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From Mathew Padilla, OC Register:

“Much press has been given to the vague looming threat posed by adjustable subprime loans.  The fear is that foreclosures, already rising quickly nationwide, will spike even higher as low introductory rates end on millions of mortgages.  Robert Lacoursiere, an analyst with Bank of America, back in June wrote a report that documented the threat, writing that “$515 billion of ARMs are scheduled to reset in ‘07, followed by approximately $680 billion in ‘08. Furthermore, of these ARMs, we estimate that subprime loans consist of $400 billion (78%) in ‘07 and $500 billion (73%) in ‘08.”

I recently got an update.

This graph from Lacoursiere’s recent update shows that reset dates on loans spread out evenly over 2008. In his earlier report, they spiked around March of 2008 and then tapered off dramatically.

I didn’t get a chance to speak with him about the trend. My guess is that some folks were able to refinance before investors cut off credit on riskier loans. Such borrowers have pushed back judgment day to later in the year (or to other years).

However, just eyeballing the chart also suggests that perhaps there are fewer loans coming due next year. Initially, he said there were $680 billion in loans coming due but I’m guessing the number has fallen significantly. I tried to get new numbers from Lacoursiere but he’s been swamped this week. If they come later, I’ll update this post.”

Today marks the end of the second year of bubbleinfo.com.  It is particularly heartwarming to review the stats to see how we’ve grown – thanks to your astute commentary, the message is getting out!

Unique users:

1st year – 27,696

2nd year- 107,424

Raw hits:

1st year – 177,483

2nd year – 705,068

I appreciate your participation!

I described the relationship between active listings and current pendings as being in “freefall” once the ratio gets higher than seven to one. Freefall means you really don’t know what your house would sell for – there are so many unsold listings around you that they overwhelm the comps and dilutes the experience for the buyers.

When confronted with too many choices, the buyers hestitate – until the prices get attractive enough.

Here are the towns and areas around SD North County:

A common thread of the higher-ranked areas is that they have older homes. The buyers are being very critical about the condition of the houses – the condition needs to be impeccable just to have a shot at selling, or the price REALLY attractive.

A year ago today was the beginning of the cup of coffee bet – Robert said he’d buy a cup of coffee if there were any neighborhoods that WEREN’T down more than 10% down in price.

Two of the three neighborhoods I named as possibilities were Olde Carlsbad and Terramar – both are older neighborhoods with individually-built homes, which are tougher to compare, apples-for-apples.

Let’s cut to the chase, the bet rides on the third neighborhood, the Davidson tract in La Costa Oaks.

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Davidson La Costa Oaks homes in 2006:

Plan One 3,739 sf model

7/5/06                 $1,144,500

7/28/06              $930,000

8/7/06                 $1,085,000

10/20/06           $1,275,000

11/8/06               $1,161,500

Average $1,119,200  Median $1,144,500

Plan Two 4,000 sf model

7/5/06                 $1,298,000

8/7/06                 $1,172,000

Average $1,235,000

Plan Three 4,337 sf model

9/27/06              $1,250,000

Generally, sales of all three models would have to be in the $1,100,000 to $1,200,000 range in September 2007 to win the bet.

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Summary of recent 2007 sales:

Plan One sales

5/14/07  $1.2 million (former model home)

7/16/07  $1.175 million

7/27/07  $1.130 million

Hanging around $1.1 million?

Plan Two sales

6/19/07  $1.05 million

6/13/07  $1.167 million

7/11/07  $1.2 million

8/23/07  $1.255 million

On the increase…..

Plan Three

No sales last four months.

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Like Robert has said, the data tends to be scattered, especially the smaller subsets.  But generally the solds have held in the $1.1 million to $1.2 million range.

How about the active listings?

Plan Two listed on the range $1.189 to $1.249, since May. 

Plan Three listed for $1.425 million, on market since May.

How about the pendings?

The latest comps will be these pendings when they close.  We saw the REO list for a VERY attractive price a couple of months ago, and even though the listing agent had said it would take two weeks for the bank to respond, it went pending in eight days.  I believe it fell out since, and went right back into escrow with a new buyer.  All of these should be closing soon, and if it weren’t for the REO – I think I’d be OK.

Three pendings, all Plan One 3,743 sf (List prices)

$989,900 Bare bones, east view, smaller yard, REO.  DOM: 8

$1,150,000 Good-sized yard, no view. DOM: 108

$1,475,000 – $1,575,000 Best SW view, premium lot. DOM: 38

The agent of the one above confirmed that it should be closing any day, at a sales price above the bottom of the range, $1,475,000.

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There is a qualifier.  While I took the bet to be a 10% decline over the past year, Robert actually said:

"I’ll buy you that $4 cup of coffee if you can find anything that isn’t off at least 10% from the peak this time next year."

The ‘peak’ is different than just the last twelve months, but these homes were built and sold in 2005 and 2006.  The first phases in 2005 were selling in the $900,000s, without landscaping.

Would you say I won the bet?  Or just lucky?

Here is the post that started it all:

http://www.bubbleinfo.com/2006/09/16/grand-poobah-of-predictions/

It was last September 16th that the "coffee bet" was made.  Robert said he’d buy me a cup of coffee if I could find any area that didn’t have a 10% decline in the ensuing 12 months.

