Friday, February 8, 2008

Flipping in Cameron Park

In early 2007 I saw a notice of default on a house in Cameron Park (4310 Rancho Road). The owner had purchased years ago, then taken out a large chunk of money on a refi, but the minimum interest rate on the ARM adjustment was near 10% APR. He stopped making payments and lived there for quite a while, apparently "rent free." The bank auction was on July 13, 2007, at about $840k if my memory is correct. In about August 2007, it went on the market at $525k. I did a visual inspection for Mrs. Paul and myself, but passed on it. Within a week, it went pending on the MLS and apparently closed at $525k. It is now back on the market at $840k, and "pending" again at that list price. "Well built Custom Home/Equestrian Property , that has been refurbished,cleaned up and several years of neglect repaired." No mention of the buried underground fuel storage tank that I saw on the property when I did my inspection. I will never know if the flipper/seller discloses the tank or not, but simply don't understand anyone paying anything close to $840k (+$320 sq ft) for a 30 year old house that has no architectural style and is only 2,700 sq ft. True, its horsey property in a generally nice subdivision (5 ac minimums), but probably in the least desirable portion of the subdivision (freeway noise from US50, the second factor that caused me to reject it). Maybe we have hit a bottom?


Anonymous said...

Wait..... are you saying that it sold in August 07 at $525K and it is now, re-listed and "pending" @ $840K? Unbelievable.

Paul said...

Anon: Yes, that is what I am saying.

coffee is for closers said...

Somebody is getting screwed.Must be one of these so called investors roaming around town.Maybe you should go tell the new owners about the fuel tank after they close.You might be able to buy it for 400k after the lawsuit.

Cmyst said...

I know a couple that bought up a little further than CP. They were coming from the Bay, and they thought prices up there were "a steal". And it was the same thing: a blah house, on multi-acre property. So now, they have their horse. They also have bears, mountain lions, and the need to maintain their property to avoid fire hazard in the dry months. I've seen a very similar place with a little less land on the market for about half what they paid in the last few months.
Plus, the wife still works in the Bay Area, and is only home on weekends. The husband finally took a position in retail, because of a loss in income due to the popping of the housing bubble on which his former career depended. Now, to me, this is no "steal".
No, I don't think this is anything other than some idiot from the Bay overpaying for a property, because no one from the area would pay that much.

mcb44 said...

Here is a snapshot of the SFH market in Auburn taken yesterday from Metrolist.
212 listings
26 pending sales
18 or 69% of the pending sales are in the 399 - 200k list price range. This inventory for this range is 65 or 31% of total inventory.
Pending sales = 12% of total inventory
Pending sales in the 399 - 200k price range = 28% of inventory
Pending sales in the 1m- 400k = 5% of inventory

This is consistent with the numbers from last week giving a pretty good hint that the sweet spot for sales in this market begins below 400k. I suspect that in time we'll see quite a few of the higher priced homes edging closer to the range where people are trying to buy. Of course, the % of pending sales that become actual sales is another question.

Beagle said...

I don't know if it's a bottom, but 15 homes went pending in EDH last week. Also, from what I gather, there are a number of offers that are circulating and activity has picked up. Maybe it's seasonal, though the fact remains that buyers are out there and stepping up.

anon1137 said...

A bottom? Ha! the market is barely past peak in some areas. Were you guys still in Huggies in the 90s? That boom was a pimple compared to this and it took something like 8 years to recover. Did you forget that we're entering a global recession now? Wake me up in 2012.

Paul said...

I read elsewhere recently that the peak month for home sales in 2006 and 2007 (closings I believe), was March in each year, and it went downhill from there. I just checked a new home sales chart (as distinguished from resales), and it appeared to confirm that statistic. If true and a similar pattern is followed in 2008 (who knows?), that would explain a pickup in activity in January-February.

Patient Renter said...

Cymst - nice story. No pity here.

Beagle said:

"I don't know if it's a bottom"

I'll help you with that one: No.

"buyers are out there and stepping up."

Buyers have been and will be stepping up all the way down. As I just mentioned on the SacLanding blog, the folks who suffered the most during the great depression were those who bought the "great deals" after the first wave down. Many more waves will follow, and fools will be drowning the entire way.

beagle said...

Anon, I don't know which areas you're referring to, but in the greater Sacramento area the market is far past peak. My understanding is that the market peaked in the summer/fall of 2005, and prices generally are down 30% or more since then.

Patient Renter, if you have some facts and figures to support your hyperbole, great. Otherwise, save it. I'm uninterested in baseless fear-mongering.

Paul said...

I should give credit for my stats (March 06 and 07 sales) to Sac Landing.

Mike said...

"Maybe we have hit a bottom?"

Nope, this is definitely not the bottom. What's happening now is what I experienced in the popping of the stock market bubble few years back. I purchased some Worldcomm Stocks thinking they were good deal at $10/share (They were near $100/share at one point I think). We all know what happened with that (It went to $.01/share)

No, what we are seeing is spring bounce thanks to recent interest cuts and some pent up demands and most likely idiot "investors"

As I mentioned previously, last week my relatives offer on a house was was rejected because there were 14 other competing bids (over the asking price). I went to visit a new home development couple weeks ago and they told me if you want the next release, you may have to take a number due to potential other buyers.

