Haircut on REO in Vista

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Submitted by AK on February 14, 2007 - 11:42am

Saw this listing for an REO 2/2 condo at 335 Windy Lane, Vista, with 2 car attached garage ... 1365 sf, built 1987, probably better than many of the crap conversions that have flooded the market.

From Zillow:

Zestimate: $355,005 (ROFLMAO)
12/29/2006: $322,756
07/20/2005: $359,000
05/09/2003: $235,000

I'm assuming that the most recent sale represents a foreclosure as it's almost exactly 90% of the previous sale price. I guess the holder of the piggyback second is f'ed.

Current asking price ... $308,000.

Call me when it's $235K again.

Submitted by no_such_reality on February 14, 2007 - 12:14pm.

Call me when it's $235K again.

Make an offer, you may be surprised.

Submitted by an on February 14, 2007 - 12:32pm.

Call me when it's $235K again.
That's exactly what I was about to say too. I'd say 2002-2003 price would be a fair price for most places in SD once it hit the bottom.

Submitted by PerryChase on February 14, 2007 - 1:05pm.

I concur with the comments above. Plus prices will stagnate for years, so you'll have your pick of the litter.

Submitted by Cow_tipping on February 14, 2007 - 1:49pm.

Yea ... that's too lenient ... call me when its at its 1997 price or Carleton Sheets is in Jail.
Cool.
Cow_tipping.

Submitted by AK on February 15, 2007 - 4:09pm.

Just noticed that a very similar unit in the same complex (357 Windy Lane, reported at 1220 sf) is on the market for $357K.

Submitted by Happy renter on February 15, 2007 - 5:53pm.

Call me when it's $235K. I agree with you both. I have seen a lot of foreclosed houses are at 2004 price already. So, we won't be not too far from the 2003 price. May be the bottom will be even further to 2000-2002 price?

Submitted by PerryChase on February 15, 2007 - 5:59pm.

I'm going to go out on a limb and say that the bottom will be 2001 prices. Those prices were already high fueled by dot-com portfolios.

In reviewing sales histories, I noticed that high-end homes already appreciated enormously from 1997 to 2001. Then when the Fed lowered rates as a result of 9/11, the speculative mania became mainstream.

Submitted by masayako on February 15, 2007 - 6:30pm.

I won't even consider that at $235k. Call me when the price go back to 1998/1999 range, below $200k is what it's worth.

masayako

Submitted by masayako on February 15, 2007 - 6:31pm.

I won't even consider that at $235k. Call me when the price go back to 1998/1999 range, below $200k is what it's worth.

masayako

Submitted by bob007 on February 15, 2007 - 6:32pm.

What is the cost of constructing the place ? Assume land is free

Submitted by Bugs on February 15, 2007 - 7:22pm.

I did a cost analysis on this unit using some agressive assumptions about the quality of construction and condition. Going strictly by the numbers and when including the driveway, walks, landscaping, porch and some landscaping/fencing for a small yardlet to the rear, the cost new on this unit would be somewhere around $225k at the most, probably a bit less if I backed off on the quality.

However this unit is now 20 years old, so it isn't new. Using a depreciation table and accounting for a reasonable remaining economic life of the structure it ends up coming down below $200k.

This doesn't include the value of the site or the common elements in the project, which at the least apparently include a pool and most likely a small clubhouse or rec room. There are apparently 54 units in the project so the pro-rata cost of those improvements wouldn't amount to more than about $5,000/unit, which would still put our costs for this unit at about $200k, not counting site value.

Raw land value could be in the $65k/unit range and having entitlements and approvals makes it worth quite a bit more, but some of those costs would go to the construction itself, so a $300k selling price could reflect the current value by cost based on current market conditions.

Of course, those costs would include a 20% developer incentive, which is surely higher than the market would bear right at the moment, and it also includes hard costs that are only now coming off peak pricing. By the time these developers, subcontractors and suppliers get a little hungry those costs could all come down by 15% and everyone would still be making a buck. The land value could easily come down by more than half in a depressed market.

I remember appraising existing 1980s apartment properties in the north county areas back in the mid-1990s at $40,000/unit inclusive of the land and improvements.

I think this unit could end up below $200k in an undervalued market, which would put it at a gross rent multiplier of ~140.00 if based on a market rent of $1400/month. Actually, at a $1400 monthly rent a $200k price would still be a little high. A 125 GRM would only result in a value indicator of $175,000. At $175k it would be just under 50% of the peak pricing for this puppy, which would put it back into line for the long term pricing trend.

Submitted by Cow_tipping on February 15, 2007 - 7:28pm.

