Email from a realtor

[sdrealtor]

The 990K in Summer 05 was a number pulled out of thin air with no analysis or support. The market peaked in most areas by the end of 2004 not in the Summer of 2005. It was an assumption that was completely invalid. It was chosen because it fit in with the “I want to beleive prices are down 10% across the baoard already” stance of the author not because of anything that was researched.

As for the price paid being the only one that matters that simply is not true. In most areas there is a fair market value as determined by prevailing previous sales. I have seen homes sell way more than they should because an out of area agent comes in and does not understand a specific local market. When it happens everyone in the neighborhood say “can you beleive that person paid $XXXX”! Invariably the next sale is back in line and the unfortunate owners are the comp everyone uses to refinance. It’s kind of like lightening striking once and as we know lightening never strikes twice…….

[PD]

Does anyone know of a SoCal area that did not have significant increases in value from 2004 to summer 2005?

[PD]

When future analyst take a look at the numbers, the official peak will be the highest price paid, regardless of whether it was “too high.” When we measure the overall reduction, it will be from the actual recorded high. Further, every area I know about peaked between spring 2005 and fall 2005. Most peaked over the summer.

[PD]

Sdrealtor, which markets are you saying peaked late 2004?

[sdrealtor]

I just checked out that sale and it was about as egregious as they come. It was a FSBO entered into the MLS and the deal was consumated with no licensed real estate agent representing the buyer or seller. The seller took complete advantage of an unrepresented hispanic buyer who finaced 100% of the purchase. There was not and has not been a single comp within spitting distance of that sale.

As for the market peaking between Spring 2005 and Fall 2005 you are 100% correct if you say the Market Median prices peaked then and I wouldnt disagree. The problem is the statisitcs are flawed in many ways. I sold a half dozen homes in Spring 2004 which each had about 6 to 10 offers on them. NONE of those homes could ever have been sold for more than they did in Spring 2004. Furthermore, there are already a few homes in my neighborhood that sold in Spring 2004 and subsequently came back on the market selling for less in 2005 and 2006. It’s nothing you’ll find in summary statisitcs but only something someone with their feet on the ground would see.

[sdrealtor]

Most of them! There are always exceptions. For example beach properties have continued to do well.

[PD]

I want names. The areas I know about peaked in 2005. You can’t get away with “most of them.”

[sdrealtor]

I went through the MLS and looked at sales that went into escrow in early to mid 2004 to find sales that would have been impossible to replicate after that. Alga Hills in Carlsbad, Mar Brisa in Carlsbad, Rancho Carillo in Carlsbad. Harbor Pointe in Carlsbad. La Costa Valley in Carlsbad. San Elijo Hills in San Marcos. Encinitas Ranch in Encinitas. These are just a few of many. Prices peaked and held steady until late Summer/early Fall 2005 and then started coming down. Sure there were some exceptions and prices may have gone up another 1 to 3% some places. But if you had a place to sell in Spring 2004 and had the nerve to put an obscene price on it…you could get just about anything!

[sdrealtor]

I’ll address this but the most important point is being overlooked. That sale in Escondido was not a fair market sale it was blatant exploitation!

Bugs…please step in and let them know what you would do with a comp like that.

[PD]

In spring 2004 the market was just gathering steam! If you sold homes to people in 2004 for a price that could not be topped later…. I don’t have anything nice to say about that.
I will admit that I am not familiar with the Carlsbad market. Anybody else out there claim prices peaked in Carlsbad and Encinitas in 2004?

[PD]

With the respect to the home we’ve been talking about, if the guy paid it, it is real as far as a property value graph goes.
When we look historical graphs, you never see any footnotes that say, “This peak is higher than some people think it should be because some fool allowed their realtor to convice them to pay a higher price than other comps.”

[Bugs]

This is a molehill. I deal with property data all day long – it’s literally the only thing (productive, anyways) that I do. I think there are a couple areas that peaked in 2004 and some that have peaked later. I’m still seeing a couple of the builders getting away with phase increases in their subdivisions, although those increases are way down from what they were doing a couple years ago. I do not subscribe to the idea that the entire region has already shown a 10% hit and I’d be hard pressed to name more than a dozen neighborhoods that I could show to have done that.

I think the quibbling over when and how much is just that – quibbling. You guys are chasing trees instead of the forest. The big point is that any discernable decrease in a year’s time is an anathema to the Soft Landing viewpoint because we are only in the beginning stanges of this side of the cycle.

Just be patient – the data will demonstrate the trend, whatever that trend is. If the RTM crowd is right the rate of change will demonstrated by so much data that we won’t need to argue its validity; the same holds true for the New Paradigm/Soft Landing crowd. If the data doesn’t conclusively demonstrate the trend then it’s not really a trend, is it?

[sdrealtor]

Thats part of the problem…there was no realtor present.

[PD]

I don’t think the entire region has seen a 10% decline either. Each area has its own micro forces. There are areas in decline and some still holding steady.

[sdrealtor]

It wasnt gathering steam it exploded. The homes I sold were listngs NOT buyer sales. I priced them, put them in the MLS and negotiated with what was presented to me. The truth is I represented very few buyers since mid 2004 because I didnt like what was going on and knew trouble when I saw it. The buyers I represented all bought about 50K below the comps or are still waiting to buy until after this Summer.

These are just a few areas, i’m sure I could many others around the county. If there was any appreciation after the end of 2004 it was minimal at best. Check the trend lines….

[Author]

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