- This topic has 20 replies, 7 voices, and was last updated 17 years, 9 months ago by
sdrealtor.
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August 19, 2006 at 8:29 PM #7248August 19, 2006 at 8:58 PM #32448
Bugs
ParticipantThat’s why the builders have been in such a hurry to finish these projects off. They know the clock is ticking and it’s already too late for the projects that aren’t completed, let alone the ones that haven’t poured foundations.
During the last downturn I appraised a whole bunch of homes that were abandoned halfway through construction. They were mostly custom homes rather than subdivisions. Usually the reason they walked was because they ran out of money and had spent the construction funds on other expenses – like eating.
August 19, 2006 at 9:46 PM #32449powayseller
ParticipantWho ended up finishing those homes, Bugs? Are you seeing any unfinished homes now?
August 19, 2006 at 10:15 PM #32450ParticipantThe banks usually had relationships with builders who would purchase the property out of foreclosure at a substantial discount, finish the home off (with a new construction loan from the same bank) and then sell the finished home off. Other than the bank taking a bath on the initial loan it worked out for everyone.
A lot of it depended on what stage the construction was in when the original builder walked. If it was still in framing and had been sitting exposed to the elements for a long time the new builder would have to tear out the framing and start over. If it had been roofed and stuccoed the structure could withstand more time and weather without much damage. More than one of these homes burned down under mysterious circumstances either before or after foreclosure.
And no, I am not aware of any half-finished foreclosures yet, but it’s just a matter of time. They’re building so many McMansions in Carmel Valley and wannabe Rancho Santa Fe that I expect some bottomfishing opportunities to crop up in the next year or so. There’s no way all those homes are going to sell given the current pace of sales.
August 20, 2006 at 12:09 AM #32458ybc
ParticipantBugs, will developers reassess their situations and start to build cheaper houses and continue to be in the business? Of course they’ll have to deal with the current inventory first. How much flexibility do they have?
August 20, 2006 at 2:48 AM #32463ParticipantWhat do you mean with “wannabe RSF”?
What kind of pricing drops have you seen in Carmel Valley and RSF, and in coastal properties (within a few blocks of the beach)?
Do you see a slowdown in refinancing yet?
August 20, 2006 at 8:53 AM #32468ParticipantThe 92067 zip area is all referred to as Rancho Santa Fe; but the areas that are included in the Rancho Santa Fe Covenant are where all the old money is. That’s the area that has its own CC&Rs and it’s own security guard service and has the design review board that controls what the homes look like in the area. These controls result in a community that is more uniform in design and quality and appeal than the outlying areas. The Covenant area is where its at.
The other areas in the 92067 zip are more hit and miss; and the areas adjacent to 92067, like Fairbanks Ranch and Del Mar Country Club are largely considered to be where the new money goes. In the last downturn the RSF Covenant areas barely got touched but all the outlying areas got hammered. I don’t know what’s going to happen this time but I do know there are a lot more pretenders to the RSF Covenant throne out there now than there were 15 years ago.
Some of the spec homes in Carmel Valley are already trying to discount but the sales still arent forthcoming. If you drive through some of these areas you’d think it was a land rush with all the building going on, but many of those homes are not selling. Those few buyers who have the cash are buying what they want, but there aren’t enough of them to absorb the inventory that’s already online and is coming online in the next 12 months.
Coastal properties haven’t been seeing any discounts but they’re also not seeing any sales, either. Encinitas has had no closed sales along Neptune or their other seafront streets in the last 9 months, although there’s one pending right now overlooking Moonlight Beach. There are currently 8 or 9 listings. Solana Beach has had a couple but there are more listings than sales in the last year, which means they have a 1+ year supply of inventory. Oceanside has slowed way down, as has Del Mar and even La Jolla. These last two still have sales but it’s because they have so many more properties on the coast. They’re not selling as many now as they were last year.
More disconcerting is that all of these areas have new construction underway, and half of those are being built by spec builders. At the current rate of sales these homes will either take years to sell or they will be heavily discounted. Something’s gotta give.
