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AK.
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February 15, 2007 at 12:31 PM #8407February 15, 2007 at 12:37 PM #45501
JJGittes
ParticipantI’m as bearish as anyone around here, but exactly what is the analysis that drives the conclusion that the house is $350k overpriced? The most recent comp is in the ballpark, like it or not.
February 15, 2007 at 12:39 PM #45502Bugs
ParticipantConsidering the proximity to the beach areas and there are some blue water views in the neighborhood I wouldn’t say the 2006 sale price was necessarily out of line. As a listing price, the $755k isn’t a bad point to start from. Interior paint and carpet are relatively inexpensive to complete, so the $5k isn’t far off, either.
For reference, this area is somewhat comparable to the area west of I-5 and east of Coast Highway in Encinitas, and I’m sure you’d find similar pricing there. Over the long term, south OC has always sold at slightly higher prices than northern SD county because of the better proximity to major employment centers.
February 15, 2007 at 12:46 PM #45503PerryChase
ParticipantNot just Dana Point, but all over.
Below are 2 examples of real sales, not wishful thinking. But that’s the past. 😉
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18 Amarante, Laguna Niguel, CA 92677
2 beds, 2.0 baths, 1,510 sq ft08/04/2005: $780,000
06/15/2004: $520,000
8/1989: $280,000
http://www.zillow.com/HomeDetails.htm?o=North&zprop=25566520
——-5211 Setting Sun Way, San Diego, CA 92121
3 beds, 3.0 baths, 2,178 sq ftSales History
Date Price
10/12/2005 $815,000
06/21/1995 $254,900
http://www.sdlookup.com/PropertyDetails/tabid/53/forumid/1/view/topics/pid/E485DF4E/Default.aspx
http://www.zillow.com/HomeDetails.htm?zprop=16791666
——–February 15, 2007 at 1:19 PM #45506kev374
ParticipantJJ, my overvaluation is based on economic fundamentals not on comps. It’s based on the trendline for the last 20 yrs. It’s based on the fact that there are absolutely no supporting factors to support the 120%+ price appreciation for the region in the last 6-7 yrs. And last but not least, it is based on the fact that carrying costs for a mortgage are approximately twice as much as renting the equivalent property 😉
Time to pull off the rose colored galsses and realize a few things:
1. most people in these properties couldn’t afford to buy their own homes again at today’s price levels, that says a lot about the situation we’re in.
2. Without the use of exotic lending there are virtually no first time buyers in the market at today’s prices. Exotic lending is rapidly dying.
3. Upgrade buyers are wiped out because of #2. If they can’t sell their own home, they cannot move up…it’s a chain reaction.
4. Loss of Real Estate jobs (30% of OC jobs), increasing interest rates, ARMs resetting with foreclosures starting to skyrocket, tighteing of lending standards (#2), more job loss due to recession caused by sharp contraction in spending (no more HELOC money)…how is all this going to bode for the future of home prices?
These are severely aggravating factors and many people are saying everything will be allright, does that make any sense?
With all these factors how is a $755k asking price sensible as a “good starting point” as you say? Especially when the seller in question here has a HUGE cushion to lower prices? It just demonstrates absolute stupidity and greed and yes that makes them dellusional.
February 15, 2007 at 1:22 PM #45509ParticipantIf it was your house, and you wanted to sell, would you list it at $400k, since you don’t wear rose colored glasses?
February 15, 2007 at 1:29 PM #45513Participant
If it was your house, and you wanted to sell, would you list it at $400k, since you don’t wear rose colored glasses?Nope, I would look at other listings in the immediate neighborhood and undercut them by $100,000. That is IF I needed to sell. If I didn’t NEED to sell, I wouldn’t even bother listing it in this market. If you check the DOMs on ZipRealty (I check everyday 😉 most homes are just languishing on the market. The competition between sellers is WAY TOO FIERCE to be so passive, list high and “try” to see if you can get that price! Not going to work!
