4S Ranch REO–still too high

[Arty]

~500,000 give good 20% down and you don’t need a jumbo loan. However, it could go lower, come on, 4s is kind of far, 15 and 52…

[Ex-SD]

temeculaguy: I was referring to 1982-1985 time period when Temecula was starting to look attractive to people who were willing to make the commute to SD and back each day. There were new housing tracts where you could buy those large 3500 + sq. ft. houses from $195k – $225k.

Back in those days, the only people who wanted to live in RB and Penasquitos were senior citizens who liked the hot weather in the summer. I’m not claiming that I have a crystal ball but logic tells me:

* that with all of the big and medium lenders going bankrupt basically because they loaned too much money to people for houses that weren’t worth anywhere near what they got loans for.
*that with thousands of homes already foreclosed on and presently at REO status
*that with a gazillion more ARM’s are going to reset over the next year or so and the foreclosure list will grow much larger than it already is…………..

Lenders won’t be loaning any more money to borrowers for houses that are ridiculously overpriced just because they’re in CA. The regulators aren’t going to raise the $417k limit for Fannie Mae/Freddie Mac and and the investors are already running for the hills all around the world and are no longer going to want any part of packaged up jumbo CDO’s from the USA. This is going to cause a serious problem for anyone who wants to sell or buy their ridiculously overpriced home when that home is compared to anywhere else in the USA. Again, just because the house is in CA isn’t going to mean squat anymore. Now, I will be the first to admit that I could be dead wrong ………………but every time in my 59 years that I have sat down and analyzed financial situations, (once I have all of the facts and variables) I have been able to predict the final outcome long before it comes to fruition. Let’s just say in this case that I won’t be buying any real estate in any of the bubble markets for several years.

BTW: I believe that those 3500 sq. ft. homes in Temecula will be selling for around $250k – $275k by 2012 (f not before). Time will tell.

[Ex-SD]

temeculaguy: I was referring to 1982-1985 time period when Temecula was starting to look attractive to people who were willing to make the commute to SD and back each day. There were new housing tracts where you could buy those large 3500 + sq. ft. houses from $195k – $225k.

Back in those days, the only people who wanted to live in RB and Penasquitos were senior citizens who liked the hot weather in the summer. I’m not claiming that I have a crystal ball but logic tells me:

* that with all of the big and medium lenders going bankrupt basically because they loaned too much money to people for houses that weren’t worth anywhere near what they got loans for.
*that with thousands of homes already foreclosed on and presently at REO status
*that with a gazillion more ARM’s are going to reset over the next year or so and the foreclosure list will grow much larger than it already is…………..

Lenders won’t be loaning any more money to borrowers for houses that are ridiculously overpriced just because they’re in CA. The regulators aren’t going to raise the $417k limit for Fannie Mae/Freddie Mac and and the investors are already running for the hills all around the world and are no longer going to want any part of packaged up jumbo CDO’s from the USA. This is going to cause a serious problem for anyone who wants to sell or buy their ridiculously overpriced home when that home is compared to anywhere else in the USA. Again, just because the house is in CA isn’t going to mean squat anymore. Now, I will be the first to admit that I could be dead wrong ………………but every time in my 59 years that I have sat down and analyzed financial situations, (once I have all of the facts and variables) I have been able to predict the final outcome long before it comes to fruition. Let’s just say in this case that I won’t be buying any real estate in any of the bubble markets for several years.

BTW: I believe that those 3500 sq. ft. homes in Temecula will be selling for around $250k – $275k by 2012 (f not before). Time will tell.

[Ex-SD]

temeculaguy: I was referring to 1982-1985 time period when Temecula was starting to look attractive to people who were willing to make the commute to SD and back each day. There were new housing tracts where you could buy those large 3500 + sq. ft. houses from $195k – $225k.

Back in those days, the only people who wanted to live in RB and Penasquitos were senior citizens who liked the hot weather in the summer. I’m not claiming that I have a crystal ball but logic tells me:

* that with all of the big and medium lenders going bankrupt basically because they loaned too much money to people for houses that weren’t worth anywhere near what they got loans for.
*that with thousands of homes already foreclosed on and presently at REO status
*that with a gazillion more ARM’s are going to reset over the next year or so and the foreclosure list will grow much larger than it already is…………..

