Home Price Drop Largest in 13 Years

The median home price in San Diego County dropped by $22,000 from the previous year, driven down primarily by slashed prices for new homes. The end to the trend is nowhere in sight, some experts say.

By KELLY BENNETT Voice Staff Writer (Voice of San Diego)

Thursday, Oct. 12, 2006 The overall median home price in the county in September was $22,000 lower than it was last year, dropping 4.42 percent to $476,000, DataQuick Information Systems reported Wednesday.The drop was the biggest dollar-amount plunge observed year-on-year by DataQuick since it started monitoring the San Diego market in 1988.The figures didn't come as a surprise to local analysts.

The median price first dipped negative year-on-year in June, one of the first tangible signs the booming housing market was quieting. Even before then, reports of slowing in residential construction staffing and projects, slumping sales rates, soaring unsold inventory levels, spikes in foreclosures and the popularity of risky mortgages had market observers waiting for the median price to catch up with the anecdotal evidence.

Some say the market's going to turn around again soon -- but others say the end's nowhere in sight."It is a big drop," said Peter Dennehy, vice president of the Sullivan Group Realty Advisors, of the median price change. "But sales prices have even come down more than that. The median price is finally coming starting to come down with what we're seeing on the street."

Andrew LePage of DataQuick said that based on the data, San Diego is "still in soft landing territory.""This market ran up for seven-plus years," he said. "We're going to see it wobble around a bit no matter what."The next couple of months will likely hold even bigger year-over-year declines, LePage said. Prices were still rising in the fall of 2005, reaching a peak of $518,000 in November.

Comparing this year's numbers to last year's would look like a hairpin -- as they were trending up last year, the current numbers are trending down now.This year, the September median price logged a 1.24-percent price drop from the price recorded for August.Both LePage and economist Chris Thornberg of Beacon Economics said it's misleading to look just at the overall median price, because the only section of the market seeing a dramatic slowdown is new homes.

The condo and detached home resale markets saw just 0.8 percent and 0.9 percent declines from last September, respectively. Those contrast sharply with the median price in the new home market, which took a 16.9 percent dive to $414,000 from last year's $498,000."You've got to be really cautious," Thornberg said. "The price of new homes is really driving down your overall median. You don't know if the quality changed or what."But sales activity slowed considerably last month, with home sales overall dropping 35.7 percent from the rate of sales recorded in September 2005.

Broken into market categories, the declines measured year-on-year declines of 41.2 percent in the condo resale market, 30.7 percent in the detached resale market and 37.5 percent for new homes.University of San Diego economist Alan Gin has forecasted a slowdown in the local economy for the end of this year and the beginning of 2007, and the weakening housing market plays into that. So does the employment rate, which could take a big hit if the housing market continues on the path it's on, Gin said."To me, the more serious aspect is the slowing of activity," he said. "

Fewer sales, fewer commissions, fewer loans -- that will result in job loss in those industries."Real estate advisor Gary London of The London Group said he saw the new data as "a relatively mild price slippage.""This is a very minor amount of money relative to the price inflation experience we've had over the entire decade," he said, referring to the median price increase of more than 200 percent between 2000 and 2005.

London pointed out that the data being released now reflects a smaller section of the market -- the "need-to-sell subgroup," he calls it -- that doesn't represent as many people or types of homes which would have been turning over a year ago."I'm not an apologist for this industry at all," he said, "but I don't see this as a disturbing thing."Neither does San Diego Association of Realtors president Charles Jolly, who hailed the DataQuick release as "great news for buyers."

The increased inventory and dropping prices are two indicators of San Diego's becoming a "buyer's market," he said.Jolly contends that home buyers who purchased a home, even near the end of the boom, with the intent and financial ability to hold onto it for at least five years, shouldn't be affected too dramatically by these value fluctuations."

In the long term, it will go up," he said. But Thornberg said the market will have to navigate some more tough terrain ahead."

All this nonsense about us already starting to see the light at the end of the tunnel, we're not even close," he said.

