The house next door to the one featured here on Heritage (last house in video) had closed escrow in February for $850,000, and since then it looked like the ER market could be firming up, because four others closed in the mid-$800,000s:
| Street | Sq. Ft. | Sales Price | Date |
| Heritage | 2,996sf | $850,000 | 2/09 |
| Rihely | 2,928sf | $845,000 | 2/09 |
| Lynwood | 4,888sf | $1,162,500 | 4/09 (east-side) |
| Spyglass | 3,501sf | $840,000 | 6/09 |
| Cyp Hills | 3,272sf | $850,000 | 6/09 |
| Ranch | 2,700sf | $845,000 | 7/09 |
| Lynwood | 4,226sf | $1,232,000 | 7/09 (east-side) |
| Lynwood | 5,388 | $1,725,000 | 7/09 |
But then the 3,112sf house on Verbena slipped down to $800,000 last month. WaMu, who owns this former model, put it on the market for $791,505, and like most bank deals, they found a buyer promptly. But when it fell out of escrow Friday, they dropped the list price down to $751,930:
The agent said this morning that there are more than TEN offers in hand.
The 4,888sf house for sale on the west side of Lynwood was marked pending today, listed on the range $1.249 to $1.399 million – well under the 5,388sf house two doors down that closed a month ago for $1,725,000.
Poof, another notch down practically overnight – sellers, are you sure you want to keep holding out?
My wife and I live in Leucadia and ocassionally walk the kids in E.R. area and use their playground (we’re cheap bastards, i know).
WEIRD PLACE! I see McMansions with gorgeous landscaping, Mercedes/Lexus in the garages, but WHERE ARE THE PEOPLE AND KIDS?
To us, it feels like a ghosttown or a place where people are not allowed out of the house. AND – you got idiots RACING at 50mph ++ down those streets.
Would take a smaller shack ANY DAY in Leucadia where there are at least people around and kids playing.
That’s my boy Jim, back on the downward slope of the RE market in San Diego
WaMu finds a buyer at $791,505, and then they dropped the list price down to $751,930 and get 10 offers? My conclusion is that there is as much insanity on the way down as on the way up.
My guess is that they had more than one offer at the $791,505, why drop at all? The house doesn’t need $40,000, it’s in good shape.
For those of you who know Ben of Ben’s Blog (the Housing Bubble blog) he will be at Pizza Port Carlsbad late this afternoon/evening for beers. He has a good interview with Bruce Norris on his blog today:
http://thehousingbubbleblog.com/index.html
I won’t be at PP, I’m in a charity golf tournament for breast cancer research today.
By any chance was the balloon selling ice cream? 🙂
My conclusion is that there is as much insanity on the way down as on the way up.
I think that line best sums up the last nine years of the housing market. Housing prices could go up 10% or down 10% in the next month and neither would surprise me all that much.
There’s just so much irrationality in the entire process. And then just when you think you’ve gotten it figured out, the gubberment does some crazy dang thing that throws it all off again.
As far as I can see, the only 2 near-constant rules are:
1) It’s hard to find a house you really like.
2) When you do, it will be more expensive than you’d like to pay.
A realtor helps with #1. And #2 is just about inevitable because other people with similar tastes are bidding against you.
Dwip,
I agree with you completely. The market is being manipulated by banks but buyers act irrational. The buy as much house as possible with the smallest downpayment possible then blame everyone else when something goes wrong.
People should be stepping back and saying “hold on a minute”. This is a 30yr commitment I’m signing. What are the odds with the economy contracting that home values won’t be going up? Instead they’re just saying “screw it” and doubling down the bet.
It seems to me Southern California is full of people that will spend every cent of credit provided to them. That mentality more than anything else is what’s pushing home prices. When/If banks start making mortgages hard to get prices will fall.
What I want to know is what exactly does one do with five thousand square feet? Play football in the great room?
When I was a child, the house I lived in was 1,723 square feet (family of four-me, my sister, my parents), and I thought it was a fairly large house at the time-it was a five bedroom, 1.75 bath, seperate living and family rooms. No formal dining room, but having two spare bedrooms made up for that in terms of usable space. Do today’s families really need two to three times as much space?
