Monday, October 29, 2007

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).


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??


Saturday, October 27, 2007

Something wicked this way comes

And by wicked I mean real estate losses. I work in Anaheim and many of the people I work with are under the impression that this crash is limited only to the IE and other "undesirable" areas. Of course, the sad truth is that this will eventually creep into the so called "different" areas like the OC. Anaheim hills has one of the highest median incomes of any city in Southern California. So how's the market there? You would think with so many rich folks homes would be selling at top dollar and flying off the shelf. Let's take a look at a few of these, shall we.

8780 FOXHOLLOW DR, Anaheim Hills, CA 92808, this is a nice looking 4 bed, 3 bath 2400 sq/ft home. It was purchased in August 2005 for $840k. Today just over 2 years later you can pick this home up for $699K. A loss of $141K plus 6% fees and holding costs. 135 days on market and no buyers....maybe the price is still too high!

Not too far away we have 1220 South Wildview TER, This is a 5 bed, 3 bath, 2000 sq/ft detached condo. It was purchased in April for $750. Today you can buy it for $650. $100k loss in 6 months! This price is close to what is sold for in March 2005. Boy is this an ugly home!

Technically this next home is in Orange but it's up on the hill in the same area. 7123 East Crown PKWY, This is a 4 bed, 3 bath, 2358 sq/ft home. This one looks like it was purchased new in Aug 2005 for $855k. Today you can have it for $770, a loss of $85k in two years. Hey isn't real estate only supposed to go up? This home has been for sale for 122 days and still no takers.

I saved the best for last. Moving over to Yorba Linda we have 5142 Fairway View DR, this is a 3 bed, 2 bath, 2000 sq/ft home on the 14th fairway of Yorba Linda country club. This home was flipped in 2005. It was purchased in May 05 for $875k and sold in August 05 for $990k. Unfortunately our current seller did not do as well as the last one. This poor fella is looking at a loss of $225K plus fees if he gets his $765k asking price. This home is listed $225k LESS than is sold for 2 years ago! If you think this is the only one you are sadly mistaken. Most of the homes I found that were sold in 2005 are now listed for FAR less. 640 South Andover DR is another example lised $120k less than it's 2005 selling price.

It looks like the OC isn't so different after all.....

Friday, October 26, 2007

Foreclosure numbers go through the roof

Foreclosure numbers are multiplying like cockroaches. Last quarter 3462 homes were lost to the bank in Riverside county. That’s up an astounding 624% from 3rd quarter last year. The total number for California hit a new record at 24,209. The old record was set in the last downturn when 15,418 homes were lost in the 3rd quarter on 1996. That beats the old record by nearly 60%. If this were a sports event they’d call that a rout!

Notices of default were sent to a shocking 69,000 people. A NOD is the nastygram the bank sends you when you stop paying the mortgage. It usually takes between 3 and 6 months of non-payment before you get the NOD. In the past 80% of people would fix things either by selling the home, refinancing or making the payments current somehow. That’s not the case today however. Now only about 45% of the people are able to take care of the NOD. The rest of them end up in foreclosure. If you do some math that means next quarters foreclosure number should be some where near 38,000 (55% of the 69,000 will lose their homes).

Here are the 3rd quarter numbers by county
County... ...... 2006.......... 2007.......... % change
LA .............535..............3627..............578%
Orange... .....179..............1280..............615%
San Berdu.....232..............2255..............872%
San Diego.....453..............2157..............376%

Thursday, October 25, 2007

Chino Hills Dreamin'

Pricing madness and magic fruit punch are both flowing in Chino Hills. Sellers still seem to think they can add $100k per year to purchase prices even if they only bought in 2005.

4991 GLENVIEW ST, Chino Hills, CA 91709, this is a 5 bed/5 bath home of 3616 sq/ft in Sycamore Heights. It was built in 2004. I believe these sold new in the high 700s to low 800s. I can't find what this home sold last for but our seller thinks it's worth $1.15 million (reduced from 1.19 million). So he's looking to make $300-$400k for sitting in a house for 2 years. He has added a pool and some landscaping but does that add $300k+ to the value, I think not. besides the pool looks like it takes up the whole tiny back yard. The realtor does not seem to think interior shots are important. Only 4 pics and all are the outside.

So does he have a hope of selling? Well no especially since 2 of his nieghbors are priced way below him.

is the same model, but without the pool. The realtor also does not think the interior is important as he also only has 4 pics of the outside. This home is listed at $825k, making it a whopping $325k less than home #1! From the tax it looks like this person is the original owner and paid around $750. If he manages to find a buyer at his price he will escape (after fees) without losing anything other than his carrying costs.

4999 GLENVIEW ST, is a slightly smaller home, 5 bed/3bath at 3424 sq/ft. This one is also undercutting our 1st dreamer by a mile. This home looks nice and the realtor at least took a few pics. The home is empty but it does not look like an REO (yet). At $785k this home is $365k less than #1.

More magic Math

The report for new homes came out today and whadda ya know. A 4.8% increase? Huh?

Once again lets look at the actual numbers

Last Sept (06) 80,000 new homes
This Sept (07) 60,000 new homes
Last month (aug) 63,000 new homes

So there was a 25% decrease from last year and a 5% decrease from last month.

