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How is the million-dollar-and-up market doing today? This chart includes the number of listings over $1 million that are currently active and pending, plus those that closed in August, 2008:

Technically it’s possible for all those that are unsold to be able to hang in there until it’s their turn, but this is a 21-month supply of million-dollar-plus listings. Can they hold on long enough? Technically, the Padres could win the World Series this year too.

Let’s take a look at the million-dollar market.

Sales above $1 million between 1/1 and 8/28:

But is the drop in sales due to fewer listings above $1,000,000? Sure enough, if you look at the county-wide stats, there is some explanation. In 2007 there were 5,250 total listings over $1 million between Jan. 1 and Aug. 28, and in 2008 there were only 3,096 – a difference of -41%.

But when you look at the individual coastal areas, the number of million-dollar listings are pretty similar Y-O-Y, with the exception being 92127:

Total Listings over $1 Million between Jan. 1 and Aug. 28:

Even though the number of million-dollar homes on the market have been fairly similar in both years, the sales are down substantially. How is pricing? Oh – here’s an answer, there hasn’t been much deterioration in the median $ per sf:

Median $ per sf of closed $1M+ sales between 1/1 and 8/28

Would there be more sales of higher-end homes if the prices were lower, or with financing being much tougher in the upper range – could it be too late?

The t-shirts have arrived!

They come in mens XL of all three slogans, and your choice of short-sleeve or long-sleeve.  Only the short-sleeves have a pocket on the front.

We only did one version for the ladies, the ’happy wife’ slogan, on a woman’s medium. 

If you’d like a different size, just let me know, we can get others done without much problem.  If you’d like one, send me an email with your address, and we’ll mail it to you with a bill for $9 plus shipping.

I’ve been more involved lately representing buyers trying to purchase a short sale. 

What a fiasco.  Let’s put it in perspective:

Out of the 18,862 active listings of attached and detached homes on the MLS today, 6,757 of them, or 36%, are marked as needing lender or court approval.  There might be 100 that are probates, so the remainder are short sales. 

There are probably another 5,000 that should have marked the box too.

If you are considering buying a house these days, you’re going to run into short sale listings – they are everywhere.

Here are some observations:

1.  There is no playbook – we’re making up this short-sale stuff as we go.  A point that needs to be addressed in each listing office is what to do with offers when they come in.  I’m not talking about the one I sent in on Sunday that still hasn’t been presented, and the “short-sale manager” is now gone until next Wednesday.  That’s another topic, about how unmotivated staff people are to process these promptly.

Here’s the dilemma – the seller owns the house, but the bank is the decision-maker.  Listing agents who don’t have the bank’s approval yet are prone to send in to the bank all of the offers received, and let them decide – afterall, it’s their decision.  But while the offers sit in a pile for months, buyers are giving up within days or weeks, and by the time the bank gets to them, there are no buyers left.

What doesn’t occur to the listing agent is that buyers aren’t very motivated to stick around when they are just one of the pack, and can be continuously shopped – and beaten out with no notice.  The listing agent should have the seller accept the best offer in an attempt to keep the best buyer more interested in sticking around to the finish.

When representing a buyer, I want my offer signed by the seller, acknowledging that as long as the bank approves, we get the house.  We’re not going to offer as much, and we’re not going  to wait around for months, unless it’s worth the wait – sign my deal, or no deal.

2.  There is a wealth of opportunity in picking up the scraps left by restless buyers.  I’d guess the average buyer is willing to wait 2-4 weeks to find out if they bought a house, after that, it’s too easy to get bored and/or find a better deal.

But how many bank approvals happen in 2-4 weeks? Maybe one out of five.  But think of the advantages to the second buyer:

a. The financial package has already been submitted, so there’s a head start. 

b. Plus you’ll have a cleaner shot at buying without competing buyers mucking up your lowball bid.

From the listing agent’s perspective, selling a short sale is hard enough – having to re-engerize it once the first buyer bails takes a miracle.  A good place for buyers to look for deals though.

3.  A primary goal is to take advantage of the existing lender.  Lenders are using automated appraisals, which don’t always recognize all of the benefits like a good view.  They’ll send a regular appraiser out too, but if the house is in an area where there are lower sales prices nearby, or no sales at all, then the automated appraisal could be your friend.  If the bank’s decision-maker is motivated to move some property and sees a low automated appraisal to use to justify taking a lowball offer, it might be just enough to make the deal.

4.  Another opportunity is a realtor selling their own house.  They usually have all the extras, and because the lenders are paying commissions, it’s a chance for them to actually make money.

5.  You have to find a listing agent who knows the game.  Short sales are a chance for the listing agent to earn a commission, that’s it.  The seller has little or no benefit, and the lenders don’t care either.  I just had one who counter-offered 6% higher than the offer I submitted, after I told him there was no way we’d do it.  What is he thinking??  I tried to tell him that my offer was a great offer – why?  Because it’s an offer!  The alternative is no offers, and no commission.

