These new tracts in northeast Carlsbad seem to have decent pricing, with 1,753sf homes starting in the high-$400,000s on the lower end, and 3,000+ square footers in the mid $600,000s.
But even with the tax credits, they have only sold half of the homes released in the last two months, which should have been the hottest new-home-sales market in the history of the world. You can see it in their eyes, and hear it in their voices – the sales people are getting nervous:
Those are freaking townhomes(Lyon)! I’d rather go look for a short sale or REO.
“fake cars” LOL
Those look like courtyard townhomes to me.No yard and 500/month in fees?Give me a break here.I ceertainly would not pay 500k for these.These are 300k homes to me.Seems like all the new developments have huge mello roos and huge hoa fees.If you figure out the purchasing power of those fees compared to other areas without fees you have to make a huge discount on price.
JTR – Do you see buyer’s beginning to have a more common/consistent aversion to the MR fees?
Is it effecting the sale/offer price, or causing them to avoid it all together?
My guess is that the better the location the less impact the fees will have. i.e. this new CBad tract is way north and schools are average (I assume) so it will be more of a deterent than say fees in 4s or perhaps La Costa Oaks, etc?
I’d love to see a MR revolt/price hit. In the commercial world where I reside, that MR fee would be a direct hit on pricing and both the buyer and seller would actually agree.
Ex: If I was buying a building for $1mm that paid me a 10% all cash yield then my net income after all expenses would be $100k. If there were added MR fees of $10k/year my income would be $90k. Thus, at a 10% yield the value would be $900k. A $100,000 hit to value.
In commercial it is the yield requirement that drives the market, not price. So we all expect to earn a certain yield on our money then just work backwards to the price.
Residential is so subjective and emotional. Its much easier to ageee on a price with my excel sheet for an industrial bldg, than on a price for a house with the wife!
Jim, the texting while driving law may also apply to driving, talking, filming, focusing. I hope you were sipping on a triple foam latte too.
haha
texting while driving law
roh, roh…there’s a law?
Agreed on the MR aversion, in Carmel Valley the builders get away with it because buyers want the new homes/location bad enough.
In Carlsbad, when the excessive fees equal $100,000 or more in purchasing power like they do in this example, the hestitation is obvious.
The backlash is killing this development – to think that they have only sold half of the homes available from the first phase? What will that mean later? I doubt that any buyer who sees this will think momentum is on the increase, and they better hurry to buy one.
But I think we can attribute the bad sales directly to the anti-MR sentiment, because tacking on the extra $100,000 to your purchasing power doesn’t get you much else in the area, not new or newer.
I was on my way to see the new listing on Stoneridge, which is an approved short sale listed for $549-$599 for 2,700sf, and it wasn’t a deal. The inventory nearby in the $600,000s is very thin.
Doesn’t 4S have similar MR/ HOA fees?Why do they continue to sell? I can’t imagine that the location is much better.
Can you do a video on new homes in Del Sur? I believe there’s a lot of action going on there, in spite of the mello roos!
Reminds me of the new DR Horton homes (http://www.sdlookup.com/MLS-100027872-13485_Sydney_Rae_Pl_San_Diego_CA_92129) in their Torrey Ranch development off of Camino Del Sur.
$500+/month in fees. $177 for HOA – I asked the sales guy what that covered besides the gate and he said the street lights! LOL.
Jim – Any chance you can find out how many homes they have sold, if any at all?
Agreed that the Del Sur sales have been surprisingly good. The Davdison models were priced about 20-25% above recent comps and they are down to their last one.
Edit: Just double-checked, and they did lower the price down from $1.1 to $879,000 before going pending on the last model. Another reminder that anybody may undercut you at any moment.
These are the kind of homes I’d see in an upper-class inner-city development. Not in a suburb!
Maybe they are GUILTY as well?… HARD TIME HANDED OUT. Who’s Next?
Foreclosure scam’s mastermind gets 46 years in prison
By Dana Littlefield, UNION-TRIBUNE STAFF WRITER
Originally published May 21, 2010 at 11:16 a.m., updated May 21, 2010 at 1:34 p.m.
