For Stop the Bubble Hype from SD Realtor

[SD Realtor]

Stop the bubble hype… sorry the last thread got out of hand. It got ugly and I don’t want to be a part of that. Here are some current (active for sale) and recently expired/cancelled listings of realtively new homes. I did a very quick search and can dig up more data for you if you like.

12887 Flintwood 92130 (Cancelled 6/2/07) List Price was 999k-1.049M

Built in 2004. Last market sale was 1.06M in 6/8/06.

*******

12854 Briarcrest Place (Pacific Highlands) (Expired 6/10/07) List Price 875k-975k Built in 2005 and sold for 877k in 2005.

*******

13500 Ginger Glen (Santa Rosa) (Expired 1/31/07) List Price 1.1M-1.4M Built in 2005 and sold for 1.425M in 2005! OUCH

*******

13517 Pacific Highlands Ranch (Active for sale) List Price 750k. BANK OWNED and built in 2005. Total assessment on tax roll is 793k.

6035 Roselle Meadows Trail (Pacific Highlands)(Active for sale) NOT already filed. List Price 849K. Built in 2005 and sold for 862 in 2005

13137 Chambord Way (Bordeaux) (Active for sale) List Price 925k-975k. Built in 2006! Sold in 2006 for 1.018M

*********

Again, I welcome posts like yours and even scruffy dogs. I am open to debate at any time. As of now scruffy dog still did not answer my questions in his thread but that is okay.

I can pull up more data for you if you like. When I post and make speculative comments, I preface them by saying in my opinion, or I will say this is speculative. However in my post to the thread initiated by scruffy dog, I made my statements based on facts.

Please let me know if you want any more factual accounts of losses for homes built very recently in higher end areas.

SD Realtor

[Critter]

Thanks SDR – as usual you hold yourself above the fray. I appreciate the time you take to do thorough research and post your findings.

[Critter]

Thanks SDR – as usual you hold yourself above the fray. I appreciate the time you take to do thorough research and post your findings.

[stop_the_bubble_hype]

SDR,

This is great and offers far more insight into what is going on than the generalities I have been seeing in other posts here.

Very interesting on that Santa Rosa home. The builder prices that I quoted in the other thread are likely the cause. I’m going to do some drive bys this weekend to see if I can gather more information on the developments and where builder prices are currently.

We (like you) are looking to buy for family reason and plan to stay put for the long haul. I don’t want to be in a neighborhood of flippers though, and welcome the weedout of those looking to turn a quick profit. My hope is that they will be out of the market sooner than later so we can stabilize (if not in price at least in the community being less transient).

I’ll write back to you after I do more investigating.

Thanks for your comments and for not getting caught up in the negativity that becomes rampant when someone questions the prevailing thought processes here.

Hype

[stop_the_bubble_hype]

SDR,

This is great and offers far more insight into what is going on than the generalities I have been seeing in other posts here.

Very interesting on that Santa Rosa home. The builder prices that I quoted in the other thread are likely the cause. I’m going to do some drive bys this weekend to see if I can gather more information on the developments and where builder prices are currently.

We (like you) are looking to buy for family reason and plan to stay put for the long haul. I don’t want to be in a neighborhood of flippers though, and welcome the weedout of those looking to turn a quick profit. My hope is that they will be out of the market sooner than later so we can stabilize (if not in price at least in the community being less transient).

I’ll write back to you after I do more investigating.

Thanks for your comments and for not getting caught up in the negativity that becomes rampant when someone questions the prevailing thought processes here.

Hype

[(former)FormerSanDiegan]

stop_the_bubble_hype –

Be careful with new developments. Foreclosures are currently concentrated in two areas: 1. New developments and 2. Area with high rates of sub-prime borrowers.

New developments tend to get hit hard at this point in the RE cycle because by definition they include the most recent buyers, and also include a lot of speculative buying (flippers, etc). The sub-prime areas tend to be lower income and the reasons for those foreclosures should be obvious from the daily news.
If you want to be in a more stable community, I’d recommend older areas (but not too cheap because of sub-prime issues). Just an opinion from someone whose owned 3 homes in SD (still have one).

[(former)FormerSanDiegan]

stop_the_bubble_hype –

Be careful with new developments. Foreclosures are currently concentrated in two areas: 1. New developments and 2. Area with high rates of sub-prime borrowers.

New developments tend to get hit hard at this point in the RE cycle because by definition they include the most recent buyers, and also include a lot of speculative buying (flippers, etc). The sub-prime areas tend to be lower income and the reasons for those foreclosures should be obvious from the daily news.
If you want to be in a more stable community, I’d recommend older areas (but not too cheap because of sub-prime issues). Just an opinion from someone whose owned 3 homes in SD (still have one).

[Allan from Fallbrook]

While I definitely agree most of the bleeding right now is confined to the sub-prime market, it appears that the pain is starting to spread into the Alt.A market as well.

I live in Fallbrook, and the majority of homes here are older. There are some newer developments but, by and large, the homes here have been here for a while.

