Carmel Valley Prices Down 12%

[farbet]

Sakina,It sems as we are looking at the same house on sea island.Its too close to other houses wedged in. No view.At 650-675 it may be a deal.
They should be in same range as Rancho Carillo(92009) zip. RC has a huge inventory now in 599-650 range…9.
Post some more bargains please. You seem to be well researched.

[vcguy_10]

My guess is that prices in the less desirable areas will drop faster at the beginning. More established, nicer areas like La Jolla will have slower depreciation the first couple of years. However, when the market reaches bottom, cumulative depreciation will be about the same across all areas.

[Steve Beebo]

There is plenty of inventory in all areas right now, so if someone pays “too much” for a property, with all of the listings and other info available to them on the internet, they really have no one to blame but themselves.

If you don’t get to see the inside of a property, though, it’s hard to say that someone is paying too much. You could have two houses in Carmel Valley that are the same floorplan, with similar views and similar lots, and one may sell for 10-15-20% more than the other, due to upgrades and rear yard improvements. One house may have no upgrades and minimal yard improvements, and the other has 200K in interior upgrades and pool/landscaping/hardscaping.

[zk]

“One house may have no upgrades and minimal yard improvements, and the other has 200K in interior upgrades and pool/landscaping/hardscaping.”

The daily updates I get include multiple pictures, listings of upgrades, etc. It’s possible that there are things that are of value that aren’t listed (which would be the selling agent’s fault), but usually the information is pretty complete. Plus, some of the houses that have sold for peak prices are ones I’ve visited during open houses. If you’re as familiar as I am with a certain area, and you’re getting pretty complete information, it’s pretty easy to tell when somebody overpaid, especially if they overpaid by a bunch. And, like PS said, it seems right now to be a two-tier arrangement. Either they’re getting peak prices, or they’re getting today’s prices. Which must be real frustrating for the sellers who get today’s prices and the buyers who pay peak prices (and then get informed of such by their neighbors).

I wonder, as prices continue to fall (assuming they do), how this situation will play out. Will some sellers continue to get prices that were current months before they sold? For how long will some continue to get peak prices? Will some start to panic sell for less than current prices for fear of having to sell for even less later?

[ybc]

zk, I’d assume that most people who own houses in CV would wnat to stay if school district is their reason to own there. So the sellers will be limited to a) investors who got in the market close to the peak; b)those who have cash flow problems if they stretched too much to buy; and c) those who move out of area… do you have a sense if there is a large number of people who belong to these categories?

[zk]

“do you have a sense if there is a large number of people who belong to these categories”

These are all wildly speculative guesses on my part:

a) investors who got in the market close to the peak;

Probably a lot less than in areas with lots of condos and cheap houses, but some. One offer we got on our house was from a speculator (that’s what our realtor said about him, anyway.)

b)those who have cash flow problems if they stretched too much to buy;

Probably the same as or less than most areas. Higher incomes than most areas, but higher prices, also.

c) those who move out of area.

Probably the same as most areas. It seems to me there are a lot of people who work in fields that require them to move as their companies change their configuration, or the project their startup biotech was working on ends, or their engineering job got sent to India. Again, wildly speculative and I really don’t know. That’s just my feeling.

Also, and this is almost a different subject (but not quite):

I think that, regardless of how many people in CV (or any other particular area) need to sell, an overall decline in the market will hurt prices everywhere. Say prices drop everywhere but CV drop by 40% (hypothetical situation). What’s to keep the next house that sells in CV from having to sell at a 40% discount (or nearly 40%)? CV is historically more desireable than PQ by a certain percentage and less desireable than Del Mar by a certain percentage. Why would that percentage change?

That’s not a rhetorical question. I’ve heard people say that certain areas hold their value better, but I don’t understand why. And I’d like to.

[barnaby33]

Think of it this way. You want to buy a house, and so do x number of other people. You also know what you can reasonably afford, as do others. When a market is in decline you gravitate towards the best area you can afford. Areas worse off in terms of general desirability have to “compete harder” to attract buyers. In simple terms those areas need to lower their prices ever more in order to pull in buyers.

