Thursday, December 4th, 2008 at 12:19 PM
Ency Ranch Review
People ask all the time, “How’s the market?”
The current conditions in Encinitas Ranch typify the struggle for sellers:
1. Higher sales prices weren’t that long ago.
2. Recent low sales can be “explained away”.
3. Don’t have to sell, No hurry, Not giving it away, etc.
The time of year doesn’t help either, because you can add #4 to the list – ‘this year is toast, it’ll be better in springtime’.
In the meantime, the buyers are focused on the low sales, and as a result, there are 16 active listings hanging around not selling.
There has only been FIVE closed sales under $998,000 this year, and sellers conveniently ignore those - heck there have been 21 closed sales over $1 million in Encinitas Ranch in 2008! Doesn’t that still mean that most every house in Ency Ranch is worth a million, or more?
The problem: two recent sales finally dipped under $300/sf, and they are across the street from each other on Cypress Hills. Both were foreclosed homes, but sorry – in this environment, every buyer wants a bank deal – or at least a house priced like one.
649 Cypress Hills
4 br/3.5 ba, 3,217 sf
$1,170,000 10/05
$865,000 9/08
$267/sf
REO
654 Cypress Hills
5 br/4 ba, 4,543 sf
$1,600,000 6/05
$1,050,000 10/08
$231/sf
REO
This last one was on the market since the beginning of 2006 with a few different realtors – it was painted white then, the new owners gave it a face-lift.
What do these mean for the future?
Though there have been four closed sales at $1,300,000 or higher since September, some of the current active listings appear to be shuffling a little closer to the exits:
2,581 sf asking $724,000 in foreclosure, short sale
2,928 sf asking $875,000 to $948,000 133 days on market
3,582 sf asking $949,900 to $989,900 started at $1,289,900 in July
4,612 sf asking $995,000 short sale, started at $1.4 million in March
3,501 sf asking $999,900 REO
These five sellers are smart – they’re trying to get out before it gets any worse. Maybe they noticed the other three in foreclosure that aren’t on the market, enjoying their free rent instead.
There are another seven active listings above $1,000,000, but not sure buyers are considering those much.
While the five more-aggressive sellers search for what the market will bear, you can guess that offers tendered will be south of $300/sf on all listings from here on out.
But they all face what is the typical struggle for sellers these days – what price will it take to sell my house?
As long as you’re not selling, all you can conclude is that your price must be wrong.
The next one that breaks out with a dramatic price reduction wins!
Posted on Thursday, December 4th, 2008 at 12:19 PM in Thinking of Buying?, Thinking of Selling? | 18 Comments » | 
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Don’t take this as an “explained away” comment, but I actually looked at both 649 and 654 Cypress Hills before they sold.
I am actually amazed that 654 sold as high as it did. The front yard was literally the next door neighbors’s driveway, and although the listing and tax roll indicated 5 bedrooms, I could only find 3. Nice interior though.
649 is one of the smaller Encinitas Ranch homes, and it looked like it was priced to sell better when it was first listed.
Kingside | December 4th, 2008 at 1:14 pm$300/ft seems kind of loud. I’m thinking $200/tootsie for these cribs.
JMHO
Turnack | December 4th, 2008 at 2:51 pm“As long as you’re not selling, all you can conclude is that your price must be wrong.”
This is academic, but I strongly disagree with this sentence. The housing market isn’t perfectly liquid. Hell, the fixed income markets are no longer liquid. At all. Plenty of legit AAA assets would sell at 70c on the dollar, and we know that’s not fair value.
You can only say what you did IF you have a sufficient number of buyers (and sellers) all ready to go. It ain’t the case. If it persists for a long time, and enough would-be buyers see it and pass to buy something else, then yes.
Think of it this way. Try to sell your house on Christmas eve and tell me what price you get at auction. Two days later you might get 40% more. Did your home’s value really drop and then spike up again by that much? No.
