Why, oh why, are some REO's priced so high?

Can anyone explain why in todays market, so many REO properties are listed at wishing prices. I realize the outstanding loans might be very high but that has no bearing on the current market value of these properties. I know the banks are getting BPO's (broker price opinions) before setting the listing price. Is it the brokers that are out of touch with reality or is it the banks not wanting to believe "it's that bad". There are more and more REO's hitting the market with pricing close to 2002 prices yet there are still loads of them listing at crazy wishing prices.

For example, 26727 Chamomile St Murrieta. This is in Greer Ranch, a newer high end development in between the 15 and 215 fwys. Like most new developments there are loads of homes for sale in this development. Many of these are REO's. The price leaders just listed (probably re-listed as it's been REO'd for almost 6 months) has and asking price of $149 s/ft. That's a lot of extra money over the price leaders since this home is 4300 s/f. It's listed for $639k when it should be under $500k to be in line with the current crop of REO's. Those are not selling so if they actually want to sell this beast it should probably be in the mid 400s or lower. There are way too many homes listed around $100 s/f in this area for anyone to bother with this thing.

$106, it's the new black

Yet another home in South Corona hits the market at $106 s/f

25087Cliffrose is a 5 bed/3bath home of 3893 sq/ft in Sycamore Creek. This one looks to be an REO that we back to the bank in Jan for $580k. This home sold new in Dec 2004 for $578k. It sold again in Nov of 2006 for $775k (if they could have stretch the sale out another month they would not have had to pay capital gains on the nearly 200k they made). The last owners only manage to keep it a year so this baby was definitely and early payment default. It's currently listed for $414k. Making this a loss of $361k in ONE YEAR. (A 47% loss).


Then there is the delusional neighbor one block over at 25285 Noble Canyon. This doofus lists his home at $700k. It's only a couple hundred feet larger than the last house. This one was purchased Feb 06 for $716k. Anyone sense a 2 year reset in this sellers future? I don't think you need to break out the crystal ball to foretell the fate of this home. Any bets on when we see it as and REO?



One last big loser. 1345 Elysia is in central Corona, high up near the Cleveland National Forrest. This one is a 5 bedroom/4 bath home of 3572 sq/ft. Nice looking home in a much more central area. This one was purchased new in Dec 2004 for $750k (seems kind high for late 2004). It went back to the bank recently for $432k. They either had a helluva 2nd or actually made a big down payment. Loosing this house for $432k just seems stupid unless there were 2nds or HELOCs. The bank has it listed for $453k. Is the bank trying to make a few bucks on this one?
If it sells at asking the loss will be $297k or 40%.

This weeks Delusional Seller Award

This weeks Delusional Seller Award goes to this fella at 3237 Clearing CRK Corona

This home has been listed for 337 days and the guys has not dropped the price one dollar. The market has fallen 30% in that year yet he remains convinced someone will fall in love with his mcmansion and write him a check for $1,035,000 (what's with the $35K?). The listing says this house was built in 2007 and does not have a prior sales price. These homes were built in 2005 and sold new in the $800s.

I will also give the realtard an honorable mention for this retarded description.

Beautiful Luxury 4,000 sq' Hilltop Estate on quiet CDS w/ Stunning Panoramic Views! 5Bd 4Bth, Xpd 4Car Gar w/ Casita. Huge White Island Kitchen SS appl, Ital Travertine, Huge Bonus Rm, Family Rm, Office/French Doors, Cstm Paint t/o. Large Veranda w/ Outdoor Fireplace, Balcony. Private Blk Fence 10,552 sq' lot. Stunning Mtn Views/City Lights. Seller assist w/ closing, landscape credit.

OK, what is with all the abbreviations? Does the MLS charge by the letter? Seller will assist with closing. By assist I hope he means he will bring a check for $500k. You also get a landscape credit which must mean the back yard is still dirt. Can't tell since there is only one pic (again, do they get charged extra for more than one pic?)

Just how delusional is this seller? There are currently 5 homes for sale on Clearing Crk. 2 are under $500k, one is $570k and one is $660k. They are all about the same age and size.

There is one exact model match very close to our dreamer at 3255 Clearing Crk. The house is a 5 bed/4 bath with 3949 sq/ft of living area. This home is a bank owned property that just hit the market. The asking price is $475k! That's not a bad price for this home. It's in a good area and it's a nice house. $120 s/f is the lowest price in the immediate area so this actually has a chance of selling.

That makes this home less that 1/2 the price of Mr. Wishingprice's. $560k less!

looks the same to me.

A picture paints a thousand words

This chart is from The Office of Federal Housing Enterprise Oversights latest report released today. The last time I saw something fall that fast was when the Challenger exploded.

January foreclosure report

Realtytrac has issued it's January report and there are no surprises, unless you were expecting the numbers to go down .

IRVINE, Calif. – Feb. 26, 2008 – RealtyTrac® (realtytrac.com), the leading online marketplace for foreclosure properties, today released its January 2008 U.S. Foreclosure Market Report™, which shows foreclosure filings — default notices, auction sales notices and bank repossessions — were reported on 233,001 properties during the month, an increase of 8 percent from the previous month and an increase of nearly 57 percent from January 2007.

“January’s foreclosure numbers demonstrate that foreclosure activity is continuing on its upward trend, substantially increasing from a year ago in many states,” said James J. Saccacio, chief executive officer of RealtyTrac.