Lenders won’t be loaning any more money to borrowers for houses that are ridiculously overpriced just because they’re in CA. The regulators aren’t going to raise the $417k limit for Fannie Mae/Freddie Mac and and the investors are already running for the hills all around the world and are no longer going to want any part of packaged up jumbo CDO’s from the USA. This is going to cause a serious problem for anyone who wants to sell or buy their ridiculously overpriced home when that home is compared to anywhere else in the USA. Again, just because the house is in CA isn’t going to mean squat anymore. Now, I will be the first to admit that I could be dead wrong ………………but every time in my 59 years that I have sat down and analyzed financial situations, (once I have all of the facts and variables) I have been able to predict the final outcome long before it comes to fruition. Let’s just say in this case that I won’t be buying any real estate in any of the bubble markets for several years.

BTW: I believe that those 3500 sq. ft. homes in Temecula will be selling for around $250k – $275k by 2012 (f not before). Time will tell.

[SD Realtor]

FLU after she bailed out I sent her email letting her know politely that if there is anything I could do to help her out to sell her home to let me know. She responded back asking me for a recommendation. I told her that my first recommendation would be to price the home at what I suggested when we first spoke over the phone before she listed which was in the mid 400’s if she was really wanting to sell.

She sent me an email telling me I had no idea how nice her home was, that it was by far the most elegant home in the complex and that the market would be far better next year. She said that I do a disservice to sellers by trying to get people to just dump their homes for nothing and that my estimates for sale were below all of the other professionals she spoke to and to make sure I never solicit her again!

re the 3/3… I take it you mean 12627. It is an REO and it is priced at 549k. It used to be at 589k. It is still active on the market. (if this is the one you meant)

SD Realtor

[SD Realtor]

FLU after she bailed out I sent her email letting her know politely that if there is anything I could do to help her out to sell her home to let me know. She responded back asking me for a recommendation. I told her that my first recommendation would be to price the home at what I suggested when we first spoke over the phone before she listed which was in the mid 400’s if she was really wanting to sell.

She sent me an email telling me I had no idea how nice her home was, that it was by far the most elegant home in the complex and that the market would be far better next year. She said that I do a disservice to sellers by trying to get people to just dump their homes for nothing and that my estimates for sale were below all of the other professionals she spoke to and to make sure I never solicit her again!

re the 3/3… I take it you mean 12627. It is an REO and it is priced at 549k. It used to be at 589k. It is still active on the market. (if this is the one you meant)

SD Realtor

[SD Realtor]

FLU after she bailed out I sent her email letting her know politely that if there is anything I could do to help her out to sell her home to let me know. She responded back asking me for a recommendation. I told her that my first recommendation would be to price the home at what I suggested when we first spoke over the phone before she listed which was in the mid 400’s if she was really wanting to sell.

She sent me an email telling me I had no idea how nice her home was, that it was by far the most elegant home in the complex and that the market would be far better next year. She said that I do a disservice to sellers by trying to get people to just dump their homes for nothing and that my estimates for sale were below all of the other professionals she spoke to and to make sure I never solicit her again!

re the 3/3… I take it you mean 12627. It is an REO and it is priced at 549k. It used to be at 589k. It is still active on the market. (if this is the one you meant)

SD Realtor

[temeculaguy]

Now see EX-SD that was what I was looking for, your argument behind the statement. This way I can either agree with it, learn from it or punch holes in it, that’s how I roll. In this case I’ll do all three.

I’m with you on all the points about REO’s and arm resets, thats the agree part. I also agree that not buying in any of the bubble markets for a year or two is wise, maybe longer depending on the speed of the unwind.

I see that you are comparing 1985’s RB and Temecula to today so I get your perspective, I was drunk in a fraternity house in San Diego for most of those years and didn’t follow any markets until 1990, that’s the learn part. I’ll give you that perspective but we must analyze the market as it exists today, we can’t value the island of Manhatten based on the $24 purchase price in 1624, it’s a different place now and must be treated somewhat differently.