You have to love Thornberg!-Bob

Flipper Tests Market and Fails

1213 EAST LANE, IMPERIAL BEACH

This flipper tried to pull a quicky on some sucker when he listed this home for sale on 7/15/2006 for $950,000 only 20 short months after purchasing it for $740, 000 in November 2004. Well 88 days have passed and this flipper has lowered his asking price to $799,000-$850,000.

This flippers hair has grown too long and it's time for another $100K "hair cut" to $699-750K. If I were him, I would get on my knees and pray I break even on this one.

Mortgage 101: Interest Only Loans

How the flippers got rich and how the buyers became fools.

This video sums up everything you need to know about interest only loans and why you should stay away from them. If you can't afford to by a home using a conventional 30-year mortgage then just rent. You are better off in the longterm.

Same old tune in El Cajon

9553 CHIMNEY ROCK, EL CAJON

This flipper purchased this 4 Br, 3 Ba 2203 sq ft home on 3/24/2006 for $670,000. He turned around and put the home for sale on 8/15/2006 after less than 5 months of "home ownership". The original asking price was $680,000 and has been lowered to $640,000. This flipper is going to get a $70,000 "hair cut" even if he gets a full offer (which is doubtful).

I estimate this house in the $500-550K range max in todays market, and $375K by Summer 2008.

A Humbling Lesson for Realtors' President

How ironic, a great story about this home belonging to Thomas M. Stevens, president of the National Association of Realtors, that has been on the market for about a year from the Washington Post...........

By Sandra Fleishman

He, of all people, should have known better.

The president of the National Association of Realtors, Thomas M. Stevens of Vienna, admits he didn't follow his agents' advice when the real estate market started to cool. That, he says, is why his old house in Great Falls has now been on the market for a year at the price of $1.45 million.

"What I should have done," confessed the senior vice president of NRT Inc., parent of Coldwell Banker Residential Brokerage, "was listened to my agent and cut the price by $50,000 to $100,000 early on, and the property would have sold last October."
Or, even better, he said, "I should have listed it a month earlier," when the market was only just beginning to lose air.

Now Stevens, like so many other home sellers in the Washington area and around the nation, is waiting for a buyer in a market that has totally reversed course since a year ago. With two or three times the number of properties listed this year as last in some neighborhoods, agents are urging sellers to lower their expectations, put on their best face and offer incentives such as closing cost help.

Stevens does have a better excuse than most for not paying attention. He's been on the road most of the year as head of the 1.3 million-member real estate organization, the nation's largest trade group. And when he's at his current home in Vienna, "I've been downtown lobbying."

He and his wife, Lindy, were also preoccupied in the past few years with remodeling the home they now live in, a 100-year-old farmhouse called Windover House. They bought that property in 2001 for $1.3 million. It's now assessed at almost $2.8 million, a testament to the hot market.

The Great Falls Colonial that's for sale was the Stevenses' previous house on Woodleaf Lane, their first home after they married. They bought the two acres of land in 1979 for $49,500, and took out what now sounds like a high-interest construction loan. Stevens remembers how unnerving those days were: "Rates went all the way to 19 percent, and my wife said we would not be able to afford to buy. . . . But we grabbed a 12-and-a-half percent loan and we thought we had struck gold."

Stevens said that when he set the price for the four-bedroom, 3 1/2 -bath Great Falls property, his agents, Gail and Terry Belt of Coldwell Banker Residential Brokerage in Vienna, warned him that he might be high. And they have continued to remind him about the shifting market.

"They sent the letter telling me the listing was approaching a year" and that the price needed another look, he said. "They're doing their job as agents. I'm not doing my job as a seller."

But, he noted, in his defense: "Who knew last September how long this down trend was going to continue," after so many years of climbing upward?

When asked how long sellers should expect a sale to take these days, Stevens said 40 to 60 days would be typical. And if a house hasn't moved by then, he said, "You need to adjust the price. . . . But I didn't do that. And my house is still on the market."