California’s January foreclosure rate ranked second highest among the states, and Florida’s January foreclosure rate ranked third highest. Other states with foreclosure rates ranking among the top 10 were Arizona, Colorado, Massachusetts, Georgia, Connecticut, Ohio and Michigan.

Foreclosure filings were reported on a total of 57,158 properties in California in January, the most of any state. The state’s foreclosure activity was up 7 percent from the previous month and up 120 percent from January 2007.

California and Florida metro areas accounted for eight of the top 10 metro foreclosure rates in January. The Stockton, Calif., metro area documented the second highest metro foreclosure rate. Other California metro areas in the top 10 were Riverside-San Bernardino at No. 3, Modesto at No. 4, Merced at No. 5, Vallejo-Fairfield at No. 7 and Bakersfield at No. 9.

Woo Hoo, we are up to number 3! It won't be long before we get to chant "we're number 1!".

Our totals for the month are:

Notice of Defaults 38,148
Notice or Trustee Sale 8,482
REO 10,528

$106 sq/ft in South Corona

South Corona seems to be taking a price beating compared to the rest of the city. I'm more than a little confused by this. South Corona is one of the nicest areas of the whole city. Some may argue but everything in So Corona is new. New school, new homes, new stores and new golf courses. It's not all roses though. The 15 fwy is damn near a parking lot night and day making commuting from there a bit of a nightmare and there's not a lot to do other than shop, golf or go to the movies. But still it's way better than North Corona (Eastvale) or Central Corona. What's killing the prices though is the fact that everything is new and many of the homes were bought at peak prices. This ultimately is leading to a tidal wave of foreclosures and short sales. Some of these are now getting tantalizingly close to $100 sq/ft.

Two more showed up today on Redfin.

25137 Coral Canyon Rd. A 5 bedroom 2.5 bath home of 3484 sq/ft. This home is only 2 years old having been sold new in Jan 06 for $551k. This home is now owned by the bank and is listed for $370k or $106 sq/ft ( it was $158 sq ft new). That's a loss of $181k or 33%.
That's probably still a little too high for this home. There's no way it pencils out as a rental yet and even to buy this as a "home" you are looking at a very large payment and the monthly utilities on this thing will kill you.



23396 Toronja Corte is another big one. This one is located near the Trilogy development. It's a 4 bedroom, 4 bath home of 4075 sq/ft. This was purchased in Sept 2005 for $743k. Now it's listed for $479k ($118 sq/ft). That makes this loss $264k or 36% from the Sept 05 price. On the same street there is a model match to this one with an even bigger loss. 23438 Toronja Corte was purchased last in March 06 for $830k. Now it's a bank owned and it's listed for $510k. That is a loss of $320k or 39% from last sale. And these have not sold yet, the final numbers might (I mean, will probably) be even worse. Check out the price cuts on the 23438 house. Talk about chasing the market down, 7 price cuts since last June and now there is a model match $30k less on the same street. It just brings a big smile to your face, doesn't it?

January CAR report

Highlights from CAR's January report

Home sales decreased 29.8 percent in January in California compared with the same period a year ago, while the median price of an existing home fell 21.9 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.

The median price of an existing, single-family detached home in California during January 2008 was $430,370, a 21.9 percent decrease from the $551,220 median for January 2007, C.A.R. reported. The January 2008 median price fell 9.7 percent compared with December’s revised $476,380 median price.

C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in January 2008 was 16.8 months, compared with 7.6 months for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Riverside/San Bernardino

Median $298,010 (Dec Med

Change from 12/07 -8.5% ($325,520) 8.5% in ONE month!

Change from Jan 07 -25.4% ($399,680)

Change in sales from Dec 07 11.8%

Change in sales from Jan 07-18.5%

Realtards think we are all idiots

I've been a little pissed this weekend after an encounter with an agent at an open house on Saturday. I was bored Saturday morning so I went out for a drive to see if there were any open houses I could look at. I stopped at a few but is seemed like a slow weekend. Must have been the rain. On the way home I noticed some signs, so I followed them to the open house. It was not something I would really be interested in (too big) but I stopped in there anyway since it is in one of my target areas. I was the only person there so the realtard followed me around asking all the usual questions.

Are you looking to buy...when?
Do you have an agent?
What do you think of the house?

I told him the house was bigger than I was looking for and that I thought the price was far too high compared to the other homes for sale in the area (which it was by about $200k at least). He got the usual surprised look and then said that the home was priced lower than the recent comps. He had his laptop on and said he could show me. Logging on to Trulia he brought up the home and at the bottom of the listing on Trulia it listed the recent sales in the area. There were 4 or 5 sales listed in the last couple of months all at surprisingly high prices. I don't use Trulia but it only took a moment for me to realize what I was looking at. This is where I lost it and bit his head off. You see those so called "comps" were the trustee sales, those were the properties going to the bank. I should have asked him if I had a big f'in sign on my forehead that read moron. In a rather agitated tone, I let him know that I was not a retard, and that showing me trustee sales as comps to justify his fantasy price was a stupid thing to do. I was pissed! I could not believe what this dumbass had just tried to do. The sad thing is that for 90% of the buyers it would probably have worked. I just happed to recognize a couple of the so called sales and I knew they were REO properties.

I don't know if it's desperation or what, but I've run into a few gems this last month or two. I've noticed it's mostly the young guys that try this crap. The young gals don't seem to have quite the same knack for the BS. I have not had nearly as much trouble with the older realtors (40+).

Increasing the Conforming Loan Limit, will it help the IE?