August 20, 2006 at 10:20 AM #32473ParticipantI wish docteur were still posting, so I could ask him to elaborate on what you are seeing. He saw 2 downturns, yet he says coastal values will stay flat or increase slightly due to building restrictions and wealthy people wanting those coastal homes. He says coastal values have never gone down, but steadily increased over the years. Perhaps he was not following the residential market in the last 2 downturns. Bugs, what happened to coastal values during the last 2 downturns? Coastal to me is within a few blocks of the beach, but I think others define it as a larger area. Could you give some information for both definitions of coastal?
With all that spec building going on, the building restrictions in place are certainly not limiting supply. Supply clearly exceeds demand. And where are the wealthy people who are supposed to gobble up these homes?
I can see how a unique area like RSF Covenant would hold fairly steady through a downturn. It is unique, stunning, and presumably owned by people who won’t lower the area’s property values through foreclosures.
How many wealthy people does San Diego have? Maybe a few hundred, a few thousand? They already have homes. Why would we have an influx of wealthy people to buy these homes? There really isn’t a business reason to come here. San Diego is a beautiful city, but the business community is not drawing new companies or new investors here.
In real estate, a high months inventory is a leading indicator of lower prices. This is a chart I’m working on when I get back from my vacation. High months inventory shows the demand is simply getting weaker, so motivated sellers end up lowering their prices. In areas like RSF Covenant, any house listed would presumably get snatched up pretty fast. The months inventory would stay very low, so prices can stay high. But once supply exceeds demand, pricing power is lost.
How long will builders keep adding to the supply? Do you see any new projects starting, or just old ones in progress?
The lenders are certainly not part of the reason for a sales decline. Investors are still gobbling up the MBS, so lending standards appear to get more lax, as lenders try to keep up volume.
August 20, 2006 at 11:19 AM #32485sdrealtor
Participant“Encinitas has had no closed sales along Neptune or their other seafront streets in the last 9 months, although there’s one pending right now overlooking Moonlight Beach. There are currently 8 or 9 listings.”
Bugs,
You really need to do your homework better. There have been 4 closed sales on Neptune in 2006 per the MLS and 1 more pending. Neptune also frequently has private sales that dont appear in the MLS. There are 13 homes currently on the market there. In 2005, there were 5 sales on Neptune. I know of other homes (attached and detached) that have closed on seafront streets in Encinitas also.August 20, 2006 at 11:40 AM #32489Daniel
ParticipantPowayseller asked…
“How many wealthy people does San Diego have? Maybe a few hundred, a few thousand?”
In San Diego county, there are slightly more than 100,000 households with a net worth of 1 million or more (not counting the value of their primary residence):
August 20, 2006 at 1:21 PM #32495ParticipantThanks, Daniel. ” Although real estate is not their sole source of wealth, it remains a staple for many. Forty-six percent of those surveyed own investment real estate like a second home or rental properties.
Seventy percent of the households, meanwhile, owned stocks and bonds, and 68 percent owned mutual funds.”
If they did not sell yet, their net worth is decreasing with the real estate market. I wonder how many bought second homes in San Diego, Nevada, Arizona, or elsewhere in bubble cities. How many of these people are buying second homes in San Diego, and propping us real estate values here?
August 20, 2006 at 1:21 PM #32496ParticipantThanks, Daniel. ” Although real estate is not their sole source of wealth, it remains a staple for many. Forty-six percent of those surveyed own investment real estate like a second home or rental properties.
Seventy percent of the households, meanwhile, owned stocks and bonds, and 68 percent owned mutual funds.”
If they did not sell yet, their net worth is decreasing with the real estate market. I wonder how many bought second homes in San Diego, Nevada, Arizona, or elsewhere in bubble cities. How many of these people are buying second homes in San Diego, and propping us real estate values here?
August 20, 2006 at 1:31 PM #32499Participant“How many of these people are buying second homes in San Diego, and propping us real estate values here?”
I have no clue. By the way, I must say that the 100,000 figure was a surprise for me, too. I thought it would be more like 20,000, so it looks like I was wrong by about a factor of 5…
August 20, 2006 at 6:57 PM #32512ParticipantMy comment was directed toward the west side of the street, which back to the ocean; not the east side of the street which does not.
August 20, 2006 at 7:54 PM #32521ParticipantI can defintely appreciate the difference but it wasnt mentione din your post. There have also been 2 closed sales on the bluffs this year(both attached).
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