New home sales in Carmel Valley

[zk]

I just went by Carriage Run, Pardee Homes’ 2000-2400 sf, 760k-810k new homes in Carmel Valley. They released 10 homes today, and sold only 2. Kind of a contrast to Derby Hill, their 3500-4500 sf, 1.2m-1.5m homes, which seem to still be selling quite well.

Any ideas why that would be?

I haven’t gone by the Ridge lately, anyone know how they’re selling?

[kewp]

Rich getting richer? Wealth-effect in action?

I have the feeling the sub-million dollar sales have been primarily sub-prime driven, whilst the million+ are more conventionally financed. I mean this in the most general of terms, however. I could also be totally wrong (and would love to be corrected).

Imagine all the FB’s taking out suicide loans, re-financing and HELOC’ing new cars, boats, kitchen remodels, etc. All that money has to go somewhere, i.e. local business. I’m sure the guy selling yellow hummer’s is doing great (for now).

So even if the FB’s foreclose and lose their toys the equity they pulled out is still going to be floating around the local economy. And since I don’t know too many folks using home equity to shop at the thrift store or buy big macs, its likely primarily going to end up in the pockets of the already very wealthy. This in turn creates a feed-forward mechanism that is further inflating prices in the high end.

Of course, this will all come grinding to a halt when the free money disappears and *everyone* feels the hurt. I have a hunch it will take a fair bit of time for this to percolate up into the high end, though. All those HELOC’s have created a massive equity cushion for the super-rich.

Maybe we can call this the ‘trickle up’ effect?

[jztz]

Went to Derby Hill, and the traffic seems to be heavy. Does anyone know how the current prices compared to previous releases? Are they still increasing slightly? We stopped by the place when they just opened, but I forgot prices back then. Didn’t stop by Carriage Run, too tired. They say that they have a waiting list of about 300 people. I remember the first time we stopped by it was 500 people.

[sdworker]

I have looked at the models at Carriage Run and, personally, I think they have atrocious floor plans. OK, that is a bit harsh. I did not find any of the Carriage Run models that appealing. Don’t know if I represent an average Joe on this sort of thing and whether my opinion of those homes may be why they are not selling. Just one data point.

[CardiffBaseball]

Actually didn’t the 4-Closure Ranch series (was that ocrenter?), mention two homes that were nearly 100% financed at 1.6 million.

[BobbyD]

Derby Hill has stayed the same, no increases, no decresases, $1.2-$1.3M.

There are plenty of zero down buyers in the 1M+ crowd as well. Do not worry stupidity runs across all price ranges.

Actually I have looked up the tax records and 75% of the 1M+ homes in new tracts such as Derby Hill and IvyGate and others are zero down or very little down and folks mortgaging $1M+ with mortgages of $4K/$5K+ per month. Just a matter of time before they all go belly up.

[Anonymous]

can you tell us how you check that?

[CardiffBaseball]

I have a friend in Bressi Ranch and they were checking the MLS and nearly everyone in their little enclave is mortgaged to the hilt, with 2nd’s. His wife is a RE agent with access to the MLS and they were curious if my ramblings had any truth. They were surprised at the types of mortgages in their nabe.

[BobbyD]

My father in law is a realtor so I have access to MLS. However I believe that there are some public web sites where you can look that up. You will be very surprised that the majority of buyers are mortgaged to the hilt and most are doing near 100% financing. It is astonishing, I would never dream of buying a $1M+ home and not at least putting 40-50% down payment. From my observation looking at Stonebridge, IvyGate, Derby Hill and others, that 75-80% of the buyers have put less 20% down and are carrying $1M+ mortgages. This is a ticking time bomb, wait until all of these mortgages reset or the economy takes a dive.

[dontfollowtheherd]

Or when they think about how much they are going to be paying in taxes over the next 5 years because they aren’t going to sell at a profit anytime soon. Yikes!

[BobbyD]

Yes, I agree. The taxes are about $14K – $16K a year including the mello roos. It is just nuts I do not get it. The real estate/mortgage industry has done a hell of a con job on all of these folks.

[jztz]

Total monthly cost to support a $1.3M house at 5% downpayment (30 year at 6.25%) is about $9,600/month. The owner, if they are in the highest tax bracket, can get about $3K in total tax deduction. Still, $9.6K is the gross cash cost assuming about 1.4% in total tax and HOA; about $300 in insurance and $200 in misc maintenance.

So what income is needed to support this? $240K ($20K/month) at the minimum? Basically, give 50% of your income to support this house. Two very good professional jobs will actually achieve that in San Diego, so maybe not everyone is doomed. What do you all think?

[Bob G]

I agree, not everyone is doomed if all you need is 240 k annual income. Have family incomes in San Diego Quadroupled since 2000?

Location Pop. Median Family
Income (2000)
San Diego 1,223,400 $53,060
Chula Vista 173,556 $50,136
Coronado 24,100 $82,959
Imperial Beach 26,992 $37,352
La Mesa 54,749 $50,398
Lemon Grove 24,918 $45,844
National City 54,260 $31,497

[kewp]

“So what income is needed to support this? $240K ($20K/month) at the minimum? Basically, give 50% of your income to support this house. Two very good professional jobs will actually achieve that in San Diego, so maybe not everyone is doomed. What do you all think?”

What % of San Diego households gross over $240k per annum? And are not dependent on bubble-related business?

And have done the sensible thing and re-fi’ed to lock in a low rate, rather than use their house as an ATM to furnish a more lavish lifestyle?

I’ll suspect not enough to finance a soft landing.

[jztz]

Anyone knows how to check the size of the mortgage that an owner owns on a property? Is that public record? Or only realtors have access? Thanks.

[Author]

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