I received an excitedly written email a day or two ago from a realtor about the new increase of the conforming loan limit. She was sure this would "turn the market around" allowing people to refinance into fixed rate loans and also allow all those "pent up" buyers to purchase some of the overpriced inventory. I normally just ignore these spam emails but I had to look into this one just to see if this might slow down the correction of prices.

Here's the deal. Before President Bushtard signed this legislation, the max loan Fannie and Freddie were allowed to buy was $417k. Anything more than that was considered a Jumbo Loan and the bank either had to keep that loan or try to sell it off to Wall Street. Because of the added risk of getting stuck with these loans the lenders are charging higher rates on Jumbo's. Most Jumbos are a percent or two higher than a conforming loan (under $417k). This is the rational behind the increase. If us buyers can get a lower rate then we are more likely to spend more. In other words they are hoping we buy an overpriced home.

The new legislation increased the limits to $729k in high cost areas. It seems we are saved thinks the Realtors. But wait, there is some fine print you need to read. The "Limit" is raised to "as high as $729k". Not $729k across the board. They peg the increase to the current HUD median price for the area you are buying in. It sets the limit at 125% of the current median price according to HUD. I'm not sure what HUD thinks the IE median price is but I know DataQuick thinks it's $315k. If we take 125% of $315k we get $393K. Hmm, exactly how is this going to help? Fortunately the old $417k limit still applies to us. If the HUD's median is higher than DataQuicks then we may see a slight increase. Don't count on it though.

It seems like this is just a lot of hot political air and it will not affect us in the IE one little bit.

What are you paying for postage stamps?

In Chino you can pick up a postage stamp for $345K. Included in the purchase price is a 2103 sq/ft, 3 bedroom, 2.5 bath home. This home and it's teenie weenie lot (3102 sq/ft) were purchased Sept 2005 for $504k. The bank is trying to unload this now for $345k. A rather unimpressive (by this blogs standards) 32% fall in 2.5 years. Of course peak prices were a year later so this thing was probably worth $650k around the summer of 06.



By the way, another fine composition by the photographer. Way to make the mail box stick out like a sore thumb! Just a suggestion, next time take the shot from the other direction and leave out the mailbox.

I guess a 3000 sq/ft lot is great if you hate yard work.

Not worth the effort

Here's a listing that a realtard took and he knows it has no chance of selling. So instead of refusing the listing he takes it and then puts as little effort into it as possible.

13754 Apple Moss Ct, Corona. The realtard could not even muster up enough enthusiasm to write a few sentences of remarks. Nope this is all you get, " This one is just like new. 5 bedrooms, 4 bathrooms with over 3,300 square feet of living area." That info is already in the listing, there is really no need to repeat it. The rest of the listing is just as light on info.

Then there is the ONE picture. It's a beaut too! Who is going to buy this place with the gazillion megawatt power lines running right behind it. Maybe a tighter shot would have been called for in this instance or possible a little photoshop job. At $650k I guess he knows there is a better chance of Bush winning a 3rd term so he chose not to expend any more effort than he needed to. It's about $200k more than most of the other listings in the area, like this one.

I'm sure the owner said "we are just hoping some one will fall in love with the house like we did, and the buzz from the power lines really does help you sleep."

Realtard of the week

When you want to list a home at a ridiculously high price, who do you call? Why not try this weeks "Realtard of the Week".

Cindy Matiran

Prudential California Realty

What has poor Cindy done to deserve this dubious honor?

I submit her latest listing into evidence your honor.

11306 Lakeport Dr, Riverside. This home is in the Riverwalk Development in Western Riverside. This home is 4281 sq/ft and has 5 bedrooms and 5 baths. Cindy lists the home for $849k AND IT'S AN REO! WTF is she thinking. There are several other homes in the same tract about the same size as this one for as much as 40% less!



This one For instance 11367 Pondhurst. This home is BIGGER at 4312 sq/ft. It has 4 beds and 4.5 baths and is listed for $499K. HELLO Cindy, that's $350k less than yours.... Oh, and this one is an REO also.



Then there is 11356 Pondhurst. This one is a model match of Cindy's listing but it's a short sale listed for $490k. That's $360k less than Cindy's



Finally there is 11373 Lakeport Dr. Another 4312 sq/ft, 5 bedroom, 4.5 bath home. This one is also an REO. It's not as cheap as the other 2 but it's still $180k less than our dullard Cindy's.



But wait, I would like the jury to read poor Cindy's listing before making there final judgment. It's a real gem!

"EXEDCUTIVE , 5 BEDROOMS 5 BATH HOME, MODEL PERFACT IN RIVERWALK GATED COMMUNITY NEXT TO FWY 91 & 15, THE LARGEST LOT IN A CUL-DE-SAC, WITH MOST UPGRADES, TILE ENTRY TO KITCHEN DINNING AND FAMILY RM, LRG OPEN KIT. W/ ISLAND, GRANITE, UPGRADED KIT. APPLIENCE, AND FLOORING, MASTER BEDROOM WITH EXTRA SITTING ROOM LRG LOFT, CUSTOM PAINT THROUT, UPGRADED FLOORING, BASEBOAEDS, DOUBLE DOOR ENTRY, ONE BEDROOM ONE BATH DOWN, LARGE FAMILY ROOM W/ FIREPACE. LUSH LANDESCAPING W/ LOTS OF FRUIT TREE, BUILT-IN B. B. Q. , FIRE PIT, AND MUCH MUCH MORE. MUST SEE !!!"