SAN DIEGO COURTS — A man prosecutors described as the ring leader of a real estate fraud scheme that defrauded hundreds of San Diego County residents out of more than $2 million was sentenced Friday to 46 years in prison.
A jury found William Jeffrey Hutchings, 63, guilty in March of 160 felony counts including conspiracy, grand theft, rent skimming and violations of the mortgage foreclosure consultant law.
Prosecutors argued that Hutchings and other defendants convinced 400-500 victims, most of them Hispanic homeowners from San Diego and other counties, that he could keep them from losing their homes to foreclosure. The criminal enterprise lasted 21 months.
Hutchings, who represented himself in trial, contended his motives were pure and that he truly believed his foreclosure-rescue program would help, not harm the participants.
San Diego Superior Court Judge Charles Gill said during a Friday hearing that Hutchings victimized people whose financial situations made them particularly vulnerable.
The judge noted that Hutchings was warned in late 2006 by one of the victims that the program wasn’t working, but he continued to take money and transfers of title from the victims until May 2008.
complete article at;
http://www.signonsandiego.com/news/2010/may/21/foreclosure-scams-mastermind-gets-46-years-prison/?source=patrick.net
I don’t think you can compare these Northeast Carlsbad homes to Carmel Valley or 4S because for most people the commute will be too much. The schools in that area are good, but not as good CV or 4S (according to test scores). They’re building a new high school out there and I’m sure it will do well. If you don’t have a far commute then the area is nice. It’s a short drive to the beach, Oceanside YMCA, Mira Costa and San Marcos colleges.
Would be interesting to take HOA + MR and convert it into purchasing power/sf then add it to the sale price for a total effective $psf. Then you would have a true apples to apples comparison.
Second – are most MR fees a fixed $ amount (say 4k/yr) or a fixed % of value?
If a fixed $ then as prices have tumbled the % of the new lower sale price would skyrocket on your tax bill.
If a fixed % then the gross revenue would tumble as homes are resold as new lower values. This will cause the income stream to the Bondholders of the CFD to shrink and not meet their requirements for repayment.
Either way I see a world of hurt in the MR Project finance world and for buyers who may be paying ever increasing MR rates in new developments.
I will pull out my Santaluz CFD docs soon and grind it out if no one is ahead of me herezm
I think someone on this blog once posted to add 15K to the cost of the property for each $100/month in hoa/mello roos. So a 500K house with $400/month fees is equivalent to a 560K house without fees. Does that sound right?
My opinion–it is unfair to add the HOA to the Mello Roos–we pay an HOA and we use their services and ammenites, plus they protect the integrity of our neighborhood, ensuring that it will look basically the same today as it does in 10 years.
Using very simple math and an interest only rate of 6% then $100/mo = $20k of lost purchasing/borrowing power. The actual effect is likely greater when other variables are added in but we’ll keep it simple.
So $500/mo = $100k of lost power.
Now divide this $100k by 2,500 sf and you get an additional $40/sf added to the sale price.
Thus, if carmel valley is selling for $300/sf then it really is selling for $340/sf. That’s over a 10% price increase.
Apply this type of analysis and create a ‘modified/adjusted sale price’ for entire markets and you’d likely see greater spreads in areas than you currently are used to.
People argue over the cost to replace a dishwasher, but don’t seem to gripe too much over a 10% smack. Its been a great off balance sheet scam, IMHO.
Local boy – Its not unfair to add HOA as it is lost purchasing/borrowing power. Does your bank not care what the HOA is when they factor in housing cost relative to your income?
Adding it in isn’t meant to “hurt” anybody, but rather give you a fully transparent cost of the asset you are buying relative to other options.
Most people place value on the HOA and its benefits which you describe. But this merely quantifies how much people actually value it.
Remember some very nice neighborhoods have $80 hoa’s with pools etc, and some are $425. Putting it all into a blender with the home price added lets you decide how much ‘value’ people are truly placing on a particular housing neighborhood.
Transparency and knowlege are empowering.
“Using very simple math and an interest only rate of 6% then $100/mo = $20k of lost purchasing/borrowing power. The actual effect is likely greater when other variables are added in but we’ll keep it simple.”
