Sunday, September 30, 2007

If you're gonna dream, dream BIG!

Many parts of the IE are full retreat but some areas have yet to see the approaching apocalypse . Moreno Valley is one of these areas. You would think MoVal would be leading the collapse but looking around I find that most sellers are still unaware there homes have dropped in value. Of course nothing is selling. In August just over 50 homes sold, with something like 2000 on the market there is roughly a 4 year supply. Even the new tracts are resisting the urge to make the drastic reductions I've seen in other areas.

Would you pay $620k to live in a tract home in MoVal? this one is not even in the nicer planned community areas.

13597 SESAME RD is a 4 bed 3283 sq ft tract home in rather unremarkable condition. I don't see any upgrades from the pics. It looks like a builder basic model and these dreamers are asking $620k. They seem to think that $100k should be their reward for living in MoVal for a year. By the way look at the pic, do you think they have enough crap in that house. I guess they don't watch those HGTV shows like Sell this House. One word "declutter" (is that one word?)

Thier neighbor with the same model at 13588 BALSAWOOD LN is asking about 100K less and this home looks much better with at least a few upgrades. Even living on Balsawood Ln is not going to help this flipper keep his head above water. This home was purchased new in 2005 for $390K. Our poor flipper bought it this year in Jan for $508k, and is now trying to escape by selling it at $525K.

This short sale 26567 QUARTZ RD in the same tract is 60K under the original builder sales price of $390k. This home is slightly smaller than homes 1 and 2 but at nearly 1/2 the price of home #1 it's got to be a wake up call for those guys. This is listed at $329K or $110 sq/ft. Not a bad price for a nearly 3000 sq/ft home if the bank approves it.

There is also an REO listed for $379k at 26600 SAFFRON, the same model as the one above. This has granite in the kitchen and what appears to be a guest house or some such. This one is also priced below original builder sales price of $391k and way below the $520 it went for in 2006.

All these homes are in the same tract and there are loads more of them. All the newer tracts seem to be suffering the same disease, rash of for sale signs. We can see the sellers here are delusional but the banks seem to be coming to their senses. At $110 a sq/ft is home #3 a good deal? Will the bank let it go that cheap? Only time will tell.

Wednesday, September 26, 2007

Bubble pop spilling over

Is it just me or does anyone else notice that restaurants are less crowded these days? My family eats out a lot. Both the wife and I work late and we often don't feel like cooking. We like the popular spots like Olive garden, BJ's, Chili's, Mimi's etc. These places usually had a short wait most evenings and on a Friday or Saturday it would be 30 minutes to an hour usually. In the last couple of months I've noticed there is hardly ever a wait during the week and often the places are half empty. This is not good. I remember the same thing happening in 93-95 and lots of businesses folded up back then.

I've even noticed this at lunch time. I work in Anaheim and sometimes go over to the Block at Orange for lunch. It's a nice place to eat and do some "bird watching". It used to be very crowded and finding an outside table to eat was always a problem. The last several times I've eaten over there the place has been nearly empty. It's spooky empty! Even today, a perfect afternoon it was less than 1/2 full, way less. We talked to the owner of the local Quiznos a couple of weeks ago and he told us his July and August sales were down 30% after we mentioned how slow it was in there.

I've also noticed fewer cars in the Fastrak lanes. I used to hit heavy traffic near the toll booths almost every day. In the last couple of months there have been very few days when I get held up. It looks like people are finally trying to spend less.

Comp Killer, $80k below 2004 price

1819 Morfontaine, Corona
4 bed/2 bath, 2413 sq/ft single story on 8700 sq/ft lot in the Eagle Glen Community.
Asking price is $450k

Sale History
11/17/2006: $550,000
05/13/2004: $529,500

Looks like a flip gone bad. The seller is going to lose 100K plus Realtor fees of around $27k. In addition to that he remodeled the kitchen so the total loss in just under a year is going to be around $150k. The new asking price is also $75k under the 2004 sales price. This is actually a nice looking house and considering the area and the price, it should sell.

But it is going to make the neighbor's place a little hard to move. 1795 Riverstone is the same model on a slightly larger lot but they are asking $619k (only 169K more). But the home does not look as nice inside as home #1 does.

