San Marcos Price Reduction

User Forum Topic
Submitted by ocrenter on April 25, 2006 - 11:22pm

I have been giving sdrealtor a hard time at the other topic "Median Price Down in North County" by showing the following two properties:

xx7 VIA DEL CABALLO, San Marcos, CA 92078
Bedrooms: 4
Baths: 3
Sq ft: 2,358
Listing Price: $550,000 - $599,876
Last Purchased: Dec 03 $460,000

and comparing the asking price of the first home with the sale price of the second home.

xx5 Via Del Caballo, San Marcos, CA 92078
Bedrooms: 4
Baths: 3
Sq ft: 2,358
Mar 06 $625,000

There was a lot of back and forth about lot premium and lot size and upgrades to try to account for the $75,000 in price difference in two homes with the same sqft and same floorplan.

All of that, I believe, is now rendered completely pointless because of this new development. As of today 4/25/06, there has been additional price drop down to $539,000 on the first home. Why? Because this home is currently in pre-foreclosure.

If you recall, this home was purchased for $460,000 in 12/03. A look into the loan doc's indicates a 80/20, zero down loan. Assuming a 2 year fixed loan on the 80% portion, this means this person just experienced a reset of his mortgage 12/05. After 3 months of paying at the higher rate, he is defaulting and going into foreclosure.

To avoid foreclosure, all he has to do is keep lowering the price until someone bites, and this can get as low as $490,000 for him not to lose money on this sale. What would the sale of a home at $490,000 do to comps in this neighborhood? Let's not even go so low as that, what would it do to the comps if he gets a buyer at the current reduced pricing of $539,000.

The next question of course is: what happens if there's another foreclosure in the neighborhood and the owner decides to slash prices? Well, we shall see, as xx7's neighbor xx2 has now just entered into pre-foreclosure this month, we'll see if xx2 throw their hat into the ever expanding San Diego Inventory of homes for sale.

Submitted by patientlywaiting on November 6, 2007 - 1:35pm.

I just calling a spade a spade here.

So you want empirical proof the that market is dropping to a certain level before you would concede that it reached that level? I wonder when the market recovers and booms again, if you'll tell your clients "well the market is not that high yet, so let's be realistic in pricing." Or will you tell your clients "let's shoot for that 20% extra, because I think you'll get it."

I'm guessing that you'll go for the latter because that will create new comps and new listing opportunities. You're not going to wait for proof-positive comps before you price higher. So why wait for comps to price lower?

My point is that the current "value" to a buyer is based in large part by expectations for the near future. I believe that ocrenter is calling that near future very accurately for San Marcos.

 

Submitted by sdrealtor on November 6, 2007 - 4:02pm.

You are talking apples and oranges. My recent point has been assessing the accuracy of our predictions as of this date. That is looking backward. There is no question as to whom has been more accurate. Over the last 4 years I have consistently been spot on in predicting every move of the market within the next 6 to 12 and 12 to 24 months.

When i am advising clients as to what I think will happen that is looking forward and my advice will follow what i believe is coming.

You can believe what you want but there is no way you will see the 2300 sq ft model that was the basis of this thread from the outset sell at a price close to the low 400's. End of story.

Submitted by ocrenter on November 23, 2007 - 7:58am.

"Those looking for a dramtaic crash to 500K have been sadly disappointed." sdrealtor, 6/06

"San Marcos currently has a 1 year supply of homes for sale, now we got 4 foreclosures in one single community. I'm now looking at these properties going down into low $400,000's mid to late next year." ocrenter 8/06

"You can believe what you want but there is no way you will see the 2300 sq ft model that was the basis of this thread from the outset sell at a price close to the low 400's. End of story." sdrealtor, 11/07

491 CAMINO VERDE, San Marcos, CA 92078 (1909 sqft)
--11/19/07: asking $396,000

584 VIA DEL CABALLO, San Marcos, CA 92078 (2259 sqft)
--11/21/07: asking $430,000

the story has just begun.

Submitted by farbet on November 23, 2007 - 8:42am.

OC Renter you are right on the Money as usual !!
How about Blueridge estates = 795 Joy Court,92078 and 2 others next door.
I think SD REALTOR is still wearing his "realtor bias"-low commissions(you think ?)

