[quote=AN][quote=CA renter]Absolutely, we are looking at the better homes/lots in better neighborhoods on better streets (or some combination, at the right price).
You’ll note that many of the homes you’ve listed are new builds from the peak years (2004-2006). Those would be lower today because every single buyer in those tracts bought at the peak, many of them with builder-financed mortgages that were just as “toxic” as the sub-prime stuff. The other homes you’ve listed are mostly in the San Marcos school district, which definitely affects the price relative to those in the Carlsbad or San Dieguito/Encinitas districts.
Like sdr pointed out, you really need to understand the nuances of the area. There are some VERY funky homes, lots, and neighborhoods around here. The least desirable with really “WTF” prices from the peak have indeed dropped, but the better homes and areas have dropped very little.[/quote]
OK, now I get it now. When I first read your post about how government intervention preventing NCC from crashing, I thought you mean all of NCC that sold in 2005 for $700k are now at $650k. What you really mean is the cream of the crop of NCC have held up extremely well. I can totally agree with that. Especially if you only look for established areas with buyers who bought long ago. I don’t doubt that there are nuances w/ every area and that certain home on certain street will fetch more than others.
BTW, I only listed house sold in 2004-2006 because a lot of the older homes weren’t sold in 2004-2006, and since I don’t know the area, I can’t assume their value around the peak. So I left those out.
I guess my posts were form from a misunderstanding of your point. I would never expect the cream of the crop to crash like the rest, especially in areas that are well established (be it MM or Encitas). There are a few lots I would love to have in MM, but they’re owned by long time owners and they’re not for sale.[/quote]
AN,
While I don’t expect the better areas to drop like O’side, Escondido, etc. (and mind you, only the “bad” parts in those areas saw the huge drops — the better areas are also holding up fairly well), I do expect them to drop to 2001-ish levels, adjusted for inflation. It’s just that the govt intervention happened right as they were about to be hit.
Real estate cycles move in waves. Not all areas rose the same percentage at the same time, and not all areas declined the same percentage at the same time.
This most recent credit bubble meant the housing market was being fed from the bottom-up. The tremendous demand came from people who *should have been* renters, but were allowed to buy with low/no-down, no-doc loans with teaser rates. They were the first to go, which is why the least desirable areas — where these buyers clustered — dropped first.
What people tend to forget is that the higher-end areas also rose as a result of what was happening at the bottom. People with little means were suddenly able to come in with $200K-$500K down payments! The volume of sales at the higher end was lower — if you think of a pyramid, the bottom was all the renters and speculators coming in, while the top rose as a result of this squeezing up from the bottom. When the toxic stuff stopped being issued in 2007-2008, there was absolutely no floor under the lower-end places (and that includes the lower-end parts in the more desirable zips). Many of the people who bought during the peak in the higher-end areas had hundreds of thousands of dollars worth of “equity” from their down payments (courtesy of the fools who bought their starter homes with no-down, $500K mortgages). Many of the people in the higher end saw the writing on the wall, and thanks to the Fed’s extremely low mortgages, they were able to do a final refi in 2008 or so, and many pulled money out because they knew that door would be closing. Others refi’d back into ARMs, but they extended again into 5 or 10-year arms in 2007-2008. They intend to ride this thing out and use that money to help them through the tough times…until prices rise again in the future.
Problem is…lots of people are waiting for price to rise again so they can make their exit from unsustainable (over the long term) mortgage payments. For this reason, I believe if prices hit their peak levels, massive inventory will hit the market, essentially keeping a lid on the anticipated price inflation.
There is a lot of distress. Lots of it. But the higher-end families have more resources and know how to work things for a while. Unfortunately, many of them are tapping into savings/retirement that they shouldn’t be touching. This will come back to haunt them in the long run.
I’m a deflationist. IMHO, if prices rise, it will be due to the Fed’s trashing the dollar which will enable foreign entities/people to buy up all our assets. Question is, who’s currency will manage to come out on top?
