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This youtube video shines the spotlight on Carlsbad’s La Costa Oaks development, one of the four villages subdivided by Morrow Development (La Costa Valley, La Costa Greens, and La Costa Ridge are the others). As with other tracts sold at the peak, there is plenty of noise in the data, challenging buyers to make sense of it.

Southeast Carlsbad’s 92009 zip code is physically about the same size as Carmel Valley’s 92130; 20.2 sq. mi. to 19.7 sq. miles. But 92009 has about 66% more homes than CV, so the foreclosure stats showing them having twice as many NODs and NOTs isn’t that drastic (the stats in video says “Carlsbad”, but they are just the 92009 foreclosure numbers):

The late-reporters will add about 10% to these numbers, but it looks like the overall sales will continue their downward trend.  When you drill down to the individual zip codes, it’s a mixed bag, but good to see 92067 slip under $400/sf for the third time this year. 

Detached sales for August, Year-Over-Year:

Will there be a big squishdown from above?

It was noted yesterday that 35% of the active detached SD listings in SD, but only 20% of the sales in the last 30 days are over $700,000.  Are the higher-end sellers who have been on the market for over 90 days motivated enough to dump on price, causing a ripple effect below?

Or will higher-end sellers hold out, either due to high loan balances or high equity positions/low motivations?

Here is a review of the 100 active $1M+ listings in 92009 (23), 92024 (43), and 92130 (34). 

(There just happens to be exactly 100 houses listed today at, or above $1,000,000 that have been on the market for more than 90 days in those three zips.)

The calculations were based on the original loan amounts, unless they looked like a neg-am which then 10% or more was added.  Using the ranges as categories should give us a general feel for the equity positions, and potential for dumping on price. The first category describes the ratio of mortgage balance-to-list price, and if they were on a value range, the low end of the range was used:

Other factoids:

1. Thirty have had no price reductions during their listing.

2. Another 17 have reduced their price less than $100,000.

3. Eight were marked as short sales (some with high balances were not marked)

4. One was an REO listing.

5. At least two were on the foreclosure list.

6. Twenty have been on the market more than 300 days on this listing.

What can we deduce? Only 30% to 40% of the current listings are in immediate trouble (those with less than 20% equity), and that’s only if they need to move for whatever reason. We can guess that the 47 who have loads of equity are likely to cancel unless they really need to move. The in-betweeners will make the difference between more sales at lower prices, or more stagnation. My guess is that less than half of these sellers are motivated enough to lower their price enough to sell.

Hat tip to Cheese who sent this in, from Bard College:

Self-reported home values are widely used as a measure of housing wealth by researchers; the accuracy of this measure, however, is an open empirical question, and requires some type of market assessment of the values reported.

In this study, the authors examine the predictive power of self-reported housing wealth when estimating housing prices, utilizing the portion of the University of Michigan’s Health and Retirement Study covering 1992–2006.

They find that homeowners overestimate the value of their properties by 5–10% on average.

More importantly, the authors establish a strong correlation between accuracy and the economic conditions at the time of the property’s purchase. While most individuals overestimate the value of their property, those who buy during more difficult economic times tend to be more accurate; in some cases, they even underestimate the property’s value.

The authors find a surprisingly strong, likely permanent, and in many cases long-lived effect of the initial conditions surrounding the purchase of properties, and on how individuals value them. This cyclicality of the overestimation of house prices provides some explanation for the difficulties currently faced by many homeowners, who were expecting large appreciations in home value to rescue them in case of interest rate increases—which could jeopardize their ability to live up to their financial commitments.

It was suggested that the market over $750,000 was “becoming non-existant”, and in yesterday’s seminar, a realtor said that demand in general was ”non-existant”. 