Roughly speaking, each $1 of monthly cost is equivalent to a buying power $1200 divided by the APR. So, as APR goes up, the HOA and MR costs become less of a factor.
It feels like Delmar Heights density with outer CV pricing for a Carlsbad location.
I’ve lived on a townhouse cul de sac. Your experience very much depends on your neighbors. I am not sure I would drive to the burbs for that experience.
It’s all speculation. Maybe the buyers don’t want to lock arms with their neighbors and share conversations through their walls. Who wants to live on top of each other without an ocean view?
Maybe they want their very own driveway.
Maybe they think the development looks ugly.
Maybe the HOA fees are fine but you get squat for it except an overcrowded pool.
I’m not familiar with that price range but that doesn’t stop me from having an opinion. I’d be after something more like this: http://www.sdlookup.com/MLS-100016467-2890_Rancho_Rio_Chico_Carlsbad_CA_92009
A three car garage, semi new, low fees, big backyard.
Get those high density developments outta here. I hope they fail.
I look at it unleveraged.
Notice the available driveway area in the first set of Models. Parking will be garage only. Potential buyers check the subdivision plans for guest parking v: open parking. Could be a headache, cities maintain guest parking levels, ie: one space per 1.5 houses. It’s possible there is no open parking within the community. I have encountered this situation. Maybe part of the reason there are no driveways poured yet, not as obvious.
From #4: Residential is so subjective and emotional. It’s much easier to agree on a price with my excel sheet for an industrial bldg, than on a price for a house with the wife!
I don’t like MR but it’s just a fact of life. I just put the MR in my spreadsheet and look at the total monthly payment. If there’s $500/mo in MR then the purchase price has to be lower than a property with no MR in order to hit the same monthly payment.
The down payment amount and the total monthly payment are really the financial boundaries when buying a house.
MR has always been a poison pill for us. In addition to he fact that the fees are often not tax-deductible and not subject to Prop 13 limits, MR homes are almost always glaring examples of McMansion or high-density overdevelopment that we’re almost certain to take an instant dislike to anyway. So the first thing we tell realtors when househunting is to check any listing they’re thinking of calling us about and disqualifying it if it has a MR assessment. We won’t even bother to look.
“Second – are most MR fees a fixed $ amount (say 4k/yr) or a fixed % of value?”
Fixed $.
The amount is % of the original purchase price.
Mello Roos are not “fixed” as you say- equal amounts per year. When the fee (read- debt) is placed (original purchase), a chart of payment is provided. The 30 yr assesments peaked around years 22-26. Components of the M/R assessments are paid off in 15/20/25 and 30 years. Some are never paid off, ie: open space maintenance district.
I would imagine the low-income apartments in the west end of this development might be a factor in the lack of sales too?
Pardee’s Pacific Highlands Ranch in East Carmel Valley has 40-year Mello-Roos, and can increase 2% per year.
the builders are pushing that MR envelope too hard. 1.8% during the RE bubble is one thing. 1.8% after the bursting is something else. ESPECIALLY when you are charged another $250/month on HOA.
clearfund is right, all of these fees sap the purchase power by about $100k. that is huge!
one thing about 4S, their HOA fees are not that pricey, $50-60/month, and some of the earlier MRs are very reasonable.
as for Del Sur, much better location compared to these and much better built and designed. even that said, their MR and fees are still a tough pill to swallow.
for these homes, in order for these builders to do better, that MR need to go down to around 1.3% and they need to bring the HOA to around $180/month. it would still be around $300/month, but at least purchase power loss goes down from $100k to $60k.
Yeah the average person doesn’t appreciate the true cost of these things. That’s why the developer didn’t just pay for the improvements and add it onto the cost of the house. It looks better as $500/mo in the fine print rather than an extra $100k on the house price.
Too bad there isn’t a way for an average homeowner to transfer some value into a Mello Roos and show the buyer a lower price with a monthly payment in the fine print. Actually there will be soon, you’ll be able to finance home energy improvements like solar panels thru property taxes, so you just pay down the loan thru the prop taxes and it passes to the next owner. The next buyer may think they got the solar panels for free, until they see the property tax bill. This program should be rolling out this summer. Something for buyers to watch out for in years ahead.
