Thursday, July 31st, 2008 at 4:06 PM
The Big Freeze
The 92130 zip code continues to hang in there – the month of July is showing 40 detached closings already, matching last year’s total, and none of the sales were REOs. The same-house sales did OK too - 36 out of the 40 sold for at least as much as the last sale, or more.
How did the other four do?
Here are this month’s prices, compared to the last sale:
$695,000 / $865,000 May 2005 (-20%)
$860,000 / $1,020,000 April 2006 (-16%)
$910,000 / $1,010,000 June 2006 (-10%)
$1,050,000 / $1,072,000 June 2006 (-2%)
There will continue to be homeowners in Carmel Valley who bought at the peak and now end up selling for less, but no massive meltdown yet. Do we just go on our merry way?
Let’s look at one example – the short sale that closed for $910,000.
13195 Sunstone Point is in the Soleil tract in Pacific Highlands Ranch. It is your typical 4 br/3 ba, 2,730 sf tract home on a smaller lot with $277/month in HOA and Mello-Roos fees. There are two other similar models, one at 2,673sf and another at 2,726sf.
On this street there are 29 houses that are one of these three models, and as far as appraisers (and buyers) are concerned, they are going to be considered very comparable. Yes, some back to the canyon, but have off-setting street noise, so let’s call them all equal.
Considering that this short sale is the new comp, what does it do for the rest of the street?
All but two of the 29 houses on the street paid more than $910,000 (though I was impressed that only 4 of the 29 had loans over $910,000).
If any of these homeowners are thinking of selling, how will they feel about giving their place away? If their loan amount is low enough to permit a sale without bringing in money, will their ego be able to handle selling for less? Are they are motivated enough?
They won’t like the thought of $910,000 at all, and will likely pack it in “until the market gets better”. Another couple of months of this and the only sellers left will be those that HAVE TO SELL. Expect the number of sales to dwindle further.
Posted on Thursday, July 31st, 2008 at 4:06 PM in Uncategorized | 12 Comments » | 
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I live in CV and the general consensus is to stick it out and wait for better times since now is not a good time to sell. A very deep sense of denial of what lies ahead.
mattKnik | July 31st, 2008 at 11:00 pmAlan Ginn (of UCSD) said last year in his usual monthly interview in the UT – "I think the county will avoid a recession". . .at the end of his interview his gave a kind of throwaway line, "unless unemployment goes up, then all bets are off, unemployed people don’t buy houses.". . . now in his most recent county monthly review published in the UT, he admits the county is in recession as unemployment spiked over 1% within a year, and is headed up.
Althoug we don’t expect any mass layoffs at Qualcom, etc. the "travel and leisure industry " here in SD is already feeling a downturn – Lindbergh Field will have a 12% cut in flights after Sept 1. Business travel and hotel occupancy rates are down at least 5% on a national basis (NYT), and the recession is just starting – as Big Alan Greenspan said today on CNBC – "housing is no where near bottom."
If I need to sell a house, I would do it ASAP.
Mark in San Diego | July 31st, 2008 at 11:17 pmSales same as last year.
No drop in prices.
Only 4 out of 29 had mortgages higher than the short sale.
That seems stable to me.
This after possibly the most brutal real estate market since the Great Depression.
Why would anyone sell unless they had to? Seems like a good family neighborhood, reasonably close to the coast and centrally located in terms of commuting.
I wonder how many of these rather expensive homes were subprime borrowers? Was there a limit to how much a subprime borrower could borrow?
Mozart | July 31st, 2008 at 11:37 pmThis after possibly the most brutal real estate market since the Great Depression.
After? It hasn’t begun yet…
Arty | July 31st, 2008 at 11:49 pmWaiting because now is "not a good time to sell" is not a rational point of view, IMHO. It’s thinking in nominal prices (the specified dollar amount of the sale) rather than real prices adjusted for inflation. Let’s be optimistic and say that CV, being so nice, merely has constant prices for a while instead of declining. With 5% inflation, that home Jim mentioned is losing $45,000 in value every year. If the flat period lasts only 3 years — seems optimistic to me — it’s lost $143,000 in value. The fact that you can sell it for the same number of little green pieces of paper is irrelevant, if those green pieces of paper don’t buy as much bread and milk as they used to.
I bet there are people living in homes that have lost 1/3 of their value who are going to doggedly stick it out until the nominal price (# of dollars) returns to what they paid for the house, even if it takes years. They will then say that, through good common sense, they never lost money on their real estate purchases. That’s a way of assuaging their ego, nothing more.
Dwip | August 1st, 2008 at 12:06 amminor correction, Mark in San Diego, but Alan Gin is from USD (not UCSD)
MT | August 1st, 2008 at 2:04 amArty said what I was thinking. This isn’t **after** the greatest housing decline since the Great Depression. The higher end hasn’t even started yet. We have a long, long way to go, IMHO.
CA renter | August 1st, 2008 at 5:54 amYou guys continually quote losses PRE-COMMISSION. Add in the insane 4-6% to sell the place. The losses are much larger…
TJP | August 1st, 2008 at 3:15 pmSell your 1M home in the best hood and it probably costs you 150k in perceived equity.
-50k commissions(maybe 60k)
-10k in inspections/termite/repairs/fix up/concessions to buyer
-90k, List at 1M, accept offer at 90% of list if you are lucky!!!
Then throw a few k to get a mover to go…where?
doughboy | August 1st, 2008 at 3:36 pmNew construction in PHR will increase downward pressure, but none going on yet.
CVman | August 1st, 2008 at 4:19 pmHa. You guys who are talking about using a Realtor(C) to sell your place are crazy. You might as well just flush 6% of your cash down the toilet. For sale by owner (FSBO) is the only way to go. Based on my extensive experience touring FSBOs, here are tried and true techniques to sell a FSBO.
1) Buyers LOVE a big place that can hold lots of stuff. So leave all your stuff sitting around to show how much your house can hold.
2) Studies show that 80% of prospective buyers like watching soap operas on TV. The other 20% like watching golf. So when the prospectives are touring around, sit in front of the TV and watch one or the other. For an extra 5% on the offer, switch back and forth between the two.
3) A trick that those useless Realtor(C)s use is to bake something right before the open house, so it smells good. This works. I suggest frying up some hot dogs. Everyone likes fried hot dogs.
4) Buyers are put off by all the formality of the purchasing process. Use jargon in your house description to make it more approachable. "U MUST C! CRZY BIG ROOMZ! XLNT VU! L33T NEW FLOORZ! PWN THIS HOME!"
5) People like having a home with a sense of historical continuity, one that feels rooted in traditional values. So updating a kitchen or bath just ruins things. Old is the new new.
Keep these tips in mind and your FSBO will net you that cash you’ve always been looking for.
Dwip | August 1st, 2008 at 4:33 pmOut of those 29 houses, I’d be interested to know how many of the "homeowners" have some type of Option ARM or other exotic loan that is going to reset to a higher payment over the next couple of years. As I understand it, the resetting of the Option ARMs is going to be next big housing disaster sunami.
If some of these homeowners can’t afford their new, higher mortgage payment, then they’ll be forced to sell and values will drop.
Tim | August 3rd, 2008 at 7:49 pm