Yesterday these comments were made a few posts back by potential buyers:
- So, for me this translates into “not going to overpay, no way no how.” I guess the issue is how long I can hold out, eh?
- Qualified and ready to go, but extremely frustrated and not going to drop $800K just to get into something…
- Looking for past 3 years in Coastal Carlsbad 92011. Anything decent is either already picked up or gets priced out with multiple bids. Anything under 800K and within the reasonable parameters is just an illusion … its just not out there.
- I’d be very happy to overpay a little. The reality now is buyers are expected to overpay a lot.
Thank you for participating, I appreciate your candor.
Their thoughts reflect what most buyers are feeling. The frustrations fall into two categories; the lack of reasonably-priced quality inventory, and seeing properties sell for amounts that far exceed expectations.
How do buyers cope?
I think you can divide buyers into three categories:
Trophy Properties – Many who have waited this long aren’t going to settle for any old house now – they are going to buy a cream puff. These are mostly determined by location and condition, then price – because there is intense competition for the trophies, you can’t get hung up on price if you expect to win. The house on Glaucus was listed for $949,000, and of the six offers submitted, three were all-cash offers over $1,000,000.
Value Buys – For buyers who can live with some warts, and just want to get a house at a decent price, there is still an intense tug-of-war. The sellers (and listing agents) price their home as if they are selling a trophy, and usually they don’t have to sell, they aren’t giving it away. etc. How can you get those at the right price? Waiting is the only solution – the sellers are extremely over-confident the first week of the listing, and your only choice is to wait a month or two, and hope they wear down.
This property was a good example:
http://www.sdlookup.com/MLS-100018767-10722_Spur_Point_Ct_San_Diego_CA_92130
It listed for $1,395,000 in March, 2010. We offered $1,350,000 a couple of days into the listing, and they responded with a $1.385 counter. We thought our offer was good enough, so we waited, and 71 days later we finally entered into a contract to purchase at $1,265,000, the eventual sales price.
Not Playing – For those who refuse to battle it out, and are comfortable on the sidelines in one form or another, no problem. These include those who are looking and are making offers, but only on their terms. The lucky sale still happens, but these days it’s usually the seller, not the buyer, who gets lucky. Hang in there, but if you see one you really like, consider adding a little extra mustard to your offer, just to get it over with! If you don’t, chances are someone else will.
What are the biggest fears?
Higher rates might cause prices to come down, a flood of foreclosures could change the game, and a natural disaster would certainly impact the market.
But for now, the market for quality buys is blistering hot on the street.
Jim — color me as ‘not playing’ at this time. With all the obvious shenanigans going on between the banksters and the government, I’ll sit on my hands a long, long time before stepping up to buy. I have no idea how the latest ploy floated by the O’administration – to pay down principal on struggling underwater mortgages – will play out. (IMO, the administration has no idea either, they’re just hoping.) I fully expect the market to either be in a holding pattern for years or suffer another 10 to 20 percent downdraft. Either way, there’s absolutely no rush for would-be buyers to buy. I’ll just keep on renting.
Anonymous…
If you’re renting a nice property, have a good landlord, and no outside influencers (ie. a spouse who says “I’m tired of renting. We’re buying something.”), I’d keep renting. Some of us aren’t (weren’t) so lucky.
They are not “REALLY” building any more apartments, new homes, new condos like they used to do. There is not much new product out there, there is not much new product coming, and
the population is still expanding.
As a landlord, I can tell you demand for my single family houses has been surprisingly strong. One guy offered me 20% more than I was asking because he was tired of losing out to other renters. Mind you, my properties are in the South Bay and completely remodeled.
I expect prices to go up at least 3% a year from here, I just don’t know how much they will go up on the coast?
This is a great article and reflected the sentiments I experienced during my 2-year search. Thank you, Jim, for being a great example of what a buyer can expect from a realtor. I kept saying “oh, I wish I could find someone like him to help me in my area.” I did just that when I finally found a realtor that was very savvy and wasn’t afraid to make a low-ball offer on older listings. The house I eventually bought was “value buy” and needs some work. It had been on the market for about 3 months & I got it for significantly under listing.