1365 sqft 1 story should be under 100K (my neighbors house was 1450 and 105K) and 2 storey should be ~85K. Of course I am including a 2 car garage not included in the sqft count. OK those are 2003 prices (my house is a centex box of 2723 sqft whcih centex will sell you right now for ~170K)
Cool.
Cow_tipping.

Submitted by no_such_reality on February 15, 2007 - 7:37pm.

I remember appraising existing 1980s apartment properties in the north county areas back in the mid-1990s at $40,000/unit inclusive of the land and improvements.

IMHO, land value only exists for SFRS on lots that can be rebuilt to suit. When a developer burdens a land with Condo or Townhome complex, multiple owners and HOA, all the "land value" is absorbed into the structures.

Individual land value is essentially worthless because you can't do anything unless buy all the properties and the property location premium is already reflected in the unit pricing.

A good example is the Florida trailer park, as an all or nothing deal, it was worth ~$1,000,000 per lot. However, without that deal, the lot and trailer on it probably weren't worth a fraction.

Of course, I'm biased, I've lived in poorly managed condos and townhomes.

Submitted by Bugs on February 15, 2007 - 9:28pm.

Two things:

The costs I used are adjusted for local market conditions and local costs. The fees alone would add up to over $35,000, which is much higher than for most other areas of the nation. Workmans Comp is more expensive here, the contractors charge more for their overhead, etc.. So compared to other areas of the nation, particularly those areas away from the coasts, costs here are always going to be a lot higher.

The "price" of a townhome or condo or apartment or office includes the contributory value of the site even if that individual site can't be broken out from the whole. The land didn't come free. You might not be able to buy the individual condo "site" out of a project, but if you divivded the project site by the number of units there would still be a value/unit attributable to the site.

Incidentally, the trailer park might sell as a whole, but the value of the whole is estimated on a price/space basis. Otherwise, a 6-space trailer park would be valued the same as a 160-unit project, which of course would never happen.

Submitted by bob007 on February 16, 2007 - 6:57pm.

thanks to bugs for telling how much is a good deal

Submitted by AK on February 21, 2007 - 9:18am.

Down to $299K now ...

Let's see how low it goes, and how it influences the three other listed units in the same complex.

Submitted by AK on April 2, 2007 - 8:59am.

Been off Zip for a while ... it disappeared once before but I think it actually sold this time. Interesting to see what it went for.

Another (upgraded) unit in the complex is at 144 DOM and playing silly pricing tricks:

Price Reduced: 12/06/06 -- $325,000 to $310,000
Price Increased: 12/12/06 -- $310,000 to $315,000
Price Reduced: 01/26/07 -- $315,000 to $314,000
Price Reduced: 03/09/07 -- $314,000 to $313,000

Submitted by AK on April 30, 2007 - 4:12pm.

Ding ding! We have a winner! Zillow reports that 335 Windy closed at $307K on April 10. Last asking price was $299K, so I assume there were some incentives involved.

By way of comparison 357 Windy sold March 22 for $320K, and 307 Windy (a 3/2) sold the same day for $345K.

Submitted by AK on December 22, 2008 - 9:48pm.

Fast forward to December 2008 ... There are now three listings in that complex ... Asking prices range from the REO fixer at $165K to the end unit that "needs TLC" for $185K.

Looks like we've hit 2000-2001 pricing here. Perrychase predicted things would bottom out around 2001 prices, which suggests he's the winner so far ... unless things drop even more, in which case Masayako might win with his prediction of 1999 pricing.

Bugs wrote a detailed cost analysis that stated, in part: "I think this unit could end up below $200k in an undervalued market ... At $175k it would be just under 50% of the peak pricing for this puppy, which would put it back into line for the long term pricing trend."

If/when the REO pipeline starts flowing again early next year I think this Pigg of modest means will be in buying mode.

Submitted by temeculaguy on December 23, 2008 - 12:15am.

Looks like the pain train just pulled into Vista, right on schedule.

Submitted by CA renter on December 23, 2008 - 12:33am.

FWIW, in early 1998, I bought a ~1,200 sf, 3/2 SFH in O'side (92057, but not the worst area) for under $120K. By mid-2001, they were selling for around $250K, so they had already doubled by then.

IMHO, we will see pre-2001 pricing **without a major recession/depression** (already here, so that's optimistic), and prices could very well fall below that if we don't see INCOME growth in the near future.

All price gains from 2001 onward were due to the credit bubble, not fundamentals. We've been in a recession (masked by the credit bubble) since the dot.com implosion.

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