The beautiful thing these days is that the data is so easy to find. It's just amazing to me that the media does not check the facts before printing headlines like "New Home Sales Rebound in September" as reported by the AP. I did expect better numbers for Sept since that's the month many of the builders had their deals of the century, Gold Star Events, and other promotions. I'm a little surprised that the actual numbers were down. Also keep in mind that these early estimates are usually revised once the actual numbers are known. Lately the revisions have been running about 5% downward. So expect the number to go down another 5%.

Wednesday, October 24, 2007

Magic Math at the NAR

More spin from Mr. Yun and the NAR.

The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record.

This is an amazing bit of mathematical magic that the NAR has performed to arrive at the 8% number. As you can see below the actual decline is either 23% or 29% depending on whether you are comparing sales to last month or last year

Sept 2007: 409,000 sales

Sept 2006: 529,000 sales, that would be a decline of 23% year to year.

Sept 2007: 409,000 sales

August 2007: 575,000 sales, that’s a decline of 29% month to month

Straining my little mind to it's fullest I still can’t see how they arrived at 8%??
If you remember from a few posts ago I listed the local numbers from Sept versus Aug
Riverside -22%
San Berdu -31%
San Diego -31%
Orange -28%
Los Angeles -35%

Tuesday, October 23, 2007

Lake Hills Kaboom

Lake hills Reserve is a development just south of the 91 Fwy on the hill overlooking Corona and Lake Mathews (depending on which side you're on). The homes are spendy and the last time I was up there the cheapest homes started in the Mid 500's. Most of the tracts are still trying to get $700's on up. But already the foreclosures and upside down flippers are cutting away at the prices.

Here's 16407 RIDGE FIELD DR, Riverside, CA 92503 This is a 4 bed, 3 bath, 2956 sq/ft home on a .3 acre lot (most of it useless slope). It looks like this home was purchased new last year for $659k. It's hard to tell but it looks like it was never lived in (flip gone wrong?). After 1 year and 4 months you can now pick this up for $475k. A loss of $184k or 28% in 16 months.
Some of the builders up there are starting to sweat a bit. Here's a home that did not sell for what ever reason. More than likely the buyer bailed or could not get financing. This home is huge and sits right on the hill. It should have a spectacular view from the back. It's a 5 bed/4 bath, 4094 sq/ft monster. The builder is trying to get $539k for this behemoth, or $132 sq/ft. That's quite a trend setter since most of the homes up on the hill are still trying to get between $175 and $200 sq/ft.

Sunday, October 21, 2007

Riverside "Real Homes of Genius"

Dr. Housing Bubble
does a "real homes of genius" for the LA area, so I thought I would post one from Riverside.

For your pleasure, here we have our diamond in the rough. Oh wait, that's not a diamond it's a turd.

5660 34th ST, Riverside, CA 92509 This gem (turd) is in the ghetto over in Rubidoux, yet our intrepid home owner thinks his castle is worth a whopping $410,000 or $438 a sq/ft!. This charming 936 sq/ft 2 bed 1 bath cottage was built in 1926. I'm sure it's been remodeled at least once since then. This luxury castle sold at a bargain price of $8,292 in 1992, or about 1/2 what I paid for my 92 Isuzu Rodeo that year. If only I would have bought this instead I could have been looking at a nice profit of over $230k with it's 2005 sales price of $250K. Our most recent owner thinks his turdburger has gone up $160K since his purchase 2 years ago. It must be that fresh coat of blue paint or maybe it's just the fumes or possibly he's gone mad looking at those red living room walls. Whatever did it our owner has definitely lost his marbles if he thinks this shack is worth even 1/2 his asking price. For pete's sake the roof is falling off, the lot is dirt, the home is 90 years old and looks it!

Even the realtor must be dumbfounded, not one word describing this shack, just a few pics.

We salute you, Real home of Genius!

Saturday, October 20, 2007

More Eastvale Madness....

Madness, madness, they call it madness....

5642 ANNANDALE PL, Corona, CA 92880, This is 5 bedroom, 4 bath, 3452 sq/ft home. Near as I can tell these were built in 2001 and sold for around $280K. This home appears to be a rather basic model. I can't see any real upgrades from the pics. We have your basic white tile counters, cultured marble vanities etc. He has painted a few rooms and the landscaping is very nice but over all this home is nothing special. But listen to what the realtard has to say "No Expense Was Spared On This Lavishly Decorated Home!" well if "no expense" is a gallon of paint, I agree, otherwise shut the hell up, how is a white tile counter expensive. If your looking for a 5 year old builder basic home for $709k, look no farther, Mr Dreambig has the place for you.

However, if you would like a few upgrades then you may want to look just down the street at
5712 ANNANDALE PL. This home is the same model but this one looks to have a few upgrades. The counters look like Corian and it has fancy tile backsplashes, new carpet and new paint. This home however, is owned by Mr. Bank and he's willing to deal. Mr. Bank gave a loan to Mr Houseflopper for his $605k purchase in Jan of 05. How ever Mr. Houseflopper was unable to pay Mr. Bank and he took the house back in August of 2006 for the balance of $530K. Mr. bank has been trying to unload this "load" ever since. Mr. bank has finally started reducing the price and currently he is asking $479K. So Mr. Bank's is priced $230k less than Mr. Dreambigs place. I wonder which will sell first. Actually I wonder it any of them will sell.....

