[Steve Beebo]

Good luck Powayseller, but keep posting, too. I don’t always agree with you, but you always have intelligent posts.

I think your true calling may be as an attorney, though. I think if you were a courtroom litigator or prosecutor, you could wear someone out on the witness stand to the point they would become an emotional cripple.

[Steve Beebo]

The San Carlos area, (zip code 92119), is an interesting area to watch – it’s a typical middle-class area, with home prices ranging from about $425,000 to $800,000. I think this area is holding up better than most. There is no new housing to compete with resales – the area is 100% built-up.

I did an appraisal last week there for a refi. The house is about 2400 sf, built in 1969, with a new roof and new windows added around 2000. The current value is $630,000. I did an appraisal on the same house in March of 2003, and the value then was $450,000. I was looking at sales from 2004 and 2005, and I don’t think the value on this house ever got as high as $650,000.

In the first 8 months of 2006, there have been 104 sales in the zip code, an average of 13 sales per month. The sales have been fairly consistent throughout the year – starting in Jan. the sales per month have been: 5-9-19-15-15-13-15-13. There are currently 16 pending sales, and there are 81 active listings, so a 6.25 month supply of homes on the market. The big difference between this year vs. 2004 and 2005 is the number of actives.

Stats on sales for the first 8 months of 2006 vs. the first 8 months of 2005 and 2004:

2006: 104 sales Median – $566,000 – Avg. – $573,000 – days on market – 55

2005: 139 sales – Median – $560,000 – Avg. $568,000 – days on market – 50

2004: 155 sales – Median $517,000 – Avg. $540,000 – days on market – only 16 days.

Even though the number of sales is off 33% from last year, prices in this area have held steady – so far.

[Steve Beebo]

There is plenty of inventory in all areas right now, so if someone pays “too much” for a property, with all of the listings and other info available to them on the internet, they really have no one to blame but themselves.

If you don’t get to see the inside of a property, though, it’s hard to say that someone is paying too much. You could have two houses in Carmel Valley that are the same floorplan, with similar views and similar lots, and one may sell for 10-15-20% more than the other, due to upgrades and rear yard improvements. One house may have no upgrades and minimal yard improvements, and the other has 200K in interior upgrades and pool/landscaping/hardscaping.

[Steve Beebo]

PD –

You’re right, and the agent is wrong – a 10 or 12 month supply of homes on the market is a lot different than saying houses are selling in 60 days. Maybe the agent means that if he priced a listing correctly, he would hope it sells in 60 days – but most aren’t.

There has been about 10 sales per month there on average, and there are 11 pendings that went into escrow so far in August. Maybe some will fall out – who knows.

PS –

I think it’s more accurate to use the average of the past 6 months if you’re trying to calculate the total months inventory in one zip code – the monthly figures for one zip code can jump up or down a lot from month to month, and I think the past six months have been equally slow in general.
If you’re calculating the months inventory for the whole County, you could use just the past months’ sales.

As much bad publicity as there has been in the media about the weak real estate market, it sometimes surprises me just how strong it can still be in some areas and price ranges.
I did an appraisal last week in the Gatewood Hills area of Rancho Bernardo – mostly 30 to 35 year old tract homes of 1800-2700 s.f. I researched the MLS for homes selling from $600,000 to $800,000, in about a half-mile radius of my subject property, and I found 15 active listings, 5 pending sales, and 25 closed sales in the past 6 months. To me, that is a fairly healthy market – price declines are not likely in that area and price range in the next several months.

[Steve Beebo]

PD –

Your calculation of an 18 month supply of homes on the market in Coronado is not accurate right now. It’s true that the last month has been very slow for SFR sales in Coronado, with I believe only about 4 closed sales.

There are currently 133 SFRs listed there, (33 are $3 million plus). But there are 18 in escrow right now – all under $3,000,0000. There have been 60 sales in the last 6 months, and 114 sales in the last 12 months. So the average is about 10 sales per month – a 13 month supply.

The $3M+ market is really not selling well at all – 33 active listings, 6 sales in the last 6 months, and 9 sales in the past year. But even when the market was great, there were always a lot of high-end homes on the market there.

If you take the high-end listings out of the equation, there is about a 10 month supply on the market, but there is a surprisingly large number in escrow right now.

[Steve Beebo]

For God’s sake, use a Realtor. The seller pays the commission anyway.

When banks sell their REO’s, they almost always use a Realtor – it’s not easy to buy directly from a bank.

[Steve Beebo]

I don’t really have any info on lender tightening, maybe a mortgage broker could say. Maybe the realtors would have info on why cancelled escrows. I do know that lenders are scrutinizing appraisals a lot more this year – doing more appraisal reviews. I suppose banks know that with prices trending down, that they’re going to have to look more at the loan collateral, instead of looking mostly at borrower’s credit scores. After all, a lot of people with good credit walked away from their houses in the early to mid 1990’s, after seeing their equity go upside-down.

[Steve Beebo]

I agree with Daniel that the price decreases in the next 5 years will be much, much closer to 0% than to 50%.