Awesome.......lesson learned

Chula Vista Nightmare

I recently recieved an email from Ben G. who wanted to expose a "flip gone bad" in Chula Vista.

1411 CAMINITO BORREGO UNIT#6, CHULA VISTA




These townhomes went on the market in 2002. Unit #6 is approximately 1,141 sq. ft. Two bedrooms, two baths, deck and attached one-car garage.

As I mentioned before, these homes sold in 2002 and were priced from the high $100,000s. In fact I pulled the brochure from the Union Tribune website:





This townhouse was sold on 5/25/2005 for $425,000 and was placed for sale by the current owner on 10/10/2006 for $350,000-$369,000.

The current owner evidently took out a 100% financed loan, because her agent listed it as a short sale.

The owner, lender and neighbors stand to take a huge hit here, a 13-18% hit in 18 months to be exact. This is unfortunate, however the story must be told to protect future buyers from these flippers.

Thanks Ben.

Affordable homes in Chula Vista?

The City of Chula Vista and Trimark Pacific Homes are making it possible for 1st - time buyers who meet certain criteria to purchase a new townhome in the San Miguel Ranch community of Chula Vista . In order to participate in this unique opportunity, all buyers must meet specific guidelines and requirements and be subject to ownership restriction during the period of ownership. Here is a brief overview of the qualifications for this program:

*You must be a first-time homebuyer. This means you have not had any interest in any real estate in the last 3 years.

*Your total gross household income for all family members (before taxes) must not exceed the following limits based on family size:

1-person--$38,650
2-people--$44,150
3-people--$49,700
4-people--$55,200
5-people--$59,600
6-people--$64,050
7-people--$68,450

*You must earn enough to meet the minimum qualifying income for the size townhome you are purchasing. No non-occupant co-borrowers will be allowed.

*You must have enough cash to provide the minimum down payment and closing costs for the size townhome you are purchasing.

*Your total liquid assets after you move in may not exceed $25,000.

*You must occupy the property as your principle place of residence for the entire duration of ownership.

*When you sell your townhome, you will be subject to resale restrictions.

You may think with all these restrictions you may actually get a good deal here right? Wrong, these townhomes start at $350-410K. That means your house payments are going to be in the $1750-$2100 range at the current interest rates.

I am sure a 2 person family making $44k ($30K after taxes, medical, etc) can afford $1800 per month, plus HOA's, plus bills.

Thank God for those $0.99 cent deals at Taco Bell.

Best and worst values in San Marcos

It's time again to pick out a random community and select the best and worst values. This week we chose San Marcos. San Marcos is a fast growing community in North San Diego County. There have been many new homes built there since 2000, so it makes it a prime location for flippers.

Today, instead of focusing on flipper activity, lets determining the best an worst values when we consider factors such as price/sq ft. In this area you would usually find many homes in the 2000-3000 sq ft range selling for $550-750K. IMHO, areas like San Marcos, Carlsbad & Rancho Bernardo fueled the housing bubble and unfortunately (or fortunately) will ultimately see the largest decline.

The worst value in San Marcos:

663 LA SIERRA DR, SAN MARCOS

This is a 870 sq ft home built in 1975 consisting of 3 Br and 1 Ba on a 7200 sq ft lot. The owner is currently asking between $470,000-$490,000. That basically means you would pay approximately $540-$563/sq ft.

Since this home is not located on the sand nor has any special qualities (such as an oil filed or a diamond mine in the back yard) you would be best served avoiding this pricey home.

The best value in San Marcos:

362 EDGEWATER DR, SAN MARCOS


Since "best value" is inherently a subjective term I submit this 3174 sq ft home built in 2004 consisting of 5 Br, 4 Ba on a 9350 sq ft lot. Even though the owner is asking $589,900-$639,900, or approximately $186-$202/sq ft, the home is at the low end of similar homes. The one draw back (and a deal breaker for me) is the $380 per month HOAs and Mello-Roos (that is a car payment on a BMW for the next 30 years).

So there you have it folks, some descent examples in the city of San Marcos.