I may just be on that very same balloon in a few weeks – I swear that balloon was over my house a just and hour before you shot that. If I had 800K, would I buy in Encinitas Ranch? Nope – I would be seen as the unfriendly parking both of my +13 yr old cars in the driveway 😀
Genuine curiosity here – could the bank have dropped another $40,000 due to some sort of appraisal issue? If it fell out of escrow for that reason, they might not want to risk it the second time around. Or maybe it’s hoping to attract an all-cash buyer, or at least more cash on the offer? It’s one thing to drop a price because you can’t get an offer but this seems almost like pushing the market down, rather than following.
Geotpf,
Of course not, but this is California — “need” was never the issue. 😉
WHERE ARE ALL THE PEOPLE AND KIDS? The people are at work paying for the a 1.5 million dollar mortgage. As for the kids???? I don’t know?
Actually I LOVE ENCINITAS! I would love to live there!!! Where do you see all the kids? I have yet to see a neighborhood that has a lot of kids.
Shaddash–I’ve got news for you–Loans are already hard to get.
Anonymous,
I know loans are getting harder to get. But FHA is still providing 5% down options. These are the numbnuts who have never learned to save but still put in offers in.
This is also the reason it annoys me when realtors say that they’ve received x number of offers on a property. X number of offers means nothing when none are qualified.
Genuine curiosity here – could the bank have dropped another $40,000 due to some sort of appraisal issue?
Then why not just sell it to the person who offered $790K for the lower amount? It doesn’t make sense to have it fall out of escrow for a low appraisal, only to list it for the low appraisal amount.
I just bought using FHA, not because I never learned to save money, but because I decided not to put that much money in. I prefer to use it for other investments.
Also, FYI it was just recently raised from 3% to 3.5%, not 5%
You are probably right though, most people go the FHA route because they don’t have the cash.
Thank you, Todd. That’s the same question my wife and I ask whenever we go looking in neighborhoods like that! Nice big houses, but hey – we need a community with tons of kids for our kids to play with. These modern day ghost towns seem to abound!
Also, you hit the nail on the head for us, Dwip (#7). Both your points are only too true!
Househippie – Jim knows
I know an established neighborhood where there are kids, small playgrounds, great schools (San Deguito School District), no McMansions and fancy cars. I took a 12% hit (bahhhhhh) since the peak. Talk to me 6 – 12 mos and I’ll let you know if I’m crying or laughing.
If you want young children to be in the neighborhood, better move out of coastal California.
While small enclaves exist, they are often easily broken up due to the ravages of the economy.
Prices that are jumpy are signals of a late-stage frenzy of speculative activity. Kind of like a 7 year old with a fresh dose of allowance. Nothing will stand between them and what they want.
Chuck Ponzi
CAN I AX A QUESTION?
How come many of the new developments in Carmel Valley (where you have waiting list to buy) and 4S Ranch type areas ALWYAYS SEEM to have a 30% turnaround of their homes in the first few years?
Whatever happened to buying a home and living in it for the rest of your lives? Why does everyone need to keep moving up?
OT:
Jim, Alan Nevin says in 3 years we’re going to have another housing shortage. What do you think and fellow bloggers?
http://www.sandiegometro.com/2009/jun/property.php
I’m no fan of tract homes but Encinitas Ranch is very nice even though it is east of the 5. You get a lot of house for the prices now and these areas when matured will only improve. These homes have character and the location isn’t bad but if you like driving for all of your daily needs and don’t mind a brutal commute on the 5 if you work outside of Encinitas then paradise found.
I bet there’s a good chance the house featured in the video goes past $791K, (see previous post from JtR).
This is overshoot for the upper end just like the lower tier overshot in February.
Permabears; just for fun check out Dataquick’s latest data: http://www.dqnews.com/
The improving market has gone beyond San Diego. First one in, first one out.
Just saw Todd’s post; of course there will be a shortage. It takes YEARS to get a project built and nothing is happening now.