One thing I have to point out is the comment “add a little extra mustard to your offer.” It’s very true and I lost out on a couple of great houses until I learned to bend a bit more. A $50 difference in the mortgage payment is irrelevant if you don’t get the house. Plus, I didn’t ask for concessions after the inspection. It was just a matter of being understanding with an older home that had a few flaws.
I’m in the South Bay as well, but I’m finding the “For Rent” signs are all over the place. It could just be my particular city though.
As on the stock exchange you get “insider trading” the only true willing buyer, willing seller, true market is that of real estate. If you pay $1 000 000 for a house that IS its true market value to both the buyer and seller at that particular moment in time though remember”caveat emptor”.
I think three categories of buyers are accurate. It is interesting that none of them involve people thinking they are going to get any appreciation out of their purchase.
I also appreciate the definitions because it helped me realize that I am a Trophy Buyer but my wife is a Value Buyer so it make the two of us look like we are Not Playing.
Anonymous at #1.
Give us more detail please. It’s not fair to the rest that you come in here and carpet-bomb with vague, general comments.
Where and why would suffice, and specific data would help.
Vague stuff includes “unemployment” and “economy”, because we’ve had those – yet the market is sizzling around here.
You forgot one other type of buyer- “Playing somewhere else.” After 40 yrs in San Diego and looking at North County Coastal for several yrs during the bubble, I have decided to leave the state with my family. It’s amzing what you can get somewhere else. Of coarse leaving is dependent on not presently owning (another reason to have been renting).
Once again, JtR writes a thought-provoking analysis. Can’t wait to read the forthcoming comments.
For those buyers who have not given up, my advice is to give Jim a call. I’ve known a lot of agents in the last 20 years or so, but Jim is the only one with the unbeatable combination of stellar integrity and real estate knowledge (25+ years experience).
As a recent buyer, I realize I was in the first category. My home search stretched 4 1/2 years– seemingly forever. When I made the decision to move from CA (born there), it was Jim’s advice and encouragement and my outright addiction to bubbleinfo that propelled me forward.
It was a 14-month adventure to finally arrive in Boise and buy my last home–a new construction. JtR was kind enough to feature my “Potato Land” video and do a voice-over back on 1/17/11.
Once again, I’m so grateful to you, Jim, for your advice the last two years (not to mention your recent, funny messages on my answering machine). I will never forget your kindness…
I just couldn’t bring myself to post to the blog article contributing to this piece. I whine too much as it is. As ‘Value Buyers’ that definitely are not in the $1.2M range, we want good ‘bones’, decent layout, good size lot for the dogs (obviously not looking in the traditional areas of this blog), and mostly cosmetic and updating improvements. We can do those partly ourselves and over time. Problem is, sellers don’t necessarily understand that if they’ve lived in the house +20 years and done very little except upkeep or banks with properties that the previous residents trashed are pricing them almost like trophy properties. Elbow grease good, paying a heck of a lot for a dump, not good.
I started out as a Trophy Buyer, but after couple of years I realized that I am up against multiple all-cash buyers that are ready to offer much-much higher price for The Trophy. I also realized that these trophies command a much higher appreciation rate than non-trophies and will never revert back to 2000-2001 price points (Non-trophies may revert back depending on the location).
So now I am playing for an “almost Trophy Like” in my price range and trying to get lucky 🙂 Compromising on fancy features like “Ground Level Ocean View”, “no power lines in the view”, interior colors etc.
I totally agree with “adding extra butter/mustard to the offer” … After loosing atleast 2 offers to someone’s extra “butter”, I would say in current market conditions, an extra butter of 20-30k on top of 800k deal can get you that “almost trophy like” in Aviara on your lucky day.
When you say the South Bay, do you mean Manhattan, Hermosa and Redondo Beach?
My current home is a trophy home. We’re hoping our investment property will also be almost trophy like. We’ve found nothing in the 500-750k that is of value in South Carlsbad or Encinitas and my parents have offered to give us some cash so we can move up our price range. Looking at the 800-900k bracket, there really isn’t anything out there at all.
