Houses around $400K?

[Anonymous]

Here is some historical info for you. In 1993 my wife and I bought a short-sale house from a couple who was getting a divorce and had to sell. They owed $220k on it and had bought it right at the peak in 1989. We bought it for $149K, the bank took a bath to the tune of $70k and of course the sellers lost all their deposit (which I think was around $25k).

I remember in ’89 no one thought you would be able to get a decent house again for less than $200k. Well guess what happened?

I agree it is very hard to wait but I really feel history will repeat to some extent. I personally am looking for about the same reduction this time, somewhere around a 30% and maybe more depending on area.

[jawbone_shack]

Wow, thank you for sharing that. Very interesting. In fact I talked a bit with a realtor about short sales in San Diego. He said even just a year ago most banks would not consider eating any loss, but now it is happening.

[kev374]

Moody’s is way off. If you look at the housing tracker (www.housingtracker.net) you’ll see that the prices are already down YOY 5.5% so is it Moody’s estimate that there is going to be only a 3% correction over the next 2 years…what a load of BS! I am already seeing price reductions on the level of 10% on the MLS listings. This is on properties where the ORIGINAL LIST PRICE was already BELOW the ZEstimate and comps from May 2006 so it’s not a case of buyers asking too much and then repricing lower. I have concrete examples of people selling at below cost and losing money…check out ocfliptrack for many examples.

Here is an example of one I was just looking at: MLS# S442558

Guy wants $464k for his 3bedroom, ZEstimate is like $571k so he has already priced $100k below appraisal. he bought this property just over a year ago for $432k so any lower and he is going to get burned.

This is just the tip of the iceberg folks…the calm before the storm. This run down will be like nothing in history and will send shock waves through the economy, just like the run up set a new precedent in history.

[sdrealtor]

Small problem Kev,

“Here is an example of one I was just looking at: MLS# S442558

Guy wants $464k for his 3bedroom, ZEstimate is like $571k so he has already priced $100k below appraisal. he bought this property just over a year ago for $432k so any lower and he is going to get burned.”

The Zillow Zestimate is pretty arbitrary and is not an appraisal. NOT EVEN CLOSE! He is priced $32K above what he paid HOPING to get out whole after paying his transaction costs. Selling after 1 year for what you paid is not getting burned, it is bearing the cost of making a bad decision. Selling at $375K or even $400K would be getting
burned.

BTW, I do agree that the Moody’s figure is completely absurd.

[jawbone_shack]

It just seems to me that very little is budging below $400K, even the dumpiest of dumps, or somehwat nicer homes that are not even really close to the heart of San Diego. I’ve been watching a long time, probably like everyone here. I’ve especially been watching that number ($400K) and lower because it would be the highest figure I could possibly imagine….of course while also resorting to eating sticks and dirt for sustenance. I understand that people attach a certain “premium” for living in San Diego, but what about places like North Escondido, etc, places not even very close. I don’t understand how this could be sustainable for more than a day, housing prices so out of line with median income. Even if houses on the lower end dropped according to Moody’s figure, it would still be out of line. But yet they stick. How long can that really last? Why does it take soooo long to supposedly normalize?

[Doofrat]

You’ll definitely see some stickiness to the market, it won’t be an overnight drop in prices, it’ll take years to find the bottom of this thing. You’ll have to wait until all the ARMs reset, until it’s harder (if not impossible) for people to qualify for loans, until people psychologically adjust to the fact that the market is declining, and that they aren’t going to get rich on those houses they bought, and that they aren’t going to find anybody to buy that overpriced piece of junk in the bad part of some town in the desert, or that 700 square foot “condo” that’s really an apartment that has a granite countertop.
Then you’ll probably buy from somebody that has held their house since before the bubble started and can afford to sell at normal prices. For a “bubble sitter” there are alot of factors that can come into play in our favor, but you will have to wait for years for them to all kick in and have their effect.
Why the rush, rent’s cheap!

[PD]

We have a friend who is trying to sell their house. It just fell out of escrow for the second time despite the fact that it was priced almost 20% below the peak. Yikes!!

[jawbone_shack]

Doofrat,

Your response makes a lot of sense….not that the waiting is any easier…..at least I can better understand the insanity of it all 😉

[sdrealtor]

Doofrat,
Do you really believe that someone who bought a house in 1997 for 300K and watched it go to 900K in 2004 will sell it for 600K in 2010? They tasted the 900K price once and I think they wont be so quick to sell particlarly when they know they can rent it out for $1000+ positive cash flow.

[Bugs]

Nor should they sell. Nobody should be concerned about people who got in at the beginning of the upswing. That is, unless they were among the sheeple who refinanced 6 times in the 9 years since they bought it. Those people who did that may not have much choice in the matter.

Incidentally, the people who bought in 1989 didn’t make it back from being upside down until 1998 or so. Whether they booked the loss or not, they were upside down and paying a lot more on their mortgage than they would have paid for the same place had they rented it. Same thing applies right now.

We don’t even know how long it will take to get that house back to $900k. It could be easily 15 years, not 4. Maybe even longer. The next swing might bring a $285k average (at the low point of the cycle) back up to only $400k or so, not $560k. With this massive distortion we are now in uncharted territory. There is the possibility that this next time really will be different, but not in a good way.

[kev374]

sdrealtor, yes you’re right many have stated that Zillow is quite inaccurate…however, the point I wanted to make is that this guy held the property for a year and most likely he is going to take a loss on it! So much for the belief that real estate in Orange County never goes down.

We’re also assuming here that this guy is going to get his asking price…in this market? FAT CHANCE! Not going to happen. He’ll be lucky to sell that thing for 400k before it gets foreclosed upon so I’ll bet you a silver dollar that any way you slice it this guy is going to be eating his shorts!

[Doofrat]

I think that it’ll be tough psychologically, and unless they are forced to sell due to divorce, death, job, etc., they probably won’t sell. But because of this psychological barrier, won’t most of the sales outside of foreclosures and short sales be from desperate sellers?

What do you think? If you look ahead a few years, where do you see the sales coming from? Buying a foreclosure directly doesn’t look like a good option, so who will we be buying from?

[Author]

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