Another bank takes it in the ***

Moving North we check in with Mira Loma.

6251 Ruby Crest WAY, Mira Loma, CA 91752, Here we have your typical McMansion. This is a 4 bed 2.5 bath home and it is 4693 sq/ft (with only 4 beds and 2.5 baths where the hell did the other 2000 sq ft go?) This home is Fwy close, in fact you probably have a nice view of it from the Master bedroom. Don't worry you get used to the I'm told. I will admit that those hardwood floors are beautiful! But they sure as hell don't match the kitchen cabinets and that granite looks like puke. Our home-loser bought this castle in July of 06 for a whopping $770k. (WHO the hell would ever pay $770k for anything in Mira Loma. So anyway, they can't even manage to keep this thing for a year. I'm guessing they never made a payment and it took the bank that long to get them out. The bank finally gets this landmine back it June of this year. The have had it on the market ever since. Currently it sits with and asking price of $589k, $123 a sq/ft. Think any one will bite?

So this home has lost $191k in a year and it's final total loss is anyones guess. It's in a terrible area (unless you like the smell of cow you know what), traffic is horrendous and the freeway is right behind it. Yup this ones a winner.

Those damn REO's

It's gotta chap your ass when your trying to sell a house and some bank repo undercuts you by $185k. People better get used to it because it's happening every where I look. Here's a fine example in South Corona (Trilogy)

8609 CAMINO LIMON RD, Corona, CA 92883 Is a 5 bed 4 bath, 3629 sq/ft home. It was purchase in 2004 for $691k. Our desperate homeowners have it listed for $675K. Already looking at a $15k loss plus another $40k in fees. They just dropped the price $20K to try and motivate one of the 2 remaining buyers in the IE.

It's probably not going to have much effect though. You see, just around the corner only 6 houses away sits 8699 HUNT CANYON RD, the same 3629 sq/ft model only this one sits on a lot almost 1000 sq/ft bigger than home #1. This home was purchased in Oct 2005 for $730. Unfortunately our homedebtors were unable to hold on to it and the bank bought it back for $646k in August. The bank does not seem interested in trying to recoup their $646k investment (finally a smart bank!) and they have listed the home for $498k. That's a loss of 33% in two years or $232K.
I don't see much difference in these two homes. Both look nice inside and seem to have similar features. Besides the dead lawn on the REO they look like they should sell for about the same amount.

Wednesday, October 17, 2007

When will the banks get serious?

Enough history lessons, back to our regularly scheduled program.....

With all the competition these days and the mushrooming numbers of foreclosures you would think that the banks would price aggressively. Not always the case, in fact in many cases the banks are trying to make a few bucks by listing the properties for more than was owed.

I found this Countrywide REO in the Dos Lagos area of Corona. I'm not sure why Dos Lagos is as spendy as it is. The golf course sucks and the homes are on the worse side of the 15 fwy. The west side of the fwy is much nicer and so are the golf courses.

3041 ANDANA ST, Corona, CA 92883 is a 4 bed/3 bath 3414 sq/ft home. This is our REO. Countrywide took this back for $689k in July. Now the have it listed for $850k. I'm guessing there is a 2nd on this place and they are trying to get a few bucks for them. btw, this has been on the market for 2 weeks and still no pictures. What, the realtor is too busy? P-leeeze!

Problem 1 for them is....

2937 VERDINO CIR, Corona, CA 92883 this is the same 3413 sq/ft home. This one also backs up to the golf course. It does not indicate that this is a REO or short sale but this home was purchased in May of this year for $1.2M and is now listed for $800K. That my friends is a 33% drop in FIVE MONTHS! After fees this house is going to lose $448K in 5 months, assuming it sells at this price. That's going to be a hard nut because of what's behind door number 3.

Behind door #3 we have the former 3414 sq/ft model home from this development.

4467 CABOT DR Corona, CA 92883 This is the highly upgraded model home. It also backs up to the golf course. This home was purchased in Dec of 2005 for $1.045M. Our desperate seller says all offers considered, must sell in the next 30 days (a foreclosure in his future possibly). He has this bad boy listed for $739k. If he gets his asking price (better chance of me winning the US Open) he stands to lose $306k or approx 30% but at least he did it over 2 years.

For the life of me I can't understand why this Dos Lagos development is priced this high. Just because it's behind a gate?? Driving through the gate, are you sent through a spacial rift into Laguna Niguel? WTF, the area used to be a gravel pit, it's still surrounded by quarries with trucks going up and down the main roads all day. it looks like this tract is seeing a 30% drop in prices in only 6 months. How long before 50% or that 65% than Leo Nordine has predicted?

A brief history of bubbles

History has given us many of bubbles to learn from. It seems however that being human we tend to forget the lessons of the past. Lets take brief tour of some of the more famous bubbles and see what we should have known would happen in this one.