Regulation of risky mortgages long overdue

Finally, there are some folks that believe for you to qualify for a 100% financed loan of $750,000 you should not make less than $30K a year.....what a revelation!

This article from Inman news is interesting.....

By Marcie Geffner

Federal regulators recently suggested new guidelines for banks that originate certain types of high-risk mortgages. The banks, predictably, were not enthusiastic about the regulators' suggestions. But the regulators have it right: It's high time for banks to limit access to these mortgages and disclose the real risks to borrowers.

The suggested guidelines would require banks to qualify borrowers for financing on the basis of fully indexed interest rates for interest-only and payment-option loans and to consider the borrower's ability to repay not only the original loan amount, but also any additional principal that may result if interest-only or minimum payments are made.

Banks have objected that these guidelines would limit the number of people who can qualify for these loans. That's true and it's exactly the point. The borrower's ability to repay the loan should be a basic component of loan underwriting and to ignore it defies common sense. A borrower's ability to manage no more than just the interest-only or minimum payments should disqualify him or her from this type of loan since the payments will escalate when the loan is recast.

Reasonable guidelines will not keep everyone from obtaining these loans, but rather the loans will be reserved for those borrowers who have the ability to manage and repay the debt.

Banks also have suggested that borrowers may be frightened by disclosures that reveal how much higher their monthly payments would be in certain circumstances. Again, that's exactly the point: Borrowers who are frightened off by those higher payments shouldn't have these types of loans. Most home buyers naturally experience some anxiety about the financial commitment, but it's irresponsible to help people buy a home they are truly frightened they won't be able to afford.

Banks also have argued that the suggested disclosures should be required of all lenders, not just federally insured institutions. That's a good point too -- and a compelling argument for more regulation, not less. Once federal regulators set appropriate standards, state regulators can and should follow that lead. Some state-level regulatory groups already have signaled an intention to do so.

Interest-only and minimum-payment loans have helped many people purchase homes, but who benefits if those homeowners can't afford the higher payments and the property ends up in foreclosure? The homeowners lose while the lenders and mortgage brokers make out like proverbial bandits. The brokers have collected their commissions; the lenders have sold the loans, and the investors who purchased them are protected by mortgage insurance, which is, of course, paid for by the homeowners.

Interest-only and payment-option loans were supposed to be intended for sophisticated borrowers who could take advantage of the greater flexibility. The fact that so many of these loans were sold to people for whom they weren't intended begs an obvious yet important question: Why didn't regulators insist on tougher guidelines a long time ago?

It's equally easy to point an accusatory finger at supposedly greedy mortgage brokers, but neither the regulators nor the brokers are solely responsible. After all, the lenders created these loans and set up the compensation systems that rewardbrokers who push borrowers into these riskiest of mortgages.

It's fair to argue as well that some of the blame lies with the borrowers. Willful ignorance, irresponsible decisions, house envy, an insatiable desire for immediate gratification, blind trust and a sign-it-now-and-read-it-later-if-ever mentality have been magnified to an astounding degree and aren't a smart way to borrow hundreds of thousands of dollars.

Since those borrower frailties are apt to undo the benefits of additional disclosures, tighter underwriting guidelines are crucial. Those who are able to qualify will be able to obtain these loan products while those who can't, won't. It's really that simple, and the regulators, lenders, brokers and borrowers should make it happen. To mix a few metaphors, it's time for everyone to step up to the plate, be the first line of defense and get the responsibility ball rolling because it's the right thing to do.

Flipper can't hideaway in Scripps Ranch

12918 HIDEAWAY LANE, SCRIPPS RANCH

This house was purchase on 11/9/2005 for a cool $1,000,000. It is a 5 Br, 4.5 Ba, 3563 sq ft, mini-castle.

This flipper quickly listed his home for sale less than 5 months later on 4/10/2006 for $1,099,000.

Even if he recieved a full offer he would barely be making a profit, certainly not enough profit to chance it in a buyers market. Well, more than 6 months have past and while he has reduced his asking price to $949,000-$999,000 there is just no motivation for a buyer to take on such a huge mortgage payment.

