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April 1, 2006 at 5:09 PM #6440April 1, 2006 at 5:51 PM #23889
powayseller
ParticipantGreat detective work. Did you speak with anyone involved in these transactions?
April 1, 2006 at 6:37 PM #23890lendingbubblecontinues
ParticipantNo. There’s no info on zillow on any of the streets listed, a friend is awaiting a call back from Lennar reps (not holding his breath) to verify this information. One thing is for sure though…at the Bressi Ranch website (www.bressiranch.com), under neighborhoods, rolling over Wisteria Place I see “Anticipated pricing from the low $800’s”, yet “clicking through” yields the following contradictory “Anticipated pricing from the Mid $600,000s” so I believe this is accurate stuff.
I plan to go in there sometime soon myself and ask about this point blank. If true, this info NEEDS to be brought to the attention of the public by whatever means necessary.
Any insight sdrealtor? Do you know about this development and why it might be available for over $200K less today than a year ago?? It’s in North County Coastal, too, by the way.
April 1, 2006 at 11:08 PM #23892sdrealtor
ParticipantI know Bressi ranch fairly well. I don’t beleive a house in the Wisteria Place neighborhood (the cheapest one there) ever sold in the 800’s. The way Bressi Ranch is laid out with different neighborhoods at different price points often sharing the same street name this might be a cause for some confusion. If you are Zillowing, you are getting bad information because it is only looking at sq footage and room counts. That’s what is probably going on but who knows.
Zillow is pretty useless from my experience. My house shows up on Zillow at 775K when the same model across the street without upgrades or a huge yard like mine sold in the high 800’s 1 year ago. The funniest thing is when I make Zillow adjustments adding a bedroom and 250 sq ft because the tax records Zillow uses are wrong my home goes down in value over 50K.
With that said, there are some relatively great deals going on in Bressi Ranch and it has pretty much crippled resales in the Rancho Carrillo neighborhood next. I know they are doing alot of discounting there and throwing alot of upgrades around. Personally I kind of like the feel of Bressi ranch but there is too much air traffic overhead for me.
April 2, 2006 at 9:56 AM #23900Bugs
ParticipantA developer cannot afford to sit on a completed house for very long. The carrying costs are massive, especially in a price range like this. They’re still in construction on a lot of homes over there and they will eventually have to sell every one of them, one way or another.
It would be interesting to see what the retail markup will be for options at these base prices. Average mark-ups in Bressi Ranch for options and upgrades have been running just under $40,000 per unit over there, with a few units up in the $80s and even exceeding $100k. It wouldn’t surprise me if Lennar finds a way to boost their $800k loss leaders back up to $900k by the time they close. I’m sure they’ll try, anyway.
April 2, 2006 at 9:59 AM #23902ParticipantBugs,
I’m right behind you. You sound like you are in the biz also. In what capacity?April 2, 2006 at 11:20 AM #23908ParticipantI have learned that, indeed, the house mentioned earlier did sell for over $800K and it is in Wisteria Place.
The exact same homes can be had TODAY for the low-mid $600s. If you don’t believe it, go into the sales office and ask for yourself. It will be a very eye-opening experience.
April 2, 2006 at 12:29 PM #23909ParticipantIf a house in Wisteria Place sold in the 800’s it surprises me. I’ll take your word for it. It must have been a premioum lot with huge upgrades. I have a client considering a home there right now and in the mid 600’s it looks like a bargain relative to most of what’s out there.
April 2, 2006 at 3:48 PM #23914ParticipantNo upgrades…no premium lot. These are all “everything included” homes by Lennar.
Again, visit their website…www.bressiranch.com and open the link to “neighborhoods”…you will clearly see that they had “Anticipated prices” FROM the $800s clearly listed on their own website…now they are starting in the $630K range a/o 3/25/06 listing sheet I hold in my hand today.
Lennar is just the first to realize that they better cut and run soon, because they must know it is going to get ugly out there. I’d hate to be the guy who just recommended somebody buy a house anywhere in San Diego County right now.
I’m going to do MY BEST to get this shocking example of what is really going on into the UT and North County Times. People need to see it before they believe it…
April 2, 2006 at 4:58 PM #23916ParticipantLennar made a profit Q1 2006, despite a 10% decline in sales in their West region. Their sales were up and profits were up.
I suspect sales were up only because they lowered their prices so much.
I suspect profits are up because they sold off a bunch of land. The U-T article didn’t say how much land they sold, only that the land sale generated more profit than last reporting period.
April 2, 2006 at 7:40 PM #23924ParticipantI’m a commercial appraiser (since 1985) and I also do some residential appraisal review work for one of the nation’s biggest banks. I’ve been working in SD County since 1990 and worked in the OC/LA areas prior to that. I also develop and teach continuing education courses for appraisers.
I’ve reviewed a number of appraisals from the different “communities” in Bressi Ranch, including Heather Court. In the last 3 weeks I’ve reviewed 2 appraisals for purchases from there; one in the “Cassia” project and another in the “Canterbury” project.
By my count there have been 10 sales at $890k and above in Heather Court, the highest two being the models for the project, both of which sold back in 02/2005. In the beginning of the project, back in early-mid 2005, they were selling the 3019 SqFt model in the $800k+ ranges, with most of the sales closing in the mid-800s. The three yr2006 sales have closed at $834k and $757k (01/2006), and at $729k (03/2006). Keep in mind that these closing prices are greatly influenced by the levels of options and upgrades chosen. For example, the model homes always sell with every possible option, including landscaping and patios, window coverings, artwork, rugs, and sometimes furnishings. This is the reason why there is such a big spread in these new projects for otherwise similar homes. Ironically, it’s been my experience that after about 5 years or so, the premiums paid by the original buyers tend to basically disappear in the resale market. In my opinion, options and upgrades are a huge “profit center” for the developers, if you catch my meaning.
