Saturday, January 3, 2009

The high end is DEAD

Yes, the high end is getting crushed, and here's why.

I started looking today at how many homes over $500k were selling. Answer, not many and if you go over $600k it's almost ZERO in the IE. I checked Riverside using Redfin. I know Redfin is not the best. It shows foreclosures as sales making it a little difficult to determine legit sales vs properties going back to the lender. But it's easy to use and the numbers while not perfect are good enough for this excersise.

Riverside, I found 57 over $500k. Lets figure (conservatively) that 10% are foreclosures ( my gut feeling is that closer to 30% of those sales are ones back to the lenders). That leaves 51 sales over the last 3 months that were over $500k. So that's 17 per month! If you change the number to sales over $600k it drops to 13. But looking at those 13, I'de say a good 50% of those are foreclosure postings.

There are well over 200 listings in Riverside over $500k. So, if we are selling 17 per month, that's about a year's worth of inventory

Corona (not including Eastvale) shows 59 sales over $500k in the last 3 months. Again lets say 10% are lenders so it leaves us about the same as Riverside. Just over 17 homes per month. If you jump up to $600k there are 14 sales that show up. Again it does look like a high percentage of those are lenders getting the properties back.


Rob Dawg said...

Channeling Yoda:

There is no high end, only sales.

golfer_X said...

Yes there is, it's right above the rear end.....

Oldtimer said...

Not only is the IE high-end market over-crowded, but it is over-crowded with motivated sellers (banks et al) that are looking for current clearing prices. By law, regulation or contract, most of these sellers have a limited time to move their REOs.

The last time we saw a market with this condition (commercial RE in the early 1990s), it trended toward a generous version of rental parity. A common rule of thumb for home rental parity is value = 120 times monthly rent. When future rents are falling and uncertain, that clearing price might fall to 90-100 times monthly rent.

120 x $3,000 = $360K
120 x $4,000 = $480K
120 x $5,000 = $600K

How many homes in the IE would rent out for $4,000 or more? Excluding resort locations (Arrowhead, Palm Springs area, parts of Temecula, etc.), I'd guess not too many.