It is miraculous to buy a trophy home in North SD County Coastal for under $1,000,000, at least if you’re looking west of the I-5 freeway.
CV Owner, if you are looking for rental property, what do you think of these newer, low-maintenance houses?
1. On culdesac and dressed up nice, but about 150 ft away from train tracks, which I think is tolerable:
http://www.sdlookup.com/MLS-110012645-610_Red_Coral_Ave_Carlsbad_CA_92011
2. Backs to trailer park currently, but it won’t be there forever. I sold the house next door and the people love it, with no regrets about TP:
http://www.sdlookup.com/MLS-110000016-213_Hillcrest_Dr_Encinitas_CA_92024
3. Smells like cats, but if you can handle that with vinegar and new carpet/paint, it’s a nice look. Same model down the street that was priced higher just smoked off the market its first weekend:
http://www.sdlookup.com/MLS-100068004-3387_Avenida_Nieve_Carlsbad_CA_92009
Full disclosure – let’s note that, except for Deb, who has been looking with us for the trophy-like under $500,000, none of the frustrated commentors above are working with JtR to find a home.
CV Owner, you are right … nothing in South Coastal Carlsbad for around 750k that looks remotely like a Trophy. All “True Trophies” west of Aviara Pkwy are untouchable under a Million now. You might get an “Almost Trophy Like” on East of Aviara Pkwy in 800-900k … if you are feeling Lucky that day 🙂
Over the last 24 months, I represented these buyers of homes west of the I-5, and I stand by them as good markers for their respective neighborhoods:
http://www.sdlookup.com/MLS-090010615-7312_Binnacle_Dr_Carlsbad_CA_92011
http://www.sdlookup.com/MLS-100013934-140_Breakwater_Rd_Carlsbad_CA_92011
http://www.sdlookup.com/MLS-100021616-141_Sanford_St_Encinitas_CA_92024
http://www.sdlookup.com/MLS-090062222-660_Stratford_Encinitas_CA_92024
CV owner – As a prospective ‘investment-property purchaser’ in NCC, what are the economic goals, markers you are hoping to accomplish.
By this I mean annual yield after expenses (including reserves for maint and vacancy), holding period, appreciation expectations.
There is no right/wrong answer to the above question as its a personal goal/expectation. I just always like to gauge the market by hearing what various investors hope to have their capital achieve for them.
Thanks for sharing.
I think buying a single 4 1/2″ lag bolt for a dollar might help clarify why sellers are reluctant to “give” their houses away. I can’t imagine any seller who’s maintained his coastal home “giving” it away because unaware buyers “believe” prices are “still” too high.
Why not just rent? Life is temporary anyway.
The whole “I’m better than you because I own my Carmel Valley House” days are long gone.
Back in 2003 – 2007 you were a “nobody” or in the middle of a divorce if you rented a condo in CV. Today you’re a family that can invest in AAPL stock, top up the 529 plan, and afford to lease a decent new 3 series BMW. Nothing fancy, just a nice ride to get to the beach on the weekend.
Maybe San Diego will be your home for say the next 20 years, then you will retire to somewhere. By then it will be part of Mexico anyway.
Maybe you retire to a little place in Florida. Retirement homes/condos in Palm Harbor, FL can be purchased for $43,000, or better yet, rented for next to nothing. These are nice little places where 60 – 90 year old folks drive golf carts to to the club house and land yachts to the early bird Olive Garden dinner special.
The end game is the same for everyone, homeowner and renter. In 40 years, everyone reading this post will have chosen between a plot at the cemetery or, even cheaper, your ashes spread along the ocean off Del Mar.
“CV owner – As a prospective ‘investment-property purchaser’ in NCC, what are the economic goals, markers you are hoping to accomplish.
By this I mean annual yield after expenses (including reserves for maint and vacancy), holding period, appreciation expectations.”
Honestly, my goal is future appreciation and that is why I’m picky on where I want to buy. Banking on huge inflation down the road but in the near term, still see deflation.
We have a substantial amount of money already invested in gold and silver bullion. That’s as close to the stock markets we get.