But the punch holes part is that a house being in California has always meant something and always will, it doesn’t mean the median should be three times what other states are but 50% to double is and will be warranted, we can go on all day about weather, social values, pretty women and the average tooth count, but I don’t want to. You can hate it but most of the planet still wants to be here, albeit for a more reasonable price. Everything between the coasts will only attract people if it is cheaper, if Cali drops to 1985 levels, the middle must follow suit and their 1985 levels which will still be 50% or more cheaper.

Demographics support a higher price (don’t take this as an argument for the current price) It is not 1985, 4-S’s zip code 92127 has a median household income over 80k and twice the national median, it’s college education rate is 250% higher than the national average. Even Temecula’s 92592 has a 75k median income and a 50% higher college education rate than the nation so the demographics support higher R/E support. The national median income is just over 40k and the national median home price is just over 5x that. That provides demographic support for 4-S at 400k at 5x and 560 at 7x, the historical range from boom to bust. And Temecula at 375K at 5x and 535 at 7x, commute and some quality of life issues will take 4-S higher and drive Temecula lower, but these numbers are for the average homes, not the top 10% as far as square footage go. This is why I think the 4-S house in question is safely valued at 500-700k, if the jumbo world never sorts itself out, the 500’s may happen. Temecula will overcorrect more and I think 250-400 will be it’s settle range but 2000 sq ft will be what you get for the bottom of the range prices, not 3700 sq ft for 250, other wise there will be 4 people left in Texas.

Lastly, mortgage lending will not end. Jumbos will pay a higher rate for a while and 0 down, 2/28’s and neg am will vanish, interest only may be a scarce option too. Fundamental 20% down, good credit, good debt ratio buyers will still get loans like they always have and they will still be the dominant pruchasers, sure 20% of the buyers may be eliminated but the other 80% will chug along and the real estate prices will settle in the 5x to 7x income range.

[temeculaguy]

Now see EX-SD that was what I was looking for, your argument behind the statement. This way I can either agree with it, learn from it or punch holes in it, that’s how I roll. In this case I’ll do all three.

I’m with you on all the points about REO’s and arm resets, thats the agree part. I also agree that not buying in any of the bubble markets for a year or two is wise, maybe longer depending on the speed of the unwind.

I see that you are comparing 1985’s RB and Temecula to today so I get your perspective, I was drunk in a fraternity house in San Diego for most of those years and didn’t follow any markets until 1990, that’s the learn part. I’ll give you that perspective but we must analyze the market as it exists today, we can’t value the island of Manhatten based on the $24 purchase price in 1624, it’s a different place now and must be treated somewhat differently.

But the punch holes part is that a house being in California has always meant something and always will, it doesn’t mean the median should be three times what other states are but 50% to double is and will be warranted, we can go on all day about weather, social values, pretty women and the average tooth count, but I don’t want to. You can hate it but most of the planet still wants to be here, albeit for a more reasonable price. Everything between the coasts will only attract people if it is cheaper, if Cali drops to 1985 levels, the middle must follow suit and their 1985 levels which will still be 50% or more cheaper.

Demographics support a higher price (don’t take this as an argument for the current price) It is not 1985, 4-S’s zip code 92127 has a median household income over 80k and twice the national median, it’s college education rate is 250% higher than the national average. Even Temecula’s 92592 has a 75k median income and a 50% higher college education rate than the nation so the demographics support higher R/E support. The national median income is just over 40k and the national median home price is just over 5x that. That provides demographic support for 4-S at 400k at 5x and 560 at 7x, the historical range from boom to bust. And Temecula at 375K at 5x and 535 at 7x, commute and some quality of life issues will take 4-S higher and drive Temecula lower, but these numbers are for the average homes, not the top 10% as far as square footage go. This is why I think the 4-S house in question is safely valued at 500-700k, if the jumbo world never sorts itself out, the 500’s may happen. Temecula will overcorrect more and I think 250-400 will be it’s settle range but 2000 sq ft will be what you get for the bottom of the range prices, not 3700 sq ft for 250, other wise there will be 4 people left in Texas.