Submitted by blackbox on November 23, 2007 - 9:00am.

yep, it really goes to show that even reasonable thinking realtors had no clue how bad this thing was going to get, and it will get worst. Please everyone, just wait until there is a 3 month consistant uptick in prices before you even think of getting in as a buyer. No one has a clue where this one will bottom. I might even get stupid low before the uptick, and levels off at affortabiltiy (income/home price). A housing bubble like this has never ever happened so no one with even 30 years RE experience knows what the downside will look like. These guys are as clueless as the rest of us in calling a bottom. Specifically don't follow the advise of people that make money out of your purchase even if you overpay or not.........

2300 sq ft model that was the basis of this thread from the outset sell at a price close to the low 400's. End of story." sdrealtor,

What a joke!

Submitted by TheBreeze on November 23, 2007 - 9:13am.

I trust realtors about as far as I can throw them. These guys typically don't have a clue and are just looking for their next commission. Besides, isn't sdrealtor the dude who is down like $100K on a recent home purchase? Or is that the other one?

Submitted by ocrenter on November 23, 2007 - 9:21am.

for the record, sdrealtor is the realtor in question. SD Realtor has been very supportive of the bear position.

as for those Blueridge estate homes, good grief!

797 JOY CT, San Marcos, CA 92078 (4243 sqft)
--10/31/2006: sold for $1,185,000
--11/19/2007: offered for $824,000 ($361k off, 30% drop in 1 year)

795 JOY COURT, San Marcos, CA 92078 (4226 sqft)
--09/27/2006: sold for $1,095,000
--11/14/2007: offered for $839,900 ($255k off, 23% drop in a little over 1 year)

that's two foreclosures side by side. meanwhile a homeowner just down the street is entertaining offers between $895,000 - $925,000... looks like it'll be three REOs on the street in due time.

Submitted by SD Realtor on November 23, 2007 - 9:33am.

farbet, breee and blackbox, both sdrealtor and myself, SD Realtor) are of the opinion that we are in a heavy bear market and that there will be continued depreciation that will be substantial. I am not sure where you guys derived opinions that are otherwise.

Now in this particular thread sdrealtor has taken a different stance regarding some of the particular properties that ocrenter has researched. The argument is not that these properties are at a certain price level (with regards to the past) but has the entire area depreciated to a given level...(ie, is the entire area at 2003 pricing, or are a few homes at 2003 pricing)

Finally the point sdrealtor is also making is that in 2003 there was incredible appreciation, that is pricing in February of 2003 was substantially different then pricing in November of 2003 so taking the year as a whole is quite subjective.

ocrenter continues to find major price reductions and distress sales in the area and like the tide going out, eventually it will be true that the entire area will hit November 03 pricing and then February 03 pricing. Will that happen in a month, or in a year or in two years is anyone's guess.

Hope I clarified things.

Submitted by sdrealtor on November 23, 2007 - 10:03am.

Gimme Break!

OCR,
The story hasnt just begun! It began about 4 years at the beginning of 2004 when things got completely whacked! I still stand by my comments that you mocked 100% and will be back on 12/31/07 to taunt you in return. There is NO WAY you will see "the 2300 sq ft model that was the basis of this thread from the outset sell at a price close to the low 400's. End of story!"

I thought you were smart enough to realize that extraordinary low asking prices set on short sales are intended to bring offers to the table so the seller can at least find out what the bank will do?

Breeze,
I own my dream home that I have been in for about a decade with a very low mortgage locked in for 30 yrs well below 6%. Not that I'll ever sell but it is still worth at least 2X what I paid. I could write a check today and pay it off if I wanted to. I also own 2 other very profitable businesses that provide most of my income completely unrelated to RE. RE commissions are nice but certainly not something I sit around waiting for.

All,
Those Joy Ct homes are ridiculous! Have any of you ever been in one? I have. They are huge McMansions in a lousy location overlooking a busy road, industrial parks and what looks like a swamp or toxic waste. Frankly, I cant believe that anyone ever bought one at any price.

SD R,
Thank you for being the voice of reason. I am as bearish as anyone. The big difference is that I (and you) understand how this plays out on a micro level. Things take time! Most of the folks out here as guilty of greed and impatience as the the FB's who bought on the way up.

Patience Grasshoppahs! It's coming....