Does a market exist? Let’s look at MLS detached active, actives on market more than 90 days, contingents and pendings, sold-in-last-30-days listings, plus the NODs and NOTS counts:

The under-$500,000 groups are running well under a ratio of 2:1 actives-to-contingents+pendings, which has been a healthy sign in the past. As long as the servicers can keep dripping out the short-sale approvals and loan mods, we could call the lower-end market survivable – though, surprisingly, it’s where the bulk of the defaults are.

The $500,001 to $700,000 market is 2.28:1 on their actives-to-contingents+pendings ratio, and the defaults are well under the number of active listings, so apparently there are elective sellers in this group that could cancel and try again later if they don’t find a buyer. Plus, a few from above should drop into this category to keep everyone hopping.

More than a third of all active listings are priced over $700,000, yet no big rush to the exits with 45% of those languishing on the market for more than 90 days. The low amount of defaults seem to justify the loitering, but with only 77 sales closed in the last 30 days, you have to wonder when sellers and agents are going to figure it out – isn’t it obvious that something is wrong after 90 days and no deal and 80+% of those around you aren’t selling either?

A commenter suggested that the higher-end sellers can’t lower their price, due to loan balance – we’ll review that next.

At 7am this morning the NAR existing-home sales data for July is due out, and everyone expects a bloodbath.  Pundits will be guaranteeing the double dip, and calling for home prices to plunge throughout the land. There will also be remarks about how the tax credit pulled demand forward.

The NAR number is measuring the national drop in sales between June and July, but everyone has been saying for weeks how the tax credit was responsible, so how much does today’s number really mean?

To get a better read on the local market action – and to smooth out the noise – let’s compare the year-over-year change in the number of detached and attached sales, and avg. cost per sf for the two-month, June/July period in each area:

The sky might not be falling just yet, especially in North SD County Coastal, where the Y-O-Y numbers look pretty similar. There is only two areas, Del Mar and Solana Beach, where both sales and pricing were negative, Y-O-Y. But hopefully the sellers are just gleaning the headlines today!

I don’t think it is in the seller’s best interest to “pre-market” a home, but most REO agents insist on installing a for-sale sign in front of their new REO assignments at least several weeks before the price is determined. 

Callers who hear that there is no price get ticked off, and are quick to forget.  Oh, you got their number and you call them back with the price?  They are bored by then, and it’s harder to re-ignite any interest, plus the other agents don’t appreciate seeing you constantly trying to scoop their buyers on EVERY SINGLE LISTING YOU GET.

Wouldn’t it seem better to avoid ticking off buyers and other agents?

Hat tip to clearfund for sending this from cnbc -it mentions the TERI house in Bressi Ranch:

They’ve been called McMansions, Starter Castles, Garage Mahals and Faux Chateaus but here’s the latest thing you can call them — History.

In the past few years, there have been an increasing number of references made to the “McMansion glut” and the “McMansion backlash,” as more towns pass ordinances against garishly large homes, which are generally over 3,000 square feet and built very close together.

What sets a McMansion apart from a regular mansion, according to Wikipedia, are a few characteristics: They’re tacky, they lack a definitive style and they have a “displeasingly jumbled appearance.”  (Wiki says the word McMansion first appeared in the SD Union-Tribune in 1990)

Well, count 2010 as the year the last nail was hammered into the McCoffin: In its latest report on home-buying trends, real-estate site Trulia declares: “The McMansion Era Is Over.”

Just 9 percent of the people surveyed by Trulia said their ideal home size was over 3,200 square feet. Meanwhile, more than one-third said their ideal size was under 2,000 feet. 

“That’s something that would’ve been unbelievable just a few years back,” said Pete Flint, CEO and co-founder of Trulia. “Americans are moving away from McMansions.”

Read the rest of this entry »

Yesterday the WSJ included the report on last year’s success rate of sellers in seven selected counties (47% of those who listed their home, actually sold), but San Diego wasn’t included.

Let’s look at how North San Diego County Coastal detached homes have done recently.

