bubbleinfo.com

Thinking about moving to the country, yet not too far out?  How about a newer 3,110sf custom home in the foothills of Vista? 

My new listing, please take it easy on me:

 
From Sunset magazine:

ZONE 23. Thermal Belts of Southern California’s Coastal Region
Growing season: almost year-round (all but first half of Jan.). Rain comes in winter. Reliable ocean influence keeps summers mild (except when hot Santa Ana winds come from inland), frosts negligible; 23 degrees F/-5 degrees C is the record low.

Link to Sunset.com for climate zones

Areas like Rancho Santa Fe are prime for sellers who list at reasonable prices.  The REOs look GREAT when there are so many houses not selling (344 detached active listings today in the Ranch), and besides, everyone in Rancho Santa Fe wants to steal one from the bank!

This 3,148sf one-story house in the Covenant (south of Paseo Delicias) sold for $3,595,000 in August, 2006.

It was foreclosed in May, 2009 when no one jumped at the $1.8 million opening bid, so the lender notched down, and listed for $1,599,000 on July 17th, about half of what it sold for three years earlier. 

It closed for $2,090,000 on September 1st, a whopping 23% OVER LIST PRICE! 

Here’s a video tour:

All it takes to sell is a reasonable list price!

Lately, there have been a number of inquiries about investing in real estate.  Even though there is some frothy-ness going around, be careful!

Below is an extreme example, but demonstrates how quick, and how bad, a deal can go wrong for a participant, in this case the hard-money lender who thought he had equity built in.

17215 Camino de Montecillo, Fairbanks

12 br/10 ba 16,636 sf

YB: 1993, 1.88-acre lot on lake

SP: $6,450,000  8/29/06

Opening Bid: $5,000,000 8/08 back to bene

Sale Price: $3,200,000

The lender ended up losing around two million dollars, and the new buyer has to spend another $1,000,000 in repairs.  The scary part is that the original mortgage that recorded the same day as purchase was $7,125,000, and it looks like in 2007 the owner paid down and refinanced at $4,650,000 – but could it have been a second mortgage?  Just a year later it unravels, and lender forecloses.

If you are thinking of buying at a trustee sale, buying a fixer, or “stealing one from the bank”, watch yourself - things can go wrong, very wrong.  Assume that there is no “built-in equity” and what seems like a simple repair job usually costs double.

A few more bank-owneds in Del Mar, Solana Beach, and Encinitas in this youtube video:

While this is supposed to be a tour of mid-market REOs, there is a 4,745sf bomber slipped in that will help demonstrate the substitution effect.

Last year there was a $1.895 million cash sale on Amber Lane, and two others are for sale now for $2 million. But now that you can buy a similar-sized house on the Encinitas Ranch golf course around $1.2 million, are people going to spend that much or more to be in La Costa Greens and the San Marcos School District? We’ll see!

Hard to put a value on this dazzling opportunity:

We’ve been following the BR/Model Homes Partners debacle for years now.

In 2005, a group of lawyers from Orange County had purchased 11 model homes in Bressi Ranch and leased them back to the builder Lennar, waiting to make the big kill by selling them once the tract sold out.

But the market didn’t cooperate.

The partnership tried to auction them in 2006, but fell flat on their face.  Here’s dny’s remarks from Piggington on the event:

I knew the auction was going to be a bust when he OPENED the first house-the biggest I think at 4600 some sqft at $1.5M. This elecited a small chuckle from me and a few others. He backed all the way down to $1M before getting ending up at $1.05M.

Quick Recap of high Bids:

sqft–price
4600–$1.05M
3700–$1.00M Great BY and View
4091–$1.1M Great BY and View
3384–$900k (1 bid)
3094–$700k-$900k “a little shy”–probably 100k or so off
3094–$700k-$825k
2812–$550k-$750k
2666–$750k
2461–$700k
2336–$700k
2506–$775k
2178–$775k
2775–$650k

Again, they did not accept any of the bids, but they did say some were close (maybe $100 or $200k would be my guess as to what close means), and they would negotiate with the high bidder. Some others had nice yards and views too.

Once the auction failed, they leased the houses, content to wait it out.

Flash forward to the end of 2008 – the partnership stops making their mortgage payments, even though they are still collecting rents.  Did I mention that this is a group of attorneys?

NODs are issued in February, 2009, adding to the other 20+ foreclosures in the works in BR.

But at the last minute, an investor group bails out the partnership, making a deal with La Jolla Bank to a bulk purchase of the ten homes. It closed on 8/28/09, and the trust deed filed was for $4,600,000, which I’m guessing was the purchase price for the package.

The partnership lost about $2 million in down payments, and La Jolla Bank had $7,500,000+ in mortgages on the properties originally.  Just $5 million down the drain.

The guy who called me said he was going to quietly solicit agents around town to bring their buyers, and sell them onesy, twosy.

