Thursday, March 20th, 2008 at 1:13 PM
Wow
You can say these sellers beat the odds. They started builing this 6 br/8 ba, 8,390 sf "Mediterranean masterpiece" on a half-acre lot in La Costa in 2004, and the orginal list price was $3,999,000.
The last time it was on the MLS was December, 2006, listed for $5,290,000.
The tax rolls show that it closed this month for $5,600,000, to a cash buyer. Congratulations to the sellers – it’s the third-highest sales price in the history of Carlsbad, and the highest non-oceanfront price ever.
Posted on Thursday, March 20th, 2008 at 1:13 PM in Uncategorized | 26 Comments » | 
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Is that one of those cash kickback sales?I should have offered 8 million and found one of those shady appraisors.I would have at least 3 million in the bank so I could live it up for a few years.Party on wayne.
arizonadude | March 20th, 2008 at 1:45 pmWow, some people have more money than they know what to do with. But over time even buyers like this will fade away. Nobody likes to losing money or even feeling like they made a poor investment.
shadash | March 20th, 2008 at 2:10 pmMust have included a $3M piece of art.
SMC | March 20th, 2008 at 2:15 pmAt least this guy paid cash – the dude who owns the all-time record high price, set in summer of 2006, financed his deal. He has refinanced three times since.
Jim the Realtor | March 20th, 2008 at 2:19 pmAnd I wouldn’t doubt that the guy that paid 5.6M cash is just going to use this as his winter home.
bearing01 | March 20th, 2008 at 3:00 pmPeople are STOOPID – even rich people
Todd | March 20th, 2008 at 3:09 pmYou can’t take it with you, Mr. Kirby.
CVman | March 20th, 2008 at 4:21 pmNot to be a wet towel, but maybe this is a money laundering activity.
LV Renter | March 20th, 2008 at 5:05 pmI thought money laundering was making illegally earned money look as though it was earned legitimately by running it through the accounting system of a company in a legitimate industry.
I’m not sure how buying a house with illegit cash would do this.
Lovely view, congrats to the buyer.
jb | March 20th, 2008 at 5:40 pmThis just cannot be arms length. Maybe there was some form of debt discharge in lieu that carried favorable tax consequences or something. Maybe it phase one of some complicated refinancing scheme. Half-acre? Not oceanfront? No way.
Rob Dawg | March 20th, 2008 at 6:48 pmWell, converted to gold, silver, oil, or even euros, $5.6M is actually cheap compared to a few years back! I’m not saying that we have reached bottom and that it’s time to buy real estate. What I’m saying is that maybe the smart money has figured out that thanks to the Fed’s highly aggressive expansionary monetary policies, high inflation is around the corner.
Maybe this buyer thought it was smart to park his $5.6M in something of real value rather than let inflation and dollar devaluation eat away his purchasing power. The argument (and some discussion) is laid out here:
http://piggington.com/the_housing_bubble_is_over
Diego Mamani | March 20th, 2008 at 7:55 pmDiego – that’s fine but at least find a parking spot that is a reasonable deal or by the beach.
Todd | March 20th, 2008 at 9:39 pmDiego,
Interesting post you did on Rich’s blog. How many Snickers bars is that house worth today as opposed to 2001?
As others already pointed out on that blog, income is the main factor and you did not use that in your calculation, nice try though…..
SMC | March 20th, 2008 at 10:55 pm"Maybe this buyer thought it was smart to park his $5.6M in something of real value rather than let inflation and dollar devaluation eat away his purchasing power."
Oh yeah, a real safe investment, that having not only the most expensive home in the neighborhood but in recent history. That’s a sure thing. No doubt about it. No way that could decline faster than inflation.
$5.6M in cash? I see this home ending up on a high profile episode of "Cops".
ice weasel | March 21st, 2008 at 5:19 am2008 Average in Carlsbad = $307/sf
This house = $667/sf.
Looks like the buyer was the former CFO of Broadcom.
I wonder if he used the comp around the corner as a guide. It was Ray Wilson’s old house, the founder of Family Fitness. It was the previous high sale of non-oceanfront properties, selling for $5,150,000 in March, 2005 for 12,000sf, according to the MLS. But the tax rolls show 10,618 sf, and a sales price of $4,020,500.
What’s a million here or there, I guess, to realtors reporting their sales prices.
Jim the Realtor | March 21st, 2008 at 12:35 pmSo it may have been a "typo" and the number is really 3.6M? That would make more sense.
SMC | March 21st, 2008 at 2:04 pmThe $5.6 million was from the tax rolls – it wasn’t on the MLS. The tax assessor can make an occasional mistake, but they are far more trustworthy than the MLS.
Without it being on the MLS we don’t know if the buyer had representation, and being a cash buyer we don’t even know if he had an appraisal. If there was any reliance on an old MLS listing of the $5.15 million sale, when it was really $4,020,500, then somebody’s going to be ticked.
Jim the Realtor | March 21st, 2008 at 2:34 pmSMC: I don’t ignore income. What I’m doing is using the price of oil/silver/gold/euro as an indicator that inflation will accelerate. Once annual inflation is over 3% or 4%, nominal incomes will start going up too. Many posters replied either that "inflation is not high at all" OR that "inflation is high and increasing but incomes won’t go up while every other price increases".
I think that with high inflation, all nominal prices (including incomes) will go up. The only nominal prices that won’t increase are those of housing because they are already inflated. But as inflation picks up, real (inflation-adjusted) house prices will drop to pre-bubble levels.
