Welcome to City-Data.com Forum!
U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > U.S. Forums > California
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 12-30-2008, 10:30 AM
 
1,831 posts, read 5,284,873 times
Reputation: 673

Advertisements

This is an example of a home I would like to buy in Las Palmas, a very nice area of Monterey County. It's bank owned and just went on the market for $575K, which is setting a new low comp for the area.

21945 Hearthwood CT, Salinas Monterey Highway, CA, 93908 - MLS ID#80849246 - Single Family Home Real Estate - REALTOR.com® (http://www.realtor.com/search/listingdetail.aspx?sby=1&pg=3&srcnt=131&sid=8e74bb 6ad6904fa180cc2d8253d56e46&fhcnt=4&loc=93908&usrlo c=93908&fhpg=1&lid=1105384382&lsn=26 - broken link)

I'm not going to buy it now since prices are stilling falling. Prices in this area have been very sticky and much slower to fall than subprime areas so ... I'm trying to figure out what the true market price of this type of property should be and when I should buy.

Income in this area is $105K on average but ... I don't think the standard income multiplier of 3-3.5 times income would apply since this house sold for $300K back in 1998 ... ten years ago. So obviously these properties were selling above standard income ratios well before the post-2000 boom.

Standard appreciation rates don't seem to apply either because when I go back and research California home price appreciation even before the boom ... you're looking at much higher appreciation rates than the rest of the country.

In 1970 California homes sold for 24K on average. By 2000 homes sold for 10 times that amount ... 240K. So I'm not sure what appreciation rates to use since California has always had high appreciation ... even before the outrageous post-2000 prices.

http://www.mybudget360.com/wp-conten...5_medianus.gif

I'm guessing that with the Alt-A resets this year and a few more foreclosures (this area has had some foreclosures but not a lot) ...

A property like this may come down another $100K but ... that would pretty much be the bottom for this neighborhood.

What do you think?

Last edited by sheri257; 12-30-2008 at 10:53 AM..
Reply With Quote Quick reply to this message

 
Old 12-30-2008, 11:01 AM
 
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,259,349 times
Reputation: 6469
Using old statistics really isn't helpful to your cause I think. The real value is what homes are selling for today. I have to tell you I'm surprised that the asking price sets a new low. I would expect that house to be that price in San Jose, not Salinas. But I don't know those markets.

Timing the market for the exact low probably isn't going to be helpful either. Obviously a home is an investment, but more importantly it's a place to live that offers some advantages over renting.

Long story short. Pick a number you're comfortable with and make the offer, if accepted you will have set the new low for solds. Someone else may come along in the next six months and lower the mark again, but you got the home you wanted at the price you wanted.

Good Luck!
Reply With Quote Quick reply to this message
 
Old 12-30-2008, 11:22 AM
 
1,831 posts, read 5,284,873 times
Reputation: 673
Quote:
Originally Posted by DMenscha View Post
Using old statistics really isn't helpful to your cause I think. The real value is what homes are selling for today. I have to tell you I'm surprised that the asking price sets a new low. I would expect that house to be that price in San Jose, not Salinas. But I don't know those markets.
Technically it's in Salinas and has a Salinas address but, it's not actually in town. It's in the very high priced areas off of Highway 68 as you head into the Monterey Pennisula. A lot of those million dollar properties are technically in Salinas but, they don't sell for typical Salinas prices.
Reply With Quote Quick reply to this message
 
Old 12-30-2008, 05:31 PM
 
Location: Seattle
1,369 posts, read 3,303,452 times
Reputation: 1499
I think you have to consider the risk:reward of buying a house now. Consider the fact that most predictions are for at least another 20% drop in housing prices in the next couple years. Consider the fact that if you put 80,000 dollars down on this property and the value drops 15% you have lost your entire lot of 80k in cash. That's a lot of money to lose! Even the "best case" scenario housing price predictions call for further declines. But what if things are even worse than predicted, and say, housing prices drop 30-35% more? I ask you, what's the upside of buying a house now? Even in the best case scenario you break even or only lose a little bit of money. The worst case is you lose almost a six figure amount of money.

Also consider the fact that in the last California real estate recession the good neighborhoods declined the same amount as bad neighborhoods, but the good neighborhoods declined much later in the real estate cycle than the bad ones. This, being a really nice neighborhood, is likely why the prices have been "sticky."

They will drop just as much it will just happen AFTER the bad neighborhoods have started to recover. Remember, what fuels price appreciation in higher income neighborhoods is people "trading up" from lower income ones. So since people can't trade up due to the rapid depreciation in housing prices in low neighborhoods, they are still priced out of nicer neighborhoods. However, eventually people have to move and sell/liquidate their houses for various reasons, and eventually people in nicer neighborhoods will need a buyer. Normally those buyers come from people trading up. The fact that real estate is such an illiquid investment is the fundamental reason why the nice neighborhoods have been more "sticky." Higher income people can generally wait longer before selling their assets and many of them haven't been "forced" to move yet, compared to people in lower income areas which are plagued by foreclosures and high unemployment (unemployment is almost always much higher among low income people than high income).