Lastly, OCR a belated "Your Welcome" as I have provided you leads for some of the best material on your blog without taking credit.

sdr

Submitted by ocrenter on November 23, 2007 - 10:25am.

sdr, thanks for the anonymous leads, perhaps pick a handle so credit is given.

I only focus on this because you are so absolute about this. Look, if there are 3700 sqft REOs in the general area going for $600k, and 4300 sqft homes dropping down to the low 800k, low $400k for these homes as the current market value is not unreasonable. while these are short sales, the fact that they have to keep dropping on their asking price to me indicates where the market truly is.

everywhere around this development has seen 20-30% drops in prices over the last year. low $400k would be in-line with that drop.

Submitted by sdrealtor on November 23, 2007 - 10:54am.

ocr,
While what you explain seems reasonable on the outside it isnt as reasonable on the inside. It's all about price compression. There is a minimum price entry point for housing in the area and as newer homes Belleza is above that by a certain margin. Once you reach 600K and 800K for the bigger homes, you start competing with older entry level homes in more desirable locations like Carlsbad/Encinitas. Ultimately this will push down the prices of Belleza but it takes time. patience Grasshoppah!

Submitted by patientlywaiting on November 23, 2007 - 12:24pm.

Seems to me like the Realtors are backward looking, just like an appraiser would be. They look at sold comps to gauge value, today.

ocrenter is more forward looking in that he looks at the direction market by reviewing asking prices.

The asking prices are dropping and dropping, so it's only a matter of time until we have closed sales confirmation of the downward trend.

One may wish to debate what the market is at, today. Why bother when all the signs point to lower and lower prices.

There was a time when sellers asked for the moon, got it and drove the market higher and higher. We now have opposite situation where sellers need to get ahead of the curve, and take some painful losses if they want to sell. They will drive the market lower and lower.

Patience is what is needed.

Submitted by patientlywaiting on November 23, 2007 - 12:41pm.

I do agree that the short sales are priced low to elicit offers that the FBs can submit to the lenders to try to pressure them.

However, by listing low the short sale FBs submarine the whole neighborhood and cause the legitimate sales to rot away.

Technically, asking prices are not comps (only sold transactions are). But ocrenter is right in that the direction of the market is down to at least the short sale asking prices.

During the boom, it was not unknown for Realtors to collude to manipulate asking prices and drive the prices up. In essence they used the asking prices as comps. And now, the Reators won't accept asking as comps? I see a certain self-serving dichotomy here.

Submitted by Ex-SD on November 23, 2007 - 12:43pm.

There are no rules or laws that prevent any house from losing value to less than what it sold for when they were new, several years ago. A home could have sold for $500k new in 2004 but if there are no takers and the house winds up as an REO, the bank will not sit on it forever and will keep dropping the price until it sells. That price could be $200k, $300k or $400k. All that matters is what someone is willing to pay for it and do they have the money (or can they get a loan) to close the sale. This happens with cars, jewelry and any other item of value that is for sale every day of the year.

Submitted by sdrealtor on November 23, 2007 - 1:07pm.

Ex-SD
You only got it half right when you say "All that matters is what someone is willing to pay for it and do they have the money (or can they get a loan) to close the sale". That is what we call a willing buyer. The other half that matters is what we call a willing seller. That half depends upon what someone is willing to accept and is able to accept. Until the two meet we dont have a market price.

I'm sure there are plenty of willing and able buyers for $1 homes but there are no willing sellers. this is an extreme example but it points out that there must be both.

Submitted by 4plexowner on November 23, 2007 - 1:11pm.

patientlywaiting makes an interesting point about the short sales listing prices - I will use the $297K short sale in 92116 (another active thread) as an example

if I were a buyer shopping in that zip code I might now think that SFRs north of Adams are worth $300K (reality is probably at least $150K higher right now for a decent SFR)

back in the hot days of the market I would have certainly considered the $297K listing as a legitimate comp (or at least a significant data point to consider) but now it needs to be thrown out

makes the realtor's job even harder having to explain to an inexperienced buyer that the $297K isn't a realistic comp - the confused mind says "No" so this short sale pricing strategy could be harming the market by creating confusion in buyer's minds

Submitted by Ex-SD on November 23, 2007 - 1:48pm.

