[Bugs]

One footnote to the ARM rests – the fallout is in no way limited only to purchase transactions; it also includes anyone who maxed out their mortgages during that time frame. It’s just a guess, but anyone who refinanced using an ARM probably withdrew much or maybe all their disposable equity when they did it; why else would someone use an ARM in a refi?

I’ve seen a number of foreclosure sales wherein the original sales transaction prior to the foreclosure was but a fraction of the foreclosed loans.

[Bugs]

One footnote to the ARM rests – the fallout is in no way limited only to purchase transactions; it also includes anyone who maxed out their mortgages during that time frame. It’s just a guess, but anyone who refinanced using an ARM probably withdrew much or maybe all their disposable equity when they did it; why else would someone use an ARM in a refi?

I’ve seen a number of foreclosure sales wherein the original sales transaction prior to the foreclosure was but a fraction of the foreclosed loans.

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There’s nothing like be rebutted with my own quote – LOL. Your point is well taken though – that is still a lot of money.

If memory serves, $300k was near the bottom in LJ in 1996. At a 3% annual rate of increase that would indicate to a $415k “should be” value in 2007. Of course, that “should be” is an entirely hypothetical value. If we ever see it again it will probably only be for a fleeting moment as the market passes it on its way to overcorrecting.

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There’s nothing like be rebutted with my own quote – LOL. Your point is well taken though – that is still a lot of money.

If memory serves, $300k was near the bottom in LJ in 1996. At a 3% annual rate of increase that would indicate to a $415k “should be” value in 2007. Of course, that “should be” is an entirely hypothetical value. If we ever see it again it will probably only be for a fleeting moment as the market passes it on its way to overcorrecting.

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I think there have already been some suicides and “avoidable” deaths due to RE business failures. I think there will be some people who will decide to check out once it becomes apparent that they really aren’t wealthy – or smart.

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I think there have already been some suicides and “avoidable” deaths due to RE business failures. I think there will be some people who will decide to check out once it becomes apparent that they really aren’t wealthy – or smart.

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I would say the range for gross income multipliers for houses (not apartments) probably won’t get any lower than 10x gross annual rents no matter what happens. 11x annual income would probably be more realistic. That’s as an average throughout the region, meaning some of the beater neighborhoods would be a little lower and the more desireable areas would be a little higher. It wouldn’t surprise me at all if La Jolla’s desirability bottomed out no lower than at 13x gross, maybe even higher.

There’s no saying that some areas like La Jolla and Del Mar will unwind as much (percentage wise) as the regional average. If the region corrects at -50%, these high-demand areas may only correct at -25% or -35%. The arguments of “they’re not making any more land, everyone wants to be here, etc” don’t necessarily apply to the region as a whole but they do apply to these much smaller high-demand areas.

I could be way wrong, but I’m just not seeing La Jolla SFRs bottoming out to $350,000.

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I would say the range for gross income multipliers for houses (not apartments) probably won’t get any lower than 10x gross annual rents no matter what happens. 11x annual income would probably be more realistic. That’s as an average throughout the region, meaning some of the beater neighborhoods would be a little lower and the more desireable areas would be a little higher. It wouldn’t surprise me at all if La Jolla’s desirability bottomed out no lower than at 13x gross, maybe even higher.

There’s no saying that some areas like La Jolla and Del Mar will unwind as much (percentage wise) as the regional average. If the region corrects at -50%, these high-demand areas may only correct at -25% or -35%. The arguments of “they’re not making any more land, everyone wants to be here, etc” don’t necessarily apply to the region as a whole but they do apply to these much smaller high-demand areas.

I could be way wrong, but I’m just not seeing La Jolla SFRs bottoming out to $350,000.

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469 / #11 sold in 12/23/2002 for $150,000. I think that would suffice as an early 2003 sale.

I saw 3 early-2002 sales at $105,000 – $110,000, and an mid–2004 sale at $220,000.

Using a 150 gross rent multiplier on a $1,000 rent would equal the $150,000. Many investors would probably bite at that but some wouldn’t. A bottomed out $150,000 price would represent a -45% price adjustment off the peak.