“CV Owner, if you are looking for rental property, what do you think of these newer, low-maintenance houses?
1. On culdesac and dressed up nice, but about 150 ft away from train tracks, which I think is tolerable:
http://www.sdlookup.com/MLS-110012645-610_Red_Coral_Ave_Carlsbad_CA_92011
We actually went to look at this and liked it but decided against it because we thought the train noise would be intolerable. There’s also another one in the Water Ends community that is a SS. Actually, we’ve passed on a few in the Water Ends community.
2. Backs to trailer park currently, but it won’t be there forever. I sold the house next door and the people love it, with no regrets about TP:
http://www.sdlookup.com/MLS-110000016-213_Hillcrest_Dr_Encinitas_CA_92024
Looks great but the trailer park is a turn off.
Basically, we’re buying this investment property like we would be living in it and looking at pros and cons.
Thanks for responding CV owner!
Have you made offers and gotten beat out?
What would you guess is the percentage of new listings that are close to being a winner, 10%, 5%, 1%?
Because the tighter your target, the more competition there will be on the very few listings that are a match.
Are you willing and prepared to pay list price or higher? Because you are slugging it out with owner-occupiers, who traditionally are willing to pay more than investors (usually by 10%), you’ll need price flexibility.
“Thanks for responding CV owner!”
No problems. Love the work you do and have a joy reading your blog.
“Have you made offers and gotten beat out?”
Yes we’ve made offers that we later withdrew and have been beaten out on a couple of times.
“What would you guess is the percentage of new listings that are close to being a winner, 10%, 5%, 1%?”
I would say less than 5% but then it might be just my wife and I that have high standards and are picky. As I said above, we’re basically looking at houses that we would buy and live in.
“Are you willing and prepared to pay list price or higher? Because you are slugging it out with owner-occupiers, who traditionally are willing to pay more than investors (usually by 10%), you’ll need price flexibility.”
Yes we’re willing to pay higher than listing and have done on 2 occasion and both times have been beaten. Granted, it was not 10%, it was more a couple of percent.
I doubt there are any decent investment properties in the most of the areas Jim covers (maybe Vista or the like, but that’s about it). That is, cash flow positive ones if you put 20% down-they don’t exist. Your mortgage payment alone will be more than fair market rental value, not even counting vacancy allowences, repairs, taxes, insurance, HOA fees, etc. You basically have to be banking on appreciation, which, IMHO, is a bad idea.
Now, in inland areas (the Inland Empire for instance, or the deserts beyond), such properties are all over the place, especially for multi-unit properties.
Deb @ #10, I’m with you. I’ve been looking for a cosmetic fixer for under 550K along the coast for a while now. Lately I’ve seen a lot of fixers come on the market priced like trophies. They’re smelly, need paint, flooring, appliances, landscaping and have all original cabinets, fixtures, etc. What happened to the fixer discount?
Geotpf,
I think CV Owner is one of the new breed of cash real estate investors, looking for a better return than the paltry savings-account rate.
If they paid $800,000 cash for a house that’ll rent for $4,000 per month:
GSI = $48,000 per year
Taxes & Ins = $10,000 per year
Net income = $38,000
$38,000/$800,000 = 4.75% annual return.
Yes, figure in closing costs and maintenance, but you also have depreciation to write off (almost $30,000 per year) and hopefully some appreciation on the horizon.
We saw Red Coral and also the SS in Waters End. Trains went by while we were touring Red Coral. You can hardly tell. The house is not rough at all, but it’s pretty overdone. Our problem with it was an an owner-occupied, all the different tiles, treatments and surfaces would drive us crazy, yet at a top price, it wouldn’t be worth ripping everything out to achieve a more pleasing finish.
The other problem with it from my perspective is that while it’s a prime corner lot, the angle is weird so there’s almost no real backyard patch and you have neighbors coming at you from two different angles so it’s even less private than the ones sandwiched in the middle of the streets. Still, someone will probably buy it because it’s clean and shiny and the feels really open in some of the upstairs rooms. $799,000? I bet it goes for less.
