Reductions in price per square feet in Carmel Valley

[KingKong]

From a recent realtor flyer, I can see reductions in price per square feet in Carmel Valley.

During the peak, the prices are over $400/sf. Now a new interesting trend is emerging.

Smaller houses, less than 2,000sf, are slightly lower than its peak, at close to $400/sf. But for the bigger houses, larger than 2,00sf, the drops are dramatic, to the low end of $300/sf.

This again may prove an old real estate mantra:
“buy the worst house in a good neighborhood”.

[PerryChase]

In the last 1990s downturn, I also saw the prices per square foot of large homes drop more rapidly.

The notion the higher-end homes will be more insulated and decline less is hogwash and does not stand the test of time.

If anything, the richer people are, the more likely they are to speculate.

[sdrealtor]

Bigger homes always sell for alot less per sq ft because there are alot of fixed costs that dont dramatically change with size like lot sizes and permitting. Also each house only has one kitchen, one HVAC system, one electrical system, one roof etc. these are the most expensive parts of a house. To see if the bigger houses have dropped by as much as you think you really need to compare with price/sq ft at the peak and not just apply a relatively arbitrary figure to homes of all sizes.

[KingKong]

My thoughts on the divergence:

Smaller houses are relatively old. Nowadays the land is so expensive in CV, greedy builders tries to put as much house as possible on a given land. People who like spaces would rather buy a smaller old house vs a mini-mansion that you can shake hands with your neighbour on the second floor.

The other day I went to a new fill-in development Verona. It sits in the Pines neighbourhood where zero-lot houses are around 1800sf on over 5000sf lots and sells for 670K right now. The new houses in Verona sits on less land, around 4000sf and much bigger, around 2500sf and sells for over 900K. This is an extremely example even in Carmel Valley. No wonder nobody moved in yet. Do not believe the sold signs. Go over there at night and knock at your potential new neighbour’s door to find the real scoop.

[heavyd]

This Verona mini-development (8-10 homes?) has been marketed fairly aggressively since early this year and recently they cut asking prices by $40-50K to a bit below $1m. As KingKong pointed out, they are on tiny lots, and to make matters worse, all the lots I have seen have steep grades and low retaining walls, so effectively you end up with a narrow strip appropriate only for a small patio and a few chairs, not a real yard.

Having said that, it’s a good location — walking distance to 2-3 parks and good elementary and middle schools, even the Vons shopping center is just a 5 minute walk away. And no Mello-Roos since it’s part of an older neighborhood.

But this makes it all the more surprising that they haven’t been able to move a measly 8-10 homes over the past 6-9 months, despite the aggro marketing (5% price cuts, sign twirlers, etc) and despite it’s location in a prime ‘hot’ neighborhood.

[KingKong]

The Ghost Town: Verona Development in Carmel Valley

Hi heavyd,

My friend went there last night to do some trick’treat and got a real surprise: none of the eight houses were occupied despite all the “sold” signs on the lawn for over three months.

Yes, it got a great location. But the biggiest problem with development is that it is surrounded by the Pines development which are either zero-lot or twin homes with no more than 1800 square feet.

The price has come down as you noticed. But it has to go even lower to attract serious buyers. If you read my posts on this board, you will know that I am not predicting a bust. I see another 10 to 20 percent down.

[zk]

A 4,000 sf+ house sold last week on White Emerald Drive in Carmel Valley for 1,050,000. He was originally asking 1,800,000+. Obviously the asking price doesn’t mean much, but 4,000sf for a million fifty?

sdrealtor, can you find out if anything was wrong with that house, or if the seller was just “motivated?” That price is far below anything that’s sold in CV in the last few years. Prices have been coming down, to be sure. But that’s cliff-like.

[heavyd]

Wow, ZK, do you have a link to the listing of that place on White Emerald Drive? Clearly the initial asking price was pure fantasy, but if deal was done at $1.05m then we’re talking close to $250 per square foot. Ouch!

KingKong, fully agree Verona is still priced ‘wrong’. It just shouldn’t take this much time / effort to sell these places…HD

[PerryChase]

I’d like to see more details on the White Emerald Drive listing also.

[r271828]

The previous owner of this house had received several notices of default before finally selling, and it was scheduled for auction I believe some time in mid-September before being sold. It was listed for quite a while with a gradually decreasing listing price, finally ending up at something like $1.3xM as the lower end of the list price range.

I actually looked at this house and it was quite nice in some respects – large kitchen, fairly large lot, and (obviously) large square footage. However, it had some significant deficiencies as well – faced a wall and parking lot across the street; interior somewhat dark (in terms of ambient daylight and decor, e.g., black porcelain fixtures in a downstairs bathroom); staircase leading directly to the front door (which is bad feng shui for Chinese buyers). My *opinion* is that these deficiencies were not the primary factors responsible for the final selling price; instead, I assume the seller had to sell, and got what the current market will bear.

Another large house in Carmel Valley, 4454 sf on Brittany Forrest Ln (Lexington development by Pardee), sold for $1.25M in Jan 2006, which works out to $280/sf in what was then a better (for sellers) market. This house backs onto the end of Carmel Mountain Rd, as do about half the other houses on that street, but otherwise was quite nice.

So I think that in some instances lower transaction prices in Carmel Valley are being realized, but these are still mixed in with sales prices that are often considerably higher on a per sf basis and even accounting (subjectively) for differences in quality of the property. I think this is not surprising given the current stage of the market – in my opinion still in the early stages of dropping, with not everyone realizing what is going on.

[zk]

Thanks for the info, r271828.

“So I think that in some instances lower transaction prices in Carmel Valley are being realized, but these are still mixed in with sales prices that are often considerably higher on a per sf basis and even accounting (subjectively) for differences in quality of the property.”

Exactly. PS and I discussed this about 2 months ago, calling it a “two-tier” situation. It’s still a two-tier situation, but the “new” tier pricing for “solds” is starting, finally, to outnumber the “old” (peak or near-peak) tier pricing.

And no, I don’t have a link to the listing. I’ll try to get the address or mls number when I get home if you want.

[Daniel]

We talked about this house on Jim’s blog as well. Check out the REO Results link at his site for a detailed discussion.

[zk]

Quote from a guy who ran some comps on Jim’s blog (before he saw the sales price): “So they might have given up a couple of hundred square feet for free, but if they got anywhere above $1.3M I’d say they got full retail.”

Well, turns out they gave about a 25% discount from full retail. Full retail in today’s market, that is, as the comps all closed in September. So that’s somewhat more than 25% off peak full price.

Of course, he had to sell, and he had to sell fast. So it’s not really a typical sale. But as we get more people who have to sell, and have to sell fast, it might be typical.

[PD]

Very true, zk. This is exactly the sort of thing that drives prices down.

[heavyd]

I agree, this type of “pressured” sale will become more typical and thus have a significant impact on overall pricing over the next several months.

I did not have the exact address but drove by White Emerald this AM on my way to work — there are only about a dozen houses on the street.

Yes, the homes on White Emerald are situated across from a busy street (though there is a high wall to reduce noise), and yes, the homes are quite homogeneous (late ’90s SoCal McMansion — certainly not to my taste).

But these homes are BIG and I believe every single one of them overlooks a nice canyon. Furthermore, it’s walking distance to the high school and on a cul-de-sac to boot.

In other words, from the outside at least, these are rather attractive Carmel Valley homes…and the bar has been lowered to about $250 per square foot going forward.

That is rough…

[Author]

Posts