Delusional builders

With the shortage of homes and the competition to buy the good ones a few builders are throwing up sticks again. The prices they are asking leave me scratching my head wondering how they will sell any. But remarkably enough people seem to be buying them. How they are getting loans is beyond me.

Pacific Homes has started building again in Moreno Valley. They had folded this tract up for a couple of years but I noticed they were building again when I was over playing golf at The Ranch GC. They were asking nearly $700k for these at the peak. Now they are asking just over $400k. But that is still nearly $100 s/f (in MoVal?). The average price in this area is closer to $80 s/f. So purchasing one of these new homes puts you about 20% underwater the minute you take the keys. It's like buying a new car.

26891 Cimarron Canyon is a new home and it's mini McMansion in this tract. Not done just yet but the builder has it listed for $409k or $97 s/f



Or you can buy 26991 Cimarron Canyon. This home was built in 2007 and sold for $571k, which was a good deal at the time because they were asking a lot more for these just a few months prior to that. But this one has already gone back to the bank and is offered as an REO for $312k or $75 s/f. The house looks nice, it's not thrashed it's just priced in line with most of the other stuff in MoVal.



So how do builders figure they can get 20% more for the same house? How to people get loans on these things? There's no way a legitimate appraisal will come in at those new home prices. And what the hell are they doing building more 4000 s/f homes?

A trip to MoVal

Moreno Valley is one of the few cities where you can currently buy and be reasonably certain your house won't be worth $100k less next year. MoVal gets a bad rap some of it is deserved and some is just hype. The crime rate in the city is about average for a city of it's size. It's no Beverly Hills but it's also no Compton. It has a few ghetto areas like Edgemont and it has several very nice areas like Moreno Valley Ranch, Rancho Bellago and Sunnymead Ranch. Home prices in MoVal shot up about 300% between 2002 and 2007. By early 2007 many of the newer tracts were selling homes between $500k and $700k (before upgrades). That's absolutely insane for a working class town like MoVal.

In the last 6 months of 2007 the market in MoVal seized up. Nothing was selling. At one point in late 2007 there was a 4 year supply at the rate homes were selling. By spring the prices were falling faster than IndyMac's stock price. Homes now, at least the ones that are selling are going for 50% to 60% off peak prices. They are all the way back to 2001/2002 prices. And guess what, they are selling!Last month they go rid of 322. That's not epic by any means but it sure beats the 50 a month they were selling last fall.

I don't want this to be a "yea, but who wants to live in MoVal thread". Let's just take a look at what you can get in MoVal.



First up is 13531 Somergate. This is one of the Model Homes for the tract. I visited these homes, my grandfather lives very close to them and they were great floorplans on large 1/4 acre lots. But back then they wanted about $500k for them and I just laughed. This home is 3570 sq/ft and has 6 bedrooms and 3.5 baths. It was purchased for $735k back in 2006. That was long before the models closed. They only closed the models about 6 months ago. It's now an REO and it's listed for $315K or $88 s/f. Thats a loss of 58%! This is a beautiful home and if you work in the IE this is probably a solid buy.



Around the corner in anothr new tract is 13388 Triple Crown. This is an equestrian tract so the lots are huge and the area is zoned for horses. The tract was build by Richmond America. I never like these floorplans or any other Richmond floorplans for that matter. I think they just finished the tract and they still might have one or two new homes left. These were also in the High $400s to Low $600s (without upgrades). And trust me these needed upgrades the stock builder grade stuff they came with was junk. This home is 3574 sq/ft and has 5 bedrooms and 3.5 baths. This home was purchased new in Jan 2007 for $510k. At that price I doubt there were many upgrades. It's now bank owned and also listed for $320k. Not as good a deal as the last home but for $320k it's a nice big home on a nice big lot and probably a decent buy at $92 s/f.



If those 2 are still too rich for your blood then how about 16513 Colt Way. This one is down the south end in Moreno Valley Ranch. It's very close to the MoVal RCC Campus. This home is 2605 sq/ft and has 5 bedrooms and 3 bathrooms. It says it has granite counters and from the one pic it looks very nice. The home was purchased new in 2003 for $292k. It sold again in 2006 for $495K. Now it's owned by the bank and the listing price is $205K or $76 s/f. If it sells at that price the loss will be 59%! I think this will go for more than that but I doubt it will fetch over $240k. Even at that price this is probably a reasonable buy and should make a nice starter home for a young family.