Sale History
08/28/2007: $587,032
08/21/2006: $779,000
06/10/2004: $540,000

This home has seen some wild price swings. It looks like our current owner is just trying to escape without losing anything. His asking price will just get him out after he pays commissions.
Of course with home #1 setting the bar $169K lower I'd say he's completely screwed.

Look at the sales prices of these two homes for a moment. Both sell for about the same price in 2004. Then in 08/2006, house 2 sells for $779k. In 11/2006 our unlucky flipper picks up home number 1 for $550k, what must have seemed like a steal. After all the same model just sold for $779 only 3 months before. But then home #2 drops nearly $200k in a year. That must have made our unlucky flipper's head spin. Now both homes are back on the market again. The $450 price seems good but I think these should be selling for mid 300's tops.

Tuesday, September 25, 2007

Hitting the house lotto in Corona

Some buyers were lucky enough to make big scores in the Eagle Glen Community in Corona. They bought, held for 2 years, sold and doubled their money. Personally I think there was some fraud on a couple of sales that just sent the comps into orbit. Even in the bubblicious IE it's hard to imagine a $500k house selling for over a million only 2 years after purchasing it.

Here's a few examples of what I'm talking about.

1572 Vandagriff Way Corona CA 92883
3 beds, 3.75 baths, 3,695 sq ft;

Sold new in 2003 or 2004 for approx $400k (2004 tax based on $408,653)
Sold on 05/21/2004: $829,000

How does a $400k tract home in Corona appreciate approx $430k in less than 2 years?

1544 Vandagriff Way Corona CA 92883
5 beds, 4.5 baths, 4,531 sq ft

Sold new in 2003 or 2004 for approx $600k (2004 tax based on $603k)
It sells on 06/27/2005 for $1,175,000
Then again on 05/23/2007 for $1,200,000

This $600k tract home in Corona appreciate approx $575k in less than 2 years? Owner number 1 hits the house lottery!

1537 Vandagriff Way Corona CA 92883
Same plan as above, 5 beds, 4.5 baths, 4,531 sq ft

Sold new in 2003 or 2004 for approx $540k (2004 tax based on $540k)
It sells on 07/07/2005 for $1,065,000
Then again on 06/29/2007 for $1,135,000

This lottery winner collects over $600k in less than 2 years?

1553 Vandagriff Way Corona CA 92883
4 beds, 4.0 baths, 3,829 sq ft;

Sold new in 2003 or 2004 for approx $550k (2004 tax based on $555k)

07/29/ 2005: $975,000
08/17/2006: $1,010,000

This original owner wins the lottery and collects over $400k in less than 2 years?
Buyer #2 holds for a year and probably sells at a loss after fees.

Sunday, September 23, 2007

Pricing mayhem in Corona

How do sellers and realtors come up with the prices on some of these homes. I'm beginning to think they spin a big wheel with numbers on it just like on "The Price is Right". Well folks, as Happy Gilmore said "the price is wrong"!

For fun, let's look at 2 similar homes on Sanctuary Dr. in Corona.

Home #1, 8113 Sanctuary Dr is a 3760 sq/ft 5 bed 5 1/2 bath home on an 11,330 sq/ft lot. Looks like a nice home although it's hard to tell from the photos. They look like they were taken with a cell phone. I kick the crap out of my realtor if I saw photos like that on my listing. This home is listed as a pre-foreclosure at $799k

Home #2, 8155 Sanctuary Dr is the same 3760 sq/ft home but this one is a 4 bed 5 bath version on a similar sized lot. The photo's are only slightly better than home #1s. This one is going to be a little hard to move at it's listed price of $1,044,000. That's $245k more than 8133 which has sat on the market since July. This realtor, in addition to pricing for the moon, cannot find the time to use the spell checker. What the hell is a "gulf course"?

Here's 3 more on Lady Banks Loop, and these are even more lopsided.

Home #1, 7225 Lady Banks is a 4 bed 5 bath, 4142 sq/ft home on a 9147 sq/ft lot. No pictures other than a street shot of the front. This home is listed for $830k and it looks like it just went on the market (18 days)

Home #2 is 1809 Lady Banks is the same model. Heck it looks like the same home from the street pictures. Something funny going on here. This thing has been on the market for 164 days and it;s no wonder considering it's listed at $1.35M. That's $520k more than Home #1.

