Let’s stop with the big bombers, and have a look at regular stock.
Here’s your basic starter home that is walking distance to the Encinitas Town Center, a big newer shopping center with many amenities. It sold for $660,000 in 2005, and then in 2007 is sold again – also for $660,000, but financed 100%….and things didn’t work out.
It is a detached condo with an HOA fee of $124 and Mello-Roos of $136, for a total of $260 per month. It could use some work, but nothing major, and it’s on a culdesac with a decent backyard.
But it’s been on the market for two weeks, and has received only one offer that didn’t stick.
Is it missing just enough that the price needs to slip a little? The opening bid at the trustee sale was $469,082, so IndyMac is a little optimistic already. Or is it a sign that demand is stalling on even the lower-end properties that have a fair amount of good points about them?
Or have buyers noticed that mortgage rates have been hammered lately?
30-year fixed, conforming loans ($417,000):
October 16th – 4.00%, no points.
December 1st – 4.625%, no points
Real pain will start when rate goes 5.5% or higher. 6.5% or higher could kill the 700k and up market.
At least another 10 to 20 % drop at the very least to move some houses. Some houses are just too darn old and dated and no one really need another money pit.
1600sf definitely screams “starter”, but $520K? Not so much.
Jim, will interest rates keep going up in December??? They’ve gone up so much, isn’t enough enough while people catch their breath. I’m in escrow and have a little time to lock, but not a lot.
I don’t think rates are coming down in the short-term.
This is where the mortgage lenders skim big profits – if bond rates come down, the mortgage lenders react slower (if at all) so they benefit, not you.
I agree with TJ – no way is $520k a “starter.” A family would have to be bringing in over $100k a year, which is pretty far beyond a “starter” family.
In my mind, “starter” is under $300k.
Last year, most everyone predicted rates to increase–what happened, they went down, not up. Who’s to say that next year we won’t see rates in the 3’s or 2%’s?
Nice house in a great location at a nice price. Just goes to show you… people really want McMansions.
Knowing the area, I’d say it is 15% over the comfort zone for pricing.
If that house was $425k then it would be seen as a good deal.
Art – In this area you are not going to get anything but a stacked condo in the $300’s…2 weeks ago we just sold a family attached townhome/condo in La Costa for $350k and its somewhat inferior on all the major points JTR noted relative to this one.
clearfund, I totally agree – but that is the area. People who buy “starter” can’t afford coastal. They buy in the more affordable areas and then move up closer to the coast over time (except those that like inland areas with larger lots and larger houses for a more reasonable price.)
Coastal isn’t starter territory, it’s move up territory.
People “want” “McMansions” because for $150-200K more, you can get about double the square footage.
Isnt the high desert for starter homes?A starter home should be from 100-200k?
Local Boy… exactly. For about $750 more a month (at today’s rates), they can get double the house.
I think buyers will still think interest rates are super-low until the first number starts with a 5, and even then they will think that interest rates are low, just not super-low.
As for this being “starter” or not-how close is it to the ocean? I’m guessing pretty darned close. You want starter, you have to go inland.
All familes are not the same nor are all starter homes. There is a difference between a starter home for 2 young professionals and for 2 public sector workers. This is a starter home for someone wanting a prime coastal location in Encinitas.
My husband calls that color “baby poop green”.
What a difference the school makes. This house is in a great school district, but the elementary school is Capri, one of the lower scoring in Encinitas. Capri has an API score of 868. Drive 1 minute east to the other side of El Camino Real and it’s Flora Vista elementary with an API of 943. I know, I know. There is much more to a school than its API, but buyers look at these things.
Take a look at this dump near Flora Vista:
This house needs to be gutted. It has major cracks across the entire sidewalk/driveway indicating movement under the slab. It’s only 1424 square feet and they’re asking $515,000, and it’s an REO!
pretty soon you will need a million dollars to buy a starter home.It will be like zinbaubwee where it tkes a wheelbarrow full of paper to buy a loaf of bread.
Woops – cleared my browser. Anonymous was me.
I guess membership sales must be way down….
Real estate data company RealtyTrac said foreclosed homes, which made up about 1 in 4 of all residential home sales in the third quarter, sold for about 32 percent lower than homes not in the foreclosure process, the highest average discount since the last three months of 2005.
It may get interesting in terms of inventory. While everybody is waiting for the banks to start marketing the shadow inventory, don`t forget about the units owned by Fannie Mae, Freddie Mac and the FDIC. If they get the go-ahead from Washington to start selling and dropping prices, things could get interesting – but i`m not holding my breath.
Speaking of the low end, can you do a video on the south of Santa Fe, east of the 5 market? Probably the “worst” in Encinitas.
SWM #21-Please let them (FDIC, Freddie and Fannie) do just that! It will start the healing process sooner and with a tiny bit of luck, I’d be able to find a house to call a home! I am not waiting on the sidelines for prices to drop. If the right place comes along, we WILL buy it regardless of if prices drop more.
I do not work for Fannie or Freddie. However, I would put the odds of them unloading inventory in a significant way in the next 6 months, way north of 1 in 50 thousand.
Time (5 to 10 years) will tell though.
The FMs won’t go under because our insolvent government has promised to keep them propped up, no matter how much of a zombie institution they are. As a result, there is no incentive to unload properties. In fact, there is probably pressure from the government to hold onto the properties and to leak them out onto the market slowly.
I was a proponent of the quick real estate market crash, but I never considered the government meddling. I now predict a sideways market for many years.
thank’s for showing some lower priced homes for a change. We are looking for our first home and while all of your videos are educational and entertaining, this is more towards the price range that we are actually looking for. Unfortunately only the lime-colored bathroom one looked like it had potential to me, but that’s why we are looking further inland I suppose. 🙂 Thanks again for your videos – teaches us what to look for. Keep up the good work!