Right now, I could spend a couple of hours of research time and present you with 50 specific properties that have dropped by quite a bit over the past 12 months, (10%+), but I could also present you with 50 properties that have not gone down at all over the past 12 months, and another 50 properties that have had sizable (over 15%) price increases over the past 24 months.

The bottom line is: for most areas, (downtown condos and some newer tracts excluded), prices have changed very little, up or down, in the past year. And we really don’t know how much prices will drop over the next 4-5 years. There are too many factors involved. The only things I know for sure is that there is a lot of inventory right now, which will keep some downward pressure on prices in the next year. And also, there is very little sales activity right now, which will keep inventories high. Most potential buyers seem to be sitting on the sidelines until they see what happens in the housing market.

[Steve Beebo]

ps –

Personally, I’m not seeing a 12% reduction in Carmel Valley prices in the last year. Maybe 0 to 6% in established areas 5 to 15 years old. Maybe a little more in some of the one to two year old tracts in the eastern part of CV.

The eight factors you mention make some sense to me. The weakest areas in the next couple of years are definitely going to be newer tracts with large Mello-Roos fees, although I’m not looking for anything like 35-50% drops.

The main reason I’m responding to your post, though, is the comments on the RSF Covenant area being immune to price drops. I noticed that someone else made this comment a week or two ago, and my experience is that the Covenant area did drop in price quite a bit in the early 1990’s. I don’t think that anywhere in San Diego is immune to price drops. When prices fall, they fall everywhere, just like when prices increase, they increase everywhere. One neighborhood may increase or decrease faster than another area one year, but the next year they will probably adjust so that the overall increase or decrease over two years will most likely be similar. It’s the principle of substitution.

In RSF, it maight have been true that some of the homes in outlying areas outside the Covenant fell by a higher percentage from 1990 to 1995, but I know for a fact that Covenent prices also dropped a lot. I recall doing REO appraisals in the early to mid-1990’s in the Covenant area, and there were quite a few REOs in that area. A bank that I worked for in the early 1990’s had several REOs in the Covenant, and I can recall some houses fell in appraised value by more than $1 million over several years, say from $3.5M to 2.5M.

[Steve Beebo]

It doesn’t seem to make sense, but according to a new study by RealtyTrac, San Diego foreclosure activity dropped 7% from Q1 to Q2

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/08-09-2006/0004413120&EDATE=

[Steve Beebo]

Interesting –

CA has 57% of it’s shipments leaving the state, but percentage-wise, NJ (65%), and Mich (64%), have larger percentages of their shipments leaving their states.

A salesman at a moving company we used in 2004 told me that even at that time, they had a lot more people moving out of San Diego than moving in. Maybe people leaving the state have money and use moving companies, and people moving into the state rent U-Hauls.

[Steve Beebo]

JG -the data source for the mortgages is from Sandicor / MLS through their tax records, or it can be found on other public records that appraisers pay for by the month, like NDC Data or Metroscan. I don’t think you can find out what type of loan it was, however.

Powayseller – Property #1 sold 4-04, and Property #2 sold 7-04, so the three month time difference may have been important at that time, since that is around when inventory was at its’ lowest. The second buyer also appears to have been the high bidder in a multiple offer situation, which probably pushed the sale price up. In general, it seems that properties that sold in 2004 and have resold this year are still selling at higher prices now, usually 5-15% or more. Properties that sold in 2005 are usually the only ones that have had any dollar decline to the present. It’s rare, (to this point), to see a SFR bought in 2004 that has declined as much as this one.

[Steve Beebo]

I don’t like dealing with VRM, but it’s here to stay.

The reason I don’t like it is that you really don’t know what the seller will accept as an offer. It seems to me that most VRM listings sell somewhere between the upper and lower price, not typically below the low price. When the market was strong it was not unusual to see homes sell at or near the top price.

If I’m in the market to buy, and a house is listed at $700,000, I know that the seller will accept $700,000. He may accept way less than $700,000, too. But if a property is listed at $675,000 to $725,000, you can’t be sure that the seller will accept $700,000. It’s not hard to figure out what the fair market value is, but you don’t know what the seller is looking for with a VRM listing.

[Steve Beebo]

They may not have gained much, if you figure that RE broker and other closing costs total 7% or more, but by doing OK I mean that to buy a house, then to resell it two years later without losing money is not too bad.

[Steve Beebo]

I pretty much agree with Batsleft’s statement – “If something goes up in price 150 percent and then goes down 10-15 percent, that is not a bubble, that is a serious runup in prices followed by a relatively minor retrenchment.”

Even if prices were to drop 20-25%, which I don’t think is likely, I wouldn’t exactly call that a bubble bursting.

Now, if inventory levels in San Diego reached 45,000-50,000, similar to what Phoenix has now, we would have an incredibly big problem. But it seems like inventory has leveled off in the past month, stuck around 23,000+ as measured by ZipRealty. It will be interesting to see where inventory levels are at this fall and winter.

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