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Bugs,

>> 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.

Are you saying the following ?

Let’s suppose that a builder plans to build 100 homes with sizes ranging from 2800 – 3500 sq ft. Half way through, with sales being very slow, the builder can sell the remaining 50 lots to a “low-quality” builder.

This low-quality builder will then build 50 low-quality/smaller homes.

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Alex_angel,

So, you look at sales in 4S Ranch being weak & sales in Carmel Valley being strong and you wonder: why the discrepancy ?

In a downturn, there is always a “flight for quality” and a tendency to “dump the dumps”. That is, prices in the less desirable areas go down first. The more desirable areas are NOT immune to the downturn. They are merely behind the less desirable areas.

The real estate market is like a giant oil tanker. It takes a while for it to change direction. We are in the midst of that process right now.

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Bugs,

Is it true that it’s difficult (even at the bottom of the market) to get a great bargain, relative to the comps, because lenders will suspect that the buyer is borrowing “on the side/under the table” from the seller ?

In case my question is not clear, here is a hypothetical situation:

Let’s say that the comps for a house is $1M. Even if the seller agrees to sell for $850k (b/c the market is very slow & he needs money quickly), the lender may suspect that the actual sale is for $950k & the seller is lending the buyer $100k on the side.

Is this true ? How likely can one get a great bargain in an “extreme buyer market” ?

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Bugs,

Since you have a lot of experience:

Why would a bank decline to foreclose ? They can sell it dirt cheap & get something out of it. What happens to a property when a bank declines to foreclose?

On a different thread, you said:

>> This basically means that on a percentage basis the
>> expensive homes lost even more than the cheaper homes

Does this apply to:

1. The expensive homes in middle class neighborhoods like Rancho Bernardo
2. Or, the expensive homes in places like La Jolla & Rancho Santa Fe …

Is it true that, on a percentage basis, La Jolla & RSF fare better than places like Rancho Bernardo in a downturn ?

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Drew,

You should have told your dental hygienist this:

When prices were going up, the press published stories about strong/continued home prices appreciation. Back then, no one in the RE industry complained. No one said that the press was BS-ing.

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A friend of mine bought a house in the beginning of 1990. During the first 6 months of 1990, prices were still going up. It was a new house, so he was reluctant to rent it, fearing that the tenants may ruin the house.

Then prices started going down. He kept hoping that prices will come back up, so he didn’t sell. By 1997, the market price for his house is less than what he paid for it in 1990.

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JG,

From your reply, I guess that Bel Etage folks cannot afford both the expensive houses & the private schools. So, they chose the house (and the fancy cars).

>> But, the place is a bit sterile

I agree with this. I thought it looks a bit too neat/clean. All of the lawns were perfectly manicured, a little too perfect.

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JG,

Thanks very much for the reply.

According the transaction histories, most houses in Bel Etage were purchased from the builder for 700k – 1M.

>> My Bel Etage neighbors were … living on home equity

Is this because you noticed that their professions, hence their incomes, do not match with their lifestyles (700k – 1M houses & cars) ?

Bel Etage seems like a nice place. I am interested in possibly buying there in a few years. So, I’d like to know what a former residence think about Bel Etage. Anything else you can tell me would be greatly appreciated.

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Bugs,

You mentioned Fairbanks Ranch being “nailed during the last downturn” (in your post on Feb. 22).

If you remember, can you please recount how agressively did the builders in Fairbank cut prices ? (I realize that it’s a long time ago)

Thanks.

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>> …on how many of those properties end up in the must-sell category

The number of “must-sell properties” correlates with the number speculators. The number of speculators correlates with the amount of greed.

IMO, SV folks are as greedy as folks in SoCal, if not more.

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masayako,

Realtors provide good services. It’s a real job & it’s a difficult job. In the future, the internet may make realtors irrelevant. But that doesn’t mean you should attack SD Reator.

IMO, I think SD Realtor is much more forthright/candid than most other realtors out there. I learned a lot from him. He is valuable to Piggington.

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I lived in Sillicon Valley (SV) from 1999 – 2005. So, I can give you some insights.

The peak of the market in SV was in May/June 2005. I know this because:

1. In May/June 2005, there were bidding wars for almost every house for sale.
2. When I got a job offer, with a relocation package, to move to San Diego in August 2005, I put my house on the market. By August, the bidding frenzy has subsided (my broker is a close friend from high school, so we talked a lot about the market).

Since then, the real estate correction has encroached SV from the surrounding regions. First, it was Sacramento/Fresno (believe it or not, many folks commute from Fresno to SV everyday). Then, it was Gilroy/Vallejo/East Bay.

Currently, it’s Evergreen/Santa Teresa (according to my relatives who still live in SV). Basically, the correction starts from the least desirable areas to the most desirable areas.

The areas that you mentioned (Los Gatos, Palo Alto …) are the most desirable. This is why prices haven’t gone down there.

One thing that you’ll hear folks in SV say: “Home prices will never go down in SV because SV is the technological cradle of the world, everyone want to live here”.

The problem with SV (same as southern CA) is that home prices are out-of-line with incomes by 50%. So, unless, the job market is so hot that incomes go up dramatically, prices will go down dramatically.

I lived in both SV & southern CA. So, I can say the following with confidence:

One of the reasons that home prices went up so much is because of the belief in continuous appreciation, an illusion. This illusion is stronger in SV than in southern CA. This is why the correction in SV lags the correction in southern CA.

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The builders in Stonebridge has lowered prices by 10%. This is part of the reason the homes there are selling.

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I agree with JohnAlt91941.

Sorry to tell you this. Sept 2005 is considered “near the peak” of the bubble. Prices have only gone down since then.

Currently, your house is probably worth no more than 650k. You may disagree with this, but you will find out once you put your house on the market. In 4S Ranch, prices have already gone down 20%.

Since your down payment is 40k, I think you are now “upside down”. One option for you is to contact the lender & ask them to consider a short sale. Or, you can sell & pay the lender the difference.

In any case, it’s best to sell & cut your loss now, before it gets worse.

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Selling for 300k means getting 300k – selling costs = ~270k (approximately). She bought it for 430k. Unless she put at least 150k down at the time of purchase, she owes more than 270k.

If she is “loaded”, that is:

1. She owes the lender less than 270k, or
2. She owes more than 270k but has equity from another house. She can sell one house for a loss & another for a profit and use the profit to cover the loss.

If either of the above is true, she may sell it to you. IMO, the chance that either of the above is true is slim, for 2 reasons:

– She fits the profile of a speculator. Speculators typically do not buy with large down payments. Even when speculators have equities (due to appreciation), they would tap on the equities to buy additional houses.
– When she said: “just make me a lowball offer …” It sounded as if she is desperate (maybe having cash flow problem).

I think there is a way to find out how much is owed on the house. That’ll give you an idea of her situation.

BTW, if she owes more than 270k, selling at 300k will require a “short sale approval” from the lender.

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