If you consider sending some dough to the seller outside of the transaction to help grease the deal, I could see the logic – wasn’t that on the Sopranos?  But it could backfire on you pretty easily, so I wouldn’t recommend it.

6.  There is another ”investment-opportunity” forming.  People with money, or access to it, are finding delinquent sellers with nothing more to lose, and offering to buy their house based on a super-lowball offer to the lender.  If successful, they then flip the property, and share in the winnings.  If the existing lender can be talked into giving away a property, then that’s their problem, I guess.  The lenders with high workloads and weaker employees & systems would be very susceptible, especially around the end of the year.

Add these folks to the investors buying at the trustee sales, and we’re going to see many more flippers trying to beat the odds.

Speaking of trustee sales, I did verify that the IRS has a 120-day redemption period.  If you buy a house at the court house steps, don’t be installing a pool or any other big-ticket item in the first 120 days.  if they confiscate the house, the IRS will return your purchase money, but that’s it.

We’ve had two contests in play for Padres tickets, and the season is almost over. I’m running out of tickets, and need to get the winners to a game!

The house on Compass has fallen out of escrow twice – the first time we had a handful of offers, and settled on a buyer with 20% down payment who offered $367,000.  But his appraisal came in at $330,000, so he bailed.

While we are in the negotiating stage, the 4 br/2 ba, 1,672 sf one-story house down the street with a better view (and also an REO) went on the market, listed for $284,900.  It had a flurry of offers, and ended up closing last week for $369,500!

But by then our $360,000 second buyer bailed out too, citing the need for a roof.  He was the second-place finisher on the first round, so we figured he must have been circling the property – but after a month he decides he can’t live with the obviously original roof?

CHL lowered the price to $349,900, and we’ve found buyer #3 and feel pretty good about it closing at the end of September for $345,000.

But then on review of the original post from April, the contest was to guess the list price – which Dwip got within $900 with the guess $359,000!  Congratulations Dwip!

The second contest was to guess the sales price of 796 Arthur, listed for $169,900.

There were nine offers, the highest being $225,000 with a $10,000 credit from seller.  But the buyer got declined because of the new ”Anti-Buy-and-Bail” guideline, and fell-out.  We went back to the second-highest offeree and made the deal at $207,000 net.

Here are the contest entrants – price, name, and the tiebreaker, # of offers:

$149,000 – No_Such_Reality, 1

$150,000 – JE, 1

$174,000 – doughboy, 1

$180,000 – Simone, 7

$184,000 – ericabiz, multiple

$184,000 – mybleachhouse, 7

$189,000 – Merc Mont, 5

$190,000 – Chuck Ponzi, 3

$190,100 – First Time Renter, 11

$191,500 – money market, 5

$193,000 – SMC, 5

$195,000 – GLG, 10

$197,500 – Don, 7

$199,900 – CVman, 5

$200,750 – Al in IC, 7

$206,500 – FreedomCM, 7

$210,000 – Mojo, 7

$210,000 – Mr. T, 14

$210,000 – loharp, 20

$212,000 – Neil Diamond, 27

$215,000 – Steph in RB, 5

$219,500 – CVBidder, 10

$224,500 – Rob Dawg, 5

$237,000 – Stephen Watts, 14

$240,000 – Coconuts, 11

Congratulations FreedomCM, you’re the winner afterall!

I have four tickets for tomorrow’s Padres vs. Rockies, the Giants on Friday, September 12th, and the Pirates on Saturday, September 27th.  All are night games.

Dwip and Freedom CM, I’m hoping one of you can take tomorrow night?

Email me at jim@jimklinge.com

I’d like to publicly acknowledge Megan Viering and my wife Donna for the great job they’re doing on closing these REO deals.  I’m just the front guy who does the pictures/videos, they are the ones doing the heavy lifting daily to get them closed.

We have one closing today, a manufactured home that needed FHA certification, which means something about the tags needed to be verified and foundation retrofitted.  Usually you can get the help of the seller, but when it’s an REO, what do you do?

I don’t know exactly how they figured it out, but they got Countrywide to pay $2,250 for it, which is a minor miracle in itself.  They also got the septic tank pumped and certified when no one knew where it was.

Yesterday the buyer’s agent, who does her fair share of buyer-side REO deals, called to say it was the best experience she’s ever had in dealing with the listing office, and the escrow officer also sent this along:

“Many thanks for all your help and an awesome job you and your team did. It made my life easier!”

Thank you Donna and Megan for your tireless efforts.  I appreciate what you do!

I’ll include more areas later, but here are the current stats for Carlsbad. In spite of lower average $/sf pricing, the closed sales are still below last year – until sales pick up, expect further price declines.

In particular, the inferior homes that are priced like superior homes are killing the marketplace. Buyers get discouraged by looking at so many over-priced turkeys (OPTs), and will likely go into hibernation for the winter.