But wait we have another wishful thinker on this block. Home #3, 7669 Lady Banks is the same model home. The realtor says it has too many features to list. And he apparently does not have any time to take a few pics of them either. One shot of the garage and two shots of the front are all you get. This one has taken root it's been on the market so long. You'de think after 180 days on the market they would get a clue that the price is wrong. This one is asking $1.389M which puts it $559k more than Home #1.

Friday, September 21, 2007

Corona in free fall

I've been looking around Trilogy golf club at homes. There are loads for sale and the race to the bottom seems to be on. Let's take a look at Cantara rd. There are 34 homes on Cantara and I found 4 for sale, so just over 10% of the street is for sale.

23672 Cantara Rd is a 3103, 4/3 near the golf course. It looks to be a failed flip. Last purchased for $575k back in April. It's already back on the market for $493,850. That's an 82K loss in 5 months! Nearly 200K from peak in 2005

Currently on the market for $493,850
04/20/2007: $575,089
08/31/2005: $689,000
10/16/2003: $459,000

The neighbor with the same plan at 23700 Cantara is already under cutting this flop by a few dollars though. His is listed for $479,000, $166k less than he paid for it only 2 short years ago (ouch).

This is gonna make 23518 Cantara a little hard to sell at $579,000. Especially since it's 500 sq/ft smaller. These appear to be the original owners though so they may still be able to escape without losing much if they can lower the price.

23602 Cantara is also for sale at $590k. This one is the same 2665 sq/ft plan as 23518 Cantara. It does have a pool but at $100k more than the two larger homes I don't see much hope. They've already reduced the price from $645. This is another original owner so they should be able to get out if they price accordingly (and have not heloc'd all the equity out).

Here lies 4 properties on one street in the Trilogy community. There are many, many others.

Wednesday, September 19, 2007

Foreclosures WAY up

From the Press Enterprise

The numbers of Inland families who lost their homes to foreclosure surged dramatically last month, as risky subprime mortgages strained the budgets of more households.

Riverside County posted 7,266 notices of defaults, trustee sales and lender repossessions, up 347 percent from a year earlier, and San Bernardino County posted 4,876 such notices, up 351 percent in a year, according to a report Tuesday by RealtyTrac, a foreclosure marketing firm based in Irvine.

In California, Riverside County ranked fourth and San Bernardino County ranked eighth in foreclosure activity.

"I think a lot of the loans going bad now are the highest-risk kind of loans," said Rick Sharga, RealtyTrac's vice president of marketing. "They were probably subprimes with adjustable rates and probably with 100 percent financing."

An especially telling statistic is the comparison of bank repossessions from last year, or even the prior month, to August.

In Riverside County, 21 homes were seized by lenders in August 2006. In July, 189 were seized. Last month 1,198 homes were repossessed. In San Bernardino County, 10 homes were seized a year ago. Lenders repossessed 518 in July. Last month, it was 708.

Properties with mortgages in default are increasingly being lost to foreclosure because there is not enough equity left in them to give their owners an option to sell or refinance, Sharga said.

Personally I think some of those numbers are way off. I can't believe there were only 189 homes repo'd last month in Riverside.

August numbers, 2+2=5?

Looking at the DataQuick numbers for August a total of 1470 homes were sold in Riverside county. DataQuick calculates they sold on average 3.9% less than last year. But upon closer inspection of their data I spotted an obvious error in the way they calculate the change. They list they change by zip codes. There were 75 zip codes listed. Nearly all the zip codes were negative with the average negative amount of -12.4% (for the negative zips). There were a few zip codes with increases. Most of these were very low quantity zips with only a few sales but BIG increases. Take Thermal for instance, it had ONE sale but there was a 67% increase over last year.

So, they way they figure the average is to simply take the changes for the 75 zip codes add them up and divide by the 75. So a city with one sale and a 67% increase has the same weight as a city with 40 sales and an average decrease of 25%. Totally bogus (and lazy) way of calculating the change.

If you remove the cities with less than 5 sales the number jumps from -3.9% to -9.8%.

If you calculate it out properly with all the sales and all the zip codes the result is -9%

So DataQuick reports an average decline of 3.9% but in reality the decline is closer to 10%

Monday, September 17, 2007

What language do realtors speak?