One of the oldest and most famous bubbles was the 1634 Tulip bubble. Tulips became wildly popular in Holland after their introduction from Turkey in 1593. Soon everyone wanted to get in on the action of dealing in tulip bulbs. People were buying up bulbs in a feeding frenzy. This caused a shortage of bulbs which sent the prices even higher. Soon people were trading their life savings, their land and anything else they could liquidate for tulip bulbs. At one point the value of them went up 20 fold in a month.

Of course at some point a few of the more intelligent people see what’s coming and decide to cash out. Once that happened the stampede for the exits began and the value of the bulbs crashed taking the whole Dutch economy with it.

The next great speculative bubble was the South Seas bubble in the UK. The South Seas Company was established in the early 1700s and using an IOU purchased the rights to all the trade in the south seas. Back then companies only offered limited amounts of stock so the shares were hard to get and very lucrative. It did not take long for the company to discover that selling stock was more profitable than running the company. They sold more and more stock, feeding the appetite of the seemingly endless supply of investors. Soon the stock was selling for 1000 pounds a share (a lot of money in 1720!). Once again at some point the people in the know decided that there was no correlation between the stock price and the value of the asset. They sold, setting off the alarm bells and triggering a crash of gargantuan proportions.

The next great bubble was the 1926 Florida real estate bubble. Land in Florida was once cheap. The state was hard to get to and generally thought of as a swamp, infested with all manor of nasty creatures and diseases. Once rail and road was laid savvy businessmen began to market Florida as a vacation paradise and a cure all for all your medical problems. Soon enough land values began to rise and people began to move to Florida. this caused a further shortage of available land, causing the values to rise even farther. Soon investors got word of this and they started buying anything at nearly any price. Land prices skyrocketed up to 600% in a year in some areas. At some point the buying stopped. The prices got to high or there were no greater fools. Whatever the reason the buying stopped and the panic began. Prices started to fall and then fell off a cliff as panic selling ensued. When all the air finally escaped prices had returned to pre-bubble levels.

The next bubble is the great depression. I don’t think I need to go into any great detail here but there are remarkable similarities between this crash and current conditions. Most people think of it only as a stock market crash but it was far more than that. It took the real estate market down, it took banks down and it took the economy down. Like all great bubbles people were buying stock at any price regardless of its fundamental value. Value was based more on what people thought they could sell the stock for tomorrow. Once the selling started there was no stopping it. Millions of uneducated investors lost everything and we all know the rest.

The Japanese market crash is a good example of a slow motion train wreck. So far all the crashes we looked at happened fairly quickly (Although contrary to popular belief the 1929 market crash actually took 3 or 4 years to fully play out.). The Asian crisis started after a long period of economic gains. From 1960 to 1990 land prices in Japan increased something like 70 times and stocks 100 times. Soon trading was a national sport in Japan. People were buying anything and paying incredible prices for it. I remember well Japanese businessmen buying golf courses for incredible amounts of money. The Japanese government in an attempt to slow down this runaway train increased interest rates. Unfortunately, instead of slowing the train it caused it to jump the tracks and the Nikkei index dropped more than 30000 points. Real estate values plunged and continued to decline for 15 years. At the peak a square foot of prime Tokyo real estate was selling for up to $140,000! At one point the royal palace was valued at more than all of Florida. In 5 years real estate values were cut in half but they continued a gradual decline until only a few years ago when prices bottomed out at 20% of their bubble values. The government tried to halt this collapse by lowering interest rates (sound familiar?). However even with rates as low as one percent the decline continued.

The Japanese crash is an interesting example of how little governments can do when the inevitable happens. Once the investors/public realize that it was a bubble and things really aren’t worth that kind of money there is little the government or banks can do to bring back the glory days. Even with free money people were unwilling to pay inflated real estate prices. The attempts to halt the crash probably did little more than slow it down, causing it to last 15 years rather that they 5 it should have taken.

Let’s hope our leaders have learned a little something from the Japanese. Sometimes it’s better to take your medicine and allow the markets to quickly correct rather than trying to manipulate a free market.

The fed can lower the interest rates to zero and I still will not buy a grossly overpriced POS house!

Disclaimer, I am not an economist nor a historian although I did stay at a Holiday Inn Express last night. Any errors or omissions are 100% my fault and I apologize in advance.

Could prices fall 65% in the IE

Well Foreclosure expert Leo Nordine thinks so. Check out this post for the LA Times real estate blog. This is not the first time I've seen 65% either. Global Insight, a finacial think tank has also rated the IE as about 65% overvalued. Is it possible that we could see drops that big? I think in some limited areas we might but overall I doubt it. I think 50% is a more realistic number and I'm already finding some homes close to that already. So here's the post for the Times...

LA Land
Seeking widsom from the front lines of the foreclosure crisis, we paid a visit today to the Big Kahuna himself -- big wave surfer and foreclosure sales specialist Leo Nordine. His take on the market: it's bad. Really bad.

We began by asking his assessment of the current market in relation to the last big downturn. "Armageddon," he said. "This one's worse, especially in the Inland Empire."

What's different? In some cases, he said, "Banks and institutional lenders are just giving up. They're just renting out some houses (instead of trying to sell them). That didn't happen before."

Are foreclosed homes selling at all? "Any place where there were first-time buyers is dead. South LA is dead. Anywhere prices are under $400,000 is really, really hard to sell right now."