How many misspelled words do you count? Heck she starts off with the very first word, completely butchering it. Then of course we have the ALL CAPS, useless abbreviations and exclamation marks. My 9 year old spells better than this, can use better grammar, and can formulate a sentence. This makes my brain hurt....

Well, what say the Jury?

By the way, this is what Cindy has to say about herself on her website.

My service, experience and dedication provide motivated Sellers and Buyers with a clear marketing advantage. I know that the only way to succeed in real estate is to provide more service than you can get anywhere else. And you will get that kind of service when you work with me.

I will provide you with the personal service you deserve. Put my professional image, reputation, and business ethics to work for you.

Let's talk today! Call for a consultation.

Sierra Hieghts, new tracts in 2008??

Believe it or not two new tracts are just opening in Riverside. Sierra Heights is just north of Victoria and East of La Sierra. It's up in orange grove country and has a nice view of the valley. I was stunned when I ran across these this weekend. I was even more stunned when I saw the prices. Apparently Lennar and Standard Pacific did not get the memo about the collapse of the market.

Standard Pacific has 4 models in Sierra Hieghts. They area all big and all expensive. The homes start at just over 3000 sq/ft and go to over 4700 sq/ft. They sit on large lots of about 1/3 acre. But with starting prices in the mid $500's you have to wonder if they will sell. They had sold signs on a few of the available homes (amazing). So it does look like there are still buyers that also did not get the memo.

The Lennar tract did not have the models open yet although they looked finished. They have 4 models and they are big homes as well. The smallest home is just under 3000 sq/ft and the biggest is over 4600 sq/ft, website says the prices will start in the upper $500's. Good luck with that!

I wonder how long before they start dropping the prices? These guys are asking $160 -$170 sq/ft when up at lake hills they have dropped many of the new homes down into the low $130's sq/ft. You can drive up to Bridle Creek and get a similar sized home on an acre for less than these. I'm guessing they are opening with the higher prices to test the waters first.

Pulte shutters Stellan Ridge in Riverside

Pulte Homes has stopped building at their Stellan Ridge development in Riverside. I stopped by the sales office today and got the news from the sales lady. She had one home left that fell out of escrow. It seems that they are losing just a little too much on these so they have decided to halt construction until the market improves (or they sell the lots which is more likely).
This was a little bit of a disappointment to me since this is probably my favorite new tract. Had these dropped another $100k I would probably have bought one. These homes were awesome and in what I feel is the best area of Riverside. These started out at 1.4 million in late 06, quickly dropped and dropped and dropped until the last price I saw was starting at $726k. I was really hoping to be able to pick one of these up around $600k. Maybe in a year there will be a foreclosure or two in here. I'll keep my fingers crossed but I'm not holding out much hope.

What is the fascination with cabinet hardware?

We went out this afternoon looking at a few more homes in the Norco Hills area. We stopped in at a few open houses and looked at some of the REO properties. 2 of the 4 REO properties we looked at had the knobs removed from all the cabinets. We noticed the same thing last week. What is the freaking fascination with cabinet hardware. If you are going to go through the trouble of removing the door knobs why would you leave the dishwasher, stove, microwave etc? I just don't get whey anyone would take cabinet hardware.

A couple of the homes we looked at actually priced well for the area. Still too much in my cheap-assed opinion though. One of the homes was priced at $525k. It was purchased in March 2006 for $898k. That is a 42% drop in value in less than 2 years. For the mathematically challenged that's a $373k loss (plus fees). The house is 3142 Vandermolen in Norco Hills. It's a 3 bedroom, 3 bath. The listing says it's a 4 bedroom but it's not. One bedroom is actually an office and is open to the main living area. Dirt yard, faux finish on the ceiling, walls and everywhere else. No knobs! Still at $525k this one has to have the neighbors just fuming. There are about 8 homes for sale on this one street. Most of them are listed near a million with a few well over that mark.

One thing I have noticed the last few times I've been out at open houses is the demeanor of the realtors. They seem like shell-shocked soldiers. The excited, happy over the top exuberance that they used to spew is gone. Replaced by a look of broken desperation like the defendants in the Nuremberg war crime trials. The more overpriced the home the worse the look is. This was certainly the case with 2 today trying to peddle a $709k home just down the hill from the $525k REO (and the REO was nicer). Anothers semi-cheery attitude changed when I asked "hasn't this house been on the market for ever?". Of course I knew the house had been listed as an REO since last July.

Amazingly enough there were actually quite a few people looking at these better priced homes. There is obviously interest when a lower priced home hits the market or a price falls enough to get some attention.

But then there was this article in the Press Enterprise about the Norco Hills. This is not going to help sell those homes!

Norco is sharing in the nationwide problem of home foreclosures, with about 9 percent of homes in one development there believed to be abandoned.

An informal survey by Norco Fire Chief Jack Frye found that 53 of the 588 homes in Norco Ridge Ranch, a newer development, appeared to be vacant, City Manager Jeff Allred said. Norco Ridge Ranch is on the city's east side, north of Hidden Valley Golf Club.

But abandoned homes can be an annoyance because it is hard to find out who owns them and should be taking care of them, Allred said....

Wow, the numbers are worse than I thought

I was poking around the Data Quick site looking at last months sales by zip code when I noticed most of the zips had larger declines than the reported numbers (20% for Riverside and 19% for San berdu). Looking at the chart I could see that the Condo numbers helped make the median price decline look a little better than it would have been. I still cannot figure out how they came up with the last number they reported. No matter what I do with the numbers from this chart I cannot come up with the numbers they reported earlier in the week.