Interesting article Todd. In principle, I think he is right that a financial crisis which abnormally prevents housing from being built for a few years will lead to extra pressures down the road. But:
1) Part of the reason inventory is low is because some homeowners are refraining from selling, thinking that prices will float back to bubble levels soon. As the new price reality sets in for a few years, this will fade and more resells will come online.
2) Developing housing is generally quite lucrative, present situation notwithstanding. Investors will be there to finance making houses when there’s an opportunity to make money.
3) How much of the housing demand in the bubble was people flipping a perfectly good house to get to an ever bigger one? I think demand was artificially skewed high. Although it’s not clear how this will pan out in the long term.
Where is Encinitas Ranch?
Give me an address so I can find it on Google Map.
Thanks,
I was driving around Lomas Santa Fe the other day looking for a rental and was shocked at all of the homes I saw for sale. There were at least 2 for sale on every street I drove down. If those are selling in the $800s then why would someone pay the same for Encinitas, even if you get a couple hundred extra square feet?
I spoke with someone who was renting a house and he said it’s hell for landlords currently; he had to drop the rent 10%. Granted, someone signed a lease almost immediately (an example of price fixing things), but I find it very interesting that rents are coming down.
‘Where is Encinitas Ranch? Give me an address so I can find it on Google Map.
Go to Google and search for “Encinitas Ranch” and it’ll show you a map, and much more.
If you are searching from out of state, search for “Encinitas Ranch, CA”
/feeding vs. teaching a man to fish and all that
@wawawa
http://tinyurl.com/n5dztl
I’ve been tracking home prices on a spread sheet in my area. New homes were offered in a new development in April, of 2008. One home’s tale is striking when seen in black and white on a spread sheet over a year’s time.
3,000 sf home (5/3) on nearly 1/2 acre lot.
-Bought in 8/08: for $1,058,000.
-Back on Market in 10/08: $1,145,000.
-Listing info (Short Sale) of $999K in 12/08.
-Listing price in 2/08: $945K
-Early 3/08: $899K
-Late 3/08: $850K
-4/08: $825K
-Went pending that month but never closed.
-Last week: Back on Market: $725K
There are other folks who bought similar homes and spent $1.1-1.269 million last August too. What a difference a year makes!
Jim, I’m a tad confused about that house I mentioned in my last comment. Since last December, the listing detail stated: “Short Sale”. Now with the new price of $725K, it’s been changed to: “None”. But the first sentence of the realtor’s MLS notes says: “See private remarks for additional terms re sale and commission amount”.
Could it still be a short sale? And if it’s a REO, why does it say “None”? In my area, it usually says that only when it’s a conventional sale.
I’ll bet they get over $800K for that house, maybe $836K-ish (just pulling that out of thin air). It’s funny how a bidding situation will get people to behave in irrational ways, but we’ve seen many examples that show people will bid more when in a competitive situation.
I’d just like to know who are these douches who can afford such homes so readily in these areas?
I can’t believe so many people in California are hard working, w2 employees and yet can afford to buy such mcmansions.
I’m not saying this because I want to live in such a place…frankly I wouldn’t because I find these types of communities repulsive. But I am interested in how they get the means to do it.
SHADASH:
It seems to me Southern California is full of people that will spend every cent of credit provided to them. That mentality more than anything else is what’s pushing home prices. When/If banks start making mortgages hard to get prices will fall.
EXACTLY. When you live amongst people who are willing to slit their own throats, how can you possibly compete with such buffoons?
“I’ll bet they get over $800K for that house, maybe $836K-ish (just pulling that out of thin air).”
I think the current bids are between the 751k and 791k. But who knows. Don’t forget ER has major mello-roos.
I haven’t studied this neighborhood very well, but I am a bit familiar with it. My first reaction when I saw the $1.7 sale, was that it was one of those outliers: probably had an amazing view or someone who has wanted that very model/that very house for a long time.
In many of the neighborhoods I do watch that happens every so often. “Didn’t they even look at the comps?” I would think.
But sometimes people want what they want and don’t even ask questions on price. Not me, but it’s always shocking to see it when it happens.