New listings entered onto the MLS between July 1 and August 15

2008 – 682

2009 – 664

2010 - 768

Closed escrows between July 1 and August 15

2008 – 298 (avg. $450/sf)

2009 – 329 (avg. $378/sf)

2010 – 307 (avg. $372/sf)

Listings that expired, cancelled, or withdrew between July 1 and August 15

2008 – 349

2009 – 354

2010 – 425

For the most part, these are unrelated to each other, but exemplify the additional noise in 2010.  When you look at the Y-T-D numbers for Jan 1 to Aug 15, the picture looks better, which demonstrates how the market conditions have been slipping away lately:

Closed escrows between Jan 1 and August 15

2008 – 1,313 (at an average of $453/sf)

2009 – 1,227 (at an average of $390/sf)

2010 – 1,538 (at an average of $381/sf)

The Y-T-D sales appear to be up 25% year-over-year, in spite of a 7% dip over the last 45 days.  The market conditions are good enough that today’s homesellers have a great opportunity to drop their price significantly now, and find a buyer…..while most sellers are napping in the end-of-summer, Padres-are-in-first-place haze.

Sealed bids, live auction to follow

The Del Mar City Council voted 4-0, with Mayor Richard Earnest recused, to try to sell its no-longer used Balboa property to pay off the remaining debt on the sentimentally valued 5.3-acre Shores Park.

Escrow closed on the $8.5 million Shores property in 2008, with the city paying the Del Mar Union School District $5 million through fundraisers, and financing the other $3.5 million. A balloon payment of roughly $3.25 million is due on Nov. 13, 2011, and the city wants to avoid paying it off through the general fund. Staff reports that the Balboa property, a 22,000-square-foot parcel with sweeping ocean views purchased in 1965, is an idle asset that generates no income.

The fundraising group, Friends of the Shores, raised enough money to make payments on the loan, $300,000 annually, through fiscal year 2008-2009. The city has contributed $92,929 this year through the general fund. Government code allows cities to sell off property as long as it provides a public benefit.

Depending on how much the Balboa property sells for, the money could also be used to fund other projects, such as a new lifeguard tower and safety center. That project is also currently in the fundraising stage.

The council adopted a process that would aim to avoid the sentiment of a “fire sale” of the Balboa property. As such, the city will set a minimum price, from which interested parties will submit a bid. At some point, Del Mar will use those bids as a starting point for a live auction, with live bids required to up the sealed bids by at least 5 percent. Given the economic climate, the council reserved the right to pass on the sale if the offer is not satisfactory.

While most of the public speakers spoke out in favor of selling the Balboa property as a way to retire the debt on the Shores property, the city received two protest letters. That upped the requirement of at least a 4/5ths vote, which the council achieved with its 4-0 vote.

Jacqueline Winterer, who sent a letter and spoke to the council, cited concerns of property values being too low to justify selling the Balboa lot and asked why the council had changed its mind after expressing a similar sentiment at a June 2009 meeting. She suggested selling a piece of the Shores Park to pay off the remaining debt.

Councilmember Crystal Crawford, however, said she believes the Balboa parcel’s uniqueness and the market of potential buyers would keep the price high, despite the recession.

“This was one of those safety nets and turns out to be the one that we’ve opted to pursue at this point,” she said.  The council will later decide a minimum asking price, but did settle on a maximum $20,000 for a real estate consultant and a 2 percent commission for the buyer’s agent. Since the property must sell for at least $3.25 million to pay off the entire debt, 2 percent would come out to be at least $65,000 in commission.

EDIT: I think this example will end up surprising some of the old guard how the market has changed.  They think they can start the auction at $3.25 million?  Just because the City of DM has owned a prized parcel since the 1960s, doesn’t mean someone will pay what’s needed to pay off another debt.  Pricing your real estate based on what you need, rather than approximating what the market will bear, has proven to be a poor predictor of what a buyer will pay in this market.  The photo above shows a red house at the end of Balboa, but I’m still trying to track down the exact location (I think it’s a little further south, on the east side of the street).