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ParticipantOff-topic comment here.
One thing I noticed over the years about people and real estate is that they seem to lose perspective about the money. It’s almost as if they see the dollars involved in RE as being equivalent to Monopoly money or some currency other than the same greenbacks we use to buy our groceries.
Many people are incapable of saving $20,000, yet we visualize a $20k loss on a condo as no big deal. I especially see this trivialization of a dollar among appraisers, who often get into treating the values they conclude to in an appraisal as if it were some abstract number with no basis in reality.
Assuming this trend plays out these losses we’re seeing right now will continue to accrue. Once we start reaching and surpassing a 25% decline scenario there will be some people who will be looking for a 15th floor window to jump out of, because their lives will be ruined. The party leading up to this point was a lot of fun but the hangover is going to be a killer. Literally.
ParticipantThe problem with comparing one year’s median to the another is that it’s based on the assumption that the same mix of units sold during both periods – this leads to the assumption that the typical home increased or decreased roughly in line with the averages. As long as the mix of units DOES stay constant from one period to the next this assumption is reasonable. It’s when the different market segments are acting in different ways that the assumption proves unreasonable.
The way I analyze it is by parsing the data into different categories in the same zip areas. Older homes tend to sell for less than newer homes and smaller homes tend to sell for less than bigger homes. This current cycle started in the late 1990s so I use that as a dividing line; and I use 3,000 SqFt as the divider in both age ranges. In effect, this puts the data into one of 4 categories. When you do this you can very clearly see the different distribution of data for this year vs. last year – we have more newer and larger homes selling this year, which has propped up the averages for the zip area.
There’s probably a dozen different ways to do this type of analysis, I just chose the parameters that were quick and easy.
ParticipantI had an editor tell me once that the reason that content sometimes seems so lopsided is because it’s very common for the side that’s selling to be more vocal and more outgoing than the side that’s hedging. Squeeky wheel gets the headline, I suppose.
Just wait until the tide of public opinion swings the other way. We’ll be overwhelmed with the stories of the victims and the media will be looking to point the finger of blame at the various players.
ParticipantThis is an illustration of why it doesn’t pay to wish for everyone else to come to their senses (or to fail) all at once. A more orderly retreat over a longer period of time will result in less collateral damage and fewer unintended consequences.
ParticipantRich’s graphs and the data he derives them from tell a pretty convincing story. Make sure you point out that it’s not when the owners bought, but to what degree they are currently mortgaged that counts. There are lots of homes purchased prior to 2000 that are maxed out with 2004-2005 refinances at ARM terms. Take him down the ARM-reset discussion and see if he really thinks the potential for loss is only limited to 10% – 15%. We’re already at 10% losses in a couple neighborhoods in this region and this trend is only picking up speed. Foreclosures are increasing rapidly.
You should fully agree with and support his opinion that rents are a “waste of money” in a stable or increasing market, but that’s not where we are right now. We are in decline.
ParticipantI still question the 30% vacancy figure among the homes for sale. But yeah, some of the rentals are being sold off, and it only takes a few people selling-to-rent to have an effect on the supply/demand. Add to that the number of refis among the remaining rentals and rents would have to come up some. The thing is, the rental increases are limited by income levels in the region – there’s no profit upside for a renter to justify paying too much in rents.
We saw the same thing in the apartment market a couple years back. Apartment rents spiked as a result of increased debt service demands resulting from those agressive sale prices. Most of those apartment rents have since backed off a little as the owners attempt to maintain their occupancy levels.
ParticipantCountry Creek was owned by a couple of realty agents, wasn’t it? If they were among those agents who subscribe to the NAR party line they wouldn’t have believed their chances for loss would be real. The whole experience of both losing their income and their house would have literally caught them by surprise in the face of all the information they had been fed to the contrary.
I don’t know what the real answer here is, I’m just speculating from the outside.
You know how it is with people who are overextended. In an effort to maintain their dream some of them will sacrifice everything else to keep the house. It only goes NOD when they can’t get within 2 months of being current on their payment. When they list the house for sale a person in this position probably has no cash or credit to bring to mitigate the deficiency close enough to enable the lender to agree to a short sale.
The bank may not want the house but they want the $50,000 loss even less. Attitudes among the banks vary greatly, from conservative to agressive. If their managers and economists are also toeing the NAR party line the bank may not even be that attuned to the true state of the market. None of us can be any smarter than the people and data that we choose to believe.
ParticipantWow, I never thought about it before but I think you’re on to something there. Back when typical home prices were below $250k a short sale might involve a $25,000 loan loss in addition to the loss of the borrower’s downpayment. A $15,000 or $25,000 loss is bad, but it’s not enough to justify going to court.
