[theplayers]

SDAppraiser,

One, if the home was truly a bargain, and not overpriced, I think they would have had more people show up to the open house, despite the loss of their signs.

Two, my post was supposed to be somewhat humorous (I guess I need to work on my sense of humor). But if you do want data, my research shows that the house in question is at 2302 Fair Oak Ct, in Escondido. It is listed at $489,000, and has been on the market for 107 days. It was originally listed at $510,000, was reduced to $485,000 after about 3 weeks, and then increased to $489,000 about two months after that. It last sold on October 12, 2000, for $219,000, appreciating at about 170% in the last 6 years. If this house appreciated approximately at the same rate of inflation (as homes have historically) since 2000, it should currently be worth about $277,000, in my opinion.

My belief that this home (and homes in San Diego County in general) is overpriced is based on fundamentals. Unless we are in a “new era”, or a “new paradigm” where the fundamentals don’t matter anymore, then I feel quite confident that this home and others here in SD are overpriced, and are due for a significant correction.

I now ask you, what data do you have to show that this house is not overpriced?

If you are new here, please take the time to read Piggington’s “Bubble Primer” to learn more about how today’s housing prices are overpriced and detached from the fundamentals. I concur with the conclusions that Piggington has reached based on his data in the Primer.

[theplayers]

Steve, I agree, they priced it way too high to start with.

Yes, the one that sold for $515,000 had much more curb appeal, was landscaped well, with a well manicured healthy green lawn. I never was able to see the inside, so I can’t comment on that.

The $415,000 house really wasn’t in bad shape, it wasn’t in disrepair, but it could use some updating. I’d say it was about average, but it did not appear as appealing as the other one (that’s why I don’t understand why the realtor and/or seller didn’t immediately drop their price alot when they saw the other nicer house sell for $515,000). It needs some landscaping work, mostly some clearing away of stuff. It is a corner lot. Inside, it was clean, had just been painted, seemed to be in decent shape. Can’t remember what condition the carpet or floors were in. The kitchen was in OK shape, but had the original cabinets, it could be updated (it was built in the early 70’s). Everything in the bathroom was original too. I seem to recall that the seller said her aunt had lived in it since it was new. I don’t know if there were any other problems, such as a cracked slab. The realtor didn’t mention any, and I never saw anything mentioned in the MLS descriptions.

I think the much lower sales price they ended up with is a combination of factors. One, timing, they should have lowered their price earlier, the market was changing, and not in their favor. Two, in the market we have now, with less buyers and more inventory to choose from, it seems that the homes that are in the best shape will sell quicker and easier. Three, it’s a two bed/two bath, only about 1100 sq feet.

[theplayers]

I check the San Diego Daily Transcript website, they list home sales on a daily basis, posting them about 10 days after they close.

[theplayers]

Lindi,

It looks like 2002 prices were in the low/mid-$300,000’s. I don’t have any data for 2001.

[theplayers]

Colombo, I believe that they waited too long to bring their price down. It wasn’t until May that they dropped their price down to $515,000. The seller (but definitely their realtor!) should have known that a similar home about 1 block away (same # of bed & bath, same floor plan, similar condition) had sold for $515,000, it closed in March.

I wouldn’t be surprised if they got a better offer early on than what they eventually accepted. February and March of this year in my area seemed like a normal active market. But by May, nothing was moving.

No_such_reality, the house that sold for $515,000 in March is the last comp in the area for this type of house, until this latest house at $415,000.

Another house I’ve been tracking went into escrow about 3 weeks ago, I’m looking forward to seeing what their final selling price ends up being. It’s a 4 bed/3 bath, with a pool, that probably would have sold in the mid-$600 range a year ago. The sellers eventually reduced their price to $549,000, then it went into escrow about a month later.

Barnaby33, I would roughly define the San Carlos area as north of interstate 8, east of Del Cerro, south of Mission Gorge Rd., and west of hwy 125. Some portions of the eastern part of San Carlos border on La Mesa. Some nearby landmarks are Cowles Mt., Grossmont College, Lake Murray, and Mission Trails Golf Course. Most of the homes seem to have been built in the 60’s and 70’s.

[theplayers]

Contraman, in response to your statement “…the guy who brought the lawsuit needs to think about the bigger picture here…”

He IS thinking about the bigger picture…

[theplayers]

I’m seeing a growing number of homes falling out of escrow and going back on market. Hope the buyer is solid, if the sale fell through and they had to put it on the market again, I think they’d be looking at an even bigger loss. If it was me, I don’t think I’d sleep too well, until the day it closes.

[theplayers]

Of course, none of us can predict with certainty how this whole thing will occur.

Saying that, I now offer my useless predictions:

One, I believe we’ll ultimately see about a 50% decrease, adjusted for inflation. Some areas and types of homes/condos will see less, some more. I base this 50% drop primarily on rental rates and their relation to home prices. Rental rates are one of the most powerful and true reflections of the supply and demand dynamic within a market, taking into account factors such as income, migration patterns, housing inventory, economic conditions, etc.

Two, I think we’ll see prices drop quicker than many of us believe, and quicker when compared to the decrease in SD in the early-mid 90’s. This is mostly due to the massive amounts of loans that are going to start resetting. Too many people will simply not have the luxury to sit and wait this out, they’ll have to sell quickly, all heading to the exit at the same time, competing with builders who will soon be dropping prices dramatically (once the incentives stop working), and eventually competing with banks who need to get rid of repossessed homes quick. They’ll also be competing with people who will be losing jobs, and people who got in over their heads with HELOCs. The trend of people leaving SD will increase (like it did in the mid-90’s), adding even more homes to inventory. Add to this the fact that lending standards will tighten up, leaving fewer and fewer qualified buyers. Worst of all, even those who are qualifed will be in no hurry to buy, as they can just wait on the sidelines until it’s safe to get in again.