The interesting thing to note is this: The people getting hit locally with NOD/NOT/foreclosure notices are upper income, white collar professionals. My information is anecdotal, but this is a small community and people talk.

While Temecula/Murrieta (north of us) have been widely pilloried as a bad example of what happens when over building and easy money collide, it appears more gentrified areas like Fallbrook, Vista and Bonsall are not immune either.

Unlike others, I am not forecasting a housing collapse, but I do think the correction is going to be ugly and I think we are nowhere near bottom yet.

It also appears that the news coming out of Wall Street supports the assertion that the major issues surrounding the sub-prime debacle are beginning to spread into the Alt.A and prime markets as well. Lehman Bros pulled a $1B warehouse lending line from HR Block’s mortgage lending unit, pension funds are admitting their exposure to undervalued mortgage backed securities and UBS fired their CEO (as a direct result of their exposure in the mortgage market).

[Allan from Fallbrook]

While I definitely agree most of the bleeding right now is confined to the sub-prime market, it appears that the pain is starting to spread into the Alt.A market as well.

I live in Fallbrook, and the majority of homes here are older. There are some newer developments but, by and large, the homes here have been here for a while.

The interesting thing to note is this: The people getting hit locally with NOD/NOT/foreclosure notices are upper income, white collar professionals. My information is anecdotal, but this is a small community and people talk.

While Temecula/Murrieta (north of us) have been widely pilloried as a bad example of what happens when over building and easy money collide, it appears more gentrified areas like Fallbrook, Vista and Bonsall are not immune either.

Unlike others, I am not forecasting a housing collapse, but I do think the correction is going to be ugly and I think we are nowhere near bottom yet.

It also appears that the news coming out of Wall Street supports the assertion that the major issues surrounding the sub-prime debacle are beginning to spread into the Alt.A and prime markets as well. Lehman Bros pulled a $1B warehouse lending line from HR Block’s mortgage lending unit, pension funds are admitting their exposure to undervalued mortgage backed securities and UBS fired their CEO (as a direct result of their exposure in the mortgage market).

[SD Realtor]

stop the bubble hype… If I were to bet a dime on anything, that bet would be that the majority of people who don’t post, but maybe read this site are people who are very much in the same boat as you and I. They want to purchase a home and they are looking to purchase for the long run. They are not speculators, not trying to flip a home or anything like that. Just pretty much trying to find a home in a nice neighborhood with a good school district. Profile wise I would imagine they are all 6 figure wage earners with good educations, and some decent money saved for a downpayment.

I have said ad nauseum that purchasing a home involves more factors then the sheer economics of what will happen in the future. I don’t lower the boom on people who have recently purchased a home, or who recently purchase a home. I don’t think it is the best economic decision but that aside, there are tremendous benefits from owning a home, including harmony in the family…My personal read on the market is that it will continue to depreciate over the next few years and the severity will be determined by the 10 year treasury yield and the default rate. Unfortunately I will not be able to wait out the cycle.

My read for the people who are going to buy now, just be aware, get as good of a deal as you can, negotiate, get rebate, just be tough. Yes the builders are going to weather the storm much better then many people think. They are savy, they have hug margins, they know how to control the rate of new releases to keep the demand high, and they know when and how to price competitively. I don’t think that the future will be that the builders in these nice areas will be slashing pricing. I think that there could be REO or distressed sales opportunities for people who purchased and cannot afford the homes. How many of these opportunities? Not sure.

Anyways, the site here has a diversity of opinions which I think is really good. Unfortunately it gets personal sometimes, and perhaps there are even shades of racism which is sad. Yet I think that even some of the uber bears have done very good factual research. I think that is why sometimes the more optimistic posters get slammed so hard. Many people who have come in and posted justifications for buying have used more speculative arguments, chiefly that the builders are still selling out phases. Undoubtedly this is true. However I think that it is a misconception to think that the entire market is tied to these phases selling out. On the other hand no uber bear can win an argument that simply states, my family will be happier in a home that we can afford, and that we own, and that economically we understand what is happening.

SD Realtor

[SD Realtor]

stop the bubble hype… If I were to bet a dime on anything, that bet would be that the majority of people who don’t post, but maybe read this site are people who are very much in the same boat as you and I. They want to purchase a home and they are looking to purchase for the long run. They are not speculators, not trying to flip a home or anything like that. Just pretty much trying to find a home in a nice neighborhood with a good school district. Profile wise I would imagine they are all 6 figure wage earners with good educations, and some decent money saved for a downpayment.

I have said ad nauseum that purchasing a home involves more factors then the sheer economics of what will happen in the future. I don’t lower the boom on people who have recently purchased a home, or who recently purchase a home. I don’t think it is the best economic decision but that aside, there are tremendous benefits from owning a home, including harmony in the family…My personal read on the market is that it will continue to depreciate over the next few years and the severity will be determined by the 10 year treasury yield and the default rate. Unfortunately I will not be able to wait out the cycle.