The actual number for year over year price drop for SFRs (houses) are,

Riverside down 23% from 2007
San Berdu down 25% from 2007

It's amazing some of the declines, for example

Canyon Lake -51%!
Norco -46%
Calimesa -48%

There are so many zips with declines of 30% to 40% that they are not even worth mentioning. Take a look at the chart for yourself, it's stunning.

The Median Price numbers also don't match what has been reported and I'm a little puzzled as to why that would be. Here are the Median Price numbers according to the sales by Zip Code Report

Riverside is down to $315k (the other reports said $331k)

San Berdu is down to $279k (the other report said $298k)

A few do make sense

There are a few homes starting to appear that could actually be good buys versus renting. So far these are in the outer areas of the IE, but even so they would still probably be cheaper (or close to it) to buy that to rent an equivalent house.

I found 4 (all bank owned) in the tract that sits below the dam holding back Lake Perris. The last time I drove through this tract it looked quite nice. It's all fairly new with a fancy entrance gate, nice parks and landscaping. It's in a handy location right off the Ramona Expressway with easy access to the 215 fwy. Probably not a bad place to live for a young family. Of course this assumes you don't mind living below a dam holding back a huge lake. A dam, that by the way they are worried about failing if there is ever a 7.5 earthquake. Since there is a major fault line running through the badlands just a few miles east of the lake, I'd say a big earthquake is a distinct possibility. Because of this flaw in the dam they reduced the level of the lake last year. And they are STILL building homes right below that sucker! But the biggest problem is that this area is foreclosure central.

Anyway back to the houses. To rent a decent 3 bedroom home in that area is about $1500/mo. These 4 homes are all listed under $225k. That would give a payment of roughly 1150/mo assuming 210k financed at 5.5%. Add in some property tax ($200/mo), insurance ($150/mo) and you end up at roughly $1500/mo. Now being a homeowner you get to write off that interest which would net you some tax savings. That would reduce the net cost by about $225/mo. That savings would cover maintenance and the $80/mo HOA fee. So these properties are very close to being a wash versus renting. The big "IF" is that IF the property values continue to decline then you would be losing money. I doubt you could buy these and make any money renting them unless you put a fair amount down but someone could buy these and live in them for about the same cost as renting. You gotta ask yourself, do you feel lucky. Well, do ya punk? Feel like betting those prices won't drop anymore?

Here are the homes,

1739 Benedetto, 4 bedroom, 2.75 bath, 2252 sqft. Purchased for $305k in June 2004. Now listed for $209k ($93 sq/ft) (Being a 4 bedroom this house might rent for more that $1500)



1449 Avila Dr, 3 bedroom, 2.5 bath, 2677 sqft. Purchased for $385k June 2006. Now listed for $215K ($80 sq/ft)



3275 El Nido pl, 3 bed, 2.5 bath, 2296 sq/ft. Purchased for $396 in Nov 2006. Now listed for $207k (90 sq/ft). A 48% loss in 16 months



2054 Mount Verdugo, 4 bed, 3 bath, 2731 sq/ft, Purchased for $435k in June 2006. Now listed for $221k ($81 sq/ft). That is a 49% drop in 18 months! This is a nice looking house, too bad it's in Perris. Again I doubt you could rent this home for $1500. It's 4 bedrooms and fairly large. This one would probably rent for closer to $2k, making buying it far cheaper than renting it. From the pics the house looks nice but the last owners did take the stove and dishwasher with them. The rest of the house looks good in the pics.

January numbers, worse than ugly

The numbers for January were released today from DataQuick. As expected they are bad, really bad.

Southern California home sales dipped below 10,000 transactions for the first time in more than 20 years last month. Last month's sales total was the lowest for any month in DataQuick's statistics, which go back to 1988

A total of 9,983 new and resale houses and condos were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in January. That was down 24.6 percent from 13,240 for the previous month, and down 44.9 percent from 18,128 for January last year.

Here's the IE numbers


...........2007(sales)..2008 .. %chg . 07 median. 08 med..%chg

Riverside... 3,089... 1,939.. -37.2%.. $415k... $331k.. -20.1%
San Berdu... 2,373... 1,111.. -53.2%.. $370k... $298k.. -19.3%

Price gridlock

Why do so called real estate "professionals" have such a hard time pricing a home. 98% of the homes on the market are overpriced. How do I know, because they are not selling. If they were priced correctly they would sell!

The market is declining. Only an idiot would dispute that fact today. Nearly every economist worth a damn is predicting California prices to continue falling into 2009. The IE is in especially bad shape as is the central valley. We are likely to see prices decline 50% to 65% from peak according to some of the more bearish economists. So far prices in the IE are down nearly 30% from peak prices.

So, once again I ask "why do real estate professionals not price homes correctly?"

We are in a declining market. The riverside median price is dropping at roughly 4% per MONTH. If a comp that is 3 months old is used to set a price, that price is already 12% too high when it hits the market. What should be done is to take a recent comp and price the home 10% to 20% below that. If the house is "below market" it will get multiple offers. If it does not get any offers then it is still too high. Drop the price 5% per month until you get an offer. DO NOT CHASE THE MARKET DOWN. It's a race, get ahead of the declining market and it will sell.

I have seen a few (very few) homes that came onto the market well below the other homes in their area. Guess what? THEY SOLD! All of them sold for above asking.