And three, when will it be safe to buy again? I agree strongly that rents will play a big part in the market eventually recovering. We will reach a time when one can buy a rental property in SD with 20% down and a 30yr fixed, and achieve decent positive cash flow. When that happens, the smart money investors will start to buy in SD again, creating demand and fueling a recovery, and thus signaling to the average homebuyer that it is OK to get in again.

Psychology created this housing bubble, and psychology will ultimately bring it down. Remember how intense the desire was for so many to buy a house when the bubble was peaking? We’ll eventually see that same level of intensity, but this time the desire will be to get out and stay away! Even though most of us here believe we’re going to see significant price corrections, I think many of us will be shocked at how badly people will feel about real estate. Many who are waiting on the sidelines will be too fearful to buy at the bottom.

Just like it was the worst time to buy when everyone wanted to buy, the best time will to buy will be when no one wants to buy, and I do mean no one.

So there are some of my simple predictions, now displayed in print for all to see, written evidence that can eventually be used to show how wrong I probably am!

[theplayers]

I vote for a pause…

[theplayers]

I believe people come here for different reasons. I, like you, sold a home here in SD at the height of the market and am now renting, waiting for the right time to buy in again. Visiting this site and others keeps me informed as to what is going on in the housing market. I also learn more about the economy, investing and finances, which helps me decide where to put my savings.

I would guess that many others made the decision to sell their homes and realize once-in-a-lifetime profits because of information they found here and on other blogs. Buying a home is one of the biggest financial decisions people will make in their lives, and my philosphy is to do the research before buying or selling.

I can’t believe how many people make the decision to buy a home without doing any research, without understanding the terms of their loan, without even thinking about what they’re doing. This has been especially evident over the last several years here in SD, as people got caught up in the mania – but that’s what a bubble is, people make decisions based on emotion, not on rational analysis.

I suppose there are people who are bitter, jealous and angry. That’s their choice. The saying “drinking the poison and hoping someone else dies” comes to mind. If someone is bitter, jealous, or angry, it’s about them, not about the person or persons they are jealous or angry with. It’s just misplaced and wasted energy, IMO.

Do I want to see people’s lives get wiped out? No, and I won’t take any joy in it. But they made choices too, choices that many other people chose not to make. I will feel joyful and rewarded when my patience pays off, and the decision to sell at the peak turns out to be the right one. Will I feel bad if I were to buy a home from someone who was wiped out and took a big loss on their home? Of course I would feel bad for them and their situation, but not about buying their home at the best price possible. I will be making a choice and taking a risk too, the risk that the house could continue to fall in value.

Only you know why you read “these damn forums”…

[theplayers]

I will be very surprised (shocked, actually!) if any counties or the state of CA have been putting away any of the extra tax revenue they’ve been receiving over the last few years.

[theplayers]

As a professional tax preparer, I can tell you that several clients changed their withholding during the year in order to have more take home pay to make their mortgage payments. Unfortunately, when April 15 came around, not only did they owe a staggering amount, but they incurred underpayment penalties too.

People’s tax returns tell you alot about their overall financial situation. I’ve seen some disturbing trends, I’ll share them on another post when I have the opportunity.

[theplayers]

It’s nearly impossible to predict now when the best time to buy will be. But when you can buy a house and your payments are equal to or less than renting that same house, I think that’s a good time to buy. I’m guessing what won’t be for at least 2 more years, probably more.

In the meantime, save as much as you can and stay out of debt. I believe that when this correction reaches the bottom, that lending standards will be much more strict, like they were in the “old days”. In other words, buyers will need a 20% down payment, good credit, and a stable job and employment history. Also, a 30% income to purchase ratio and a 30 or 15 year fixed loan will be necessary. I don’t think we’ll be seeing all of these creative loans that we’re seeing now.

Once again, patience is key, we’re just at the beginning of an impending significant market correction.

[theplayers]

PS,

I’m not 100% in cash. We hold some foreign currency (Swiss francs) and some gold in a gold pool account at Kitco.

Re: t-bills, there is an auction every Monday which determines what the yield will be for that particular 6-month t-bill. For instance, last Monday, the yield was 5.297%. That 5.297% gain is not taxed by California, which makes the after-tax gain higher. Assuming a Calif tax rate of 9.25% on the gain, than a 6-month CD would have to have a rate of approx 5.78% in order to have the same after-tax gain. And as far as length of t-bills or CD’s, I’m more comfortable with 6-months right now, and 1-year rates are not much higher anyway.

[theplayers]

I too believe the stock market is headed for a recession led downturn over the next few years. I agree with many here that being conservative in the present economical environment is not a bad idea. I view my “liberated equity” as still home equity. In other words, if I still owned a home, would I take some of the equity out to invest in risky things? Probably not. Most who have bought a home in the last two years here in SD have not seen any appreciation (if they were to sell now), so gaining 5% on CD’s or Treasury bills is not so bad.

One of the reasons I like treasury bills is because the gains are not taxed by California. When you take that into account, the return is better than the highest paying CD’s in many cases. Also, I feel a little safer with t-bills. I do have some in CD’s too, however. I think spreading it around a little is safer than having it all in one place.

I can’t remember who said this, but it’s something like “in bad economic times, it’s not how much money you make, but how much money you keep”. In other words, if things really do get bad over the next few years, those who manage not to lose will be far ahead of the rest of the crowd.

As always, please don’t take any of my comments to be investment advice 🙂

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