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The Case-Shiller index for January is out.

San Diego’s index was 148.25, the same as in August/September 2002. 

The peak was 250.34 in November, 2005.

As a result, you’ll hear that San Diego prices are down 41% – the difference between the index in November 2005 and January 2009.

But that is a broad stroke by a very wide brush, plus doesn’t January seem like a long time ago?

Are Carlsbad Detached Homes Back to 2002 Pricing?

There were seven houses sold this month that previously sold in 2002 and 2003.  All but one closed for double-digit gains compared to what they paid.

The one that sold for less was the guy on Pelican who refi-cashed-out about $600,000 before getting foreclosed, and the bank giving it away for $975,000.

So I wouldn’t say that Carlsbad is back to 2002 pricing. 

Will there be a big improvement in the Case-Shiller index between January and March? Doubtful, if anything it’ll probably get worse.

Where is Carlsbad compared to peak-pricing?

2003 – 4 sales, at 7% average gain

2004 – 2 sales, at 12% average loss

2005 – 5 sales, at 19% average loss

2006 – 6 sales, at 23% average loss

2007 – 2 sales, at 22% average loss

There were only three that lost more than 30%:

1. A junker on Pine in the barrio (-37%)

2. A house with 3,057sf but no view in Bay Collection (-32%)

3. A very suspicious sale on Valley where the former owner paid $1.2 million (-52%)

Generally I think you can say Carlsbad is 20% to 25% below peak pricing.

In March there were 15 of 40 houses that sold for a loss, but that means that most sold for MORE than they paid, which should be noted somewhere in the media coverage too.

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The N.Y. Times is on the case, and their quotes include the words ‘gruesome, and ‘no daylight’. 

They even quoted a part-time local blogger today:

http://www.nytimes.com/2009/04/01/business/economy/01econ.html?ref=business

Remember the newly-built seven houses on Newland Court that back to Carlsbad Village Dr.?

They tried to sell the 3,400sf homes for around $1,500,000 EACH, beginning in mid-2006 when they were completed.

But no luck.

By the end of 2007 they were down to $1,199,000.

No luck there either.

Eventually the builder’s LLC made it into court, and in December, 2008, and the properties were listed in the mid-$800,000s and called a “court-ordered sale’ in the MLS.  But after two weeks, all seven listings were cancelled.

I represented the sellers of this vacant lot when the builder bought it, and the buyer’s agent swore to me that he was made of money.  But in January, 2009, the lender, United Commercial Bank, foreclosed on their $6,400,000 construction loan.

All seven properties were purchased at the trustee sale for $4,690,000, or an average of $670,000.

Want to guess who the all-cash purchaser was?  The original buyer/builder of the project.

I believe he has since rented them out.  If you can’t get your lender to give you a break, you can always pressure them into foreclosing, and buy ’em back at the trustee sale!

Here’s a link to the old youtube video tour:

http://www.youtube.com/watch?v=w03uFO49qvM

Are you thinking, “Wait until the neg-am resets hit”?

I asked a major title company to tell me how many neg-am loans there were in Encinitas, Carmel Valley, and Ranch Santa Fe, a good cross-section of the higher-end properties.

Here was the response:

There are 29,488 properties

Neg-Am Loans
SFR (Detached) – 682
Condo/Duplex (Attached) – 288
Total = 970

Pay Option ARMs
SFR (Detached) – 440
Condo/Duplex (Attached) – 190
Total = 630

That’s it, 1,600 out of 29,488, or about 5.4% of the properties have either a neg-am, or option-arm.

They confirmed that they read every single trust deed and ARM rider that gets recorded, whether it’s a purchase or refinance transaction.

There were 10,268 adjustable-rate mortgages, so the remaining 8,668 must be mostly the interest-only, 3-year to 10-year mortgages, the ones that lenders are modifying. Today I heard of a homeowner who was coming up to the end of his five-year term, and called Countrywide for advice. He got a five-year extension at 4.75% interest-only, at no cost!

He was so happy he took his wife to Hawaii for a week!

Are you looking for the bottom of the real estate market?

Full recovery will begin when homelookers feel confident that buying a house is a good idea, and that’s it’s safe and comfortable to proceed.

Price will fix that.

But there are other hurdles getting in the way, and either they need to be cleared up, or prices will have to adjust further to compensate:

The Powers That Be – Unfortunately there isn’t a single governing body in real estate that helps educate people.  The national, state, and local associations of realtors think they are helping, but they aren’t. 

The statewide MLS is currently in development, and soon Aunt Bertha from Eureka will be listing and selling homes in San Diego. Real estate is a local sport, why would realtors support a statewide MLS, and how does it better serve buyers and sellers? Would you feel comfortable buying a house that was listed with a Eureka agent, unless you knew the price was low, or at least very reasonable?

Short Sales – The short sale listings are ridiculous.  The banks are overwhelmed, and processing takes months.  As a result, the homeowners have no incentive to cooperate, because as long as the banks are dragging, the sellers get free rent.  For buyers to endure, the agents would need to do a masterful job at managing the transaction in a timely manner…..or keep lowering the price.

It gets worse.  Supported by Sandicor MLS guidelines that allow listings to remain active in spite of having an accepted offer, the listing agents are tempted to conspire with the sellers to find their own buyer, and double-end the commission.

This week I was contacted by someone looking to purchase a short sale. They had already spoken with the listing agent, and didn’t feel comfortable with her version of dual representation.  I called the seller to arrange a showing, and was told that it’s no longer being shown.  Because the listing agent had given the seller’s phone number directly to the buyer so he could set up his own showing, when he called to set-up, the seller said, “Sure, come on over anytime”. 