My prediction is this spring bounce will dry up by mid year and we will have a really ugly fall/winter 2008. We will see....

mcb44 said...

beagle asked patient renter for some facts to support his position. I'm not sure about facts, since the info is from the MLS, but I tend to agree with patient renter's conclusions, and thought I'd take a shot at some data points at least, from EDH. Same methodology as my Auburn stats with Metrolist as the source.
There are 382 listings between 1.5 million and 200k
43 pending sales in that range
16% of the PS are in the 1.5m - 700k range, 30% in the 699 - 500k range and 53% between 499 - 200k. Actually the lowest price in the range was 299,900.
Assuming 100% of the PS become sales, there is 8.9 months inventory in EDH between 1.5m and 299,900.
I don't have a data point for what the %PS to Sales has been lately, but given the credit situation, I'd expect it to be low. It would not be toom much of a stretch to double that almost 9 mnths figure. This seems to support the contention that the bottom is a ways off. If you look at the last 2 years of seasonal inventory pattern, for the 4 counties area on Max's blog, it's a pretty good bet that the inventory will be headed up before it heads down from here.

The month's inventory for Auburn using the same PS figure for sales was 8.2.

Patient Renter said...

"if you have some facts and figures to support your hyperbole, great. Otherwise, save it. I'm uninterested in baseless fear-mongering."

Baseless fear mongering? I've been following this crap for over 2 years. I'm not going to waste my time providing facts and figures to you. If you want to educate yourself go for it. You might want to start by looking at Shiller's research, credit suisse data, historical price and inventory data (from previous bubbles). Even the median price graph over at SacLanding is pretty to look at (hint: the fact that the direction of the falling is steeply downwards should indicate to any fool that we are nowhere close to the bottom. shiller's research will teach you that housing bottoms turn slowly over several years, they don't turn on a dime.)

I think I'd prefer to see you catch a knife though.

Beagle said...

Thank you, Mcb44; Question: when you reference the 8.9 months of inventory, what sales rate are you using? Is it the past month's sales rate, some historical-based amount, or other?

You're sounding shrill, Patient Renter. You must be bitter about something. Whatever.

I didn't think you could put up anything to supoport your bs. The reality is that it's not about what has happened to this point as much as it is about what is going to happen from here. Shiller doesn't track Sacramento, and his indexes do not in any event incorporate the kind of decline that *already* has occurred here. Credit Suisse's ARM reset graphs do not take into account prevailing low rates, refinancings, modifications, etc. I could go on, but the bottom line is that if you're in the camp that believes the majority of the decline has -not- already occurred, then you necessarily subscribe to the view that there will be an aggregate decline from the 2005 peak of greater than 60%. I don't think so.

Paul said...

Just a reminder. It was only last week that Bernanke opined that the worst of the housing decline is ahead of us. Is he right? I don't know. We all have out opinions and only time will prove whether he or any of the rest of us have the correct opinions.

mcb44 said...

"Question: when you reference the 8.9 months of inventory, what sales rate are you using?"

I used current inventory / current pending sales, not past actual sales. The likely sources of error with this method, are houses will show as PS for variable periods of time depending on escrow period, and nowadays, a signicicant number of pending sales do not complete the transaction. This is why using PS these days, most likely underestimates the months of inventory.

alba said...

In the last 30 days, there have been 64 homes in EDH that went NOD; up from 45 the previous 30 days. Looking at a RealtyTrac map of Serrano, it is littered with nearly 200 homes that are NOD, NTS, or REO. The timing and prices of the purchases in EDH coincide with either subprime loans (newer homes) and 5yr resets. I'd say EDH has yet to feel the inevitable free-fall, but will, when folks can't re-fi because their home is under water.

In the $500K-1M range (4/3), there are 174 homes listed, with 14 pending. Sounds brisk! Any of them your listings?

smf said...

"if you have some facts and figures to support your hyperbole, great"

It is called history.

In we look back to any bubble thatn has occurred since tulip mania, we can see the same forces working on the way UP as they do on the way DOWN.

You can go back and the chart for the bubble and notice how the NASDAQ went all the way down till it 'returned to mean'.

Since this market still has not returned to mean, we still have a ways to go.

Patient Renter said...

"It is called history."

No smf. You're just bitter about something. Whatever.


Westparker said...

Remember, nothing goes down in a straight line. Pull up a chart of the nasdaq from 2000 to 2005, while it dropped 75%, there were 3 or 4 10%-20% jumps. The housing market will recover based on fundimentals, not anicdotes.

smf said...

"You're just bitter about something."

I know you are joking, but just to set the record straight, I already own a home. Just looking to move on up.

"The housing market will recover based on fundimentals"

That chart is pretty typical. Down, up, down, up, down till you get some real losses. 75% off, remember? We are at what, 30% now?

And of course, after almost 8 years from the high, it is barely halfway there. (That one is for those who believe prices will come right back).

Patient Renter said...

Yep, I hadn't forgotten that you own, but I was definately joking :)

I too use previous boom/bust patterns as my template for what's happening now. That's all you need to know what's going to happen (or not happen) next.

smf said...

"I too use previous boom/bust patterns as my template for what's happening now."

They ALL follow the same template. That's why it bothers me when it is assumed that some bubbleheads are making stuff up (when it is really the other way around).