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ParticipantIf the property has already been on the market starting at $275k then that price has been well tested in the market and has apparently been found wanting. I’d venture to say the real comps for this house probably aren’t the $290k sales you are referring to.
If the market value in 1999 was $215k and the current list on this house is $260k that represents an annual increase of ~3%, just slightly ahead of the annual rate of inflation. This is definitely not indicative of what we would call a bubble market. I don’t think you have to worry about this property losing a ton of value over the next few years.
That is, beyond whatever local economic conditions could occur to decimate local employment. Is this a town that’s overly dependent on one or two companies in a manufacturing industry? If not then it almost doesn’t matter whether you offer $240k or $260k. The spread between them is only 8%; that’s practically within a reasonable margin of error.
ParticipantThere are several areas in Oceanside that bear watching; the Crown Heights area over by I-5/Mission; the older neighborhoods north/west of Mission/El Camino Real; and this area. I wouldn’t choose to move into any of these neighborhoods. If I am working in these areas I usually try to get in and out before noon. That’s when the members of the local social clubs get up and start downing their 40s.
The older neighborhood on either side of North River Road between College and Douglas is pretty active. The 3 hotspots are the little retail center at N. River Rd/Redondo, Melba Bishop Park and Libby Lake Park. The Oceanside PD Officer who just got killed a few months ago got shot in this area. He was backing up another officer on a car stop and a 17-year old Samoan gangsta kid shot him with a rifle from inside a house that is a block or so away from the car stop.
Let me put it this way; if you decide to buy over in this area you probably won’t want to be stopping off at the fast food joints after 9:00 PM.
There’s lots of other areas in Oceanside that are a better bet. I’d rather buy a 10-year old home in Rancho Del Oro (for $200k less) than buy one of the new homes in the backgate area.
ParticipantBut the kids will still watch the hip-hop videos and aspire to the hip-hop lifestyle of being the thug and getting paid.
I’m afraid that living buck wild will be in fashion for a long time to come.
April 10, 2007 at 11:50 AM in reply to: I am confused, pls help me on how much this home should be worth #49669ParticipantYou are making a number of assumptions here, any of which could prove unfounded. The Zillow Zestimate is probably heavily influenced by the 2006 sale price.
I took the liberty of looking this property up in the public records. It is reported as a yr2005 home of ~3,800 SqFt on a relatively small (11,400 SqFt) subdivision lot. The other properties on this block were all built between 1920 – 1950 and represent a wide variety of ages and sizes. So we aren’t talking about a custom home on a large lot that is part of a conforming tract of similar homes. This thing is an orphan.
According to the public record – which may or may not be accurate – there are no sales of similar age within the prior year within a 1 mile radius. Again, public records reports only 2 sales of comparable age/size in the city of Glendale within the last year and a total of 5 such sales going back as far as 04/2005. Those 5 sales demonstrate a range of about $1,100,000 – $1,650,000. As far as I can tell all of these other properties have lot sizes that are larger; the two higher priced homes are on 1 acre lots and may have a view amenity.
I don’t know how much this home is worth, but I don’t see any data that would make obvious a conclusion that this home was EVER worth the $1.9mil. Based on what I’m seeing I wouldn’t even assume the recent sale price at $1.15mil is crazy-low. Bear in mind, we don’t even know what kind of condition or buildout this property currently has. If – as sometimes happens with foreclosures – this home has been stripped of its interior or squatters have taken up residence that bid might be very fair. Or not. My point is that we just don’t know and we can’t tell from here.
April 10, 2007 at 9:32 AM in reply to: I am confused, pls help me on how much this home should be worth #49650ParticipantIt is apparent that the people in the room don’t agree with Zillow’s Zestimates. Zillow is easy to use, but beyond identfying what a property’s general attributes are it isn’t reliable enough upon which to base any decisions.
Think of Zillow in terms of it’s entertainment value.
It could be that the house in Glendale was never really worth the $1.9, or it could be that upon purchase the debtor started a major remodel that didn’t get beyond the demolition. There could be any of several reasons for the differences.
The same thing for the Covina house. Unless you’ve seen it you don’t know what it really is.
Buying a property is the easy part, Buying it at a price that will result in a profit of sufficient amount to justify the risk of purchase + resale is the hard part.
ParticipantThat about sums it up. I’ve already seen some so-called “Bulk Sales” wherein a developer sells off 20 or 30 recorded and finished lots to another builder. “Finished lot” meaning the site improvements prior to construction of the structure have been completed: streets, curbs, gutters, rough grading, etc.
I just got done appraising a small subdivision project up in the Temecula area and ran across a couple sales like that among my data. A developer is sitting on a recorded subdivision map and the sales of their finished homes is moving too slowly so the holding costs for the lots is eating them alive. They sell off a portion of their project to another builder and that reduces their holding costs as well as providing some cash to continue on with their Plan A.
The new developer buys the finished lots and proceeds to build what would amount to a project-within-a-project. The only thing that would stop the 2nd builder from going smaller/cheaper is if they have already agreed in advance not to do that as part of the sales agreement; if there are private deed restrictions or CC&Rs that would prevent it; and/or they paid too much for the sites to go smaller and still clear a profit.