Also consider that the Salinas area consistently ranks as one of the most "unaffordable" housing markets in terms of median income:median house price. This is one of the key metrics that drives real estate prices...people need to make a certain income to afford a certain level of house. These numbers will almost certainly deviate back to historical averages, which still put real estate prices in this area (and most of CA) way out of whack with history. Combine that with people having less than average cash on hand due to a bad recession and a massive deleveraging of consumer balance sheets and housing price:income ratios may actually fall BELOW historical averages, despite low interest rates.

In short I think buying a house now is the rough equivalent of burning money. Rent for a year and buy the same house for probably 20% lower, plus we'll know a lot more in 6-12 months about how bad this recession will get. Housing prices will almost 100% certain not be HIGHER in 12 months than now...but they could be a LOT lower. In a recession, cash is king. Please don't forget that.

My guess is this property could bottom close to 1998 levels (not all the way but if that house drops to 400k that's still only a 30% additional decline). Income levels have not increased that much since 1998, although this is a difficult number to substantiate since a lot of the latest income data is from 2006 which is a completely different economic environment than now. Regardless I wouldn't touch that property unless it was in the low-mid 400s personally.

Last edited by drshang; 12-30-2008 at 05:46 PM.. Reason: clarity
Reply With Quote Quick reply to this message
 
Old 12-30-2008, 05:50 PM
 
889 posts, read 3,111,465 times
Reputation: 362
Wait,IMO.Las Palmas is in Spreckles BUT--- i still think it may come down a bit more.
I do know at its peek,the area was going for alot more.Good access for you for where you work though.
Reply With Quote Quick reply to this message
 
Old 12-31-2008, 08:25 AM
 
1,831 posts, read 5,284,873 times
Reputation: 673
I didn't say I was going to buy now. I won't. I was asking when I should buy and at what price.
Reply With Quote Quick reply to this message
 
Old 12-31-2008, 08:32 AM
 
1,831 posts, read 5,284,873 times
Reputation: 673
Quote:
Originally Posted by drshang View Post
My guess is this property could bottom close to 1998 levels (not all the way but if that house drops to 400k that's still only a 30% additional decline). Income levels have not increased that much since 1998, although this is a difficult number to substantiate since a lot of the latest income data is from 2006 which is a completely different economic environment than now. Regardless I wouldn't touch that property unless it was in the low-mid 400s personally.
I don't think those houses will drop to '98 levels (that would be 300K) but I do think the mid 400's for this size house (2300 square foot) is a good bottom call.

Right now the smaller houses (1100 to 1300 square feet) are selling in the low 400's (one even sold for 390K) but the larger homes haven't gotten down that much yet.
Reply With Quote Quick reply to this message
 
Old 01-01-2009, 01:29 AM
 
Location: Northern Nevada
8,545 posts, read 10,259,488 times
Reputation: 3068
Hey Sheri..when you get this housebuying thing figured out, will you let me know..we are starting our househunting next month east of Sacramento..totally different ballgame than the coast, but we are in the same boat as you..how much more will prices fall? What about interest rates? We are buying to live in, not flip or as an investment per se...retired but young still..

It's kind of a crapshoot..i guess my thinking is that if you see a home you love and want to LIVE in. We have owned homes for 31 years. For most of those years, housing prices went down, then up, then down, then up. Did we ever really think about it. No. it wasn't until the last few years that folks started making tons on their homes.

We just want a home to live in...PS that looks like a really nice house if that is the area you want to be in! I know what an ordeal this has been for you too....Happy New Year!
Reply With Quote Quick reply to this message
 
Old 01-01-2009, 09:19 AM
 
Location: Las Flores, Orange County, CA
26,338 posts, read 93,569,402 times
Reputation: 17830
I don't know if this helps but redfin has recent sales data on it. I can't think of anything else.


21945 Hearthwood Ct, Salinas Monterey Highway, CA 93908 | MLS# 80849246
Reply With Quote Quick reply to this message
 
Old 01-01-2009, 10:39 AM
 
Location: Daytona Beach, Florida
268 posts, read 898,213 times
Reputation: 160
$500,00.00 can buy a fairly new mansion on the Beach in Florida.

It's beyond me why a guy would pay 1/2 million bones for a basic/average home in California when that same $ buys you a large home/small masion anywhere in the US.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Settings
X
Data:
Loading data...
Based on 2000-2020 data
Loading data...

123
Hide US histogram

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > U.S. Forums > California

All times are GMT -6.

© 2005-2024, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top