He predicts prices will fall 65% in some areas of the Inland Empire, and sees the market hitting bottom in 2009. "There's one buyer, maybe, for every 20 houses for sale in Riverside," he said.

"We're not gonna bottom out until 2009 -- because they were doing so many crappy loans in 2006 -- even until March of '07. It'll be a while before those loans start defaulting. I hope I'm wrong. But I'm not wrong."

In a declining market, it makes sense to get a house on the market as soon as possible. For that reason, banks often speed the foreclosure process by paying defaulting homeowners cash to vacate the house -- "cash for keys." The going rate is $1,500, but in a sign of how quickly the market is deteriorating, some lenders are now paying up to $6,000, he said.

Tuesday, October 16, 2007

September Numbers

Here are the Sales numbers from September. As expected they continue the downward trend in both sales numbers and sales prices. I’ve include last months numbers to gauge how fast the declines are happening, since the August was the month when the credit markets imploded and the media started to actually report on the housing downturn. As you can see the one month declines are staggering. Orange County leads the price declines with a stunning 11% in one month. Not too far behind is San Berdu with a 10% drop in median price. If that trend keeps up homes will be free in a yearJ. Riverside had a more respectable 5% decline in Median along with LA, and Ventura. San Diego did the best this month with only one percent, but San Diego has been declining for far longer than other areas so a small drop may be expected. The sales numbers are also dismal and show just how hard it is to sell a home today.

Keep in mind this chart is based on “median price” which I hate as an indicator. Median does not accurately indicate what homes are selling for and can be easily skewed higher or lower if most of the sales are at one end of the market. It has been well documented that the higher end properties are still selling well and that this is probably making the median prices higher.

From DataQuick
Home sales in Southern California plunged to the lowest level in more than two decades, as financing with "jumbo" mortgages dropped by half. The median price paid for a home dropped sharply as a result, a real estate information service reported.
A total of 12,455 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in September. That was down 29.9 percent from 17,755 for the previous month, and down 48.5 percent from 24,195 for September last year, according to DataQuick Information Systems.
Last month's sales were the slowest for any month in DataQuick's statistics, which go back to 1988. The previous low was in February 1995 when 12,459 homes sold. The September sales average is 25,258.
The number of Southland homes purchased with jumbo mortgages dropped from 5,359 in August to 2,681 in September, a decline of 50.0 percent. A jumbo mortgage is a home loan for $417,000 or more. For loans below that threshold, the sales decline was 19.3 percent, from 9,237 in August to 7,459 in September. Historically, sales drop by about 10 percent from August to September.
The median price paid for a Southland home was $462,000 last month, down 7.6 percent from $500,000 in August, and down 4.0 percent from $481,000 for September last year.

A new low

Homebuilder Outlook Falls to Record Low

The National Association of Home Builders said Tuesday its housing market index, which tracks builders' perceptions of conditions and expectations for home sales over the next six months, fell two points to 18 in October, the lowest level since the index began in Jan. 1985. It was the eighth straight monthly decline.

On as scale of 1 to 100, the builders rate the current market at 18! To put that in perspective let’s use the old “babe scale” . That means if you were at a party all the girls (or guys) in the room would rate 1.8 on the “babe scale”! That does not sound like much of a party now, does it?

The effects of Fraud on Prices

If you have not been reading much real estate news you may be unaware of just how much fraud there has been in real estate over the last few years. There have been several major fraud rings operating in places like the Inland Empire, Bakersfield, Atlanta, New York and nearly every other hot market. Some of these rings are now under investigation and there have actually been a few arrests. Many more are sure to follow as the FBI starts to investigate these rings.

This fraud took many forms and there were several different scams. The most popular was to find an “investor” or using identity theft use some poor guys name and credit to purchase a home from an honest seller. They would often offer the seller far more than they were asking but then ask for the excess to be refunded to them after closing. So a seller asks $500k, these clowns show up and say, “I’ll give you $600k but you give me $100k back at closing. Most sellers were happy to do it, as they got their house sold. In this scam they would have an appraiser and often a mortgage broker working with them in order to secure financing. Once the property was purchased the buyer would often take his cut and vanish without making any payments on the loan. They would often times purchase multiple properties at the same time in order to increase the money they stole.

A second version of this scam is where they buy the house at asking price then refi immediately and pull money out based on a phony appraisal. Once they get the money they stop paying the loan just like in the first scam.

The results of these scams is to artificially inflate the value of homes in the area. As you can see from this example pulled from a realtors blog, it only takes ONE of these scams in an area to screw up the whole neighborhood.