sdrealtor: I think that too many people and possibly you, have been immersed in the SoCal real estate game so long that you don't really realize what happens in most of the rest of the USA. Things have been so out of whack and crazy in CA when it comes to housing prices that it's easy to get totally out of touch with reality. I believe that there will be plenty of willing sellers (The Banks) when they eat enough of these properties and they sit on them long enough. Several markets (not just one) in Florida have already had builders selling their remaining inventory of new homes at 50% less than they were selling them for just a year or two ago and in Sacramento, there are REO's that the banks have priced at 50% discounts (homes less than 3-4 years old) to move them but they can't find qualified buyers. Wanna guess the financial hit that they'll wind up taking on those? My point is that these tract homes have no special pedestal that they sit on and just because a bunch of fools bought into the game and drank the kool-aid by paying too much for these homes when they were new. They may only be several years old but that doesn't meant that they can't see some severe drops when enough standing inventory sits on the lenders books for too long a period and the stockholders start demanding that they do something about it. I worked as an executive for several very large corporations and also was the CEO of a large retail corporation for 15 years and I've seen the pressure come raining down from the stockholders too many times. I think that it will also happen when it comes to the REO inventory that is growing like wild weeds. Add to that, the homeowners who will have to sell due to job transfers, divorces and job loses and will have to compete with the REO's and you're going to see some big drops in pricing. Simple logic tells me that the good ole times for the CA real estate market have gone bye-bye for quite a few years to come.

Submitted by farbet on November 23, 2007 - 9:56pm.

Ditto Ditto EX SD
SD Realtor things are really bad out there from conversations with folks that I know. We are in a recession.Bernake is sugar coating the numbers. The next step are layoffs then "panic"
Its worst than the 90 -91 recession of "Read my lips"GHWBush tax increases.

Submitted by SD Realtor on November 23, 2007 - 10:47pm.

I don't think it is a matter of if... it is and always has been a matter of when. As many great leads that ocrenter pulls up that are foreclosures, there are sales. There are sales in Carmel Valley, there are sales in La Costa Valley and there are sales in 4S Ranch, Scripps, Sabre Springs... etc.........I cannot tell you how many people I have that are patient buyers yet are very frustrated by the rate of decline. They all ask me why people are still paying premiums for homes like this and all I can tell them is because they do. I show then the stats that the volume of sales are down but that doesn't console them.

This is what I do not understand. Nobody is arguing that the market will not go down, nor is anyone saying that prices will not drop dramatically. It seems to me that there is some displaced anger or whatever trying to justify that we HAVE TO HAVE big drops. Well we don't HAVE TO HAVE anything. Will they happen? In my opinion yes. Could it be this spring? Next Summmer? 09? I don't know... probably sometime in the next few years.

If you truly think that homes in 4S are gonna for for 400k and the same for Carmel Valley then so be it? Maybe they will and maybe they won't. I do know of plenty of people who will buy before they get there though.

The fact is that real estate moves slow. Do I think the banks are sitting on properties and holding them out? Perhaps they are. Do I think banks are sitting on properties in Carmel Valley or La Costa Valley? No I don't.

Try to have some patience.

Submitted by eyePod on November 24, 2007 - 6:07am.

Big SDR and little sdr - wow! I guess if you're a realtor then you are bad. You guys really add a lot to this site.

Submitted by ocrenter on November 24, 2007 - 6:39am.

this never was about realtor bashing. when I bash realtors I make sure to pull the capitalized and trademarked "REALTOR®." and sdr and SDR have contributed way too much to ever deserve that.

I do echo the call for patience. just sit back for a moment and think about this. When in history have we seen homes drop $200-$300k just in a year? I remember my folks being unhappy when their equity in WestLA dropped by $30k from peak to valley from '89 to '96. good grief, they are STILL talking about it like it was yesterday. And now we see drops of $200k in a single year and people are throwing out quotes about how certain predictions weren't met (in reference to the 4S REO).

Submitted by Bugs on November 24, 2007 - 9:13am.

Years, not months. The spike took 7 years to build. If we are predicting that the market will eventually overcorrect below the long term trend it's gonna take at least 7 years (from 2005) to get there.

Submitted by patientlywaiting on November 24, 2007 - 11:14am.

Just because people do certain things, doesn't mean you have to. And they are not necessarily good examples to follow. Watch what others do and learn from their mistakes.