Now that prices are starting at $500,000 and many loans start out with no equity the intial loss to a lender with a 10% deficiency – which is where we are right now in some markets – starts at $50,000. A $750,000 purchase puts it up to $75,000. Those kinds of numbers start to make it worthwhile to skip the short sale or to sell the position off to a collector. It only becomes more viable as more markets go negative.
ParticipantOf course you’re right about pricing being the imperative. I’m just saying that if two houses, identical in each respect including price, are competing against each other for the same buyer the property that shows better has the edge and might be able to fetch a couple extra bucks on the sale.
Clean people like a clean home. Dirty people LOVE a clean home.
ParticipantA seller faces a more competitive market than they did last year. Homebuyers often make their decisions in part based on their emotional needs. Anything a seller can do to capitalize on that will help them compete.
Maybe better staging will offset some of the price reduction a seller needs to make in order to close the sale. It can’t hurt.
ParticipantPS, I didn’t say that the Poway schools weren’t better or that it isn’t a draw; I only said that I can’t see any indications in the sales data that Poway is doing better than other communities with similar proximity to employment and demographics. If you go north into Escondido you’ll see as big a minus difference there as the plus difference between Scripps and Poway. Go to Murrieta and you’ll see that Escondido shows much higher even though the Murrieta schools are a little better. Most other attributes being very similar (and they are), Encinitas sells higher than Carlsbad.
Participant“To make a long story short, being an active and involved parent and loving partner to your spouse are more important than what school district you choose to purchase a home in.”
That sums it up for me, too. Parental involvement and commitment to success is the defining factor in performance. I live in Carlsbad and although it’s a pretty good school district it has its share of lazy and apathetic teachers.
However, regardless of my personal opinion on the matter there remains the main question of this thread about how the market reacts to Poway’s schools. Even if I am right about family involvement being the key to success, if the average homebuyer thinks the schools are the attraction then the schools are the attraction. There are lots of people who don’t like living near the beach because of the gray and gloom of the marine layer, but that doesn’t mean that the market doesn’t value coastal proximity.
That said, there remains the data that demonstrates that the prices are slightly higher in RPQ/RB and much higher in Scripps, both of which are adjacent to Poway and both of which have lower rated and less popular schools. As far as I can see that pretty much shoots down the price-relates-to-school-quality theory.
There’s obviously another reason for why Poway’s June volumes are higher than they were in May. I have a couple ideas about that, but I’m going to have to break the data down by price ranges and physical attributes to see if those ideas pan out. The conclusions have to follow the data, not my personal opinions.
BTW, SDRealtor’s comments about the MLS Sold numbers increasing after the 1st of the month are absolutely correct. Most of the zip areas show a couple more sales now than they did when I first looked them up. Not enough to change the trend of a declining June vs. May, but it did reduce the percentages. It seems some of the realty agents really are a bit slow to update their listings after they close.
ParticipantConsidering the lack of information you were working with that was a pretty gutsy move. Most people wouldn’t do what you did based on a hunch. I sure wouldn’t.
That said, I’ll bet you never make another real estate purchase without researching it to death before you do it.
ParticipantIn my opinion, next to the heat index, proximity to employment is one of the biggest factors, followed by neighborhood homogenity and (hate to say it) physical isolation from the lower class and crime. We prefer to be close to work, but not so close that we’re shopping with our workers. The quality of all public services, including schools, is also a factor, but it’s not as dominant as the others. Lots of homebuyers have no kids.
My use of the term “neighborhood homogeneity” refers to how similar the homes in the neighborhood are to each other – you get this in residential subdivisions. Obviously, Poway has residential subdivisions with a high degree of conformity, but so do its neighboring suburbs.
I ran the sales statistics in the MLS for the last 12 months. Coming down the I-15 corridor from north to south, here are the average prices for sales of homes built between 1970-1996 and between 2,000 – 3,000 SqFt (of which Poway has lots), on subdivision-sized lots:
92025…$661,612
92029…$667,739
92064…$733,665
92128…$738,122
92131…$776,213
92124…$770,396
92120…$729,689
92126…$613,661As you can see, Poway does better than Escondido (92025,92029), but neighboring Sabre Springs/Rancho Penasquitos (92128) does slightly better, Tierrasanta (92124) does a a fair bit better, and Scripps does a LOT better – and those zip areas are located in our dreaded San Diego school system. It’s not until you get into Mira Mesa and the mid-cities areas of San Diego that (apparently) the ills of urbanization start making up for proximity to employment.
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