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Unless the developer was finished with the project these sales would most likely include a leaseback agreement that would be intended to last long enough for the completion of the project. That’s what leads me to question whether the buyers were owner-users or investors.

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Unless the developer was finished with the project these sales would most likely include a leaseback agreement that would be intended to last long enough for the completion of the project. That’s what leads me to question whether the buyers were owner-users or investors.

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I wonder if it was the same buyer on all three properties.

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I wonder if it was the same buyer on all three properties.

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DaC

For model match homes in that price range a $70,000 variance in pricing – even during that period – indicates to some differences that go beyond floorplan. That’s why I asked for specific addresses so I could look them up and see what those differences are.

If you don’t want to put up the addresses, that’s fine by me. However, you need not delude yourself into thinking that I am incapable of reconciling those prices and finding a baseline for that neighborhood.

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SDAppraiser,

I completely agree with you that the element of the emotional response is ALWAYS present in the residential markets; and indeed should be considered to be among the fundamentals that contribute to the pricing. Based on what happened during the last downturn I would say that almost anyone who can avoid booking the loss during this downswing will do so, the “rational” alternative notwithstanding.

However, all the action occurs in the margins. In my opinion the combination of significantly reduced sales volumes and rapidly increasing rates of “must-sell” transactions will combine to increase the size of those margins. Surely you are already seeing that in your own work.

I would say that in 2001 NOBODY could have guessed what 2006 prices would have looked like. Why should we consider is the reverse of those increases to be beyond reason?

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DaC

For model match homes in that price range a $70,000 variance in pricing – even during that period – indicates to some differences that go beyond floorplan. That’s why I asked for specific addresses so I could look them up and see what those differences are.

If you don’t want to put up the addresses, that’s fine by me. However, you need not delude yourself into thinking that I am incapable of reconciling those prices and finding a baseline for that neighborhood.

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SDAppraiser,

I completely agree with you that the element of the emotional response is ALWAYS present in the residential markets; and indeed should be considered to be among the fundamentals that contribute to the pricing. Based on what happened during the last downturn I would say that almost anyone who can avoid booking the loss during this downswing will do so, the “rational” alternative notwithstanding.

However, all the action occurs in the margins. In my opinion the combination of significantly reduced sales volumes and rapidly increasing rates of “must-sell” transactions will combine to increase the size of those margins. Surely you are already seeing that in your own work.

I would say that in 2001 NOBODY could have guessed what 2006 prices would have looked like. Why should we consider is the reverse of those increases to be beyond reason?

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As a society we have decided that the public interest goes far beyond the creation and maintenance of an interstate highway system and national defense. Our government has no more power than what we give to it, conspiracy theories aside.

I’ll also say that any parent who is sufficiently motivated to do so can readily overcome the weaknesses of our public school system. Kids fail in their education to the extent their parents abdicate all responsibility for performance to the schools.

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As a society we have decided that the public interest goes far beyond the creation and maintenance of an interstate highway system and national defense. Our government has no more power than what we give to it, conspiracy theories aside.

I’ll also say that any parent who is sufficiently motivated to do so can readily overcome the weaknesses of our public school system. Kids fail in their education to the extent their parents abdicate all responsibility for performance to the schools.

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DaC

Granted, there will be some variance at any given time. May I ask if both of those 2004 sales occur in the same quarter the way I’ve been referencing it or are you using the broader term of the entire year on your own?

My preferred method of comparing the effects of the different time periods is to use paired sales of the same property that sold during both time periods. Of course, that only works when I can find those examples. Another way to do it is to compare like for like during the different time periods – obviously that’s not as reliable as actual paired sales but much easier to identify and compile. I can largely make up for the lack of specificity by using a lot more data.

If you want, I can easily look up the original MLS listings for both your high and low sales and figure out where they’d each have been at peak as well as today. Neither one of them would tell the whole story, but they probably would both point in the same general direction.

Would you care to volunteer the 2 sales in question? Actually, I only need one of them – I can find the other one on my own.

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DaC

Granted, there will be some variance at any given time. May I ask if both of those 2004 sales occur in the same quarter the way I’ve been referencing it or are you using the broader term of the entire year on your own?