These were 3 of the REO's that hit the market today. The city is full of them! It's no surprise that the sales for Riverside County were up last month. With prices hitting 50% to 60% off in MoVal, Perris, Hemet, San Jacinto, Wildomar, Meniffee, Murrieta, and surrounding areas it's easy to see why sales are up. Don't fret, soon enough 50% to 60% off will be coming to a city near you!

1989 pricing in MoVal

We (buyers) get excited thinking about pricing returning to sane levels. Most of us feel sane levels are prices from around 2000 give or take a year or two. So how about a return to 1989 prices? Insane you say. Well let me submit 16505 Vista Conejo Dr. MoVal, it's a nice looking little 5 bedroom home down in Moreno Valley ranch. This home sold in 1989 for $206k. It's currently listed for $180K! $26K less than it sold for 19 years ago.

I realize that 1989 was during the last real estate bubble and that this house fell 35% in value through 1995 when it sold for $135K. But it's still fun to say "prices back to 1989 levels!" By the way, this house looks like a good deal at this price (Assuming this listing is legit)

The market is BROKEN!

Here's a few examples of a market that has broken down. First a couple of nice homes at reasonable prices. Yes, still high but almost in line with what it would cost to rent something of similar size. Then we have the rest of the market, asking ridiculous, pie in the sky prices as seen by our last two homes. Unfortunately the last two homes are the norm and the first tow are the exceptions (today anyway).

$379k!

13574 MEADOWLANDS CT, Moreno Valley, CA 92555, is a 5 bed 4 bath, 3294 sq/ft mini mansion in Moreno Valley. This is out on the east side of town where the big lots and horse properties are located. This home was built new in 2005. It sold in Dec of 05 for $464k and was quickly flipped in August of 06 for $580k, netting our initial buyer a healthy $116k less fees in 8 months. This home is a bubble poster child. Here we are just 1 year, 2 months later and this home has lost 35% of it's value IF it sells at the $379k asking price. He has competition too at 13535 WILMOT ST, is the same style home one block over, Listed as a short sale at $374k. This poor fliptard paid $565k in July of 06. He's looking at a loss of $191k plus 6% ($22k) in fees. Wow, it's not everyday you get a chance to piss away over $200k in a year. These homes are actually very nice and on big 1/4 acre lots. If you don't mind living in MoVal these are about as cheap as renting something this size. God know what your electric bills in the summer will be though. These two homes are priced to move and I actually think these have a chance of selling, although the first ones been for sale for over 2 months check out this next home though.

Now here's where most sellers are currently living, it's called dreamland USA. Our first seller is only a block away from the two mini mansions at 13680 STODDARD ST. This " CHARMING HOME IN GREAT LOCATION" is a 3 bed, 2 bath, 1305 sq/ft 1985 POS. It's got a slightly larger lot but then again it's just dirt. This beauty has been listed for 102 days so far with no takers at $399k. I wonder why? Another block down we have dreamer #2 at 29046 GIFFORD AVE, this is another 3/2 but slightly bigger at 1700 sq/ft. This home was built in 1975. I didn't think there was anything out there in 75. This dreamer thinks his "classic" is worth a whopping $469k! How can a realtor even take that listing??

$399k??

$469k??

Which home would you buy?

I'm sure most of us would pass on both, but assuming you just had to buy a house which would you choose? These homes are about a block apart on the hill beside RCC MoVal Campus. This is in the best area of MoVal. Most of the homes, schools, roads and stores are new.



Home 1, 26240 CLYDESDALE LN is a 5/3, 2803 sq/ft home in Moreno Valley Ranch or soon to be known as the city of Rancho Bellago. The original owners paid $291k for this castle in 2003. They added a $1500 chandelier and a security system and seem to think this justifies the asking price of $580k. You would think after 220 days they might lower the price.

Nice pic, Mr. Realtor!

Home 2, 16437 HACKNEY CT is a 4/3, 3238 sq ft with a pool and spa. The bank took this one back and has it listed for $399,900. So you get a bigger home with a pool for $180K less. Ther is another listing for another home of this model a few doors down also for $399k. So you get two to pick from, both $180k less than home 1.

I know $180K may not seem like much these days. After all, we have gotten brain washed into thinking $6ook is a cheap home. But think about what you could do with that $180K difference.
These crazy priced homes are just too easy to find these days. They have no chance of selling and I have a hard time understanding why realtors waste their time and clog up the MLS with these overpriced homes. They must know there is no chance they will sell. Even the lower priced homes I am showing here have little chance of selling in today's market.

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.