What language do Realtors speak? You would think most of them would at least try to write their listings in English. I know you don't need a 4 year degree to be a Realtor but for crying out loud a basic course in writing might be in order. I've read so many unbelievably bad listings in the last few months I'm beginning to think they are letting their pre-schoolers write them.

Notes to Realtors

1) Please for the love of god DO NOT USE ALL CAPS in your descriptions.
2) Don't Capitalize Each Word!
3) Use the friggin spell checker. If need be, write your listings in Word and then paste them in after you run the spell checker.
4) Just because there is a granite counter, that does not make it a "gourmet kitchen".
5) Enough with the !!!! and ****
6) I'm sure we are all aware by now that nothing "Will Go Fast", so give that one a rest till the next bubble.
7) Skip the minutia, you don't need to tell me about the ceiling fan or painted garage floor.
8) Stop the unnecessary verbiage. For example, all fireplaces should be considered cozy.
9) Tell me about the house. 6 words about the house and 2 paragraphs about the nearby parks and golf courses is not helping your cause.
10) Did I mention about not using ALL CAPS.

Here is a perfect example of what not to do.

MLS #K07133984


Wednesday, September 12, 2007

Riverside median falls below $400k

From DataQuick

In Riverside County, 2,834 homes were sold in August at a median prices of $394,523, representing a 46 percent drop in sales from the same month last year and a 6 percent decline in prices. It marks the first time the median sales price dropped below $400,000 since November 2005.

Lets see with a median of nearly 400k that means about 15% of families can afford to buy a median home using traditional standards...... Still a long way to go!

There was a scary chart in USA today that indicated that 24% of riverside homeowners are spending at least 50% of their income paying the mortgage. Holy smokes 50%, what does that leave after taxes? For me it would be just about NOTHING!

The median 2 posts ago is the Riverside city median, this is the county. That is why the 2 numbers are different (just in case anyone is konshizzled)

Tuesday, September 11, 2007

Over a 3 year supply in MoVal

The chief economist for the California Association or Realtors wants agents to refuse to list homes at fantasyland prices. She notes that in Moreno Valley only 59 homes were sold last month (July?). There are currently 2200 listed in the MLS (Not mentioned is that there’s probably another 500 new homes finished and empty plus another 1000 FSBO’s that are not in the MLS). At that rate there is over a 3 YEAR supply of homes and that’s not counting new construction and FSBOs. WOW!

How overvalued is the Inland Empire’s real estate?

How overvalued is the Inland Empire’s real estate?

According to Global Insight, the world's leading company for economic and financial analysis and forecasting the Inland empire is overvalued by 55%! On the bright side we did beat Madera (70.9%) and Merced (69.4%). LA was listed as 51% overvalued and the OC came in at a more respectable 25% (which seems way low to me). This low number might be skewed down by the low end areas like Santa Ana, Tustin etc.

So, Global insight calculates that the IE is overvalued 55%. According to the charts I played with from the NAR a couple of posts ago that’s right in the middle of the range I came up with too. The last report I saw from them we were actually a few percentage points higher. It looks with the prices are coming dow, it's making homes slightly more affordable.

How much has the medial price fallen from the peak? From the data I have been able to find Riverside’s median home price topped out at $485,000 in May of 2006. Currently the Median for Riverside is $419,000 which represents a 13.5% drop in a little over a year. Much of that 13.5% has happened in the last 6 months. In other words the rate of depreciation is accelerating. If the rate of depreciation remains the same it would take 4 years for homes to get back into the “normal” median range of 2x to 3x median income. Unless hyperinflation kicks in or we all get big fat increases in pay (dunno about you, but I’m fairly sure that’s not gonna happen to me).

Riverside Median from 8/2005 to 7/2007

Tuesday, September 4, 2007

BIG price drops

A few months back me and the wife stopped at a Centex development in Riverside. The prices were high like all the other places. They started in the mid $500s and went into the high $700s. I picked up a price sheet and put it into my notebook. Well today I went to the website to see how the prices were holding up. Wow was I shocked. These things have taken a dive in price.

For instance the 4303 model Hawksbury is listed in the brochure I have at $769,990.....
New price on the website.....ready for this.... $599,990. That's a 22% drop and puts this model at $140 sq/ft.