My preferred method of comparing the effects of the different time periods is to use paired sales of the same property that sold during both time periods. Of course, that only works when I can find those examples. Another way to do it is to compare like for like during the different time periods – obviously that’s not as reliable as actual paired sales but much easier to identify and compile. I can largely make up for the lack of specificity by using a lot more data.

If you want, I can easily look up the original MLS listings for both your high and low sales and figure out where they’d each have been at peak as well as today. Neither one of them would tell the whole story, but they probably would both point in the same general direction.

Would you care to volunteer the 2 sales in question? Actually, I only need one of them – I can find the other one on my own.

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I don’t think SD County is moving as quickly into this downtrend as Riverside County, nor do I think it will bottom out as hard.

The areas in SD County that peaked the earliest did so in the Summer of 2005 or thereabouts. The majority of the market segments peaked at various times over the next 12 months after that. Only a few market segments peaked after Summer of 2006, although that wouldn’t have been apparent by looking at the new home sales because of the concessions the developers were giving away so they could maintain the illusion of a stable price structure.

So all in all, I guess you could say that in SD County, retraction to mid-2004 pricing could probably be stretched to fit the definition of the soft landing the permabulls were wishing for when their vaunted New Paradigm theory proved itself to be unfounded. We’re still at or below a -15% off peak pricing range in a lot of market segments. The bottom end seems to be getting it worse right now, but losses in excess of ~15% haven’t spread throughout the middle and upper pricing ranges as yet.

Now by the time we get to the beginning of 2003 pricing we’ll be talking about some epic corrections. But that’s still a long ways off at this point.

I truly think that most buyers in 2007 are going to (privately) kick themselves by the time 2009 rolls around.

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I don’t think SD County is moving as quickly into this downtrend as Riverside County, nor do I think it will bottom out as hard.

The areas in SD County that peaked the earliest did so in the Summer of 2005 or thereabouts. The majority of the market segments peaked at various times over the next 12 months after that. Only a few market segments peaked after Summer of 2006, although that wouldn’t have been apparent by looking at the new home sales because of the concessions the developers were giving away so they could maintain the illusion of a stable price structure.

So all in all, I guess you could say that in SD County, retraction to mid-2004 pricing could probably be stretched to fit the definition of the soft landing the permabulls were wishing for when their vaunted New Paradigm theory proved itself to be unfounded. We’re still at or below a -15% off peak pricing range in a lot of market segments. The bottom end seems to be getting it worse right now, but losses in excess of ~15% haven’t spread throughout the middle and upper pricing ranges as yet.

Now by the time we get to the beginning of 2003 pricing we’ll be talking about some epic corrections. But that’s still a long ways off at this point.

I truly think that most buyers in 2007 are going to (privately) kick themselves by the time 2009 rolls around.

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$20k for options is nothing. Seriously, it’s almost not enough to even be considering. Prior to peaking out a while back, a new home wouldn’t go out the door with less than $50k in options and upgrades, and it wasn’t at all unusual to see 15% increases for what I would consider to be 5% worth of stuff. I mean, $75k in a $750k purchase was almost standard for a while.

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$20k for options is nothing. Seriously, it’s almost not enough to even be considering. Prior to peaking out a while back, a new home wouldn’t go out the door with less than $50k in options and upgrades, and it wasn’t at all unusual to see 15% increases for what I would consider to be 5% worth of stuff. I mean, $75k in a $750k purchase was almost standard for a while.

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If I were a professional economist and my reputation mattered to me, I’d be a bit circumspect, too. Since nobody knows or cares who I am I can get away with not having to worry about that on this blog.

He somewhat has to express his public opinions in conservative tones. Nobody can account for the unforseeable. Better to be wrong by degree than by direction. He gets almost full credit for being right even if the market winds up overshooting his initial projections.

As for where it settles, I spent a couple hours over the weekend looking at all the closed sales so far from May 2007 in the MLS for Carlsbad and Oceanside. I was looking for properties with recent prior sales from 2003-2006. I found a number of examples of current sale prices matching previous sales prices on the same home from mid to late 2004. That doesn’t include the losses from 2005 and 2006.

The 05/2007 price didn’t retract to the 2004 price in 100% of the examples I saw, but it was more than 70%.

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