I wouldn’t expect to see it happen as a result of the original developer changing midstream as I would expect it from successor builders who get the lots cheap as a result of a weaking market.
ParticipantThis appears to be the smallest floorplan in the neighborhood. The most recent sales – including the larger models – have been in the $750k – $825k ranges.
Anyone who would put in $250k in upgrades on a $750k home is just begging to get their clock cleaned on resale. $100k would have been too much.
ParticipantThey won’t be changing the General Plan or the zoning for a parcel that already has a recorded subdivision map.
However, there’s nothing stopping a developer from drastically changing the design and quality of subsequent phases in a project. The only question is whether or not it’s profitable to do so. It hasn’t been profitable to do so during this economic cycle but I’ve seen where it has happened a few times during previous cycles. You’ll be driving down a street in a subdivision and all of a sudden you’ll see smaller and inferior quality homes that were built later in the cycle.
Seeing as how there have been a few subdivision site sales between builders, it wouldn’t surprise me to see a couple mixed neighborhoods spring up.
ParticipantThis area abuts the “backgate” entrance to Camp Pendleton. The training areas are to the north, so there will be artillery noice from time to time. The proximity to that gate is a plus for buyers who work on base, but those folks mostly can’t afford those prices.
When the sentries are checking IDs at the gates the traffic can back up on Vandergrift; maybe not enough to create ingress/egress problems at this project, but it is noticeable.
This area of Oceanside was originally built out in the late 1950s and early 1960s. The older neighborhoods in the area are home to several gangs. Lots of problems in the neighborhoods and at the parks, and lots of problems in the schools (particularly the high school).
If you’re going to spend $700k or more on an average quality tract home I’d say that almost any other planned community in San Diego County would be a better bet.
I think this area is going to get hit a lot harder than most in terms of price declines. Access to the Interstate-5 corridor is marginal (via Hwy 76), and access to the other major freeways (Hwy-78 and I-15) is a nightmare. It’s convenient to Camp Pendleton and the industrial parks in Oceanside but it’s very inconvenient to all other employment centers.
ParticipantWhat should be troubling is the ratio of listing inventory to sales transactions. The number of residential sales listed in the MLS 2006 (29,000+) demonstrated the lowest volume since 1997, despite the fact that we’ve added just over 10% more homes and condos to the inventory since then.
If 2006 was bad, 2007 is shaping up to be even worse. The first quarter of 2006 saw 6,700+ sales in the MLS, which at an average of 2,235/month is about what you would expect for a first quarter in a 29,000 sale year.
So far, the first quarter of 2007 has resulted in <5,800 sales, which demonstrates a drop of ~14.5% when compared to 2006. If this trend holds up the volumes for 2007 could slide in there between those for 1997 and 1996.
Meanwhile, the number of must-sell transactions is ratcheting up to comprise an ever growing percentage of the transactions.
ParticipantGood deals do happen and on occasion I do appraise properties in excess of their sale prices. Obviously, those appraisals don’t turn out that way without there being a preponderance of data to support it, but it does happen.
How a lender treats that loan application is their decision. Some lenders will base their loan on the sale price regardless of the higher appraised value; others will adjust their loan based on the appraisal. Their money, their rules. Our job is to observe and report, not to participate in the lending decision.
Having said that some appraisals do come in higher I should probably point out the obvious fact that it’s far more common for me to appraise a property for less than it’s sale price. That happens about 30% of the time. Again, a lender will not treat a “low” appraisal as credible unless it clearly shows that preponderance of data. It takes a lot to overcome the natural bias in favor of a sales contract involving a willing seller / willing buyer.
ParticipantSorry, no can do. Appraisers are required to take this course every other year in order to maintain their license. There are only 8 qualified instructors in San Diego County, and most of the other instructors don’t teach the course but once or twice a year. If I don’t follow through that’ll create a hardship for some of the appraisers who are signed up.
ParticipantIn answer to your first question, there are a few situations that come up that can cost a lender more to foreclose than simply writing off the entire loan.
A lender that owns a property is legally responsible for that property. If it has legal or physical conditions onsite that must be mitigated or cured and the costs of cure exceed their loan balance they are sometimes better off to just walk away. Junior lien holders can easily find themselves in the position of having no equity to recover if the value of the property is less than what they need to sell it for in order to net a return.
On a $600k property financed with an 80% 1st and a 20% second, the junior lienholder has nothing to gain if the value of the property declines (or was never worth) at least $550k, because by the time they foreclose on their 2nd and satisfy the 1st, and sell the property off their costs will exceed the difference between the 1st and what they net from the resale. They’re better off just writing the loan off and walking away.
As for the second question, the short answer is: both types of markets will compress. Once you get past basic shelter requirements (buy vs. rent), the different sales prices are relational to each other, not based on any kind of intrinsic value. Even cost doesn’t represent a floor for value; there are areas where houses can and do sell for less than the sum of their costs or their salvage value.
ParticipantI’m going to try and make it, but I’ll be a little late. I’m teaching a class (appraiser ethics) that day down in Old Town and we won’t be finished until 4:30.
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