Big reduction in Carmel Valley

[equalizer]

Hi PerryChase and Daniel

To access the county accessors web site for home sales go to
http://www.sdarcc.com/arcc/services/propsales_search.aspx

put in a number in first box and street in second box and submit query.

The data is probably 3 months old. Of course we cant determine options or incentives. But we know last year there were few incentives.

[cooperthedog]

Another factor to consider is that most builders advertise their base price, which could be anyway from 20-100+K less than what the final price will be.

So, if the flipper has added 100K in options, they will tack that onto the base price (plus their “profit”), but I would assume most new buyers would want to add their own options, thus ignoring the flipper property, & gravitating towards the builder’s lower base price (not realizing the true finished cost until their visit to the design center…)

All of which doesn’t bode well for the flipper – add in the incentives discussed and rate buydowns the builder can afford out of their 10-20+% profit margin, vs. the flippers 5-15% cost hit, and it gets ugly.

Also, many buyers of new construction ask for the brokers coop, or use a realtor who will provide a kickback/contribution, something the flipper can’t do unless their FSBO, which in this market would more time to sale, increasing carrying costs…

[PerryChase]

10-20% profit margin for builder? No, I think it’s much great than that.

Does anyone have information on builder margins?

[KingKong]

This is very rare.

Tricks for developer is incentive, incentive and incentive. They will do everything to protect the sale price. Because a low sale price will lower the value of the rest of his inventory. The sale price is public but the incentive is behind the table.

Last time I visited Portico, also in Pacific highland ranch, in Feb, they were offering 30K on a finished house of 799K. If you want to buy now, remember to ask for 10 to 20% of sale price in incentives.

Good luck!

[sdrealtor]

10 to 20% in incentive ssounds about right from what I’ve seen. 10% incentives should be easy while 20% would be a big one to get.

[zk]

Derby Hill, Pardee Homes’ very expensive neighborhood in Carmel Valley, has had several homes come back on the market, probably as a result of contingent buyers not being able to sell their homes. A few weeks ago, they had 4 homes available; now there are 9 available.

Also,if you go to Carriage run, (smaller homes in the same area) they are very reluctant to tell you how many houses they have available. In the past, at most new home tracts, they have a map on a table in the sales office that tells you which lots are available. At Carriage run, they don’t have one of those. And, if you ask what they have available, they ask you what floor plan you’re interested in (my wife and I went in at different times and both got this response). If you say, “all of them,” they give you a blank stare for a second, stammer about “I don’t know exactly” for a few seconds, then go to the back room to consult with the lady in charge, and come back with a sheet of paper that has highlighted one home of each model from each phase (two phases so far, so that’s six houses). Are those really the only six available? Possible, doubtful.

I think it’s pretty clear that they’re worried about market psychology at this point (and well they should be). At Carriage Run’s first phase release, some friends of ours were thinking about buying a house for their mother. They were pretty far down the list, and when they saw nobody in front of them buying, they got a bit scared and decided not to buy.

I think the market psychology is changing faster than I’d have anticipated despite the best efforts of the RE industry. I mentioned a friend in an earlier post who called me a “dumbass” for not buying a home right now, as they’d be going up 10% a year for a while ’til things got better, and then, in a few years when things got better, they’d be going up faster than that. That was only a few weeks ago. Yesterday, he called me a “genius” for waiting. Sounds ridiculous, I know, for somebody to change their mind that much that fast. But that is, I think, typical of your average person. I think that homebuyer sentiment is a huge wave that just crested and is crashing right now before our eyes.

It’s been my argument all along that market psychology is the most important factor in the future of the housing market. And if peoples’ opinions continue to change at the current rate, it’s my opinion that prices will drop pretty fast.

[powayseller]

zk, I’ve been called a dumbass and idiot on this forum for my predictions, too. Maybe they’ll call me a genius next year ?? 🙂 Both you and Bugs have talked about buyer psychology, and I didn’t understand the importance of it, until I started my latest book, Irrational Exuberance by Robert Shiller. Psychology starts bubbles, and psychology pops them. Once psychology shifts, not even lower interest rates will increase sales.

Eric at iTulip describes it so well. On the way down, houses go on the market and fewer people show up to look. That’s because earlier buyers bought on the expectation of rising prices NOT because they needed a place to live. As in the example you cited, the people didn’t want to buy now that they were first on the list, so they opted out. Since they sense there won’t be a future buyer in line to purchase that house from that, they stay home, so to speak.

Once housing transactions fall, this creates fear and loathing about prices. Eventually you get long periods of time with no transactions, like barnaby33 who told me of a house that had NO lookers for one year in the last bust. This happened in Japan, and prices nationally are still more than 60% below peak prices of 1992, although interest rates were 0%. So you have an actual example that not even FREE loans could entice buyers back in, once the psychology shifted.

Once the foreclosures start and prices start falling, the psychology will pick up momentum. Could we go to sales of 10,000 per year or less? Last year we were at 40,000, and this year it is probably 30,000.

[dontfollowtheherd]

zk,

Market psychology absolutely has been the primary factor in the latest overexuberant runup. People were panicking thinking they’d never be able to buy a house again. Bill Gross from Pimco pegged this a while back. He said Japan had a 0-1% rate for ten years I believe and you know what? The price of housing still dropped. People who have taken out a large portion of their equity and bought second homes, Hummers etc. are stuck for life (or a very long time) unless they earn incredible sums of money.