Real Estate Fraud

I was startled in early 2006 when I interviewed to list a small house near the train tracks in Mag Center in Riverside, and the sellers told me that other agents had told them the tiny 2/1 bungalow was worth over 400k. I told them this was impossible. If their house had been one of the cute historic Tudor-style cottages from the 1920's, it may have been possible, provided that it was in excellent condition. But their house was from 1959 and, though nicely updated inside, the exterior was chocolate chip mint green. I gradually talked them down, and for the next 6 months, I struggled to get their price down to reality.
There was, however, a house across the street that was from the same year and had similar square footage though with a 3rd bedroom and another bathroom. This house had sold late in 2005 for 480k, which seemed bizarre. It couldn't have been worth more than 380k during the slow fall period, and even that would have been pushing it. This house would come back to haunt everyone.
A neighbor called me off my sign for a CMA. When I met with her and told her what her house could go for at that time, she informed me that they owed more than that. They had just refi'ed a few months before, and an appraiser had said their house was worth much more. That's when I realized that the mystery house was getting people into trouble.
I poked around some more and discovered that the house had been sold in 0 days on market, with the agent representing both sides. According to public title records, the buyer had gotten 100% financing. Yet the house had been listing just a year before and had failed to sell at 359k, even though it was described at that time as a 4-bedroom.
Well, this past spring, that house went on the market as a pre-foreclosure house. They were asking 305, dropping to 299k without any bites. Now it's bank-owned with a dead lawn and a couple of broken windows. They're currently asking 295k.
Just where did that extra $100,000+ go? Apparently, according to mortgage fraud investigations into companies such as Stonewood Consulting in Murrieta, the money would appear to go to the buyer at close of escrow. The buyer would then give the money to his mortgage broker who would then promise to help pay the mortgage while investing the money in other properties for the buyer. The realtor got an extra 3k in commission (it was 3% to the buyer's side, but there was apparently a dual rate commission, so we don't know how much total he got.) He didn't do the loan, as far as I can tell, but he's likely related in some way to the lender. In the end, the buyer was stuck with an unpayable mortgage and couldn't possibly sell the house for close to what he owed. The bank is stuck with a house that wasn't worth nearly as much as had been invested. And who knows how many home owners in the neighborhood have been affected by that scam.

You have to wonder just how much of the run-up in prices was caused by this fraud. There already have been several LARGE examples of this scam found in the IE. The Stonewood scam (you should read this article) from the South IE (Temecula/Murrietta/Corona) is a perfect example. How many more groups were operating out here that we don’t know about?

Here's another very good article about real estate fraud

Sunday, October 14, 2007

clueless sellers

How long does it take for a seller to come to the realization that their home is hopelessly overpriced? Does it take weeks, months or is it going to take years. Will they just give up and let the banks have it? It just amazes me how many homes I find that are identical floor plans with similar feature yet they are priced continents apart. Do the real estate agents really think a home has any hope of selling when there is a twin down the block for $150K less.

Here's a perfect example of this insanity;

26885 Winter Park PL, Moreno Valley, CA 92555 This is a newer home in Moreno Valley ranch. It's 2764 sq/ft 4 beddroom/3 bath. It's nicely upgraded with granite and nice cabinets, but all the homes in this tract are as it was standard from the builder. The home was purchased last year for $469k. Our seller has consumed mass quantities of kool-aid and believes that his meal ticket has gone up $94k in a year. Oh yea, I'm not making this up!

The first problem he has is his neighbor down the street at 26955 WINTER PARK PL who did not partake in the magic kool-aid and has his identical home priced to sell at $390k. That's $86k less than he paid for it last July. It does not say this is a short sale so the seller is looking to escape before reality sets in with the rest of the IE. Two sellers, two identical homes on the same street yet they are priced $180k apart.

The 2nd problem for seller #1 and also a problem for seller #2 is the much bigger home just down the block that the bank is trying to unload for $407k. This 5 bedroom home is nearly 1000sq/ft bigger than the other 2. Which would you buy, the cheap smaller home at $146 a sq/ft or the bigger home at $108 sq/ft?

To add to the insanity a builder (pacific homes) is putting up more homes just up the street from these. Those homes start at $516k and got to over $600k. WTF are they thinking. They should be cutting the prices like mad or they are gonna be stuck with a tract of new homes and no buyers.

Saturday, October 13, 2007

Can't see the forrest for the trees

Wanna see a few scary pictures. This is what it looks like when neighborhoods implode.

This is Sycamore Canyon in South Corona. It's a new tract in fact they are still building. It looks like we may have a few people that might have bought over their heads. Looks like they are trying to get out while the gettin's good. awww, too late.

This is a little farther north in Corona. This area is mostly larger and more expensive homes. Well it was, they are getting cheaper all the time. Judging by how many are for sale, you don't need a crystal ball to see where this is heading.

This is Moreno Valley Ranch. Another area where they built gobs and gobs of big $500k tract homes (soon to be $250k tract homes). The implode-meter is pegged, and this area is going to explode soon.

These aren't cherry picked areas, the whole IE looks like this. The newer areas much more so than the older areas though.

Those Pesky Price Droppers

It's gotta irritate the other sellers in the tract when one guy breaks rank and drops his price. Of course, they better get used to it. It's going to be a regular event. If the neighbor don't do it the bank sure will. Here's a few p/o'd sellers in Corona.

This new tract is in the Eastvale area of Corona. One of the models in this tract is a 2700 sq/ft 4 bedroom/3 bath home. There's currently 4 of these for sale in this small tract of homes. One is bank owned. 3 of them have set the bar at $539k

13521 SHALLOW BROOK Ct, Corona, CA 92880 (this is the bank owned home)
7408 Rock Creek CT

These first 3 are all listed for $539K, Then home # 4 drops his price to $450.

