Rob Dawg said to keep an eye on seasonality, and I think we can all concur that the real estate market around the holidays is “different” than other months.
I took out RSF and La Jolla, and ran stats on Carlsbad-to-Carmel Valley detached.
Let’s compare 3Q to 4Q:
| Year | 3Q/4Q Sales | diff | 3Q/4Q $/sf | diff |
| 1997 | -25% | +8% | ||
| 2001 | -26% | 0 | ||
| 2002 | -4% | -1% | ||
| 2003 | -26% | +7% | ||
| 2004 | -23% | +2% | ||
| 2005 | -22% | -5% | ||
| 2006 | +1% | -2% | ||
| 2007 | -34% | -4% | ||
| 2008 | -29% | -11% | ||
| 2009 | $340/ |
If you take out 2002 and 2006, the average decline in sales is -26% between 3Q and 4Q.
Last year was the only year where there were double-digit declines in both sales and average cost-per-square foot. What does that mean?
It was my experience that there was a lousy selection of homes for sale (accounting for lower pricing), and/or terrible pricing that left most sellers waiting.
The numbers for July and August of 2008/2009:
Sales: 292/268
$/sf: $388/$340
After the late-reporters we should see that we’re on the same track for sales this quarter as 3Q08, but running around -12% on pricing. Assuming that a trickle of REOs are coming to keep sales about ‘normal’ (-20% or so for 3Q-to-4Q), and we should see them keep pricing 10% to 15% under 4Q08.
If it goes like that, it’ll be setting up a boisterous first half of 2010, with buyers hearing about more people “stealing one from the bank”.
Jim,
Why did you take out RSF and La Jolla? Is there something different about them that would skew the data? Are they not subject to seasonality just like the other areas?
I think he excluded RSF and La Jolla because sellers there still think they can get more than peak prices. Lots of inventory, very few sales.
QUESTION: (Off Topic) Jim, is there anything I can do in this situation? (Read info below.) I’d like to get some vital info to soon-to-be owners about the home they’re about to buy. It may be some young family who believes they “stole one from the bank”, but in reality didn’t. I’d like them to know the facts I know, so they can make an informed decision and decide to walk away from this “supposed” deal or not. Then at least I know I tried to warn them.
Just my two cents, but is it an awesome deal if we (finally) get a good rain (like late 2004) and their furniture and all their belongings are drowning?
Here are the facts: One house I rented a few years ago, the owner paid $644K in 6/2004. Lost it to foreclosure in 2/2009. It was resold a couple months later at $599K and fell into foreclosure again. It’s been languishing on the market ever since with consistent price declines for about 15 months. Just last week, I noticed it’s pending at $449K (REO).
I want to tell the prospective owners that the slab foundation is seriously cracked. (Back in 1997, the developer’s job supervisor used Quick Set concrete mix (we’ve used that for a fence) and started framing the next day. He was shut down by the city (only because an aware citizen who was in the building trades called them)and the developer fired him.
But the first eight homes built in this subdivision (all in a row on the same street) have cracked foundations.(One owner two doors down from this home I rented sold a couple years ago($705K)as FSBO and one of his selling points was a french drain. He made no mention of the cracked foundation in his home, but I understood why he put the french drain in. I don’t even know if the bank selling the property is aware of this.
Really, this upsets me and I would hope if I was in the same situation, someone would warn me.
If anyone has the answer, I knew you would, Jim. I do understand with it being a REO that it’s buyer beware. Is there anyway I could find out who these owners are? *Chuckle* I’m sure the listing agent representing the bank won’t be any help…
There’s no stealing from the bank unless you’re going all cash. You don’t get something for nothing here. But you can definitely outperform the market and get a modest discount.
I’ve noticed a high correlation between cracked foundations and REOs. It’s not a coincidence that there’s no disclosure for a REO. That said, someone sooner or later is going to buy it. The only question is if they price it in. You may be able to warn one buyer, but not another.
If this has a HOA, a lawsuit – even one that fails – will definitely let every buyer know when they try to get a mortgage. But owners are in a dilemma because if they sue their home value drops and this loss can only be recouped by winning the lawsuit. See the lawsuit in Lucera for how ugly it can get:
http://sdssexperts.com/yahoo_site_admin/assets/docs/Lucera_Litigation_Paperwork.241171704.pdf
Susie,
Hit the print button and take your story over to the house with a roll of tape and stick it on the front door.
They’ll be coming by for the physical inspection, that’s when they’ll need to see it. Otherwise you’ll have to stand guard over there, hoping they come by to measure for drapes.
RSF and LJ high-cost areas bail out the pricing component.
3Q/4Q change in sales and pricing 08/09:
Incl RSF & LJ: -26% sales, -6% pricing
Excl RSF & LJ: -29% sales, -11% pricing
As a prospective buyer, all I have to say is…
Bring on the 10% discounts!
“Susie, Hit the print button and take your story over to the house with a roll of tape and stick it on the front door.” JtR
You are worth your weight in gold, Jim! I can’t tell you how this whole thing concerns me. And I do have another confirmation of the cracked foundation from an unlikely source that I forgot to add to my original story.
Two weeks before, the owner had confirmed I could continue to rent and would be happy to sign another 1-year lease. But then I received a call from a RE agent. He said: I represent the owner of the home you’re renting. He’s selling the home. Here are your three choices: (1) Buy the home at the listed price of $725K; (2) If you do buy it, use me as your agent; and (3) If you’re not going to buy it, the owner wants you to continue to rent until it sells.”
Nearly speechless, as I thought we were set for another year, my mind raced. I immediately said, “I’m not buying it, and I won’t continue to rent it (how would I know when it would sell?). I’ll be out by the end of the month.”
When we were departing, I called up a guy for an estimate for carpet cleaning. I asked to set up an appt. so he could get an estimate of the square footage.
He told me: “I don’t need to come over, I’ll never forget your house. Remember those terrential rains back in late 2004? Well, the previous renters just before you called me up then ‘cuz their home had flooded–from the cracked foundation. Much of their furniture and belongings were ruined. It was a complete and utter nightmare for them.”
The complete pricing history of this house is striking: 1997 (brand new): 1,500 sf 4/3: $197K; resold for $356K in 2003; sold (to my then landlord) in 6/04 for $644K. REO in 2/2008 and bought in 6/08 for $599K. Now pending for $449K.
My first confirmation of the cracked foundation was the carpet guy. Then when my daughter and I moved to another home, I heard about the original Quick Set (concrete) foundations. But since the foundations were already in, I guess the city let these houses still be built. There are nine homes on that street; eight have cracked foundations.
Although it was difficult to tell my daughter we were moving,(She was in the middle of finals for her last year of high school),I consider us lucky. We lived in that home for a year (after my husband died) and I always paid my rent on time–in full. Looking back, I could have easily heard a knock at the door and there’s a Sheriff telling me the home I was renting was now foreclosed and we were out on the street.
That home is a prime example of the housing debacle on the Central Coast. Sadly, there are many more in the same neighborhood.
I’m grateful to you, Jim, for coming up with a solution. I hope the note does some good! *Sigh* I can’t save every buyer of that home, but it might make a difference to the pending owners right now. Once alerted to its history, it’s their responsibility to make their own decision. I won’t lose any more sleep over this whole adventure.
My apologies for two VERY long posts, Jim. Feel free to delete them if you wish.
There’s no stealing from the bank unless you’re going all cash.
sdbri | August 31st, 2009 at 3:03 pm
I personally believe I stole one from the bank (I believe I paid about 25% below what it is actually worth). But I got damned lucky.