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469 / #11 sold in 12/23/2002 for $150,000. I think that would suffice as an early 2003 sale.

I saw 3 early-2002 sales at $105,000 – $110,000, and an mid–2004 sale at $220,000.

Using a 150 gross rent multiplier on a $1,000 rent would equal the $150,000. Many investors would probably bite at that but some wouldn’t. A bottomed out $150,000 price would represent a -45% price adjustment off the peak.

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sdr

No jab intended. Truly. I’ve been appraising for 22 years and I’ve heard the “willing buyer/willing seller = sales contract = market value” from agents a lot more often than not. From 30-year pros as often as 12-month rookies, for that matter.

I’ve also had the experience of asking agents what comps they used to set their listing price, only to get the answer that they didn’t use comps, they just “felt” they could get that price. Again, more often than not. I don’t say that as a criticism of agents because first of all I recognize that is how a lot of agents, buyers and sellers do their valuations; and secondly because I really don’t much care what an agent thinks about value anyway. I only care if they can provide data that I should consider.

There are two reasons why I wouldn’t consider your larger pending as a direct comparable, and the size difference is actually the lesser of those reasons. That home is a mid-sized model in a subdivision of much larger homes than our subject is; our subject being the largest model in its neighborhood. That pending benefits by its association with those larger and more expensive homes, just as our subject’s value is affected by its neighboring properties of smaller size and lower prices.

That’s why, all other factors being equal, the one factor a good appraiser attempts to avoid having to deal with whenever possible is the effects of a different location.

Let’s not forget that your smaller pending, which is a bit more similar, was listed at $850-$875. As I noted before, that subdivision has historically sold a little higher than our subject has. Depending on where it closes, that sale also indicates to much less than a $900k indicator for our subject, too.

Anyways, I’m repeating myself now as I have nothing new to offer on the subject, so I should just cut this one loose. I’m not an realty agent, and I don’t set listing prices or market properties. I only stuck my 2 cents in because the question was one of value; and I offered my observations within the context of my perspective as an appraiser.

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sdr

No jab intended. Truly. I’ve been appraising for 22 years and I’ve heard the “willing buyer/willing seller = sales contract = market value” from agents a lot more often than not. From 30-year pros as often as 12-month rookies, for that matter.

I’ve also had the experience of asking agents what comps they used to set their listing price, only to get the answer that they didn’t use comps, they just “felt” they could get that price. Again, more often than not. I don’t say that as a criticism of agents because first of all I recognize that is how a lot of agents, buyers and sellers do their valuations; and secondly because I really don’t much care what an agent thinks about value anyway. I only care if they can provide data that I should consider.

There are two reasons why I wouldn’t consider your larger pending as a direct comparable, and the size difference is actually the lesser of those reasons. That home is a mid-sized model in a subdivision of much larger homes than our subject is; our subject being the largest model in its neighborhood. That pending benefits by its association with those larger and more expensive homes, just as our subject’s value is affected by its neighboring properties of smaller size and lower prices.

That’s why, all other factors being equal, the one factor a good appraiser attempts to avoid having to deal with whenever possible is the effects of a different location.

Let’s not forget that your smaller pending, which is a bit more similar, was listed at $850-$875. As I noted before, that subdivision has historically sold a little higher than our subject has. Depending on where it closes, that sale also indicates to much less than a $900k indicator for our subject, too.

Anyways, I’m repeating myself now as I have nothing new to offer on the subject, so I should just cut this one loose. I’m not an realty agent, and I don’t set listing prices or market properties. I only stuck my 2 cents in because the question was one of value; and I offered my observations within the context of my perspective as an appraiser.

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There is always the law of unintended consequences to consider:

I think there’s a risk he might accidentally talk the Chinese into realizing their current exposure, thus setting off a selling spree.

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There is always the law of unintended consequences to consider:

I think there’s a risk he might accidentally talk the Chinese into realizing their current exposure, thus setting off a selling spree.

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I can’t decide whether that’s going to help his ratings or hurt them.

No matter. Those numbers aren’t going down any time soon. Eventually someone else is going to bring it up again.

[Author]

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