13419 Jasper LOOP Same model, same tract but $90K less. Yet even at $90k less this home is not selling. It probably won't because it's not worth $450k. If our intrepid home owner does manage to find a gullible knife catcher and unloads this thing he will walk away scratching his head and wondering how he lost $127k plus carrying costs. After all his agent told him get in now or be priced out forever, because real estate never goes down......

Eastvale is probably the most overpriced area in Corona. It you don't know where it is you can just follow the smell. It's out in the old dairy farm area, the flatlands near Chino. They've been building $500k-$700k homes for a few years now. I can easily see this area taking a 50% hit. It's nowhere near as nice as South Corona, yet the homes are just as expensive. It's dusty, hot and stinks to high heaven beacause there are still plenty of farms out there.

Thursday, October 11, 2007

Remember the greedy people

A few posts ago I talked about the greedy people in Norco that thought their tract homes were worth 1.xx million dollars. One guy is asking 1.4 mil for a big home with a dirt lot in hot and smoggy Norco.

To illustrate just how INSANE that price is let's take a look at what that kind of money can buy you in a nice area.

34572 Camino Capistrano, Dana Point, CA 92624 This is a beautiful home, 5 bedroom/4 bath, 3700 sq/ft with an ocean view. It has a high end kitchen, top of the line appliances, great looking hardwood floors. Over all this is a great looking house. Price is $1.55M. Give or take a few bucks this home is the same price as the dreamers in Norco. Where would you rather live?

People trashed thier home before forclosure

Press Enterprise

Just before the bank took possession of a home in northwestern Riverside County, its former owners attacked the walls with paintball guns and smashed gaping holes in them.

They ripped out stair railings, banisters and cabinet doors in the half-million-dollar Eastvale (Corona) house. Then they turned on the upstairs bathroom sinks, put down the drain stoppers and fled as the bank's locksmith arrived to rekey the doors.

At least this is what real estate inspectors, working for the bank, concluded after they found the roughly two-year-old dream home soaked and halfway gutted. They say it wasn't even the worst that they encounter.

"You can walk into all kinds of things because the people are angry they are being evicted," said Lauren Rooney, a Corona agent who inspects homes just after lenders foreclose on them. "You get people who are really upset at the last minute, and they say, 'We are going to make the bank pay!' "

Lenders seized more than 1,000 homes in Riverside County in August and again in September. That's more than five times as many repossessed homes as in July and almost 20 times as many as in September 2006, according to RealtyTrac, an Irvine-based company that monitors foreclosure data.

In Fontana, a man begged agents to let him take his newly purchased stove, but he quickly relented when they informed him it now belonged to the bank.

A short time later, someone hurled a trashcan through a back window, Rooney said. Only one thing was taken: the stove.

I remember reading similar stories in the mid 90's during the last crash.

Wednesday, October 10, 2007

BROKEN! The $100 sq/ft barrier

Faster than a speeding bullet the $100 per sq/ft barrier has fallen.

29008 AZARA ST, Murrieta, CA 92563 Price per sq/ft $97 and even at this price this home has been listed for over 90 days

Price $315,000

Bedrooms: 4
Full Baths: 3
Partial Baths: 0
Square Feet: 3,258
Lot Size: 9,148 Sq. Ft.
Year Built: 2005
Listing Date: 07/12/07
On Market: 90 days
Type: SFR
Status: ACTIVE
MLS #: T07137201

29159 DENTARIA WY, Murrieta, CA 92563
is the same floor plane and it's listed for the same price, Price $315,000. So it's also $97 per sq ft!

29 PONTE LOREN, Lake Elsinore, CA 92532

This one is 3093 Sq ft and is prices at $299,900! Also $97 per sq/ft

3084 BRADLEY, Perris, CA 92571

This one is 3526 sq ft and is priced at $335K, Our price leader so far at $95 sq/ft

2849 EUREKA RD San Jacinto, CA 92582 This one is in a tract of new homes where there are about 25 homes for sale. They are all asking between $93 sq/ft and $125 sq/ft. This particular home is 3704 sq/ft and the asking price is $345k putting it in the lead at $93 sq/ft

There are also gazilions of them up in the high desert if anyone cares you can search yourself for those. They are still a little hard to find down here in the IE but under $100 sq/ft was damn near unthinkable just a few months ago. How low can it go?

Monday, October 8, 2007

OUCH, Riverside sales down 68% in Sept

Here are some sales numbers for Sept in the IE, they appear to be going down in flames....

...........................2007...... 2006.....%Change

Riverside............... 107........... 334...........- 68%

Moreno Valley ..........63 ............167 .......... - 62%

San Bernardino ........51..............176 ...........- 71%

Fontana .................51 .............171............- 70%

Rialto ....................29............. 77..............-62%

Banning/Beaumont... 35.............81..............- 57%

These numbers are BAD and they are even BAD when compared to last month instead of last year. Riverside for instance went from 144 in Aug to 107.

More tidbits.

KB Homes reports their cancellation rate jumped to 58% in the 3rd quarter this year. (ouch!)

In August/Sept approx 70% of the deals in Riverside did not make it through closing due to buyers being unable to secure financing.

