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SD Realtor
ParticipantThis sale would probably be better explained by a broker or banker then myself. The MLS tax roll shows the 15k sale as well. However the seller is First American Loanstar while the buyer is listed as US Bank National Association. It should be noted that this sale was not listed as a SOLD on the MLS.
Right now the property is active at 691k, down 8k from the original 699k it came out at 27 days ago. Lets look at the listing history. This house was originally purchased 3/3/05 at 750k. Then it was placed on the market 11/15/05 for 849-889k. That lasted a week. Then it was relisted on 2/3/06 at 792k-805k and was on the market for many months. Then it was pulled off the market on 11/17/06. Then it was relisted as a foreclosure which is where we are at today. So basically it is down about 8% from the sales price in March of 05. Wonder how low it will go…
SD Realtor
ParticipantHi waitingpatiently –
I believe that the La Costa Valley will see some more depreciation. This spring will be particularly telling because I am personally hoping for a bump in the inventory. If we can get a bump in inventory and the sales remain relatively flat then I think you will get some of the depreciation you are looking for. Try to at least sit tight for the next few months. I do believe that there will be continued depreciation over the next several years but it will be at a slower pace, 3-5% per year is a guesstimate. Since this is your forever home then I think you are okay to sit it in it many years to ride out early depreciation.
A caviot would be a catalyst such as a quick rise in interest rates, or an extraordinary jump in inventory (that could be due to foreclosure activity).
SD Realtor
ParticipantThis has been discussed in previous posts. As we have seen previous real estate cycles tend to take approximately 6 years. There already have been certain housing types in various regions that have had major price depreciation already, like in the 20% range. (See UTC condos)
Again, what we have not seen are drastic price reductions by sellers, as well as lenders who have foreclosed and are offering the property for sale. They just are not pricing aggressively yet. Similarly inventory has dropped off by close to 30% from the summer highs. This has been due to sellers giving up, and seasonal adjustments typical for this time of the year.
Finally I think most people who have posted here only forecast single digit drops for the next year as well. We really need a major catalyst to get the bump down you are hoping for. With the 10 year treasury being so low, our or my biggest fear is that distressed homeowners will simply refinance out of whatever mess they are in.
As I am a future buyer, this is not what I want to happen but it is what I think will happen. We just have to be patient. This spring will be a very interesting time. Cross your fingers for high inventory and slow sales.
SD Realtor
ParticipantProfit sharing, 401ks, are great. Defined benefits plans are even better but can be tricky because of the committment you must make to them. In either case, these are all excellent ways to keep money out of the hands of the taxman.
Also one thing you may want to do is if you advertise, structure your advertising costs so that perhaps you can pay up front for next years contract. My wife does that and she even got a 3% discount on the contract because of the up front payment. Also talk to other vendors you deal with like your accountant, perhaps even paying some of your lease costs up front if you can. Talk to anyone and everyone you pay for the operating costs of your business.
December 22, 2006 at 9:21 PM in reply to: 3567 Calle Palmito & 3571 Calle Palmito, La Costa Oaks 92009 #42289ParticipantHi Farbet –
Yeppers I do think they bought them as flippers… I guess they flopped instead of flipped… I tend to agree with your analysis as well.
SD Realtor
ParticipantJuice – I think there have been alot of good ideas about the way to payoff the cards or consolidate the debt. What is more worrisome is how will you help them break this habit. I would advise that before you come up with the solution, of which there are many, the harder task is identifying the root cause of the problem.
First thing first is to identify how they have come to accumulate so much debt. Has the accumulation occurred over time due to excessive buying or has it simply been the cost of daily life? If you do not figure that out then it doesn’t matter what you do, they will be in hot water again over time. Then come up with the recovery gameplan. Honestly I agree with duuuuude about a HELOC or even a refi with cash out may be the better deal. I think the quickfix solution of the 401k is not psychologically healthy. I think the fix (a higher mtg payment or a HELOC) acts as little bit of a reminder of what will happen if they do it again. Also losing a good portion of your 401k can be stressful.
Whatever solution you provide, identify the root cause AND definitely make sure they implement a strict new regimen immediately. Otherwise all your work will have gone to waste.