Here's a tip for any realtors that might read this. PRICE THE HOME WELL BELOW THE COMPS! It's not like the home is going to sell for 50% below market. If it is indeed priced below current market it will get offers above asking. It's like every realtor in SoCal has forgotten how to SELL a house. It's the price stupid!

This applies to delusional sellers too. Pull your heads out of your butts long enough to get a whiff of reality. Price your home below recent comps!

Wall Street Journal "California prices still Wildy Overvalued

From the Wall Street Journal

"If you own a home in a former bubble region like California or southern Florida, there's bad news… and really bad news. But the really bad news is that, even after a year of misery and falling prices, homes in many of these regions still aren't cheap. They remain wildly overvalued compared to average personal incomes.

How far?

Try around a third in Florida and Arizona -- and closer to 40% in California.

Median prices in California peaked in 2006 at 13.3 times per capita incomes. Hard to believe, but true. They may be down now to about 11.1 times.

But that's still way above the ground. Throughout most of the 80s and 90s they ranged between six and seven times incomes.

Just to get down to seven times incomes, prices would have to fall 37% tomorrow."

Here's a nice video of treasury secretary Paulson saying the worst is not over, it's just beggining. As Robin would say "Zoinkers".

Lyon takes a big bite out of prices in Bridle Creek

Me and the wife took a drive over to Bridle Creek today to see a REO property. It was a bust, the house was in bad shape and they wanted way too much for it. On the way out I stopped in at the sales office and picked up the latest sales sheet. Everyone in that tract that is trying to sell a home is now hosed. Lyon has dropped the prices $230k+ for the new phase. Homes that were starting at $725k now start at $499k. That's gotta sting for those desperate sellers and it even undercuts all of the bank owned homes. The REO property we looked at was priced at $700k and now they are $648k new from the builder. Hmmm let's see, $648k for a new one where I pick my own options or $700k for a half thrashed one painted green in most of the rooms and pale pink in one of the small bedrooms. The 2 year old's artwork on the walls is no additional charge!

I have two price sheets from Bridle Creek. The old one is from July of 2007 and I picked up the current one today. So these prices are 7 months apart.

Plan 1 Appaloosa, 2899 sq/ft.... was $744k.... Now $499k

Plan 2 Chestnut, 3266 sq/ft.... was (none avail) Now $525K

Plan 3 Lippizan, 3512 sq/ft,...was (none avail) Now $547k

Plan 4 Palomiono 3385 sq/ft, was $863k....Now $585k

Plan 5 Pinto, 3701 sq/ft, was $891k....Now (none avail)

Plan 6 Shetland, 4023 sq/ft, was $899k, Now $579k

Plan 7 Dapple, 3512 sq/ft, was $783, Now (none avail)

Plan 8 Andalusian 4364 sq/ft, was $952k, Now $648k

Plan 9 Breton 4830 sq/ft, was $950k, Now $599k

As you can see some of these homes are down over $300k from last July. It looks like they dropped the price by approx 30% from July. I don't have any price sheets from later in the year to compare. I did pick one up in Nov and the prices were still quite high but I think they were lower than the July price sheet I have. I guess it does not matter though. What matters is the huge price drop. This will put pressure on the other builders in the area to compete. It will make the agents and banks cringe when they see it. Every resale home in the tract is now overpriced by a bunch.

This little afternoon trip made my weekend!

A couple of signs of things to come

Here's a small taste of what is we are likely to see a lot of in the future. Up until very recently the banks have been slow to price their properties aggressively. Here's a couple that buck that trend and hopefully we will see many more of these soon.

14317 Ashton Lane in Riverside. This 3090 sq/ft 4 bedroom home is in one of Riversides best areas. This is snob hill, this is where you want to live if you have to live in Riverside. These homes were built in 1999 and this one sold new for $410k in 99. As you can see, this was a pricey home, $410k was a lot on money in 99. It sold last in 2005 for $775k (there is a $400 sale listed too, I dunno what that is though). They lost it to the bank a few days ago for $677k. Even though the bank was owed $677k they have listed the home for $450K making the loss $325k from the 2005 selling price. That is only slightly more than this home sold for new in 1999! At $450k this home should sell. would not at all be surprised to see it go for above asking. This listing is going to make the next door neighbor faint. He has had his home listed for 215 days. He started off asking $899k and is down to $639k. Both houses are identical although the more expensive one is landscaped better. The REO is listed for exactly 1/2 of the original asking price of the neighbor. I have been watching the neighbors house, I actually like that house. Hopefully I will get over to look at the repo this weekend. At that price I might be tempted if this house is decent inside.



18828 Malkoha St is in the development called "The Boulders". It's near Woodcrest, but it's actually in the city of Perris. These are big homes on big lots that at one time had big price tags. I've posted about this development before since some of the price declines are epic. This one is no different. Well it is actually a little different, it's MORE epic. The home is 3725 sq/ft home and it sits on a one acre lot. The home sold new in early 2006 for $787k. It just posted as a bank owned property for $371k! That is a loss of $416K or 53% in 2 years.

The preserves are starting to rot

The preserve in Chino is an attempt to turn former dairy farms into a master planned community.

The Preserve at Chino will become a master planned community encompassing over 1,000 acres as the plan unfolds throughout the next decade. Guided by thoughtful design ideas and proven planning strategies, the community will mature graciously, with tree-lined streets and parks close to home, walkable neighborhoods, and outstanding public and private amenities.

So far only a few tracts have been built. Most of the roads into the area are small or under construction. There are only a couple of main streets out of the area, and when built out the traffic could very well become a nightmare. On the few occasions I've been over there it's already bad. Most of that though is due to the road construction.