Here’s another case where we were told that the short sale had been approved, and we went back to see how the house looked. Even though I called ahead, when we arrived, we were locked out:

Listing agents are allowing their sellers to game the system, rather than make an honest attempt to procure a timely sale – or if they can find their own buyer, then magically the sale all comes together.

Valuations Must Be Tough - With fewer sales to use, trying to pinpoint what a property is worth must be tougher than ever, or people just don’t care.  Consider this:

Did I mention that the other model-match comp that backed directly to RSF RD. closed for $695,000 three months ago? It would be hard to convince anyone that prices have gone up that much in the interim.

The sales prices are scattershot all over the map, making it difficult for buyers to get a warm, fuzzy feeling that they are paying the right price. Websites like zillow complicate it further – the zestimate on lower house is $890,000!

Want to know when you’ve reached your own personal ‘bottom’?

It’s when you feel comfortable proceeding!

Are prices finding some traction? 

We’ll examine it further, but first, here is the lightweight, vague answer - from sddt.com:

There might be a price bottom forming as first-time buyers and investors vie for homes on the lower end of the market, but it was up to debate whether it could last.

Seven local real estate experts met at The Daily Transcript offices Friday to discuss current issues in the housing market and talk about where home prices are headed.

San Diego County home resales have been up nearly 50 percent this year compared to 2008. The median price of both detached and attached homes have hovered around $340,000 and $200,000, respectively, for the past four months.

Participants said there is heavy competition for lower-end homes.

“It’s a great opportunity for first time buyers,” said Mark Goldman, professor of real estate at San Diego State University and certified mortgage planning specialist. “But the restrictions are getting so tough that first-time buyers can’t hop in and if they can, they’re being outbid for these buy investors — all cash.”  Goldman said lending needs to pick up rather than money flowing out that comes from private investors paying cash. 

With multiple bids coming in for less expensive homes, Norm Miller, director of real estate academic programs at University of San Diego, said a floor can be formed, regardless if the people buying are private individuals or investors.

However, the housing market could have further to fall depending on how the economy fares within the next year or so, said Alan Gin, professor of Economics from the University of San Diego.  “It all comes down to: is the economy growing in terms of jobs? And right now it isn’t,” he said. “So that is the fundamental problem.”

Adding to problems in the housing market is the general lack of consumer confidence, coupled with uncertainty about the country’s economic future, said Gin.

Homebuilders like Guy Asaro, the president of McMillin Homes, face similar issues that are complicated with resale home prices so low that new homes cannot compete.  “Everyone in the money world recognizes historic opportunity to buy property at below replacement cost,” he said. “Once this stuff is gone, it won’t be at this price ever again because we can’t replace it at this price whether it’s new or used.”

While the housing experts did not come to a specific conclusion about when or how home prices will increase in the future, Miller said it is important to note recovery does not come in the shape of a “V”. 

“Anybody who tries to time it is nuts,” said Miller about trying to purchase a home at the bottom of the market. “If you get within three months or five months of the bottom you did great.”

The website www.carlsbadistan.com is our political watch-dog, and offers other local news and dry humor.  They recently inspired this knucklehead rant:

The elementary school is right across the street, so if you were interested in buying this house and wanted more information, hustle on over – it looks like they are having a couple of events today:

I need some filler here to help balance out the photo and text, so hat tip to Steve for suggesting this one, and I’ll mention that San Dieguito Academy is highly acclaimed too!

Pardon my fascination for the dynamics of the higher-end market, but here’s one more chart to measure the dysfunction.

People have commented that the numbers are skewed because prices have dropped, but I’m purely looking at the number of sales, because that is the best sign that sellers are getting their price right. The fewer the sales, the wronger the list prices are.

The ‘New Listings’ are every house listed from La Jolla to Carlsbad between March 1-25, and the ‘Closed’ are those that had their final recording during the same time. They are two separate categories, but let’s compare them to previous years:

Detached Listings Above $600,000, March 1-25

For every house that closed this month over $600,000 between La Jolla and Carlsbad, there have been AT LEAST FIVE come on the market.

While the MLS may have deleted a few from the older years, and there are going to be some late-reporters, the out-of-balance is incredible. Back in the day $600,000 was a lot of money, yet every year in this decade had more sales than 2009 – and today rates are helf of what they used to be.

Is the market heating up?

Here are the pendings – previous years have all closed, while this year’s paltry number will have some fall out:

Detached That Went Pending between March 1-25

If you are thinking of buying a home between La Jolla and Carlsbad over $600,000, you need to proceed very cautiously, and grind for the best values – and get good help! If you are selling, do what you have to do to get out – lower your price early and often. You’ll know when you’re getting the price righter, offers start coming in!

Professor Piggington says that the comparison of buying to renting hasn’t been this reasonable in years:

Link to Rich’s article

Not sure exactly who the buyers are, but we can examine their down payments – it looks like those buying have some dough:

Down Payments of the 46 SD North County Coastal Detached Buyers, March 1-15

Eight sales were REOs, and seven were new homes, which leaves only 31 regular resellers. How did they do on same-house sales? Only 12 of 46 sellers (26%) had purchased since 2002, and only five of those sold for less than what they paid.

Like Rich said, each sub-market is having its own dynamics, but so far this month, 80% of the buyers from Carmel Valley to Carlsbad have been able to use at least a 20% down payment. The banks may be insisting on bigger down payments, but people are complying – if they find the right house, at the right price.