The lower 01/2006 and 03/2006 closed sales are a good $70k lower than the previous low sales in 05/2005. That $70k doesn’t even represent a 10% reduction, though. While it would seem to be a little quick for such a big markdown, I’m not particularly surprised because I’ve seen it go like this before. I knew it was going to happen sooner or later, and by my reckoning it’s going to get a lot worse as time goes on – we ain’t seen nothing yet.
Speaking for myself, I wouldn’t want to be one of the yr2005 buyers right now. Based on their recorded financing and considering it costs money to sell, it looks like about half of them effectively have no equity right now. I sincerely hope they all have staying power.
April 2, 2006 at 8:25 PM #23925ParticipantBugs, can you describe how the last real estate downturn played out?
April 2, 2006 at 10:01 PM #23929ParticipantI think all cycles play out a little differently. But I also think that past predicts the future.
I remember in 01/1990 seeing a real softening in most of the residential markets. For about 3 months it was real spotty and inconclusive. By about 03/1990 most of the appraisers had figured out that the market was in decline. It took the newspapers about 6 months before they picked up on that and by then it was way too late for some of the “last fools”.
The residential markets here started to decline and the foreclosures started to rack up. As the lenders’ reserves got quickly eaten up by foreclosing, then selling the foreclosed properties under quick sale conditions, the feds would close them in order to stem the losses. That only made it worse. More lenders went down, more properties came on the market as “bank-owned foreclosures”. Believe me, when potential buyers see that sign on a property they know they can lowball the offer even more because the lender is under pressure to sell and they have to liquidate. It sets the market because at the same time the prices are declining that decline is contributing to the rate of foreclosures which in turn swell the inventory and cause further declines. This is the flip side of the “real estate never goes down in value” line that has been so popular these last few years.
As the declines picked up speed, it affected almost every price bracket, but especially the middle ranges. The bottom end lost a bit, but the middle and top price ranges collapsed like an accordion. At one point there wasn’t a whole lot of price differential between what would have previously passed for a $350k home and a $150k home.
The subdivision developers had to finish their projects and get out, no matter what, so they had to cut their pricing. That made selling their homes even harder, and on top of that it spurred some lawsuits from previous buyers. The developer had basically undercut their purchase prices leaving them upside down. People were suing because a $50k loss was enough to ruin them. There were a whole lot of people who were basically trapped in their homes for a good 6 or 7 years, until prices caught up in the 1996-1997 time frame. Those who could hang made it through and those that didn’t added to the inventory.
All that happened in a market where the peak had topped out about 25% – 30% above the long term trendline. Now that we’re 60% above the trendline I don’t think I am capable of overestimating how bad it can get. We only wish we were looking at $50k losses. Heck, that one model in Bressi Ranch has basically lost $70k and things haven’t even started going south yet.
April 3, 2006 at 11:51 AM #23937ParticipantGreat Info Bugs,
To summarize:
Everythings Included from Lennar doesnt mean you cant spend more than these nicely appointed homes come with. Flooring which isnt included can easily vary by $50K or more.The highest sales were models which were very well appointed and are likely outliers pricewise as they are in most cases.
The real decline in these homes based upon builder concessions looks to be about $70,000 which is a roughly 10% discount. Additional financing concessions and free upgrades could push this up higher and its not out of the question for the discount to be closer to $100,000.
As a point of comparison, I have seen 5 to 10% declines in the value of many resale homes (particularly those sold at the peak of the frenzy Feb 2004 – May 2004) also so this seems to be on target with what is going on around here and perhaps slightly ahead of the curve.
Sorry but no 25% Off Fire Sales……..YET?
April 3, 2006 at 12:31 PM #23940ParticipantLook sdrealtor,
I appreciate your insight. I also can assure you that my posts are delivered with insight as well. Let’s assume that the model home in Wisteria Place had $100K in upgrades (and I am being generous here). Since it sold for $875,500 and an equivalent home could be had today for $761,000 ($661,000 plus $100K) it looks more like a 13% discount YOY. But David Lie-reah and Blanche Evans and Appleton-Young said things could only go up?!?!
The point I am making here is this: some poor bastard is pretty unhappy about this (ask them in the sales office) and you said it yourself…the good deals in this community are killing the resales in the next door community. If people only knew how to extrapolate…
We have “summitted” the slippery slope and the downward pressure is ON, big time. As we stopped in on open houses and the models in 4S Ranch yesterday and shared the news of what you could get just 2.5 miles from the ocean (2400 sq. ft nicely appointed home) for $661,000 (new construction no less), the realtors and model salespeople were paying keen attention and they were like…REALLY?!?!
On another note, bugs said it best when he said this price drop in Bressi Ranch is surprising, considering this thing hasn’t begun to go south yet. My aim in distributing this info to the North County Times and UT is to encourage people to wise up, think for themselves, and ask “why would I buy ANYTHING right now, when I know that when sales don’t pick up, I am going to have the re-sale value of my house SEVERELY UNDERCUT by someone else who needs to sell and has a MUCH LOWER COST BASIS than I do?”
Nobody wants to be immediately underwater. Most people do not realize that if they buy today, they are doing so pretty darn near a “generational peak” and they are all immediately underwater with no hope for a life ring.
Think of the poor schmucks who bought those models in Bressi Ranch…what will their houses be appraised for next year and the year after? Nobody should buy in there if they know the builder has a history of dropping prices in there without the crap even hitting the fan!! Geez…
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