Let’s take a look at the mid-range, and specifically in the $700,000s – what does that get you?
I had to split these into two videos to keep under the 10 minutes required by youtube, the first is Encinitas/Carmel Valley, the second video is in Carlsbad:
“That’s not red oak, that’s red joke!” LOL!
Second video, second house. I can definitely work with that floor plan. The breakfast nook can be turned into an office, the living room can easily be turned into a home theatre room with a front projection system, and the “telephone booth” next to the staircase is where the 42U high equipment rack would be installed (almost the size of a telephone booth). The dining room would be relocated next to the kitchen where it belongs, ensuring the hosts remain with the dinner guests at all times.
Whenever I look for a new place, I always look for a living room layout that will accommodate my front projection system. It’s become a prerequisite. It needs to be located in a livable an accessible area such as a living room, and not in a deep, dark dungeon such as a basement or an enclosed room with no windows.
I’m surprised at how many homes being built today still don’t take into account the ever increasing size of television sets. Even in large homes where you should have plenty of space for a wall mounted screen, its placement can still be awkward for the people in the screen’s room, or in the adjoining room.
Anyway, that’s me and my gadgets. Don’t even begin to understand how I wired my apartment! 🙂
Man, it sure is hard for me to get my mind around $500k – $1 million being “mid-tier.”
Great videos, Jim. I really think this $700’s segment is going to be one of the most interesting to watch. I would guess buyers in this range are affluent but still accumulating wealth, unlike the $1M+ market with heavy cash down and buyers who are possibly more willing to part with an extra $100-200k. In other words, I would expect these buyers to be more discerning. I think there are many first-time buyers in the $700k market who waited out the bubble; also more discerning by nature.
My guess is those discouraged buyers fit that profile. They’re not going to sacrifice their life savings (or a good chunk of it) for beat-up carpet, freeway noise, power lines, bad floor plans, etc. People are no longer confusing shabby homes with can’t-lose investments. Just because the sellers did doesn’t mean the buyers have to. I’m not surprised at the stand-off in this market, nor at the frenzies created by well priced properties.
Agreed, and the “mid-tier” is probably where this battle will be won or lost.
We can comfortably predict that the under-$500,000 market will be hot, and above $1M won’t.
Will this new “move-up” tax credit encourage those in the mid-tier? Will the improved pricing inspire those to get more now than they used to get?
The next two months will be very interesting – happy holidays to all!
I’ve been looking in PQ in the sub $500K range and there’s certainly a frenzy. However, poor floor plan properties are not selling except at a big discount. Same thing for properties next to freeways or power lines. I know of two investor properties and one is going to have troubles selling. Both investors bought for cash at auction, but they both have major flaws in their floor plan. The first has a tiny kitchen that’d be very expensive to expand for various reasons. The second has only two small bathrooms. So small that there is no counter space at all in the bathroom.
We’ll see what they eventually go for, but as of right now it doesn’t seem like people are buying at their asking prices.
Market update from San Jose, CA: My ex has been looking around for a house there for a while, but kept getting beaten out by either all-cash offers on foreclosures or FHA crazy-money loans on regular houses.
Finally he figured it out, and made an offer on a fixer short sale that didn’t accept FHA offers! He thinks it’ll take less than $1000 (and some sweat — but he knows his stuff) to fix the house, and he has the offer approved by the 1st lender. Waiting for the 2nd lender.
The house is in downtown San Jose, in a nicer/older area, and he’s buying it for the same price it sold at in 2000… and is paying $185/sq.ft.!
Great deals can be had with persistence and patience. He’s been looking at houses and submitting offers for months, and is ready to move in. Plus, his mortgage payment will be quite easy for him to afford.
-Erica
Jim,
Although Jay is certainly being patient, I think it speaks volumes for *your* patience and integrity. A tremendous number of realtors would’ve given up on a buyer after 50 homes shown with only 2 to 3 offers made. Damn your good! 😉
p.s.: Regarding the broader economy… although a huge X-phile, I’m not so much into grand conspiracies as to people in power acting in their own self-interest. In that regard, TPTB are already testing the limits of their creditor’s patience, and IMHO there’s no way we monetize even $1T more MBS without consequences.
[NOTE: Previous comment should’ve said “Damn you’re good!”, not “Damn your good!”.] 🙂
“I’m not so much into grand conspiracies as to people in power acting in their own self-interest”
Well stated.