And it also seems to me that a bunch of homes in that neighborhood had been listed way too high for what was selling. The $1.7 house got lucky. Perhaps the others would praying for such a buyer to come along again for them. “Not bloody likely,” IMHO.
Don’t forget ER has major mello-roos. – pemeliza
Do tell. I’m always asking JtR for the M-R and HOA fees. The gifts that keep on taking.
According to RedFin that house has a monthly fee of $143 for the HOA. No mention of MR.
Other houses in the tract all list the $143 HOA, but then have total monthly fees listed in the $380 range.
So it looks like if there is a MR, it’s relatively low.
M-R = $3,300 per year for both CFDs, or $275 per month, and usually good for 25-30 years.
Ouch, $275 per month for both CFDs. But if you have the money and willing then go for it. I had to remove myself from a number of bidding situations during the peak because I was competing with free money. Sounds like the situation is the same now. That said, even if one overpays by 50K, prices have dropped low enough to more than make up for it.
“When you live amongst people who are willing to slit their own throats, how can you possibly compete with such buffoons?”
I think the challenge for many bubbleinfo readers is exactly this. We’re conservative. Too many people whom I consider morons are able to sleep at night paying way more than I’m willing to, even if their household income is less. I feel almost defeated sometimes; either I have to suck it up, or wait until the morons get washed out. But what’s it going to take to wash them out, and will they ever get washed out?
I think the challenge for many bubbleinfo readers is exactly this. We’re conservative. Too many people whom I consider morons are able to sleep at night paying way more than I’m willing to, even if their household income is less. I feel almost defeated sometimes; either I have to suck it up, or wait until the morons get washed out. But what’s it going to take to wash them out, and will they ever get washed out?
Personally I feel the same way…defeated. I don’t think these types of people will be washed out. The reason I believe is because the “system” thrives on people like this.
If you look at how things are set up, most decisions, purchases, things people want is attached to their egos….to their lack of personality, to fill a void.
The majority of people are like this. It just depends to what extent someone has a void. People who are willing to throw themselves under a bus so they can have their 3500 sqft overpriced POS and their 2 Benz C class cars outside in their driveways have…to me….epitomize such issues.
Sure…they blame it on having children, on “good” school systems…whatever they want to say. As if people with kids don’t have insecurities that need to be filled.
The problem is for conservative people like yourself and myself, life goes by while they get the bailouts, the handouts, and live in their luxury homes. It’s pathetic.
The system thrives on people like these….it won’t exist without them…but it will without us…at least in these types of areas. It pays to be a douche.
I’m not conservative, I’m analytical. Think of me as the second mouse. If you understand the allusion you know why I’m still on the sidelines. Look at the people JtR mentions in this video. $100k air pockets. That’s not investing. It isn’t even wise home shopping.
Noz:
I live a conservative life. We are selling our Leucadia home in 3 years (long story but tax avoidance reasons) and moving back to a more conservative home in University City.
We will take the equity proceeds from the sale and use it to ENJOY OUR LIFE.
We will have a modest home paid off, a good chunk of $$ in the bank and then I’m going to work 50%. I’ll be 42 at that time.
We’re going to continue to travel the world, eat at nice restaurants, spend lots of time with our children, and having a good life. We can easily move into a 2 million dollar home, but I don’t want to work the rest of my life and worry about job loss.
Go visit a cemetery. How many of those people would have done things differently if they could had?
Life is short. Impressing the Jones’s is retarded.
Living a good life WITHIN YOUR MEANS, is the key.
Good luck to you!!
All this talk about people spending beyond their means reminded me of this commercial from just a few short years ago.
http://www.youtube.com/watch?v=hn5EP9StlVA
The irony? The company is suggesting you resolve your credit problems by taking out another loan!
Sir, my nuts are not numb.
Having been stuck in a pricy rental (due to good schools), there is not much left over. We have our 5% down for an FHA loan + a little but are competing in the lower middle (ie small houses but good schools and little crime) here in Silicon Valley.