Buying a house is like marriage. It takes commitment. If you're not sure, then don't buy; otherwise, divorcing the POS will cost you very dearly.

Submitted by sdrealtor on June 2, 2008 - 12:21pm.

Time to resurrect an old thread again. Here's where we left off:

"Those looking for a dramtaic crash to 500K have been sadly disappointed." sdrealtor, 6/06

"San Marcos currently has a 1 year supply of homes for sale, now we got 4 foreclosures in one single community. I'm now looking at these properties going down into low $400,000's mid to late next year." ocrenter 8/06

"You can believe what you want but there is no way you will see the 2300 sq ft model that was the basis of this thread from the outset sell at a price close to the low 400's. End of story." sdrealtor, 11/07

491 CAMINO VERDE, San Marcos, CA 92078 (1909 sqft)
--11/19/07: asking $396,000

584 VIA DEL CABALLO, San Marcos, CA 92078 (2259 sqft)
--11/21/07: asking $430,000

"the story has just begun."ocrenter 11/07

414 Camino Hermoso, San Marcos, CA 92078 (2,358 sqft)
CLOSED ESCROW on 4/28/08 for $515,000 to buyer with 20% down.

FWIW, 584 Via Del Caballo which was a horrible house with 5 feet of backyard and massive slope (100's of feet high) directly behind it. It closed for $447,000 in early March.

6 months later it looks like sdrealtor was spot on!

Going forward is another story but for now, I'll crow a bit.

Submitted by jmrrobbie1 on June 2, 2008 - 3:16pm.

JMR

What of the San Elijo Hills "planned community"? My digging indicates numerous ownership complaints with poor building & construction problems - obviously these built during the boom. Is this micro-area of San Marcos holding its own; this section started in the late bubble era and the next two phases yet to start?

What of this community in general - if the price drops enough in the next two years this location seems ideal - proximity to ocean, high enough on hillside to give a sense of uniqueness, access to freeways, infrastructure & shopping, new schools? Several pricey homes on Schoolhouse Way (#1400 & 1405) - with ocean views but now listing in this bubble burst ($990K)... although Westcliffe is the higher end for this community? Is $775K too much of a stretch in the future for these two - but worth the risk of a poorly built home (Ocean view, 9000+ sq ft lot, $189/sq ft).

Submitted by farbet on June 2, 2008 - 8:31pm.

AKA San Mello Roos 92078
faux rich
lots of NOD

Submitted by farbet on June 2, 2008 - 8:31pm.

AKA San Mello Roos 92078
faux rich
lots of NOD

Submitted by Roxane on June 2, 2008 - 9:58pm.

jmrrobbie1

My running route takes me through Westcliffe. I've met some of the people who live there and can tell you that I would love to live next to such nice folks.

However, I've noticed a few houses on Schoolhouse way that have no signs of life. I mean, the blinds are always drawn, I never see a car in the driveway, no patio furniture (you can see all the yards from up above on the hill). But there are no lock boxes on the front door, and no for-sale signs in the yards. If you drive by you'll see what I mean, they just look empty.

I could swear I picked up a flyer on Schoolhouse a while back asking $890,000, but my memory could be wrong. Not sure if it had an ocean view.

Submitted by jmrrobbie1 on June 2, 2008 - 10:57pm.

JMR

Like your thread name ... and a running route or bicycle tour is the best way to get a feel for an area. I was looking at San Elijo Hills (Westcliffe) only from a paper/internet/geographical search - as we are in the early process of a home & area search. Geographically this area appears great - just North of RSF and South of Carlsbad, close enough to the ocean for temperature moderation, high enough on the hill to catch the breeze, great freeway excess, proximity to services but still distinct enough on it's own. Ok ... RSF it is not nor a Carlsbad - but for the price range and with the bear market still on the way down ... maybe in 1-2 decades it could be Carlsbad or better??? What of the builder?

What of the "planned community" - still going thru or put on hold. From others on these post looks like tax & ownership fees are high.

Your thoughts & insight are appreciated ...

Submitted by JWM in SD on July 7, 2008 - 5:59pm.

"There is NO WAY you will see "the 2300 sq ft model that was the basis of this thread from the outset sell at a price close to the low 400's. End of story!"

sdr circa Nov 2007

Credibility....Gone.

Start Eating Crow.

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