Two of the houses showed up on the MLS yesterday, and immediately marked pending:

2771 Palmetto

4 br/2.5 ba

2,178sf

SP: $968,500 2/05

LP: $549,000-$599,000 9/09 PEND

2658 Garden House

4 br/3.5 ba

3,092 sf

SP: $1,009,500 2/05

LP: $649,000-$699,000 9/09 PEND

If the new investor can evict the other tenants quick enough, could they make a million?

Two thoughts worth exploring:

1. Is there any evidence of the foreclosure flood hitting the MLS yet?

2. How are regular sellers faring, compared to REO listings? 

Currently the new REO listings are about 20% of the total new listings coming on the MLS.  Last month there were 855 REOs sold, or 32% of the 2,659 closed sales.

So the majority of sales are non-REOs today, but as more enter the market, buyers will gravitate towards them because of the notion they are giveaway-priced just because they are bank deals.

SD County New Total Listings, and Number of Them Already Marked Pending:

The 602 REO pendings over the last five weeks is only 28% of the total new pendings, but the banks are more effective with their pricing (62% vs. 37%). With REO listings expected to increase dramatically, and regular sellers cancelling their listings for the holidays, don’t be surprised if we see the number of REO sales increase to 50% to 60% of all sales by the end of the year.

Once the REOs make up the bulk of the sales, it will be very hard for regular sellers to compete – the buyers want to steal one from the bank!  Look for 2010 to be the year of the Bank Deals! 

Listing agents are getting increasingly more cocky about how they conduct their business. They can’t justify the refusal of FHA offers, but they do it anyway.  In the end, while they feel quite righteous about it, they are actually damaging the seller.

A story written by Kate Berry:

Despite years of efforts by the Federal Housing Administration to cut back on red tape, a bias remains against borrowers using FHA financing.

Thousands of properties listed for sale on various Multiple Listing Services around the country say simply: “No FHA” under the description of acceptable financing, lenders and mortgage brokers say.

Some attribute the restrictions to outmoded perceptions about FHA, which in 2005 eliminated some of its strictest requirements on property repairs, home inspections and appraisals. Others say lenders are excluding FHA borrowers from buying short sale or real estate-owned properties because higher default rates on distressed properties could land them on FHA’s Credit Watch list.

“This is the worst-kept secret in real estate, that the MLS is full of listings that say ‘no FHA,’ ” said Scott Stern, the chief executive officer of Lenders One, a cooperative of mortgage banks in St. Louis.

Rodney Anderson, the executive director and managing partner of Rodney Anderson Lending Services, a unit of the Dallas lender Everett Financial, called the practice “buyer discrimination” and said that it is based on old ideas about the government program.

“There’s still a stigma from the old days when FHA required more repairs on properties,” Anderson said. “But now FHA works just like conventional loans, and there is a real lack of education out there.”

Steve Majerus, the director of retail lending at CMG Mortgage Inc., a San Ramon, Calif., lender, said there are “perceptions that FHA has roadblocks to the entire process.” The real roadblock, he said, is sellers who won’t accept FHA loans.

Mortgage brokers and lenders said the problem is most prevalent among sellers of homes that require significant repairs because many realty brokers think FHA borrowers will not have the money to cover these costs.

Raffi Tal, the chief operating officer at IShortSale Inc. in Woodland Hills, Calif., said many lenders are also refusing to accept FHA financing for short sales and REOs.

“When a property goes to REO, the lender is really discounting the price, and if the buyer has an FHA loan, it takes longer, so that’s why they’re discriminating,” he said. “The guidelines on FHA are tougher, and if they get multiple offers they don’t need FHA.”

Majerus said persuading sellers and their listing agents to accept FHA buyers is important because the housing crisis has catapulted FHA into the mainstream. In June mortgages backed by the FHA accounted for 35.9% of all applications, the biggest share since 1990, according to the Mortgage Bankers Association.

FHA mortgages currently are half of all new loans for home purchases, up from 10% in early 2008, according to analysts at Bank of America Corp.

Lemar Wooley, a spokesman for FHA, said the agency has not gotten any complaints from borrowers and was unaware that MLS listings forbid FHA financing.

But Brian Montgomery, a former FHA commissioner, said that during Montgomery’s tenure (mid-2005 to mid-2009) FHA reformed its appraisal requirements, shifting from an emphasis on minor repairs to those that endanger the health and safety of a home’s occupants.

Lenders also are concerned about the ability to close a loan, he said, since housing prices are still falling in many markets.

“If there’s something that comes back at the 11th hour and the borrower can’t use FHA, then the seller is left holding the bag,” Montgomery said.

Angelo Rhea, a first vice president of FHA underwriting at $16.4 billion-asset Flagstar Bank in Troy, Mich., said realty brokers may be randomly adding “no FHA” to MLS listings because they have not kept up with changes made by the agency in recent years.