At a certain point when prices have fallen a large enough percentage, buyers stop considering these lesser areas altogether, regardless of price. This also assumes that the buyer pool has shrunk enough that not all units can find a buyer at almost any price.

If they can afford Del Mar, CV probably isn’t really an option at that point. Then the competition is between a much smaller group of sellers for a particular buyer.

Josh

[zk]

“Areas worse off in terms of general desirability have to “compete harder” to attract buyers.”

I’m not sure I follow. Less desireable areas have lower prices. There are always going to be people on all areas of the income spectrum. Some of those people have income lower than they need to buy real estate. No matter how low prices go, there are people who can’t afford a house. So as the cheapest areas become cheaper, they’re opening up home ownership to new people on the income scale. Why do they have to compete any harder than they did before?

“If they can afford Del Mar, CV probably isn’t really an option at that point. Then the competition is between a much smaller group of sellers for a particular buyer.”

I’m missing the logic leads to that statement. What does buyer preference have to do with the number of sellers? If San Ysidro buyers move up to National City, and those buyers move up to Chula Vista, and those to Ramona, then Scripps Ranch, then CV, then Del Mar, why does CV (or any other area) have a smaller group of sellers per buyer? Haven’t the buyers that moved from Scripps Ranch to CV relaced the buyers that moved from CV to DM?

It’s entirely possible that you’re stating your theory clearly and I’m just not getting it. If you could clarify, I’d appreciate it. Also, if anyone else wants to take a stab at explaining their theories as to why some areas fall less than others, that’d be good, also.

[barnaby33]

I’m not sure I follow. Less desireable areas have lower prices. There are always going to be people on all areas of the income spectrum. Some of those people have income lower than they need to buy real estate. No matter how low prices go, there are people who can’t afford a house.
I would say yes and no. Less desireable areas have balooned up in price at a far greater percentage than more desireable areas in this boom. So while in absolute dollars they are cheaper, percentage wise they are not. There is a floor below which prices can fall and yet no-one will buy a house, ergo Phoenix or Palmdale in the 80’s. This is because at that time there are so few buyers and so many sellers that at a certain point Phoenix or Palmdale weren’t considered an option. From the buyers perspective there are always lots of options and they have to narrow them down. Usually this is done in some geographic fashion, then by type of dwelling, schools, etc. I suppose the fundamental point I was trying to make here is that as the pool of buyers shrinks areas that were previously considered less desirable become flat out undesirable, and for those with money to buy not an option.

There are always going to be people on all areas of the income spectrum.
This is not true. Our economy is hollowing out in the middle. There are a fair amount of jobs in IT/Biotech/Law/Medicine and alot in retail/services, but not alot in the middle.

“If they can afford Del Mar, CV probably isn’t really an option at that point. Then the competition is between a much smaller group of sellers for a particular buyer.”

I’m missing the logic leads to that statement. What does buyer preference have to do with the number of sellers?

In short, everything! If there are generally more buyers than sellers prices go up! If the opposite is true, prices go down. When a buyer makes an initial location choice he has automatically elminated alot of potential sellers from competition for his money, but from a sellers perspective that is one potential buyer, that isn’t. This shrinks the pool of potential buyers even further(for the areas that are out). Mutliply this by how undesirable the area is and you get my point. Essentially prices may decline, even significantly, but it pays to be in a more desirable area, because ultimately you are at the top of the heap, most likely the last to become undesirable.

I suppose the fundamental concept that is being juxtaposed here is that there are a continuum of buyers. Your assumption is that for every move up buyer there is someone on a lower rung to take his place.
I think history is ripe with examples where that is not so. I tend to think of it this way and yes I am over-simplifying. There are basically five areas of San Diego that are very desireable, all others are a compromise.

• Del Mar
• La Jolla
• RSF
• Coronado
• Mt Helix

As the buyer pool shrinks, those less desireable areas fall of the radar and prices plummet even harder. I am not sure that in SD I can make the case that there is no price a home will sell at, but there are large swaths that are marginal at best.

I am not sure I answered your counter-points but I tried.

Josh

[zk]

Josh,

Thank you very much for the input and the clarification.
I disagree with some of your assumptions, but I think I understand your logic now.

[Author]

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