Over the weekend I was discussing with a new client my outlook for 2010.
He said that in person I sounded more optimistic about the market than on the blog, and I agreed. Some is due to trying to provide all evidence and let you decide, but more is due to recent activity.
Watch this youtube, and you’ll see reasons why I think the local real estate market is going to take off like a rocket in 2010:
Asking prices are coming back down after their runup this summer.
link
Certainly, the market will be “hot” if sellers price things right or banks stop extending and pretending and just let them go to the trustee’s sale.
I expect a wild ride. Some steals, some bidding wars. I don’t know which will prove market indicators. My advice for 2010: “be nimble.”
Trustee sales don’t show up as comps, correct? Does it make a difference if it goes back to bene or to a 3rd party?
Trustee sales don’t show up as comps, correct? Does it make a difference if it goes back to bene or to a 3rd party?
I don’t agree that a trustee sale is a true comp. There’s a difference in buying a house with cash and no protection, versus a normal escrow process. I will say that REOs and short sales are true comps since they are purchased on the open market with the escrow process in place.
It’s all market data, it depends who is looking at it, and what their level of expertise is when deciding what to do with it.
Fresh REOs (being listed for the first time) should be considered retail, because they’ll get the most action – and “everyone wants to steal one from the bank”. The listing agents who actively market the homes and are easy to work with will be selling REOs at retail-plus.
Short sales will be all over the map. There could come a time when you tie-down a short sale, six months later it gets approved, and in the meantime some higher sales may close nearby.
The trustee sales will be unpredictable, but likely to have spurts where banks decide to dump a handful here, a dozen over there. The properties with huge second loans that wash out will be real plums.
“3.Trustee sales don’t show up as comps, correct?”
It’s sort of like buying a BMW at auction vs buying a BMW Certified Pre-Owned from the dealer. They are both sales transactions but with very different degrees of risk and requirements.
JtR ~ Can’t get a hold of you! Your Carlsbad phone # is constantly busy this morning. Remember me? I was drooling over that solar home up here on the Central Coast last spring.
At that time, you wrote me an email which began *Chuckle* “Hate to break your heart but…” At least I can now laugh about it.
I hope you still have my phone # and can call me sometime today. I’m off to do errands, but–if possible–can you call me after 4 PM. Mahalo nui loa!
Jordan T, as a potential buyer, I’ll reluctantly agree with you. I like Game Agent’s analogy too.
I wonder what percentage of flip buyers know what price the flipper paid at the trustee sale. Heck, I wonder what percentage of realtors bother to know that. Would people still be falling all over themselves to pay $750k for a home if they knew the flipper paid $599k a few weeks ago? (Sadly, something tells me the answer is yes.)
“I don’t agree that a trustee sale is a true comp. There’s a difference in buying a house with cash and no protection, versus a normal escrow process. I will say that REOs and short sales are true comps since they are purchased on the open market with the escrow process in place.”
If trustee sales are a rare occurence, then I’ll agree with “not a comp”. But when they have a high presence (such as in the current market), then they should be counted as comps. At that point, they are a true influence within the market and should be considered a dynamic. Not being counted as such simply starts to become a loophole that can be exploited.
that one for $539 in summerwalk on a cul-de-sac and encinitas schools….tempting! if I could buy on the courthouse steps that would have been a nice one.
That house in la costa greens, where is it? Is it on the san marcos school side?
Not many buyers or agents know what the previous sales price was. Most flippers are adept at recording their trustee’s deed so the price is undisclosed, and nobody knows how to look any further to find out, and give up.
Those properties that have the previous sales price published don’t seem to bother people, as long as the appraisal comes in.
We had the one on Roja. The flipper paid $170,000 in July, invested real money ($40K cash), listed for $297,000 in November, and sold for $312,000 – and the appraisal came in at $312,000. The $170,000 sales price was on the MLS and tax rolls.
San Marcos schools.
We were also talking yesterday about how things that didn’t used to affect buyers as much, sure make a difference now.
Hey Jim- what are your thoughts/experiences with interest rates? It seems to me a 1pt move is roughly equivalent to 10% of purchase or monthly payment.
With the talk of the Fed stopping their MBS purchases and the speculation of what that’d do to mortgage rates (if anything), I got to wondering what we’ll be in for in the spring.
stats says about 70 grand is rough income for carsbad folks.. are these people in a position to buy houses in the 500 grand price range? as an outsider i don’t understand where the money is coming from… thoughts?
Must be exhausting for buyers with all these mixed signals. Probably will get people to overpay just to end the agony of the hunt.
James-
The money(and craziness) for a lot of the current purchases comes directly from a country that is about a 13 hr flight heading east Of Cali. I will reckon that this country will one day possible own California. Remember when the Japanese were doing this crazy buying here 20 yrs ago.
hmmm.
thanks observer.. if i read you right, the money is coming from outside the country.. a 13 hour flight would get you to europe… i wonder what the rental verses owner ratio is in carlsbad?