(2007 closed sales are for Jan. 1 through Aug. 22)

2007/2008 Detached-home sales and average $/sf comparison:

Here’s a scorecard – add the two scores together, and:

Levitators = totals less than -25%

Slippery slopes = totals between -25% and -50%

Panic Buttons = totals more than -50%

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How are the defaults? The tax rolls have a ‘foreclosure activity’ category, which groups both the NODs and NOTS, plus a few lis pendens (the obvious lis pendens were deleted).

Most are condos:

Compare to Oceanside and Vista:

NEW YORK (Dow Jones)–The Federal Home Loan Bank System sold $3 billion of three-year notes Tuesday, offering investors a larger premium to compensate for risk than it did last month.  

FHLB sold the notes at 133 basis points over comparable Treasurys, 29 basis points higher than it offered on $4 billion of three-year notes in July.   Preliminary geographic distribution data show 34% of the deal was sold in the U.S. and 66% overseas.

Asian investors only bought 14% of the note, FHLBanks announced. Typically, investors from Asia buy roughly 36% of new FHLB deals.   Investors have been demanding higher compensation to offset the perceived risk of investing in the debt of government-sponsored enterprises such as Freddie Mac (FRE), Fannie Mae (FNM) and the FHLB.   While investor focus has been on Freddie and Fannie and the losses they are facing in the wake of the housing crisis, FHLB is also being forced to pay higher premiums because it shares a similar arrangement with the U.S.

(Dow Jones Newswires 04:17 PM ET 08/26/2008)

bold added

Let’s track specific properties over the next few months to see how they do, price-wise.

Watching regular sellers can be frustrating when trying to establish a trend, because they are prone to emotional decisions, and can just pack it in for the winter if they don’t like their results.

Instead here’s a group of professional sellers – tracking their results should give us the most accurate read on the diffuculty of selling in the last third of 2008:

Last week we saw five examples of lenders listing REOs higher than their opening bid.  They are testing the market, like most sellers do, but if they don’t find the lucky sale, they have to get real on price. 

The five REOs, with their opening bid, and list price:

1.  10556 Hollingsworth, 92127  $397,500  $525,000

2.  1270 Birch, 92027  $462,500  $609,900

3.  3464 Corte Selva, 92009  $731,000  $869,900

4.  2575 Arundel, 92130  $1,073,432  $1,127,000

5.  14790 Encendido, 92127  $1,860,000  $1,990,000

Here are four others to keep an eye on – how long do they hold out?

602 Strand, Carlsbad 92011

4 br/3 ba, 2,468 sf

$660,000  SP – new, probably 2003 pricing

$570,200  SP at trustee sale

$774,900 – $824,900  List Price (range)

38 Days on market

Like are trustee sale buyers, this owner paid cash, and he hasn’t refinanced so money isn’t much of an issue.  But a professional seller is in the business to move properties.  Does he start to lower the price as summer winds down, or hold out for the retail sale?  Are they any more retail sales left?

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976 Whimbrel, Carlsbad 92011

5 br/3 ba, 2,888sf

$343,000  SP 4/97

$809,900  loans 12/06

$636,231  SP at trustee sale

$799,000  List Price 8/08

17 days on market

A standard Aviara tract house from the late-1990s, and nothing fancy inside.  The new owner installed “New handset 20″ tumbled stone style floors and new carpet” but they’re cheap enough that you can’t tell they’re new.  He is also touting the 13,690 sf lot, but at least half of it is up a slope and behind the HOA fence – creating instant disappointment upon arrival by buyers.

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1738 Village Run N., Encinitas 92024

3 br/2 ba 1,212 sf

$119,000  SP 3/1986

$355,200  loans  4/07

$51,173   SP at trustee sale

$484,900  List price 5/08

108 days on market

The former owners went down with the ship here, not even attempting to sell even though they could have pocketed at least $50,000.  Swashbucking Captain Jack is an old veteran of this game, and he paid the amount the second mortgage holder needed at the trustee sale – the $51,173.  The first mortgage holder (of $305,200) is probably wondering when/if Jack is going to start making payments, but Jack’s hoping to dump this before the first lender starts foreclosure on him.  He began at $519,900 in May, so he’s gotten a little more realistic – how much more, and when?

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11415 Mustang Ridge, SD 92130

5 br/4 ba, 4,204 sf

$1,438,500  SP 4/07

$1,790,000 to $1,890,000  List Price 6/08

56 days on market

This Derby Hill offering says it has $500,000 in improvements, and to their credit, they didn’t hit the housing ATM to do them.  It’s included here because in the remarks it says, “The owner is one of San Diego’s must sought after home builders”, so we’ll assume that this is more business-like, and he’s a professional seller.  One that will do what it takes to get ‘em sold!

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We’ll follow these over the coming months to track how they do!

Here’s the addendum we’re using – click on ‘enclosure’ below.  Buyers should have the ability to review this well in advance and in the comfort of their own home, not in the closing booth of their realtor’s office.  Because you don’t want to miss the little kicker in paragraph 15.