Hey, I like the line “there’s nothing that price can’t fix.” But sometimes you’re a little hawkish on the price rhetoric. And hey #2, I’m long land down there and building in ’09. I want prices to crater so I can appraise lower and lock in my prop tax at a reasonable level (excluding prop 13 shenanigans!).
Aztec | December 4th, 2008 at 5:37 pmSpoken like a true seller.
I speak strongly about the pricing issue because it is THE issue. If I say, “Well. um, I guess it might be your price”, then sellers grab for any OTHER reason they can think of.
You know as well as I do that if you’ve been on the market since summer and haven’t sold, you missed the best time to sell. Buyers may pass you by just because you’ve been on for so long.
I don’t mind casual criticism from passers-by, but know that my retoric is targeted to those active in the marketplace. They need to hear strong language – better chance it’ll sink in.
BTW, 602 Paloma listed today for $929,000 for 3,407sf. Encinitas Ranch sellers are facing a very competitive 2009.
I looked at the REO listed for $999,000 too, and it isn’t a slam dunk. If it ends up in the mid-$900,000s, (or $271/sf) it’ll be the third REO in a row to close well under $300/sf.
Jim the Realtor | December 4th, 2008 at 6:26 pm“Did your home’s value really drop and then spike up again by that much?”
Yes, it did. At any given instant in time the value of anything is determined by what you can get someone to pay you for it.
GeneK | December 4th, 2008 at 6:38 pmDuring the peak of the bubble I had lots of folks tell me how much there house was worth at that moment, but I guess what they could sell that same house for now is somehow not fair market value. I’m happy to wait for the spring 2009 FMV.
Anonymous | December 4th, 2008 at 7:04 pmIn the 25 years since I bought my first home, every time there was another boom/bust cycle (and I lived in Silicon Valley until last year, there’s been four of them during that time), a common subject for party conversations was always how much our homes had “gained” or “lost” and how much they were now “worth.” We always made that little four-finger “exclamation mark” gesture when we said those words, because we knew we weren’t selling and were talking about Monopoly money.
GeneK | December 4th, 2008 at 7:35 pmAztec wrote:
The housing market isn’t perfectly liquid. Hell, the fixed income markets are no longer liquid. At all. Plenty of legit AAA assets would sell at 70c on the dollar, and we know that’s not fair value.
Actually, that’s exactly what “fair market value” means…what it will sell for at that moment. What you wish for has no bearing on fair market value.
You can only say what you did IF you have a sufficient number of buyers (and sellers) all ready to go. It ain’t the case. If it persists for a long time, and enough would-be buyers see it and pass to buy something else, then yes.
As Jim (and others, including myself) have been pointing out all year, this market has been **extremely** liquid. The buyers have been out in droves, literally buying up anything **that was priced right** within a couple of days.
———–
Why is it that when fraud was pushing prices up, some people claim homes were priced at “fair market value”? When the peak “buyers” were financing with no-doc, neg-am loans had neither the ability nor intention of ever paying them off unless the housing market bailed them out of their gamble…did you think your house was suddenly “worth” what that seller sold for?
If fraud (and most of those sales were fraudulent, as is evidenced by the number of foreclosures) was not considered an outlier for FMV back then, why should REOs be considered outliers now?
It’s likely there will ALWAYS be a very liquid housing market in San Diego. There are always lots of people who would like to buy homes here. If houses are not selling, it is becaused they are not priced correctly, period.
CA renter | December 5th, 2008 at 12:54 amDitto, CA Renter.
I totally agree. The “market price” is always of the moment.
For your example on Christmas Eve, you would be crazy to do so, of course, but if you constrained yourself so, then yes, that’s what your home was worth on that day.
(And I, BTW have actually bought a house that we saw on Christmas Eve–we had one day; saw 25 houses and made an offer that night. Not in a market like this–more even-handed times.)
shoppingaround | December 5th, 2008 at 7:00 amTechnically, the “official definition” of FMV is what a willing seller and willing buyer agree on if both are entering freely into a deal with no coercive forces working on them. So if you’re selling your home in a down market just because you decide you want to (and at this very moment there’s probably at least one newly-retired seller who paid $90k for his house in 1978 and thinks that selling it for $400k instead of the $600k it was a couple of years ago before he was able to retire is still a reasonably good deal), the price you agree to take is FMV, but if you’re selling because you’ve lost your job, maybe not.