With the Internet, high-knowledge buyers will know what the previous sale was for in a flip (such info is easily found on sites such as Redfin and Zillow). Of course, in the cases where the flipper does actual repairs or improvements instead of just instaflipping, the amount of money they add in value by doing such is not reflected.
Plus, more people can buy a flip than at the trustee sale, or even an REO-listed fixer. FHA, for one, won’t loan on a fixer (yeah yeah, FHA 203k does exist, but that’s pretty rare and complicated). On top of that, if the flipper does the repairs, those costs get wrapped up in the main loan, further reducing out of pocket expenses. That is, let’s take a $200k property that needs $50k worth of work. A FHA buyer might have the $7k down needed but have absolutely no way to come up with an additional $50k for the repairs. But if a flipper buys it, does the $50k worth of repairs, takes $50k worth of profit, plus pays $19k commission (6%), and charges $319k, that FHA buyer can probably come up with the $11k needed for the 3.5% down. The flipper then provides a service above and beyond the repairs alone.
That front archway resembles a penis. Great.
Jim,
How about the one I contacted you about the other day? Want to do a story on that one (including the loans)? Only if they turn me down, though! 😉
Point taken on the short sales, I agree that the length of the transaction makes them iffy to use as comps. If they start to make up a significant part of the market then that would change things, but at this point they don’t seem to.
stats says about 70 grand is rough income for carsbad folks.. are these people in a position to buy houses in the 500 grand price range? as an outsider i don’t understand where the money is coming from… thoughts?
With 20% down at today’s interest rates (4.875% with no points) is about $2600 a month in PITI. At 33% DTI that’s a $93K/year income. If you figure the median homebuyer in Carlsbad is richer than the median person in Carlsbad this is pretty affordable.
I’m curious about the courthouse step flips – that flop. Either the home purchased was trashed inside or the liens and encumbrances turned problematic when trying to get clear title.
We’ve seen some good reporting on successful courthouse steps purchases – especially the series of videos with Adam (sdrealtor). But the risks haven’t been explored as much.
Some of these homes in the video that went back to the bene… did they have suspicious liens? Why didn’t anyone bid on them if they were such screaming deals?
That’s where Jim’s service that he’s offering – to prescreen some of the properties coming to auction – is so valuable, IMO. Reduces the risks so those of us without brass ones can consider it.
I would love to get a courthouse steps deal but I just dont know if I’d be comfortable buying a $700,000 that I havent actually seen and fallen in love with. Thats my biggest challenge with going that route.
@23 also scraping up $700k is not an easy feat for most folks. Do they accept CA state IOUs?
another bogus stock offering buy wall street so you can repay their tarp debt:
http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20091214006339&newsLang=en
I agree with UCGal, I think it would be very educational to see you cover a trustee sale gone bad. Something with major structural issues, weird liens, trashed interior, etc.
JTR,
What approximate percentage of homes scheduled for auction do you actually see go to auction? I’m still not seeing many, most are getting put off still.
I sounded more optimistic about the market than on the blog
I doubt homeowners will appreciate your optimism, but I would agree. Hope to see more of the same up here in LALA land.
BTW, apparently someone thought it was a little cool last night near old town and made a bonfire…
http://www.signonsandiego.com/news/2009/dec/14/fire-causes-3-million-in-damage-to-midway/
http://blog.youwalkaway.com/?p=471
You have got to hear this. 12 days of default Christmas song! Hilarious!!!!!!!!!!!!!!
MUST SEE. FUNNIEST THING I HAVE EVER HEARD!!!!
Correction, it is the 12 months of defaulting Christmas song. You will die laughing!
I’ve got a couple of “trustee sale gone wrongs” for you, but they are in Las Vegas because that is where I have most of my experience:
1) 6204 Sterling Ranch Way, North Las Vegas purchased at sale 8/7/2007 for $238,465. At the time comps were probably around $270,000. Put on Craigslist almost immediately for $324,900 (way too greedy). They took a loan out on it in April 2008, and finally disposed of it in July 2009 for $170,000. Held almost 2 years, never rented (I passed by there regularly), loss of $68,465 + carrying costs + fees. THAT is an example of what not to do.
2) 320 Mattie Brook Ave, Henderson A real estate broker (who should have known better, but had never bought at the trustee sale before) bought a second mortgage for $54,956. The first foreclosed on him about 9 months later. If you buy a second, you may as well just mail a generous “gift” to your “friends” at HSBC.
But overall, if you look at the success rate of the people who buy at least one property a day, it has got to be around 98%. There’s a reason for it: they only buy the VERY BEST deals.
What about the 3.5 trillion dollars of non subprime loans taht are to reset this year. They would seem to all fall in this category of $800,000 to 1,500,000 homes/ supposed to be a ton of them crashing on the market this year?????