A friend had an open house in Lake Forest the other day, the guy is cheaper than the cheapest listing in that area by $25,000 and still NOBODY, not one soul showed up to see his home, and it’s a beautiful 3bd home too 😉
It’s become a different market overnight and requires a different way of thinking, that is all I’m saying with my point about the dellusional seller 🙂
February 15, 2007 at 3:26 PM #45521sdrealtor
ParticipantTime to pull off the rose colored galsses and realize a few things:
1. most people in these properties couldn’t afford to buy their own homes again at today’s price levels, that says a lot about the situation we’re in.
I know this is an extreme example but here goes anyway: I have a client that purchased his Carlsbad oceanfront estate in the mid-1970’s for $70,000. It’s probably worth about $5M today. He couldn’t buy his house today nor could 99.99% of the US population
2. Without the use of exotic lending there are virtually no first time buyers in the market at today’s prices. Exotic lending is rapidly dying.
First time buyers today are young couples that tend to marry much later than a decade ago and frequently have 6 figure incomes. Sure prices are high but IMHO nowhere near double of where they should be. Also some first time buyers in this area are not 1st time buyers, they come from other areas of the country where they are are moving down in size but not price. There are also move down buyers purchasing entry level homes.
3. Upgrade buyers are wiped out because of #2. If they can’t sell their own home, they cannot move up…it’s a chain reaction.
See above.
4. Loss of Real Estate jobs (30% of OC jobs), increasing interest rates, ARMs resetting with foreclosures starting to skyrocket, tighteing of lending standards (#2), more job loss due to recession caused by sharp contraction in spending (no more HELOC money)…how is all this going to bode for the future of home prices?
That’s a good question and something no one has a handle on. Just like my golf swing: Anything can happen and it probably will.
I’m not necessarily disagreeing with what you are saying but rather pointing out that there are counters to each of your points. It will be interesting to see how it all plays out and nothing would surprise at this point in either direction.
February 15, 2007 at 3:35 PM #45522Participant“JJ, my overvaluation is based on economic fundamentals not on comps. It’s based on the trendline for the last 20 yrs. It’s based on the fact that there are absolutely no supporting factors to support the 120%+ price appreciation for the region in the last 6-7 yrs. And last but not least, it is based on the fact that carrying costs for a mortgage are approximately twice as much as renting the equivalent property ;-)”
That’s an example of “what should be” type of thinking, not “what is”. Based on the economic fundamentals, I agree with you that the pricing structure for the entire region is not supported or sustainable. However, within the context of the sales activity that is actually occurring, the price for this particular property may be a very reasonable starting point. For all I know, the list price might even be representative of the current market value of the property. Or not.
My point is that while we may be waiting for “what should be”, by definition what should be….isn’t.
February 15, 2007 at 3:54 PM #45523
barnaby33ParticipantBugs, I believe you meant to say, “markets can remain irrational longer than you can stay liquid.”
Josh
February 15, 2007 at 4:13 PM #45526ParticipantHowever, within the context of the sales activity that is actually occurring, the price for this particular property may be a very reasonable starting point.
What sales activity are you measuring?
In this market unless a house is very aggressively priced it is not moving. How is reducing a home price by $5k since it’s August 2006 comp a reasonable starting point? The home is going to languish on the market just like the multitude of others which are overpriced.
My point is that this is yet another dellusional seller who is refusing to believe that the market has turned and is declining.
February 15, 2007 at 4:15 PM #45527AK
ParticipantThose houses are on a one-way street (going the wrong way IMO) with minuscule street frontage and no real yards to speak of. Kids have to cross either the freeway or a busy six-lane street to get anywhere. No blue-water views in that neighborhood, except for some peek-a-boo views … and on that side of the freeway you’d need a telescope to see the water. At least there’s a sound wall on both sides of the 5 now.
But $755K isn’t so egregious … I’ve seen much worse going for much more in that area.
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