The few tracts that have been built were on the spendy side, $700k and up when I last checked. That was probably almost a year ago. The REO's and shorts are already hitting the market and they should begin to drag those prices down.
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The current leader per sq/ft (that I could find) is this property at 7906 Garden Park St.
This home is a monster, 4146 sq/ft with 5 bedrooms and 4.5 baths. The lot is a little small at just under 7000 sq/ft. It was purchased in Feb 06 for $741k. It's currently listed for $525k or $127 sq/ft. That's a loss of $216k, plus fees, plus 2 years of holding costs. OUCH!



Just down the block is 8093 Garden Park. This is a smaller home "only" 2569 sq/ft with 3 bedrooms and 2.5 baths (what did they do with the rest of the space?). You sure as heck don't need 2600 sq/ft for 3 beds and 2 baths. This home was purchased new in June 05 for $530k, now it's listed for $449k. The loss is not that impressive but at the peak (late 06) this home would have gone for nearly $700k. The actual loss is only $80k plus fees and 2.5 years of holding costs



7922 Spring Hill St is another big home. 3790 sq/ft with 6 bedrooms and 4 baths. From the pics this house looks like it's 12 feet wide. The lot is TINY at just 5000 sq/ft. Your neighbor can wipe your butt after you take a dump they are so close. This sardine can was purchased in Jan 06 for $769k. Think about that, over 3/4 of a million for a tract home on a postage stamp built on a former dairy farm in a hot, smoggy, hard to get to valley. WTF?? Now this thing has gone back to the bank and they have it listed for $543.5k. That is a loss of $225.5k in 2 years (plus fees and holding costs).

But it's a dry heat

Here's a tale I'm sure many will be familiar with. Back in 2005 an acquaintance of mine from the golf course started to talk about the home he was buying in La Quinta. He figured that this would be his big score and finance his early retirement. Of course I mentioned that I thought it was a bad time to be investing in real estate. His reply was laugh it off while insisting that I would be sorry.

When he closed the sale (July) of his financial future he was as excited as a kid on xmas morning. He had his home and it had already gone up $40k since he put his deposit down in April. He paid $450k for a 6 bedroom, 2600 sq/ft home in La Quinta (so he said). Of course he financed nearly 100% (he said he put down $2500) and his payments were only $1800/mo. (His plan was to rent this to snowbird in the winter to pay for it).

I spoke with him again late last summer. Of course I had to ask "how is the house in La Quinta going?" He looked at me like a little kid that just pee'd his pants. Not so well, he admits. The rental thing did not work out (duh). He admits his house is not in La Quinta but in a development close to there in Coac-hell-a called La Colonia. He is tired of making the payments and the value has fallen. He figured he could sell it for $400k and only lose $50k. I said, "wow, bummer dude". I was thinking, man you are a complete tool. Haven't spoken to him but his name came up today and I thought I would check in on La Colonia.

I will assume this is a model match to his (hell it might be his, but the dates don't match).

83386 San Asis DR Coachella, CA 92236,

This is a 6 bedroom home in La Colonia. It's 2653 sq/ft. It was built in 2004, the last sale is listed as June 2005 for $450k. It went back to the bank in Nov 07 for $361k. The bank is currently asking $269k. A loss of $180k in 2 years



Here's another one in the same tract, 50161 San Solano,

This is the same plan as above and sold last in April 06 for $465k. This home went on the market only a few months after it was purchased for $499k. A year later the price is down to $279k. Roughly the same loss as the home above.

So, how did that "investment" work out? Eh not so well as we have seen. One word of advice. If you ever do "invest" in a tourist area. Try to keep your property IN the tourist area. Coachella is NOT La Quinta. That was his second mistake. The first being buying in 05.

The IE is rated Category-5

There’s a hurricane heading for the IE and Countrywide Financial has rated it a Cat-5! Countrywide has rated it’s market areas from Cat-1 to Cat-5 and the full report is posted here. Of course, Riverside/San Berdu is rated a Category 5. What does this mean? It means they expect the market in this area to be the most “challenging” as far as housing goes. Their lending standards ( I know, what standards…) are different for each area. The worse the rating the more difficult financing will be to acquire. Being a Cat-5 area they are requiring a lower loan to value percentage. 90% is the max they will go, so you either need 10% down or a high appraisal. I’ve also read in some realtor blogs that they also bumping up the paperwork, income and FICO requirements on these Cat-5 loans. Bottom line, it just got even harder to get a loan.


http://blownmortgage.com/wp-content/uploads/2008/02/softmarkets.pdf

Soft Market Category 4-5 loans

Maximum financing will be reduced by 5%Example: Maximum financing per Countrywide's Loan Program Guide allows for 95% LTV. Loans in Category 4-5 will be limited to a new max LTV of 90%.

Soft Market Category 1-3 loans
Maximum financing will be reduced by 5%, only if the appraisal or appraisal review indicates any of the following:
* Declining Market
* Oversupply
* Marketing time over 6 months

Median continues to plummet

Riverside median price continues it's uncontrolled plummet. In the last 12 months the median price has fallen 19.1%, from $419k in 02/07 to $339k today. Inventory is up 24% to nearly 50,000 homes (keep in mind this does not include most new homes). Most of the price declines have been in the last 6 months. The speed of the decline seems to be accelerating hitting 3% in the last month alone.

