you post a photocopy of the cleared 900K check okay?

Uhh, speaking of not knowing what you're talking about.....

This is an 1,130 SqFt house on a 4,300 SqFt lot, and it's not some spectacular remodel. This house is not now and never has been worth more than $800k, let alone $1,000,000.

In fact - this home was listed for 4 months at the very height of the market for this area in 2006 at $775,000, and it didn't sell then. That failed listing shows what this property wasn't worth at that time. What does that tell you about the current value?

The very "best" I could do in looking around in that area is the home at 4361 Hermosa, which is on the canyon side of the street (4298 is on the inland side), has a 12,000 Sqft canyon lot (vs. 4298s 4,300 SqFt triangular lot) and the home is 30% larger at 1672 SqFt - with a 3rd bedroom and 3 baths. That home sold for $735,000 in 02/2008 and it positively blows 4298 Hermosa out of the water.

4361 Hermosa is so much better than 4298 that I wouldn't dare include it as a comparable sale in an appraisal.

This property going into NOD has no effect on the value of every other property in the neighborhood - they're already worth less now than they were at the height of the market.

BTW, there are 2 homes within a 5 block radius of 4298 Hermosa that have recently sold for $382,000 and $441,000, respectively. If you want to talk about dragging the neighborhood down those are your prime suspects.

These stories will be more and more common as we continue in this correction

Here's one in La Playa (nice area of Pt Loma) - purchased in 1994 for $300K and 'owners' currently owe more than $700K and are trying to short sale

http://www.realtor.com/search/listingdet...

I believe there are lots of people who have been living far beyond their means via the equity in their houses for the past decade

From the outside they look financially successful but a combination of factors is now biting them in the ass:
> house prices have dropped so there is no more equity to be extracted
> house prices have dropped so there is no way to refi the property without putting cash into the deal
> lending standards have gotten tougher - no more 'fog a mirror' loans with 0 down
> HELOs have been frozen
> jumbo loan rates are at least a full percentage point higher than non-jumbo rates right now IF you can find a lender willing to do a jumbo refi in CA right now

This combination of factors means no more housing ATM for many supposedly 'well-heeled' San Diegans

It also means that they are stuck in their current loan (almost certainly an ARM) and will have to deal with whatever reset terms they agreed to

As their properties are put on the market in distress sales we will see who has been swimming naked

I seen the $1.5 and $1.7 million listings. they are much bigger. perhaps a large portion of the refi's went into the updating of the house too. but is it truly worth over $1 million? the size of the house hasn't changed per zillow, so is the house truly worth more than $880/sqft? I'm not so sure about that.

How much would the house rent out for?

Rents around there are all over the map depending on how long the owners have had the place. My guess for this is somewhere between $1800/mo and $2500/mo.

I had initially said $2500-4000 but now I see that it is only 1130sf! Not much bigger than a lot of apartments so it ain't worth a lot...

"From the outside they look financially successful but a combination of factors is now biting them in the ass:
> house prices have dropped so there is no more equity to be extracted
> house prices have dropped so there is no way to refi the property without putting cash into the deal
> lending standards have gotten tougher - no more 'fog a mirror' loans with 0 down
> HELOs have been frozen

This combination of factors means no more housing ATM for many supposedly 'well-heeled' San Diegans"

couple that with a jobloss or two and you really get a viscious cycle going. I'm telling you guys, some people have no idea what is coming down the pipe and it is not pretty.

I reckon the market rent for this sucka would be $2,000 or less. It's only 2 bedrooms.

If the prices eventually do return to trend as we anticipate, a 175 monthly gross rent multiplier would result in an indicated value of about $350,000, which when compared to the 1995 purchase price of $255,000 actually makes some sense.

Granted, if the price structure in this neighborhood ever do go that far that point is at least a couple years off yet. Still, it could happen.