What happens when a whole tract of homes is under water by $400 or $500k per home? There are quite a few of these in the IE. These tracts were built right at the peak in late 2006 thru 2007. You have to figure that nearly every home will default. I'm sure there are a few homes that were purchased out right and there might even be a few buyers with high moral standards and high enough incomes that they stick it out and keep paying. But most buyers will probably just throw in the towel.
One such tract is "The Highlands". It's a small tract right at the western edge of Riverside. It's located in a funky area at the north end of Buchanon St. The homes are all large 2 story and came equipped with high end fixtures and appliances. The kitchens are outfitted with Viking appliances and granite counters. The homes were nice but you were paying for it. These babies started around $700k and went up close to $900k (without lot premiums or upgrades). Now the market corrects and these things are worth $400k. How many will be going back to the lenders?
Here's the first of the failures. 4273 Carnegie Ct. This is the plan 3, the largest of the homes in the Highlands. It sold new in August 2007 for $850k. It's now listed for $429k which must be a short sale as there is a NOD filed against the property. That's just about a 50% decline in slightly over a year. $429k is not a bad price in today's market for this house. These homes really were outfitted nicely. An additional bonus is there is no Mello Roos in this tract and the tax rate was only 1.09% when I looked at them.
The builder is actually still trying to get rid of the last few built homes. I don't beleive the tract is fully built out though. But there are signs saying builder closeout so they might have just given up for now.
2 comments:
I could be naive, but in the old days that would have been considered a move-up neighborhood. If so, you probably have a good % of people that cashed out bubble equity on other homes, and are sitting with manageable amounts of mortgage debt.
People that took out 100% financing for their first home purchase in an $800K neighborhood are facing a pretty tough reality.
I had checked this tract out about a year ago. They were already discounting and we were offered a home for around $630K. Like you say, they are nice. I inquired about the lack of mello-roos and found out that the builder prepaid them and they were rolled into the sales price. I wonder what happens when a CFD is created and bonds are sold, and a builder such as this plans to sell a bunch of homes... but he runs out of money to finish the tract, then what? Who pays back those bonds, if the lots were never built or sold? Hmmmm...
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