“Many Realtors think it takes 60 days to close a loan and that the seller has to pay extra costs, which isn’t the case,” Rhea said. “If anything, it’s harming the seller not to allow FHA financing.”

The perception that FHA borrowers have lower incomes and credit scores persists even though the average FICO score on FHA loans has risen from 626 to 692 in the last year, said Brian Chappelle, a former FHA official and a partner in Potomac Partners LLC, a mortgage banking consulting firm.

“If you’re loaded up with REO properties and they’re putting ‘no FHA’ loans on the listing requirements, it’s because they’re concerned about the audit risk,” Chappelle said.

Lenders may be at risk of being placed on the FHA’s Credit Watch program if they have high default rates in certain areas such as California, Arizona, Nevada and Florida. The lender “would be worried about their liability and their FHA performance,” Chappelle said.

Kris Berg is having similar trouble:

http://sandiegohomeblog.com/2009/09/03/fha-no-no/

from sddt.com

Legoland California has submitted plans to the city of Carlsbad for a water park with rides, outdoor dining and shops on a 7.3-acre portion of its 350-acre property.

Legoland officials declined comment on the plans but Van Lynch, a Carlsbad senior planner, explained that Merlin Entertainment Groups, an entity largely owned by Blackstone Capital Partners (NYSE: BX), submitted plans on Aug. 25 for a project being dubbed the “Waterworks Cluster.”  The cluster would be constructed in multiple phases.

These would include the “Lazy River” with family raft rides; water spray features and fountains; slides and pools for tots and older children; and more vigorous rides for older children and adults.

A key component would be an inner tube ride dubbed “Mini-Boomerango” that would push patrons up a waterslide before taking the inner tube over a ramp and dropping it back down into a pool.
While Dieter Ronchetti, Legoland spokesman, wouldn’t provide details about the Waterworks Cluster, he indicated he hopes to “unveil the new land next year.”

So does the sluggish economy warrant adding to the theme park? Ronchetti said yes.

“Last year was a record year for us in terms of attendance,” Ronchetti said, without revealing numbers, “and we are currently running ahead of 2008.”

Ronchetti, who added that his theme park is about to celebrate its 10th birthday, said Legoland is still years away from buildout.

As plans become clear for park rides, the California Coastal Commission is scheduled to consider a measure next week that could create a campground at the park.

Plans are subject to change but currently call for tent/shelters on site, bathroom facilities, a hospitality tent, central fire ring and a small outdoor amphitheatre.

“Additional overnight camping facilities, the main source of lower cost visitor and recreational facilities, are needed throughout the San Diego coastal region,” the Coastal Commission staff stated, before adding that additional camping facilities should also be provided in a regional park within the city.

That in turn, the staff report stated, should be in conjunction with such low cost facilities on private lands.

Coastal Commission staff has been pushing for lower-cost options at multiple properties around the county during the past two years.

Of higher priority than a campground to Legoland is a proposed 254-room, three-story, 121,000-square-foot Lego-themed hotel, with meeting areas, 11,000 square feet of retail and a pool.

“We’re still at the technical drawing stage, but that would be a very exciting project at the entrance to the park,” Ronchetti said.

While reasons for the hotel’s removal from next week’s Coastal Commission docket were not immediately clear, hotel financing has proven to be elusive during the past year.

Although the hotel is now not expected to come to the commission before early 2010.  That could be a good thing, as consultants such as Robert Rauch aren’t predicting a rebound in the hotel market before 2012.  If the new hotel is built, it will have no shortage of competition.

Carlsbad already has more than 3,500 rooms, including Grand Pacific Resorts’ neighboring Grand Pacific Palisades Resort with its 161 timeshares and 90 hotel rooms, and the Carlsbad Sheraton Resort & Spa with its first phase of 250 hotel rooms and 44 timeshare units operated by an affiliate of Hilton Grand Vacations.

Tim Stripe, Grand Pacific co-president (with David Brown) said while he has one timeshare building with 12 units currently under construction, the economy will dictate how quickly the rest of that project comes online.

Stripe said while he might eventually be competing with a Legoland Hotel, the theme park has proven to be a huge boon to his business.

“We are probably their largest purveyor of tickets outside the park,” Stripe said. “We’ve had an excellent relationship for a long time.”

Another neighbor of Legoland on the Carlsbad Ranch property is the Gemological Institute of America in its 236,000-square-foot headquarters constructed in 1997 on 17.7 acres at 5345 Armada Drive.

In the last couple of years, the GIA had been considering a 150,000-square-foot expansion of its Carlsbad headquarters but that was before the recession changed the dynamic.

In early 2004, the GIA acquired a vacant 10.87-acre adjacent to its headquarters for $5.37 million.
With the U.S. economy as it is, the GIA said it plans to focus any expansion in countries such as India.