If you think that snicker bars are a better measuring stick than oil/gold/euro combined, then go ahead
Diego Mamani | March 21st, 2008 at 9:17 pm"I think that with high inflation, all nominal prices (including incomes) will go up."
This only happens if a significant portion of the nominal prices going up are for goods and services that require domestic salaries to produce. If the higher prices are mostly for imported products – and we are fast running out of products that are not imported – it is entirely possible for domestic prices to go up while an increasing portion of the incomes that go up as a result are foreign.
GeneK | March 21st, 2008 at 10:42 pmDiego,
We agree on one thing, kind of: "prices will drop to pre-bubble levels."
The difference being, I think if a house sold for 300K in 2001-2002, it will sell for 300K in 2009.
Let’s look at gold, it is actually a good example of a bubble. It was $800 an ounce in 1980, then moved down to a low of around $250 an ounce some years later and hovered between 300-400 for many years. It took it 28 years to get back to the $800 an ounce it hit at its 1980 peak(I am sure during that time oil and house prices fluctuated as well, but were not influenced at all by gold).
Seeing as many people in this recent RE bubble were speculators and drove prices way higher than any fundamentals supported, it is logical to think that prices will come back down to the point that they were before the madness, right?
I am not an economist; I just look at things using common sense. It seems people that think they know economics are usually way off, they get too caught up in trying to make the numbers work to prove their point and end up confusing themselves.
Let’s just use USD instead of oil, gold or snickers bars. House price in 2001, 400K. Same house in 2005, 800K. Same house in 2009, 400K.
Correct me if I am wrong, but it sounds like you are trying to compare the San Diego housing bubble to the Japan housing bubble of the early 90’s?
SMC | March 22nd, 2008 at 12:10 amGenek: I was in South America when inflation got really nasty in the 1980s. I left just before hyperinflation made everything surreal. Even before they got to the hyperinflationary phase, high inflation was pervasive enough to make averything go up in price: it didn’t matter that products were domestic or imported. Salaries, food, energy, the price of the US$, everything went up in nominal terms.
I may be wrong about whether inflation will get out of hand, but if Bernanke policies bring us back to the high inflation we had in the 1970s, then we can’t expect to see only some goods being affected by inflation and others not.
Diego Mamani | March 22nd, 2008 at 1:44 am"I think if a house sold for 300K in 2001-2002, it will sell for 300K in 2009."
SMC, one would think that common sense dictates that inter-temporal comparison of prices can only be done in constant (o real) dollars. Comparing nominal prices of 2001 with those of 2009 is like comparing apples to oranges.
In your example, if annual inflation is only 4%, that comes to 37% over 8 years, compounded. So that $300 in 2009 dollars are equivalent to only $219 in 2001 dollars. True inflation is probably much larger than recorded and reported today, so that $300 in 2009 will likely be worth a lot less than $219 in 2001 dollars.
Do you have any idea of how much has liquidity grown since 2001? Unless you believe that the laws of supply and demand are completely wrong, there’s no way that supply of dollars can grow enormously without the dollars losing value.
Diego Mamani | March 22nd, 2008 at 1:52 amDiego,
I do believe in supply and demand. Let me just change one word in your own comment and see what you think.
"there’s no way that supply of HOMES can grow enormously without the HOMES losing value."
Only time will tell how much lower prices will go. Thanks for the information though, it is always interesting to hear other’s views on the BUBBLE….
SMC | March 22nd, 2008 at 3:21 amI’m sure there’s some natural limit to how far prices can rise before they reach a point where people simply can’t afford to buy them (we’re already hearing that people are starting to cut back on their driving due to the price of gas), and there will always be some part of the supply chain that can’t be offshored. But in between a stable economy and hyperinflation, there is a phase in which prices rise while incomes do not rise correspondingly, and we are in that phase now. You can see it happening in various charts that show real income after inflation for the average American over the past five years.
GeneK | March 22nd, 2008 at 4:42 pmSMC is right. Houses are purchased with income. CPI calculations are based on costs. In a closed system, it’s true that rising costs would eventually force rising wages, but this isn’t a closed system.
There are a few things which might increase wages in the future: Baby Boomers exiting the work force, tightening border controls, and protectionism (also related to border control).
Baby Boomers will probably find themselves much poorer than they had anticipated, especially when the financial markets are cleansed of the excesses. Everything will be affected, including pension plans, retirement funds, home prices, etc. This might make more Boomers stay in the workforce longer than they had planned.
Politically, the politicians are not willing to listen to those they represent who overwhelmingly want to see well-paying American jobs better protected.
IOW, there’s a possibility that wages will rise, but it’s not a done deal, by any means. Housing prices will have to fall in line with incomes, no matter what the dollar is doing, unless the U.S. is sold to foreigners (totally possible, but the ramifications need to be considered, too).
CA renter | March 22nd, 2008 at 11:16 pmI live on this block – it is a close knit community, and I’d like to clarify some information that has been posted. Firstly this is not the ex-Wilson house (in fact it’s brand new); the ex-Wilson house is on Obelisco Place and not Obelisco Circle; though they are within walking distance of each other. BTW The ex-Wilson house is currently valued at $7 million. Back to the house in question, there are personally reasons why this couple moved to this neighborhood and it has more to do with location/child-custody/visitation laws than ocean views.
LaCostaNeighbor | April 9th, 2008 at 5:38 pm