GeneK | December 5th, 2008 at 7:41 amFair Market Value also contains an element of time:
“The price that an interested but not desperate buyer would be willing to pay and an interested but not desperate seller would be willing to accept on the open market assuming a reasonable period of time for an agreement to arise.”
Needing to sell on Christmas Eve without adequate marketing time would be called “restricted” FMV.
GameAgent | December 5th, 2008 at 8:38 amGeneK, you got it right in your last post, as that is what I was trying to say.
I objected to JtR’s blanket statement (not in reference to the particular homes he pointed out that may have had the element of time fairly given).
Aztec | December 5th, 2008 at 9:45 amAztec, by your definition, almost no sales represent “FMV”.
In addition to the current financial turmoil, people have to sell because of: moving jobs, ill-health, growing family, retirement, etc. Each of these reasons would negate your definition of “FMV”.
When exactly would your conditions be met?
FreedomCM | December 5th, 2008 at 10:19 amTo determine FMV, you would need to somehow exclude all the people who buy or sell because they “have to.”
Selling your home because you have decided to retire, move to take a new job when you haven’t lost your old one or to get more space for a growing famiily are not “have to sell” situations. They are the result of freely-made choices.
GeneK | December 5th, 2008 at 11:40 amGameAgent has it right as well, with the time element.
GeneK said “Technically, the “official definition” of FMV is what a willing seller and willing buyer agree on if both are entering freely into a deal with no coercive forces working on them. So if you’re selling your home in a down market just because you decide you want to (and at this very moment there’s probably at least one newly-retired seller who paid $90k for his house in 1978 and thinks that selling it for $400k instead of the $600k it was a couple of years ago before he was able to retire is still a reasonably good deal), the price you agree to take is FMV, but if you’re selling because you’ve lost your job, maybe not.”
I’d add that you may not have FMV if buyers are aware of the sellers’ problems and take advantage of that (e.g., force lower prices than they’d be willing to pay if they did not have that knowledge). We’re clearly seeing some of that today. So while someone above noted that we have a liquid market when the price is right, sometimes those prices may be “vulture” prices.
Please note I’m only objecting to JtR’s original *blanket* assertion. Not that he is wrong with the specific examples listed in that particular blog post.
Aztec ("Anonymous" above) | December 5th, 2008 at 12:24 pm“Offical definitions” aside, what a willing seller will accept is irrelevant if there are no willing buyers offering more than the prices that a mountain of REOs are going for. Sellers who are not desperate then have two choices: either decide they *want* to sell enough to take the same prices as those who *have* to sell, effectively setting the FMV, or decide not to sell at all, and render FMV moot because there are no “interested but not desperate seller/buyer” deals happening to set a figure for it. It is entirely possible for the answer to “what’s the FMV?” to be, “we have no idea.”
GeneK | December 5th, 2008 at 2:08 pmJim’s right on the price issue. If you want to play this game of eliminating sales from banks and people selling/moving because of job loss, then you should also be willing to eliminate the buyers that HAVE to buy because their family is coming, or the school year is starting etc, and just include people like myself that are happy renting until they see a screaming deal come by.
If the price is listed on MLS, everyone knows about the offer. A week is plenty of time. A natural part of the market is the mismatch between the number of buyers and the number of sellers. You can’t say the price is only fair when that number is equal because it never is.
Jay Jay | December 6th, 2008 at 8:52 amFMV has nothing to do with whether the numbers of buyers and sellers are equal. It’s based on *why* people are buying or selling. If there was only one house on the market in the entire county and 500 people were engaged in a bidding war for it, as long as the seller and the winning bidder are both in a position where they could have walked away and said “no sale” if they couldn’t make a deal they were happy with, then whatever price they end up with is FMV.
GeneK | December 8th, 2008 at 9:24 am