I named three areas that I thought would be possible winners in Carlsbad: Olde Carlsbad, Terramar, and the Davidson tract in La Costa Oaks.  I also agreed to put it to the vote of the readers who the eventual winner would be.

Today let’s examine the area known as Olde Carlsbad, generally the area between between the I-5 freeway and El Camino Real, and bounded by the two lagoons – all in zip code 92008.

I searched both the tax rolls and the MLS looking for houses that had sold in 2006 and resold in the summer of 2007, and found only one, on Knowles.  It was already mentioned here as the goofy reverse auction – the owner paid $652,000 on July 5th, and has it up for sale currently for $675,000 and is knocking off $5,000 every Sunday until sold, starting today.

But there were others who had resold within 2-3 years, and we’ll use all of them as evidence for your vote.  If anyone knows of others, I’ll be happy to add them – I’m not cherry-picking these, they are all I could find that have closed since July, 2007:

1309 Knowles

$610,000  6/29/06

$652,000  7/5/07

DOM: 144

OLP:  720,000

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3205 Sandy

$630,000  2/9/05

$660,000  8/8/07

DOM:  30

OLP:  $689,000

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3997 Alder

$655,000  6/3/05

$735,000  8/29/07

DOM:169

OLP:  $815,000

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3335 Valley

$779,000  12/28/04

$775,000  7/2/07

DOM:  43

OLP: $819,000

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3306 Donna

$817,500  5/18/04

$835,000  8/15/07

DOM:  350

OLP:  $985,500 

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4079 Skyline

$1,140,000  7/13/04

$1,250,000  7/13/07

DOM:  291

OLP:  $1,990,000

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DOM = Days on Market, OLP = Original List Price.  You can tell the market isn’t supporting the wild and crazy list prices, but buyers are paying about what they have been over the last few years – at least for now.

What do you think?

Was Robert just a little early with his call, or will prices hold up in the superior areas?  The fact that there aren’t more recent homebuyers reselling is a key factor – will it last?

When you are looking at houses for sale, what do you look for? 

It is a struggle to turn off the judgement machine churning away in our heads.  When walking around someone else’s house, we rush to critique their tastes (or lack thereof), look at the photos to see if we know anyone, or try out the furniture/bathrooms.

But if you can get beyond that, and focus on specific clues, you can find out plenty about the houses – and their owners – and use it to your advantage.

Specifically, what can buyers look at to find valuable information?

1.  Curb Appeal – Look at the palm trees – are they established, or are they the Home Depot cheapies that were rushed into the ground a couple of hours ago?  Even if you just planted them just to sell the house, you can buy well-grown trees that add appeal.  The seller’s choice of palms can tell you how they maintain the house, and whether they cut corners.

2.  The Approach - Walking up to the house, and while waiting for the door to open, study everything in the immediate vicinity.  This is your first impression, and a preview of what to expect inside.  Is the door and door trim impeccible?  Nice clean mat?  Screens on the windows?  Spider webs or hornet’s nests in the eves?

3.  Cosmetic Quicky? – The facia board is  the wood that wraps around the eaves and creates the transition between house and roof.  This is where you can gauge how thorough the seller has been with exterior maintenance.  If he threw on a quicky roof, he probably didn’t replace the old facia boards – and probably treated the rest of the house the same way, taking shortcuts.   It’s also a place where you can get a feel for the quality of construction.

4.  Water Intrusion – Check the bottom of the stucco/siding – there should be a gap of two to four inches between the stucco screed and the ground.  If the dirt level is touching the stucco, water is probably making its way into the house, and so are termites.  This same gap is where you’ll find cracks in the slab.  If you are really analytical, look through binoculars at the roof for cracks/holes.

5.  Listen Closely – Any traffic noise outside?  How about annoying kids or yapping dogs?  Hard to detect when so much else is going on, but you don’t want to miss any problematic noise here.  BTW, if the street has a double-yellow stripe, it has too much traffic.

6.  Kitchen Sink – Once inside the house, check out the kitchen sink and surrounding area.  If it is old and tired-looking, that probably means the rest of the house has taken a beating too.

7.  Paint and Carpet – You want to buy a house that needs paint and carpet.  Why?  Because most buyers make a snap decision that they are fixers, and pass on them.  Make sure the rest of the house has "good bones", and if the only thing that is wrong is new carpet and paint, then make a low offer.  With buyers looking for any reason NOT to buy, this is an opportunity to find a motivated seller who hasn’t seen many, if any, offers. 

8.  Refrigerator – Want to know more about the sellers’ financial situation?  Look in the refrigerator – lots of hints there.

9.   Divorce-meter – Check the master bedroom closet.  If you know that a married couple owns the house, but there is only one type of clothing in the closet, you know what happened.

10.  Listing Agent – Even if the house checks out, the listing agent can still blow the sale for you.  Have your buyer’s agent look up the sales history of the listing agent for the most recent year.  If they have sold a few houses, then they know how tough the market is, and will be giving great advice to the sellers.  If the listing agent hasn’t had much recent sales history, they’ll probably still be in la-la land about waiting for the lucky sale.  Don’t expect much from them in advising the sellers to negotiate a market-value price.  Want a quick read on the listing agent?  Look at their pictures, and remarks – specifically if they note ’seller to select all services’ – that remark is so 2004.

These tips are just the beginning – an experienced buyer’s agent brings insights like these to every property, and can help you from making a mistake.  Get good help!