You folks can cackle about your money, but my earnings have gone into ensuring that my two daughters are well-clothed, well-educated (including music lessons, gymnastics, etc), and have the best medical care.
We are hoping to buy a house, any house, with enough room for 4, in our school district. It is very tough. My landlord of 10 years could send us packing with minimal notice. At least with a 30 fixed rate mortgage, our housing costs are predictable and somewhat protected against the coming inflation.
Sure, perhaps I should play the market some and wait for huge drops, but I don’t see much more coming in my market segment.
I’ll be working to 70 and beyond but it will be good to be a useful, contributing citizen rather than an aging consumer.
‘Sure…they blame it on having children, on “good” school systems…whatever they want to say.
I’m going to go against the traffic here in regards to the last few posts.
Not everyone is a ‘buffoon’ or ‘douche’ for buying something they really want, especially if this purchase is intended as a home.
We all overpay for something we want in the eyes of another. Whether it be an expensive dinner, choice of schools, first class airline tickets, two ply toilet paper, etc.
I don’t have kids, but when I do – I want a nice home, in a good safe neighborhood, with top notch school districts. I don’t want to move around every few years, deal with landlords, worry about if my place is going to be foreclosed on, etc. If my dog chews up the walls, I decide to re-garden the entire place, add a jacuzzi, or my daughter decides to paint her room bright pink it’s my concern alone.
These are all luxuries, and I, and I presume many other people are willing to pay for.
If you are looking at it as a way to make money, that’s one thing. I know I’m not, and I don’t think a lot of other people are either.
Wow, that a lot of rationalizing for a purchase that is beyond your means.
These are they type of mentalities I’m talking about. Southern California is full of people like this. What’s annoying is as soon as something happens to the tightrope they’re walking on it’s suddenly everyone else’s fault that they fell.
Tod:
Not sure why you’re telling me all that….I don’t think you fully understand what side I’m on.
sdnerd:
I’m not looking to make money…that’s what I’m talking about. Most of the douches do.
My philosophy is not to put myself in that position. Unfortunately though, we are surrounded by people who are….and that’s why we are in the mess we are in.
‘Wow, that a lot of rationalizing for a purchase that is beyond your means.
Who is that comment directed at? If it’s me, I have a response for you. 🙂
I’d like to hear your answer regardless….I think it was directed at you.
I’d like to hear your answer regardless….I think it was directed at you.
It’d be an absurd comment if it was directed at me. It appeared right after my post, hence why I asked.
Telling someone something is ‘beyond their means’ is a rather bold statement, in particular without any factual data to base the claim on. I provided none.
It leads into the mental masturbation trap so many people on these types of blogs fall into. Projecting their own circumstances on others, or making claims based on assumption vs. data and viewing it as the norm.
Pick any house in San Diego, and I will find you two people: one who can easily afford it, and one who thinks it’s over priced.
That was the ultimate point of my post – my example is I know I will pay more then someone who is looking at the same house purely from an investment perspective. We would want entirely different outputs from the same unit.
Whitehall mentioned having just a 5% DP, plus a little extra. IMHO, outside of additional variables I’m not aware of, I would qualify that as purchasing beyond ones means. It’s extremely risky, in particular in this market. One slip up and you are ruined.
I haven’t bought yet, but when I do it will be 20-30% down and a few years of mortgage payments in the bank as an emergency fund. I would recommend the same to everyone, in particular in this economy.
If the post was in reference to Whitehall; I would tend to agree from a financial aspect and would highly recommend not purchasing.
Wanting good schools, health care, etc for his family and being willing and able to obtain those things for them is IMHO quite commendable. The reality is these things cost more regardless whether you are renting or buying.
Here we go again. I would easily pay a 2x premium over Oceanside and similar locations. The home improvement projects continue – that is when I can squeeze them in between my summer travels.
Pick any house in San Diego, and I will find you two people: one who can easily afford it, and one who thinks it’s over priced.
I don’t think being able to easily afford something precludes someone from not thinking that thing is overpriced. I can also afford an expensive home but I believe a lot of homes out there are extremely overpriced.