Sunday, October 7, 2007

Greed, let's hope they choke on it

Greed is the selfish desire for or pursuit of money, wealth, food, or other possessions, especially when this denies the same goods to others. It is generally considered a vice, and is one of the seven deadly sins.

Nothing pisses me off more than the greed of some of today's sellers. I don't grudge a person a fair increase in the value of their property but to think they can ask double what they paid 2 or 3 years ago is just too much.

Here's a perfect example of greed gone mad.

159 FRIESIAN ST, Norco, CA 92860, This is a monster 5 beroom/4.5 bath 5659 sq/ft home near Hidden Valley GC. It sits on a big dirt lot. I know it's dirt because you can see this home from the 15th tee. The front back and sides are all dirt, jsut like the day the guy moved in. He has not spent a dime on the outside of this place yet he thinks worth $648k more than he paid for it in April 2004. Huh? Excuse me, are you freakin nuts dude? You want me to pay you $648k for keeping the weeds down for 3 years. This place is not worth what he paid for it and I'll be surprised if he can sell it for $750k.

He's not the only one either. His neighbor across the street at 170 FRIESIAN ST, Norco, CA 92860 with the same floorplan is asking $1.5M, or $100k more. He is looking to make $736K in 3 1/2 years. At least this guy added some landscaping and a pool. The amazing thing is, this guy started out at 1.7 million. No doubt this is a beautiful home and if it were in Irvine it might be worth 1.5M. But DUDE your house is in Norco and it's not worth 1.anything million.

Friday, October 5, 2007

Norco Hills comp killer

The Norco Hills area is up behind the Hidden Valley Golf Course. These are big homes on big lots and most are zoned for horses. Most of these were built in around 2003. I looked at the models when they were new and I think these started around $500k from the builder.

229 OLDENBURG #LN is a 4 bed/3 bath 3087 sq/ft single story home on a 1/2 acre lot. This also qualifies as a DOM winner since it's been on the market for 408 days. I would also like to nominate this for the "dumbass seller of the year award" just for the price changes this baffoon has made. Look at these price changes;

Price Reduced: 11/13/06 -- $1,050,000 to $989,000
Price Reduced: 12/01/06 -- $989,000 to $955,000
Price Reduced: 02/03/07 -- $955,000 to $935,000
Price Reduced: 02/08/07 -- $935,000 to $925,000
Price Reduced: 02/26/07 -- $925,000 to $875,000
Price Increased: 03/20/07 -- $875,000 to $949,000
Price Reduced: 04/13/07 -- $949,000 to $899,000
Price Increased: 07/21/07 -- $899,000 to $1,050,000

It's almost makes you dizzy looking at what this bozo is doing. So he starts at 1.05M over a year ago and 8 changes later he's back where he started.


Here's his competition. 1453 PASO FINO is the same model home, one block over but this one is a REO. The bank took it back in July for $648k. They are looking to make a few bucks on this one and have it listed for $745k. They have been reducing the price $40k every couple of weeks.

Price Reduced: 08/07/07 -- $950,000 to $825,000
Price Reduced: 08/27/07 -- $825,000 to $799,000
Price Reduced: 09/16/07 -- $799,000 to $790,000
Price Reduced: 10/05/07 -- $790,000 to $745,000


We have another player at 1449 Morab WAY with the same model home. This one looks very nice with a cool rock pool. But at $889 it's still quite a bit more than the Repo. It's been on the market for 158 days and was reduced from $950k to $889 a couple of months ago. Of the 3 this look like the best but at $145k more than the repo it has little chance of selling. The current owner bought the property 05/13/2004 for $647,500. So unless he refi'd to pay for that fancy pool or the $200k RV parked besides the home he should be able to drop the price some more.

Growing roots, days on market

I searched Ziprealty to see what the longest "days on market" was that they had listed for Riverside.

11365 LAKEPORT DR, Riverside, CA 92505 is a 5 bed/4 bath 4252 sq/ft home. Built in 2001, this home is in the Riverwalk area of Riverside. It's not the best area but it is the western most part of the city of Riverside. It look like our greedy seller paid $417,500 for this behemouth. The he added a pool and a little paint. In March of 2006 he listed the home for ....drumroll please.... $960K! He has been slowly reducing the price ever since, all 570 days since. He's only down to $865k though. The amazing thing about this home (other than the asking price) is the color of the bathrooms. BARNEY PURPLE bathrooms, that's got to be hard to take after a long night of drinking. You'd think after a year and a half they would at least paint the purple bathrooms.

Really, they are PURPLE, I'm not making this up.

18314 LAKEPOINTE, Riverside, CA 92503 this is a new home, never lived in up in the Lake Hills area. It's a nice area but this home is at the very top of the hill. I can only imagine how many sets of brakes you would go through every year living up that hill (transmissions too). This is another big home, 5 bed/4.5 bath and 4895 sq/ft. It was built in 2006. I can't find the original selling price or tax info but these homes were not cheap. It was put on the market in April of 2006 for $1.095 million, total DOM 525 days. It's seen 3 price reductions but it's still only down to $925k. That's a lot of money for a home with a dirt back yard.

I found about 100 homes that had been on the market for a year or more. These two are by no means unique. In fact they are probably going to become the norm, unless prices come back to reality.