Plan 4, 3931 of the Ardenwood homes was $645,990 and is now $499,990. Again that's about a 22% drop. That puts this one at $127 sq/ft! Not too bad

There are about 15 models in this development and all of them have similar price drops. Looks like Centex is getting the message. I think they still have a ways to go though. Another 20% should get the prices back near where they should probably be.

I wonder how the poor saps that bought at the old prices are feeling right about now knowing they are upside down $170K on that 4303 Hawksbury model.

Sunday, September 2, 2007

What should the Median Price be?

Just for kicks I took a chart from a NAR report for Riverside. Using their chart and drawing a line from the start (1980) through the top of the last peak and out to today we come up with a median price of approx $225k. Since this line is through the top of the last peak it's probably on the optimistic side. If you took that line and went through 1995 the median drops to about $150k. I personally think that the median price should be closer to the middle if those 2. However looking at another NAR chart on Price to Income ratio's we can see that this ratio stays between 2 and 3 from 1980 all the way through late 2002. After 2003 the ratio goes parabolic, jumping to nearly 6x by late 2005. I believe it's closer to 7 or 8 now! If we go back and use this traditional measure of what a home should cost we once again come up with a number close to $150k. Riverside currently has a median price of about $420k putting it about 170% above the $150k number I keep coming up with. Even if I use the higher $225k number, prices are still 85% overpriced. In other words, to fall back to traditional values homes would need to decline 65% to hit the $150k number or 45% to get to the higher $225k number

And if it's not clear enough yet that home prices are WAY out of whack, take a look at the last graph.

IE Maket conditions

According to the media the IE is one of the areas in the US expected to fall the hardest. We have had a run-up in prices that can only be described as meteoric. In most local areas home values have tripled since 2000. There are no fundamentals that can explain this increase. We are certainly NOT running out of land and few people "want" to live here. So why have real estate prices gone through the roof. Some of it can be attributed to the run up in the surrounding areas having a spillover effect. We have also had lots of speculators, flippers driving up the prices. The availability of easy money and low interest rates just accelerated the price increases. So, here we are in late 2007 and the foundation of this great bubble is starting to crack.

How bad is it? Well, the cracks are serious and some large chunks have fallen out of the foundation but I have not seen any signs of a total collapse just yet. New homes are still popping up like weeds in my flower beds. The prices of most new homes continue to defy gravity. Some builders are showing willingness to deal and others have actually lowered the prices. Temecula is one area where the prices have fallen significantly but in the more central areas the prices seem to be holding up. For instance a 3000 sq/ft home in Temecula with upgrades can be had for about $450k, That same home in Corona or Riverside is still priced in the $600k-$700k in most cases. Resale homes prices are still way too high but then again very little is selling. The skyrocketing numbers of REO's should bring the prices down but so far the backs seem to be stuck in 2005 Fantasyland as far as their pricing goes.

Why do I care. Well, I own a starter home and now that my wife is out of school and has a good job we are looking to move up. I would place us in the upper middle class as far as income, but with current prices I could barely afford to purchase my current home if I had to. I find it ridiculous that in order to buy a decent house we would need to spend 50% of our income on the payment. What's the point? You can't enjoy life if you are spending all your money on a house payment. We should be able to comfortably afford a nice house in a high end area, but without exotic loans or a $500k down payment we cannot. WTF? Before my wife started school (2002) we looked at some high end homes in and area that we were hoping to move to after she graduated. Those homes were appox $450k which was high end as the typical 3000 sq/ft Riverside tract home was $300K. I figured that we should have no problem buying one of those in a few years. I didn't see the bubble coming! Those homes are $800k to over a million now. IN RIVERSIDE?

The good news is that in the last few months those homes are coming down. One of the tracts we liked was Stellan Ridge by Pulte Homes. Some of those models have dropped over $200k. Another $300k and they will be back down near 2003 prices. So for now I will wait along with the millions of other home buyers.

Why Golfer_X?

Why am I golfer_x? All the pictures I have of me golfing are from behind. Could it be I'm too fugly for a head shot.......

I used to be a golf pro 10 years ago but then I got a "real" job. My game hasn't totally gone to pot but it's not what it once was. I did manage to scrape together a 2 under at Hemet Golf Club on Friday. I'll put that down to luck since just breaking 80 these days is fine with me.