To illustrate the increase in speed of the price declines look at the last year.
12 month 19.1%
6 month 14.2%
3 month 8.4%
1 month 2.9%

If the declines continued to accelerate at the current pace or even just leveled off at the current pace we would be looking at a 35% drop in the median and that would take it down to $220k. With all the data out there pointing to increased foreclosures, increased inventory and tighter lending standards does anyone think this year will not be worse than last year. Last year the drop was 20% which makes the projected 35% well within the realm of possibility.

listing hanky panky

here's two listings for the same house,

17651 Timberview DR Riverside, CA 92504

MLS#p594460. On the market for 157 days. The price history goes like this

Aug 15, 2007	$749,900
Sep 05, 2007	$699,000
Dec 19, 2007	$625,000

Now a new listing shows up, for the same house. Days on market reset to zero and the price goes back up. This is a new agent too, the old one was with TNG and the new one is Exit Realty West (what kind of name is Exit Realty?). A new listing and the price goes up to $670k. What, she thinks if the old guy had no luck at $625 she can do better at $45k more? The house is still priced nearly $200k more than a couple near by REO's, and those are not flying off the shelf.

More join the sub 80 club

poking around this afternoon I noticed a few more homes had joined the sub-80 club. I found a few last month but those were a short sale and a total wreck. Today I found a couple of bank owned under $80 sq/ft.

It was not all that long ago that the $100 sq/ft barrier fell. I did a post on October 10th 2007 where I listed a few homes that had finally gone under $100 sq/ft. Most of those were in San Jacinto, Murrietta, Lake Elsinore etc.

Here we are, less than 4 months later and there are homes selling for under $80 sq/ft. That's a 20% drop in only 4 months for the price leaders.

On to our price leader.

615 Drake DR San Jacinto, CA 92582, This is a 4 bed/4bath house. It's 2850 sq/ft and sits on an average lot of 7400 sq/ft. This home was built in 2005 and sold new for $425k. It has been listed as a bank sale for 155 days now. they started out looking to get thier money back but that did not work out so well for them. 4 price reductions later they are now asking $215k. That's $75 sq/ft and make this house 50% down from it's original selling price.

4440 THORNBUSH Hemet, CA 92545, This is a 5 bed/3 bath home. It's 3127 sq/ft and sits on a 6097 sq/ft lot. This one was built in 2002 and sold new for $212k. It sold last in Sept 06 for $420k. Before going back to the bank in Oct 07. Again they originally listed this a little too high and after 2 reductions they are currently asking $248k, that works out to $79 sq/ft

I have no idea what homes rent for in SJ/Hemet but these tow have got to be close to penciling-out as rentals.

I did find several others but they looked like short sales so I'm going to leave those out for now. There are now a multitude of homes under $100 sq/ft and many of those are under $90 sq/ft. Still, most of these are in the out lying areas but like ripples in a pond they will work there way towards the more central areas. I'm still shocked by the speed of the price declines. I was sure the prices would come down but I was expecting it to happen over several years. Personally I think a quick deep correction is going to be far better for the economy that a long slow one. So, I'm happy to see the speed that this is moving at. Even though my house is probably worth 1/2 what it was last year.....

52% off last sale in Corona

3255 Huntfield ST Corona, CA 92882,

This home is a large one, McMansion-ish if you will. The house is a 5 bed, 4 bath that is 4249 sq/ft in size. Before being lost to the bank this home sold in July 2006 for 1.25 million dollars. The bank got the house back only 14 months later for $720k. It's currently listed for $599k. They have been dropping the price $50k per month since listing in Oct. The loss if it sells at this price will be $651K or just over 52%

How realistic was the $1.25 million selling price in mid 2006? Well, this one is very obviously a huge steaming pile of mortgage fraud. There are at least two model match properties in the same tract that also sold in 2006. One in early 06 sold for $830k and one a couple of months after our fraudster sold for $800K. All 3 of these homes are currently for sale for the same price. All three of them are beautiful homes inside. I can't see anything that sets any one of them apart. Possibly the $830k home stands out just a little bit as it has a nice back yard and a landscaped courtyard. Our fraudsters yard is au-naturale. Yes, for 1.25 million he got a dirt back yard! Judging by the other two this home sold for roughly 50% more than it should have in 2006. Of course after this sale posted I'm sure everyone in the area thought there home was worth a million plus.

3226 STONEBERRY LN ,

This one sold for $800k in 8/2006

3262 Elysia ST

This one sold for $832K oin 1/2006. This home looks to have more upgrades than the other two and probably should have sold for more back then.

Prices back to 2000 levels?

When the main stream media starts reporting that prices will fall 25% on average, back to 2000 levels, you know we are in for a seriously big ding here in bubble central, the IE.


This is good article in Newsweek

Here's a snippet

Home prices could sink an additional 25% over the next two or three years, returning values to their 2000 levels in inflation-adjusted terms. That's even with the Federal Reserve's half-percentage-point rate cut on Jan. 30

While a 25% decline is unprecedented in modern times, some economists are beginning to talk about it. "We now see potential for another 25% to 30% downside over the next two years," says David A. Rosenberg, North American economist for Merrill Lynch (MER), who until recently had expected a much smaller slide.

Shocking though it might seem, a decline of 25% from here would merely reverse the market's spectacular appreciation during the boom. It would put the national price level right back on its long-term growth trend line, a surprisingly modest 0.4% a year after inflation. There's a recent model for this kind of return to normalcy after the bursting of a financial bubble. The stock market decline that began in 2000 erased most of the gains of the boom of the second half of the 1990s, leaving investors with ordinary-sized returns.