December 21, 2006 at 10:24 PM in reply to: nesting young 4s Ranch experiences and puzzling questions #42244ParticipantHere is my problem with your calculations:
The cost of renting is your annual rental which I agree with. However, if you rent you also would earn 5% on the 140k correct? So shouldn’t you calculate a 7k windfall or credit to the rental calculation? Also you should be crediting another $7392 to your rental decision because you are applying that to your principal on the purchase calculation. (you sure you don’t work for a mortgage broker? heheheh… just kidding)
Also as Nancy posted you really should itemize property tax seperate from Mello Roos as you cannot deduct Mello Roos. Also are there any HOA’s for your home?
Okay so just looking at those factors I think I have pushed you to over 21K in savings. One thing that T really fell may help you and your wife out would be for you to have a look at the expireds, withdrawns, and cancelled listings for the 4s Ranch area this past year. Lemme know and I can send them over to you.
SD Realtor
ParticipantJust be careful mixxalot. Lease options in general are structured to be in favor of the seller. More often then not the tenant ends up not exercising the option, thus the option money ends up going to the landlord. I am not sure I would recommend a lease option in a declining market either. Why? Well think about it. First off you giving someone money that they will earn interest on. Second if there are circumstances that dictate a change in your life and you cannot exercise the option it will be lost money. Third, if the market is declining how will you base the final sales price? Will you price the home at the beginning of the lease term or at the end of it? If the market is really going to decline like we think it is, doesn’t it seem prudent to keep your options open in case something better comes along?
Anyways I am simply trying to give you some helpful words of advice. If you do choose to enter into a lease with an option to buy make sure you are well protected or set it up so you have as little exposure as possible. If this person is novice in real estate you may be able to dictate favorable terms for yourself. As a landlord I have had 2 lease options on properties I have owned. In both cases the tenants didn’t exercise and I did very well.
SD Realtor
December 21, 2006 at 9:53 AM in reply to: nesting young 4s Ranch experiences and puzzling questions #42201ParticipantWell nesting you sought feedback and have received plenty!!
A few last thoughts from myself. I do agree that I think your calculations may be overly optimistic unless you are plunking down a ton of cash on the deal. If that is the case I bet that renting for another year, sticking the cash in a CD and sitting tight could be fairly lucrative. Also if you want to post your calculations including the details of your loan, downpayment and sales price, mello roos, property tax and homeowners insurance estimates, there are lots of inquiring minds here that will proof your work.
I have accompanied several clients on trips to the builders the past few months. Personally I have seen that builders have very much tightened up on concessions and even negotiations compared to the late summer. I think Juice’s advice is well intentioned however I do not know if the builders would bite on that. Still though it never hurts to ask right?
One thing I detected in your post is that emotionally it seems that you and/or your wife have already made the choice by stating that you are ready to go in this weekend and make an offer. This means that even if there are numbers staring you in the face that imply waiting may be fiscally correct, emotionally it may be to much to overcome. It may also cause strife with you and your wife and that is never fun. I see this more then anything else in my line of work. If you can stick with logic then great, if not then try to do what Juice said and get the VERY best deal you can. I do heavily agree with Perry’s post.
DEFINITELY do not look at how well people did in 2002 or 2003 and think I HAVE to buy now. Moreover thank your lucky stars you did not buy in 2005!
SD Realtor
ParticipantJuice I am sincerely hoping your logic turns to reality. My fear is that interest rates will be lower but it is hard to say. Right now the 10 year treasury yield is a tad higher then it was a year ago but it is trending down. Last year the rate hikes were trending in the opposite direction.
I ABSOLUTELY agree with you that we did see extraordinary inventory last year, and we saw a 30% DROP in sales each month over the past. So where did all the listings go? Like you said, they came on the market and simply didn’t sell. Sellers pulled thier homes. So the litmus test is, will those sellers return en masse…If they do, will they price to REALLY SELL or will they simply ride it out again and give up? Finally will lenders let people refinance who are in financial distress…(see other posts)
I do hope your scenario plays out…
SD Realtor
December 20, 2006 at 10:54 PM in reply to: nesting young 4s Ranch experiences and puzzling questions #42179ParticipantIn my opinion it is a risk verses reward scenario. Personally I believe that there is alot more risk of depreciation then reward. If you do purchase now, and you are going to be living in the home for several years then you will be okay. Basically no matter what the market does, you don’t care because you are not planning on moving. However, I think that you would be well served to hold off at least another year.