I don’t know that interest in Carmel Valley and 4S Ranch is as high as people think it is. If nothing else, it’s not as high as it was.
In CV, the interest list for Manzanita Trail is dwindling and pretty quick I think they’ll either slow down releases or they’ll start having standing inventory. Or maybe both, whether they like it or not.
In 4S, they had leftover homes in the release that just took place on Saturday. They still sold something like 19 out of 23 homes, so that’s pretty great, but in the first three releases, they didn’t even get through there entire list. They have now.
Some of this can probably can probably be attributed to a number of factors, but it seems unescapable that the value just isn’t adding up for enough (or at least as many) buyers. The stiff Mello-Roos can’t be helping.
The whole MR thing really ticked me off when I first learned of it. It just seemed like a way obfuscating the true cost of a property by burying that cost in a monthly payment instead of showing it in the selling price. A lot of people don’t have the math skills to evaluate the true cost of the MR.
It was also an end around Prop 13 (which I’ll refrain from commenting on whether or not that end around was necessary).
I think the market does reflect the effect of MR however, at least in some cases. I’ve looked at some homes that were almost perfect model matches in areas with varying MR. The homes where the MR was higher were less money. Admittedly the comparison is confounded by different pricing in different zip codes/neighborhoods, but nevertheless the effect seemed pretty clear.
http://www.google.com/products?hl=en&q=car+tripod&um=1&ie=UTF-8&ei=lRb7S5TpOsP68AaioKi3Dg&sa=X&oi=product_result_group&ct=title&resnum=1&ved=0CC0QrQQwAA
Just sayin’…. 🙂
Jeeman….that’s cool. Didn’t know they made three legged stools for the dashboard.
M-R revolt has happened before, during the last downturn in the early 1990s. In 1989, 1990 people didn’t care what the M-R was, they just bought. A few developments had $200/mo M-R and sold well…until the economy hit the skids. Those homes then became the hardest to sell, and those neighborhoods gained a reputation as having outrageous fees.
But…as soon as economy returned to partying again, like it was 1999, people returned to buying those homes and, by today’s standards, $200/mo M-R seems quite reasonable.
I would expect a similar cycle this time around.
Yeah the average person doesn’t appreciate the true cost of these things. That’s why the developer didn’t just pay for the improvements and add it onto the cost of the house. It looks better as $500/mo in the fine print rather than an extra $100k on the house price.
Jakob | May 24th, 2010 at 2:37 pm
———————-
Quite frankly, I don’t think it needs to be added on to the back end as much as it needs to be **subtracted** from the front end. Developers should take these costs into consideration, then reduce the amount they’re willing to pay for the land by about that amount.
Right now, they are working their numbers the wrong way: land + development and building costs + profit = selling price.
What they should be doing, IMHO, is: average selling price for similar houses/lots – estimated profit – development/building costs – margin for error/falling market = purchase price for land.
They’re letting sellers dictate price when it’s the buyers who should dictate pricing, especially with raw land.
One of the reasons we didn’t look twice at that neighborhood. I would have LOVED brand new (said as I get ready to shell out $$$ for new carpet, and spend wayy too much time at Home Depot), but lower HOA’s and an already landscaped backyard in a better school district was something I couldn’t pass up.
The MR and HOA for the Foothills are insane. We could have bought a less expensive home, but would have had a higher monthly payment had we bought there.
Jakob wrote:
” … soon, you’ll be able to finance home energy improvements like solar panels thru property taxes …”
I wouldn’t call photovoltaic solar panels an “improvement” – I don’t believe with today’s current technology you can ever recoup the cost of the photovoltaic panels. The subsidies help, but that’s just taking money (energy) away from other rate payers.
I would pay $100K more to not have 400 – 500 extra hours added to my everday routine and weekend commute per year. Throw in HOA and MR to the equation and one has a compelling reason to spend more money on a smaller house in better location with two digit HOA and no MR – assuming one works near or past Sorrento Valley.