Flat earnings anywhere cannot keep up with an overpriced market. Flippers are sweating big-time, realtors are being laid off or finding other jobs (I’ve hired a couple and some mortgage brokers)and we’re still at least 25% away from “reasonable” prices. You’re going to find a lot of “pissed off” buyers who had they waited 6 months to a year would have saved 40% off the house they bought.

[solman]

dontfollowtheherd,

Add me to the stats. Signed up for an expensive new home in CV, but haven’t been able to sell our old house. Heck, we haven’t even seen ONE buyer in the last 60 days. Price reductions of 5-10% have resulted in NOTHING. We’re the 6th cheapest house in our area, even though we have tons of upgrades. So we’re backing out of the new house.

I figure this is fortunate for us. In 6 months, as you say, both houses will be cheaper. Since our old house is MUCH cheaper to start with, we’ll save money overall. It’s a good thing we don’t NEED to sell. That would be scary.

[powayseller]

dontfollowtheherd – what types of jobs are these realtors and brokers doing now? Is the pay about the same? Do you know if any of them left San Diego?

solman, would it be worthwhile to rent for a year and then make the move to CV? My neighbor backed out of her new house in Temecula, because after 8 months she couldn’t sell her house for the price she needed to make the move.

It sounds like buyer psychology has seriously shifted. You are the 6th cheapest house in the area, and no buyers for 2 months? How much lower would you have to price it to get someone through the door? I read from Jim Klinge’s website if you have no buyers coming to look, you are at least 10% overpriced. If you have buyers and no offers, 5-10% overpriced. If you get offers, you are just about right.

[solman]

powayseller,

We got 2 buyers the first weekend. Got an offer 5% below asking. We countered, they wouldn’t budge a dollar. So they walked. That’s the last time we ever saw a buyer.

We’ve since lowered our price below that offer. I see all the other houses lowering by 5% every few weeks… it’s not working for them either. I live in Mira Mesa, and the market seems very slow here.

So in order to sell, I think we’ll have to lower at least 10% more. In that case, we can’t afford the new house, so we’re walking away from that. And like I said before, I’m thinking this is fortunate. I’ll be anxiously awaiting 10-20% drops in CV.

As for renting, we have a baby and a dog, and so need a yard. I suppose we could rent a house, but why pay so much money in rent? Like I said, our house is very cheap comparitively, and so it’s actually worth it to keep living in it.

[powayseller]

So your mortgage is less than $2K/month? That is very lucky. I have 3 kids and a dog and a cat, and I rent a townhouse. I love it! We pay $2200/month, and just signed a 2 year lease.

Interesting about the 5% drop. We had the same situation, and my husband and I still argue about our sales price. We listed our house last October for $780-830, but fully expected tot get $830. After 2 weeks on the market, last November, we had an offer at $780K. We countered, and the buyers walked. A month later, another offer at $780K. I told my husband, “we need to take this”. He said, “No, I’m not giving away my house.” We argued about this (a lot, actually, because I had been reading about the housing bubble and was afraid our offers would keep getting worse, and he was so in love with the house and thought the right buyer would fall in love with it and pay $800K).

We countered at 800K, even though the offer came with a cover letter that said the $780K was a firm and final offer. The buyer’s agent said they would not consider a counter, so we better remove that or they would walk. We buckled, and removed the counter, and sold for $780K. My husband thinks we should have held out for $800K. He thinks that someone would have paid that much. I don’t think so, since we were selling in a declining market. The other 3 homes that were our competition are either expired, cancelled, or reduced. We are the last sale in 8 months in that area.

But to keep marital peace, I told my husband that it is *possible* that we could have got the $800K. But I don’t believe it at all! It is more likely that our next offer would be $760 or $740, or that we would have reduced our price like the other sellers. I was feeling like that house, as beautiful as it was, was an albatross, because it was on its way to losing half its value. That’s what I think – most houses here will lose half their value, so I just wanted to dump and run before it got worse. I feel so much freedom now without that house.

[SDbear]

Seems like some people are following the CV market closely. Seems like there is quite a bit of inventory from already constructed phases of these new projects and there are atleast a few projects in the pipeline. Does anyone know if any of these projects are getting cancelled?

[FormerOwner]

powayseller, my wife and I are in the exact same situation up here in Temecula. We sold our “dream house” and are now renting a house. The one we’re renting is smaller but we ended up actually liking the layout better – it’s more practical and our A/C usage is a lot lower. We listed our house at the lower end of the price range and it sold fairly quickly. Others that listed higher have now reduced down to the price we sold at and are still sitting on the market. The two best days of my life are the day I bought my house and the day I sold my house.

[solman]

powayseller,

If we had another offer, as you did, a month after the first, we would take it no questions asked. So you were very wise to get out. This is a declining market. We’ll get 10% less than our first offer now, 60 days later. No question.

Our mortgage is under $1400/mo with impounds, so it’s best to stay put until we can find a new place. I figure sellers will accept contingencies now that the market has shifted. We certainly would!

As for following CV, I’m guessing that’s because a lot of folks (including me) would love to live there. So we all hope it will crash, so we can afford to get in. If CV is hurting a bit, I’m guessing other areas will be hurt much more. I can attest to the fact that Mira Mesa has FEW FEW buyers. What, boats/RVs parked on the street & shopping carts all over the place are no longer desirable? 🙂

[Author]

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