One thing that I consistently see as a Realtor is that buyers (especially first time buyers) feel as if they will miss once in a lifetime opportunities when they pass on various homes. I have seen that the builders have done a good job reducing thier inventory over the last few months. They have also been prudent and slashed thier prices and adjusted thier books for wall street. So yeah it doesn’t surprise me that they have reduced incentives.
Again though, try to be patient if you can. I think this spring will provide us all with some very important data. If the inventory does what we think it will do, you may run into some great opportunities by the middle or end of the summer. There is another wild card involved as well and that is the possibility of foreclosure. How would you feel if you bought your home but then read about foreclosures in your subdivision where the homes are offered at 50k or 100k less then you paid.
Yes the difference you are seeing now is only 7k ( I assume the rent verses buy calculator factored in property tax, mello roos, homeowners insurance as well correct?) however the potential for lucrative savings is very real. Also before going in and striking a deal with the builder consider getting representation from a Realtor. They not only could negotiate a better deal for you, but they can rebate you commission they get from the builder.
I am in a similar dilema as you. We currently rent a home but we desperately need and want a bigger home. I have been the one holding out and my wife really has been pushing. Try to not let emotion factor into your decision.
ParticipantAgreed with the other posts… My heart wants at least 8-10% per year but my brain says 3-7%. I am concerned that the flat rates and sneaky lenders will help distressed people out more then anticipated and I also believe that people with substantial equity will sit on thier homes rather then take the loss. I am hoping we 25k inventory this spring. What will also be very telling will be the sales numbers. As the past few months we saw close to 30% declines in sales, I believe those numbers will level out (unfortunately)… but I hope they do not.
ParticipantI agree with the consensus of all the posts… I am not thrilled with a more prolonged deterioration but what can I do…
Also there is a large factor that I do not understand yet either as I am but a simple engineer and realtor… What I do not understand is the process of mortgage backed securities… So my point is that I do not think any of these bad loans can be readjusted or tweaked correct? There are bond holders earning interest on these mortgages right? So in essence the lender or current owner of the loan would essentially have to offer an entirely new loan wouldn’t they? You cannot “tweek” or “alter” an existing loan.
ParticipantOkay so perhaps we are actually in agreement here. I do believe that the median price indicator is a useful component that is useful in studying the macroscopic aspects of the market and trends.
My problem is that on a daily basis I deal with individuals who do not take ANY of the other components into account. Today…this day… Dec 19th… I have a listing in San Carlos on Royal Gorge… you guys can look it up… Nothing special about this home. It is actually a perfect study in how sellers do not cope with declining markets correctly. They have been chasing the market down for months and months. They priced incorrectly to begin with, (against my advice) and are currently at 499k. They got an offer at 469k and they buyer requested 3% back for credits. Now I have been bumping heads with them on the counter offer. The wife wants to summarily reject the offer altogether. Even though there is a SOLD comp at 475k on the SAME street! She points to the median price all the time…
Arrrrrrrrrrgggggg… So again, the problem as I see it, is that there are no other useful statistics out there that are fed to joe public who wants to sell his home…
Here is a question for all of you out there. Many post here and say yeah I don’t need a realtor, I can sell my home as it is easy to do… Hey that is okay with me, no argument. So you all priced your home based on whatever comps you dug up. How many of you actually sold a property in a down market like this? Also when you priced your home did you have any idea how many homes did not sell in your area? How many expireds, cancelleds or withdrawns there were? My bet is that most of you have answered no to these two questions.
The point of the above questions is not to convince anyone to use a Realtor. It is simply to convey that the public is not given enough information to make well informed decisions. I think alot of this feeds fuel to the sticky on the way down mechanism. It can be argued that the Realtor should inform the client of all these facts and I do! However not all Realtors do that. Some will point to the median or point to outdated sales simply to get the listing and then lower the price after the home sits there…
So yes jg, I agree… all people should look at ALL of the symptoms of the problem. The main problem is definitely lack of buyers. Median price movement is a symptom just like higher inventory and more failures to sell. Each of them are important.
SD Realtor
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