These last two (three I guess) videos are right up my alley, and I’ll watch them once the Laker game is over. Thanks Jim!
I was eying that house backing to the Detroit River, but had never seen it in person. Yikes. A video is worth a billion words. That place looked so much nicer in the pictures.
FWIW I’m noticing some houses with For Sale signs sprouting up For Rent signs recently. I guess that $1mm market ain’t so hot.
The mid-tier is still in range of FHA zero-down put-option loans.
Until the FHA implodes, the mid-tier will keep afloat on an ocean of free money.
I echo sentiments about the mid-tier. Virtually all houses I see close at the sub 500k or over 1M level are good deals relative to peak pricing. In fact, I think that the myth that the high-end is immune has already been shattered and that probably happened just within the last few months. We went from an occasional good deal to most sales being good deals.
The mid-tier is the only segment in which I am seeing sales that make me scratch my head and wonder what the buyer was thinking. But even this buyer segment is starting to get more picky based on what I am seeing linger on the market. Pretty good but not great deals lingering on the market was one of the first sign of trouble for the low end and high end markets.
“Until the FHA implodes, the mid-tier will keep afloat on an ocean of free money.”
WC I agree with the theory there, but I’ve also heard that FHA loans aren’t being taken seriously by sellers (for good reason.) I guess it depends on what percentage of closings in that range are FHA, right? Jim, any data on this?
What is the price point at which FHA and the $8k credit are out of the picture? Is it $800k? I’d be more inclined to buy a house in the near future where funny money isn’t (as much of) a factor.
Still, I think an FHA implosion or removal of the credits would affect the entire market.
Agree with the previous poster – I laughed when I read the headline that 700k is mid-tier! Oh well, that leaves me in the dust, or should I say, the whirlwind competition that is sub 500k (I am in LA, and not buying right now anyway – just watching, always watching).
Good videos. Jim you are are realtor par excellence!
fix typo there —
Jim you are a realtor par excellence!
Jim – don’t know if this helps you think about the coastal market in this price range but I can tell you that I bought a house in Carlsbad in the mid-700s after renting in Windansea and Solana Beach since 2005. I would be described as a younger family who works in the finance industry (not housing related) that valued living within walking distance to the beach.
Since I had the 20% down payment saved up from several years of paying rent in the $1800 to $2500/mo range, I put it into a house with a 4.5% mortgage 30yr jumbo conforming mortgage that would be just over $3000/mo to own a newer house in the area.
For anyone that that has rented over the past 5 years in the area and has been able to “save” the difference in their rent vs. mortgage. It makes sense to buy now (if you have a secure job) and it’s the perfect house for you and don’t want to ever be hassled by moving again until retirement.
SO, MY VOTE OBVIOUSLY IS THAT THIS PRICE LEVEL SHOULD STICK FOR MOVE-IN READY HOUSES ON THE COAST. We knew a lot of prudent coastal renters in the two neighborhoods that were similar to us and would have loved to buy “at the right price” since they valued living so close to the coast.
In my line of work, trying to wait for the bottom tick will make you miss the trade. Renters like myself have been waiting for the right time to own their first house along the coast.
p.s. I’m sure there are viewers of this blog that will think this guy is throwing his money away because housing in SD will fall another XX% but it’s a 30yr trade for me and I get extra points for giving the wife a house to call her own.
I dunno if housing will fall further. It may have already bottomed. It sure did bottom at least on a temporary basis in most areas; the question now is whether or not we have a double dip (due to a possible future flood of REOs) and prices will fall again. However, the flood has been barely a trickle so far.
Now, in most desirable areas, renting is cheaper than owning, as is usually typical, bubble or no bubble. But that doesn’t mean purchasing is always a bad move, even ignoring the non-financial considerations like keeping the wifey happy or the ability to decorate and remodel the place to your exact tastes. If you are buying in a low end area, or really do plan on staying put for a decade or three, buying now makes sense.
WC I agree with the theory there, but I’ve also heard that FHA loans aren’t being taken seriously by sellers (for good reason.) I guess it depends on what percentage of closings in that range are FHA, right? Jim, any data on this?
I disagree that FHA loans aren’t being taken seriously because they are making up a large portion of the current market. I know on certain properties they aren’t accepted, but when they are 30%-40% of the total sales it’s not that widespread.
Jim posted on this earlier, where the NAR said in the same paragraph about how FHA loans aren’t taken seriously and this is a problem because they make up 40% of the home sales. It’s either one or the other, but it can’t be both.