Lastly, mortgage lending will not end. Jumbos will pay a higher rate for a while and 0 down, 2/28’s and neg am will vanish, interest only may be a scarce option too. Fundamental 20% down, good credit, good debt ratio buyers will still get loans like they always have and they will still be the dominant pruchasers, sure 20% of the buyers may be eliminated but the other 80% will chug along and the real estate prices will settle in the 5x to 7x income range.

[temeculaguy]

Now see EX-SD that was what I was looking for, your argument behind the statement. This way I can either agree with it, learn from it or punch holes in it, that’s how I roll. In this case I’ll do all three.

I’m with you on all the points about REO’s and arm resets, thats the agree part. I also agree that not buying in any of the bubble markets for a year or two is wise, maybe longer depending on the speed of the unwind.

I see that you are comparing 1985’s RB and Temecula to today so I get your perspective, I was drunk in a fraternity house in San Diego for most of those years and didn’t follow any markets until 1990, that’s the learn part. I’ll give you that perspective but we must analyze the market as it exists today, we can’t value the island of Manhatten based on the $24 purchase price in 1624, it’s a different place now and must be treated somewhat differently.

But the punch holes part is that a house being in California has always meant something and always will, it doesn’t mean the median should be three times what other states are but 50% to double is and will be warranted, we can go on all day about weather, social values, pretty women and the average tooth count, but I don’t want to. You can hate it but most of the planet still wants to be here, albeit for a more reasonable price. Everything between the coasts will only attract people if it is cheaper, if Cali drops to 1985 levels, the middle must follow suit and their 1985 levels which will still be 50% or more cheaper.

Demographics support a higher price (don’t take this as an argument for the current price) It is not 1985, 4-S’s zip code 92127 has a median household income over 80k and twice the national median, it’s college education rate is 250% higher than the national average. Even Temecula’s 92592 has a 75k median income and a 50% higher college education rate than the nation so the demographics support higher R/E support. The national median income is just over 40k and the national median home price is just over 5x that. That provides demographic support for 4-S at 400k at 5x and 560 at 7x, the historical range from boom to bust. And Temecula at 375K at 5x and 535 at 7x, commute and some quality of life issues will take 4-S higher and drive Temecula lower, but these numbers are for the average homes, not the top 10% as far as square footage go. This is why I think the 4-S house in question is safely valued at 500-700k, if the jumbo world never sorts itself out, the 500’s may happen. Temecula will overcorrect more and I think 250-400 will be it’s settle range but 2000 sq ft will be what you get for the bottom of the range prices, not 3700 sq ft for 250, other wise there will be 4 people left in Texas.

Lastly, mortgage lending will not end. Jumbos will pay a higher rate for a while and 0 down, 2/28’s and neg am will vanish, interest only may be a scarce option too. Fundamental 20% down, good credit, good debt ratio buyers will still get loans like they always have and they will still be the dominant pruchasers, sure 20% of the buyers may be eliminated but the other 80% will chug along and the real estate prices will settle in the 5x to 7x income range.

[Ex-SD]

temeculaguy: You may be correct about CA houses carrying a premium……….but what I’m trying to figure out is who is going to finance that premium after the bloodbath of mortgage lenders going bankrupt, investors losing money and a gazillion foreclosures hitting the market that will eventually get sold at big discounts? I just think that the financial community is not going to bend over backwards to finance a repeat of what’s happened in the last eight years in CA and with F.Mac and F.Mae holding that $417k limit on conforming mortgages (which I don’t think is going to go up anytime soon)……..it’s going to put a huge squeeze. I was just reading another post about the auction on the Temecula home that was sold yesterday for $327k. (approx. 2600 sq. ft) so prices are going down and I believe that whomever bought that house for $327k will find out within six months that they paid way too much because the prices will get a lot lower. Only in CA will large numbers of people live 75 miles away from where they work to buy a cheaper home.

Anyway…………..that’s my logic……….right or wrong.