My read for the people who are going to buy now, just be aware, get as good of a deal as you can, negotiate, get rebate, just be tough. Yes the builders are going to weather the storm much better then many people think. They are savy, they have hug margins, they know how to control the rate of new releases to keep the demand high, and they know when and how to price competitively. I don’t think that the future will be that the builders in these nice areas will be slashing pricing. I think that there could be REO or distressed sales opportunities for people who purchased and cannot afford the homes. How many of these opportunities? Not sure.

Anyways, the site here has a diversity of opinions which I think is really good. Unfortunately it gets personal sometimes, and perhaps there are even shades of racism which is sad. Yet I think that even some of the uber bears have done very good factual research. I think that is why sometimes the more optimistic posters get slammed so hard. Many people who have come in and posted justifications for buying have used more speculative arguments, chiefly that the builders are still selling out phases. Undoubtedly this is true. However I think that it is a misconception to think that the entire market is tied to these phases selling out. On the other hand no uber bear can win an argument that simply states, my family will be happier in a home that we can afford, and that we own, and that economically we understand what is happening.

SD Realtor

[Allan from Fallbrook]

SD Realtor, you make some good and valid points. I would point out a few others as well. First off, we’ve never been here before, meaning the market has never seen a bubble of this size in any asset class in history.

Second, the level of exposure in financial markets has not been fully felt, meaning the true size of the problem is only now becoming apparent. When you hear a constant and consistent drumbeat regarding the banks, investment houses, hedge funds, pension funds and their concerns about sizeable losses in the mortgage markets and beyond, it is apparent that something very bad is in the offing. There are investors in the mortgage backed securities markets selling off at approx. 11 cents on the dollar. This is not the behavior of someone who believes they are occupying a solid position. In the business, this is called a fire sale.

Lastly, while I think the big players such as Lennar, Toll Brothers and Pulte will indeed ride this out, they are sustaining catastrophic losses right now, in some cases between $125MM and $250MM in just the last quarter alone. Bob Toll, the CEO of Toll Brothers, who is generally a very optimistic guy when it comes to housing, has stated in no uncertain terms that the housing market is a long way from bottom and it is going to hurt a lot to get there. Toll Bros does not construct middle market tract homes; they are a luxury home builder, catering to the high end of the market. The market segment least likely to default and most likely to hold a fixed mortgage product and not a sub-prime loan. What this means is that the consensus view that this will be confined to the sub-prime middle market buyer is probably wrong.

As strange as it sounds, given this little epistle, I am not doom and gloom. I don’t think things are going to crash, but I also realize that we are seeing an event never before seen, and something that is dwarfing the NASDAQ boom and bust in terms of size.

[Allan from Fallbrook]

SD Realtor, you make some good and valid points. I would point out a few others as well. First off, we’ve never been here before, meaning the market has never seen a bubble of this size in any asset class in history.

Second, the level of exposure in financial markets has not been fully felt, meaning the true size of the problem is only now becoming apparent. When you hear a constant and consistent drumbeat regarding the banks, investment houses, hedge funds, pension funds and their concerns about sizeable losses in the mortgage markets and beyond, it is apparent that something very bad is in the offing. There are investors in the mortgage backed securities markets selling off at approx. 11 cents on the dollar. This is not the behavior of someone who believes they are occupying a solid position. In the business, this is called a fire sale.

Lastly, while I think the big players such as Lennar, Toll Brothers and Pulte will indeed ride this out, they are sustaining catastrophic losses right now, in some cases between $125MM and $250MM in just the last quarter alone. Bob Toll, the CEO of Toll Brothers, who is generally a very optimistic guy when it comes to housing, has stated in no uncertain terms that the housing market is a long way from bottom and it is going to hurt a lot to get there. Toll Bros does not construct middle market tract homes; they are a luxury home builder, catering to the high end of the market. The market segment least likely to default and most likely to hold a fixed mortgage product and not a sub-prime loan. What this means is that the consensus view that this will be confined to the sub-prime middle market buyer is probably wrong.

As strange as it sounds, given this little epistle, I am not doom and gloom. I don’t think things are going to crash, but I also realize that we are seeing an event never before seen, and something that is dwarfing the NASDAQ boom and bust in terms of size.

[SD Realtor]

Agreed with you Allan… There have been some very enlightening posts on the site about the effect on the financial markets. IMO, and I say IMO because it is something that I don’t have a great understanding of, the situation is precarious. I think that the ratings to which the funds are based on are quite preposterous and outdated. That if the contents of each tranch (probably mispelled) within each fund were studied, the investors would find that they are really not holding what they thought they were holding.

I especially agree with your last paragraph.

SD Realtor

[SD Realtor]

Agreed with you Allan… There have been some very enlightening posts on the site about the effect on the financial markets. IMO, and I say IMO because it is something that I don’t have a great understanding of, the situation is precarious. I think that the ratings to which the funds are based on are quite preposterous and outdated. That if the contents of each tranch (probably mispelled) within each fund were studied, the investors would find that they are really not holding what they thought they were holding.

I especially agree with your last paragraph.

SD Realtor

[Author]

Posts