This home and many others in this area are well on their way down this slippery slope we call the biggest price correction in the history of California.

Great Deal For 1st-time home buyers

2616 MEADE AVE, NORMAL HEIGHTS

Hurry up folks we have a great deal for you, but act fast because this listing will not last!

2Br, 2Ba, 983 sq ft, built in 1934, sitting on a spacious 2500 sq ft lot.....

I'll just let the realtor do the talking, because I'm just so excited....

"GREAT OPPORTUNITY!! FOR INVESTOR OR 1ST TIME BUYER. COSMETIC FIXER WITH GREAT OPEN FLOOR PLAN. NICE WOOD FLOORS. TAX RECORDS SHOW JUST UNDER 1000 BUT SELLERS STATE OVER 1000 ESTIMATED SQR. FT. AND FEELS LARGER. NEEDS UPDATING AND HAVE A GREAT HOME. SELLER MOTIVATED FOR A QUICK SALE. NICE SPANISH COTTAGE LOOK. 24HR NOTICE "

All this for a low price of $549,900-$599,900

I can't wait until my realtor takes me on a tour of this home, even though it is on the high end of my range, I'm sure I can talk my wife and kids into living in this beauty.

Mission Valley Flippers Frustrated

8355 STATION VILLAGE LANE, MISSION VALLEY

These flippers purchased these 5 units last year and attempted to pull a fast one on the general public.

Unit # 4304

2 br, 2 ba 1171 sq ft, purchased for $481,267 on 6/21/2005, listed on 8/31/2006 for $430,000-$485,876

Unit # 4104

2 br, 2 ba 1171 sq ft, purchased for $402,713 on 6/24/2005, listed on 8/3/2006 for $549,000 has now been reduced to $512,999-$524,999

Unit # 4218
2 br, 2 ba 1171 sq ft, purchased for $516,769 on 6/24/2005, listed on 9/5/2006 for $517,000-$535,000

Unit # 4309
2 br, 2 ba 1176 sq ft, purchased for $485,738 on 6/20/2005, listed on 9/6/2006 for $539,900 has now been reduced to $525,000

Unit # 4203

2 br, 2 ba 1179 sq ft, purchased for $507,999 on 6/15/2005, listed on 3/28/2006 for $610,000 has now been reduced to $529,999

All of these flippers will be lucky to break even. What ever happened to earning money the old fashioned way with screwing innocent folks who just want a place to live without pay 80% of their take home salary.

Folks, the blog is for your education spread the word and stop this outrageous behavior. We must make a stand and take back our county.......together.

How fast can you flip a house?

9286 OLYMPUS COURT, MIRA MESA

This flpper purchased this house less than a month ago on 9/15/2006 for $663,900. He listed it on the market the next freak'in day on 9/16/2006 for $699,000-$765,000. I am shocked that there are flippers out there that still believe that they can get away with this, and I can't believe that there are buyers out there that help them achieve their goals.

Spread the world we are not going to put up with this anymore.

**Flipper Alert**Flipper Alert**Flipper Alert**

452 CORNWALL, ESCONDIDO

This flipper has 2 other flippers on the same street to compete with, 412, and 423 Cornwall, respectively. Even though his house has a smaller living area, 1995 vs 2158 sq ft, he aggressively put his home on the market for $539K after only 8 months after purchasing it for $465,990. Currently, it is listed for $529K and has been on the market for 50 days.

Lets look at his competition:

412 Cornwall, 2158 sq ft, purchased for $501,989 on 12/2005, asking $499,900-$529,900, on the market for 35 days.

423 Cornwall, 2158 sq ft, purchased for $506,604 on 12/2005, asking $499,900-$529,900, on the market for 27 days.

What do you think? My inclination is that all of these flippers will be very luck to sell in the $425-450K range. IMHO, if Iwere looking to buy in this area, I would definately hold out until they reach $275-375K, hopefully by Spring 2008.