[Ex-SD]

temeculaguy: You may be correct about CA houses carrying a premium……….but what I’m trying to figure out is who is going to finance that premium after the bloodbath of mortgage lenders going bankrupt, investors losing money and a gazillion foreclosures hitting the market that will eventually get sold at big discounts? I just think that the financial community is not going to bend over backwards to finance a repeat of what’s happened in the last eight years in CA and with F.Mac and F.Mae holding that $417k limit on conforming mortgages (which I don’t think is going to go up anytime soon)……..it’s going to put a huge squeeze. I was just reading another post about the auction on the Temecula home that was sold yesterday for $327k. (approx. 2600 sq. ft) so prices are going down and I believe that whomever bought that house for $327k will find out within six months that they paid way too much because the prices will get a lot lower. Only in CA will large numbers of people live 75 miles away from where they work to buy a cheaper home.

Anyway…………..that’s my logic……….right or wrong.

[Ex-SD]

temeculaguy: You may be correct about CA houses carrying a premium……….but what I’m trying to figure out is who is going to finance that premium after the bloodbath of mortgage lenders going bankrupt, investors losing money and a gazillion foreclosures hitting the market that will eventually get sold at big discounts? I just think that the financial community is not going to bend over backwards to finance a repeat of what’s happened in the last eight years in CA and with F.Mac and F.Mae holding that $417k limit on conforming mortgages (which I don’t think is going to go up anytime soon)……..it’s going to put a huge squeeze. I was just reading another post about the auction on the Temecula home that was sold yesterday for $327k. (approx. 2600 sq. ft) so prices are going down and I believe that whomever bought that house for $327k will find out within six months that they paid way too much because the prices will get a lot lower. Only in CA will large numbers of people live 75 miles away from where they work to buy a cheaper home.

Anyway…………..that’s my logic……….right or wrong.

[joebaduba]

Nancy,

my wife and I were back in Austin in April and looked at a lot of houses there. I grew up in Texas and went to school there at UT. You are correct that Austin is a different world from the rest of Texas. But the RE market there is one of those pockets in the country where prices are rising. Austin RE market has always had a habit of zigging when the rest of the country is zagging. It has always been the most expensive market in Texas, largely because of the obstacles to growth that have always won out there. But people love to live there, and for good reason. Most of the cool action there is close-in to downtown and the university. But you can head out to the lake too or hill country for the weekend. We love Fredericksburg. Concerts are always going on in Luckenbach. As the city spreads out to Round Rock and Leander, I worry that it becomes just another big town.

Home prices there are creeping up and the better areas seem to be looking at 350,000 – 400,000 easily now. The agents in the new models we looked at were all saying that fully a third of buyers are coming from CA. We asked about jobs and they all said the job market is great and lot’s of the californians are bringing their businesses with them. Property taxes are high but no state income tax offsets that for the most part.

One worrying sign – a couple of realty sites I surfed indicated that supply is down and investor activity is up in Austin. Let’s hope Austin stays weird and doesn’t become a lagging indicator.

[joebaduba]

Nancy,

my wife and I were back in Austin in April and looked at a lot of houses there. I grew up in Texas and went to school there at UT. You are correct that Austin is a different world from the rest of Texas. But the RE market there is one of those pockets in the country where prices are rising. Austin RE market has always had a habit of zigging when the rest of the country is zagging. It has always been the most expensive market in Texas, largely because of the obstacles to growth that have always won out there. But people love to live there, and for good reason. Most of the cool action there is close-in to downtown and the university. But you can head out to the lake too or hill country for the weekend. We love Fredericksburg. Concerts are always going on in Luckenbach. As the city spreads out to Round Rock and Leander, I worry that it becomes just another big town.

Home prices there are creeping up and the better areas seem to be looking at 350,000 – 400,000 easily now. The agents in the new models we looked at were all saying that fully a third of buyers are coming from CA. We asked about jobs and they all said the job market is great and lot’s of the californians are bringing their businesses with them. Property taxes are high but no state income tax offsets that for the most part.

One worrying sign – a couple of realty sites I surfed indicated that supply is down and investor activity is up in Austin. Let’s hope Austin stays weird and doesn’t become a lagging indicator.

[Author]

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