The short sale is gross, but the bigger problem once you clean it up is that some of the square footage is in the useless front “office” that is completely detached from the house and has no closets or anything. This makes the house really small and fantastically overpriced. IMHO. Considering the Sandside REO went for $640k and was bigger and nicer, I don’t see this one getting near asking, but that’s just me.
Everything else in that neighborhood has disappeared!
“Considering the Sandside REO went for $640k and was bigger and nicer, I don’t see this one getting near asking, but that’s just me.”
Your talking about 625 Sandside Ct. We actually put in an offer then later decided to back off on it. Didn’t really care for the trains.
The other Water Ends actually ended up selling for between 700k-760k. So, 640k was a nice deal.
Red Coral I think will end up selling between 750k and asking.
“I think CV Owner is one of the new breed of cash real estate investors, looking for a better return than the paltry savings-account rate.
If they paid $800,000 cash for a house that’ll rent for $4,000 per month:”
Correct.
Our investment property will have a down payment of between 40-60% depending on the price or more if I was to accept money from my parents to buy outright.
I guess I fall somewhere between Trophy buyer and Not Playing. Location/lot is really important. There are very few properties to even look at.
I purchased my first home without knowing about value aside from recent comps. This time around I am trying to better understand “fair value” using indicators such as price-to-rent ratio. I sense that many in the BubbleInfo audience may also be looking at value in similar way. Unfortunately, I observe that other buyers are not paying attention to value or have a different metric for determining value because I continue to see sales prices that I consider to be over-valued. If there are a line of buyers willing to pay market price even if over-valued, then as Jim said about the Not Players, those looking for a deal may have to wait a long time or get lucky.
Hoping I get lucky!
So, here’s a nice new listing. Mr. Prof loves this, but we don’t want a pool. How much do you figure a remodel of a similar dated one would cost to get it to look like this:
http://www.sdlookup.com/MLS-110016285-946_Daisy_Ave_Carlsbad_CA_92011
Prof,
what a timing … Here is what you are looking for …
http://www.redfin.com/CA/Carlsbad/7211-Daffodil-Pl-92011/home/3739736
Its an REO asking for 799k (last sold for 1.1 Mil in Jan 2008) … how much you think its gonna go?
flipper, right? could work. I don’t see how it goes for $799.9k.
My wife and I like this one but don’t want a pool especially since it’s an investment property. Too much headache and maint.
http://www.redfin.com/CA/Carlsbad/7382-Calle-Conifera-92009/home/6582096
http://www.sdlookup.com/MLS-110016285-946_Daisy_Ave_Carlsbad_CA_92011
Gorgeous home but same reason I wouldn’t buy this as the one I posted. Pool.
Seems like a few of us are looking in the same price bracket. 😉
Heh. Throw me your rejects! 😉
Yes few of us are looking into same area and same range. At times probably running into each other …
“Heh. Throw me your rejects! ;)”
If there were any rejects I would LOL.
There just isn’t anything on the market at all. Looking back my wife and I kind of regret not buying the Sandside Ct place in Waters End. A little work and you would of had instant equity on that place at 640k.
If it wasn’t for us being picky about the train but it makes perfect sense with the no backyard so little maintenance would be idea for a rental.
re: Sandside. You and me, both. I think this is the problem – we have crossed over from frustration to stubborn determination and can’t recognize a good deal when it hits us in the face!
Woulda, coulda, shoulda…
“re: Sandside. You and me, both. I think this is the problem – we have crossed over from frustration to stubborn determination and can’t recognize a good deal when it hits us in the face!
Woulda, coulda, shoulda…”
We knew it was a good deal but didn’t really didn’t like the trains.
We actually had final crack at it and was going offer a few more k’s over what the final selling price was but backed off.
Only regretting now because there has been nothing else on the market. LOL
“didn’t like the trains.”
Well, better than the freeway!
“Well, better than the freeway!”
But we wouldn’t buy near a freeway in the first place. 😉
My wife and I are actually keeping an eye out on Red Coral and hoping it will still be on the market in a months time. We plan on low balling a bit on that one.