California Dreamin'

“IT’S DIFFERENT HERE”

“take a look at the great schools“

“how about that weather”

Carmel Valley is pretty much the definition of Southern California Mcmansion bubbleville. If you looked this up in a dictionary it would say=Carmel Valley.   A top ranked school system , easy access location , strong Asian demographics and mostly post 1999 construction has created a overall tulip mania mentality of :  “high ranking schools equals 200k value premium over similar sized homes in neighboring areas”

Remember the theme song from the show “Weeds”  – “Little boxes made of ticky tacky” – well that basically exemplifies Carmel Valley.

Yes Carmel Valley is all of that and more .  Why would you want to pay insane bubble prices for homes that all look the same?  Its pretty sad actually.  I guess if it was a great deal and priced low- combined with the local ameneties-then I could possibly see the reasoning for this -But not right now in the soon to be crashing Carmel valley bubble!

Lets take a look at Carmel  Valley :

Yes it would seem that Carmel Valley has basically stayed bubble inflated -But lets take a more recent look pricing activity:

Seems like we have a more recent trend here- List prices have been coming down substantially with sales price per st foot holding steady to slightly down- guess where this trend is going?

92130

Homes Sold	Sep ’11	vs. Prev. Month	vs. Prev. Year
# Homes Sold	58	-6.5%	-19.4%
Median Sold Price	$688K	-15.9%	-12.3%
Median Sold $/SqFt.	$318	-1.2%	-4.2%
% Sale to List	96.1%	0.1%	0.2%

11228 Vereda Mar De Corazon  92130   -$847000-reduced 4 times in 30 days!

http://www.redfin.com/CA/San-Diego/11228-Vereda-Mar-De-Corazon-92130/home/6293611

“Come take a look at this great home! This 2679 sqft Montecito home with bright open floor-plan, gorgeous westward view to Torrey Pines preserve, and is ready for its new owners. Short walk to shopping, East Ocean Air School and 3 parks! “

How are these bubble owners feeling right now? Bought in 2005- for $1.050 , better get out before its too late.  At least they are dropping the pricing quickly as despite the historic low interest rates-foot traffic has been beyond slow.

Whats this home really worth?  LETS LOOK AT THE “CALIFORNIA DREAMIN’ VALUE INDICATOR”  (VALUE ON 01/01/2000 +1/3 COST OF RENOVATIONS SINCE)

Home sold new on  03/2000 so we will use that price

$489000   + (1/3 of 45k in renovations-being generous again) 15k= $504000 current value. 

Good luck to the “lucky person”  who picks up this Gem at a  still inflated price- but quickly falling price.   Maybe many individuals will start taking the cue from the show “Weeds”-   start growing some stuff on the side to help pay for your mortgage and Jonesing lifestyles.

Is all well on Fantasy Island?

Q:Well is this place an Island or a peninsula?

A:Based on pricing history its a BUBBLE Island, but actually really a peninsula .

But what we can agree on is its a scenic place:

Lovely View of the “Island” and world famous Hotel Del.

To go along with this Utopia of Large beaches, fantastic Village area and tons of History , we have this:

A full fledged Naval Airbase- a great example of our gov’t keppin’ the Bubble intact

A major reason of inflated pricing in Coronado is the Housing stipend that many Pilots and officers receive to live here. Usually averaging 3-5k per month! So with a extra 3-5k to spend on housing every month,  its  easy to see why housing prices and rents in Coronado have somewhat “stabilized” at such bubblicious levels.

BUT IS THS ALL LIKELY TO CHANGE?

The answer is eventually -yes! We know that all bubbles implode to at least the level of were the bubble first started-its a law of Physics.It will take 3-5 years for this one to blow.

Lets look at two seperate homes in 92118 to illustrate the magnitude of this bubble:

1116 Third st  Coronado, 92118

http://www.redfin.com/CA/Coronado/1116-3rd-St-92118/home/5781491

“This charming cottage has many fine features including a fireplace, hardwood floors, large brick patio, air conditioning and lots of parking. Listing agent is owner. This charming home has many fine features, including fireplace with brick hearth, hardwood floors, air conditioning, French doors leading onto large brick patio. Parking in garage, driveway and back yard from alley entrance. Large storage area in finished attic. City park and library just down the street.”

PRICE-$749000! Say what? Ok a tiny 1 bedroom home on a busy roadway(third st is the entry street into town from the bridge, 4th is the exit street)

sold for 175k in 1992,then 329k in 1999,470 in 2002 and then 645k in 2006! This is how  the California dreamin began! Everyone makes money on real estate, just hold for a couple years,then sell for a couple hundred grand higher.

lets see what its really worth with the “california dreamin’ price indicator”(value on 01/01/2000 + 1/3 the renovations)

approx price on 01/01/2000 – $340000 + renovations (none on this one)=present value-$340000   (probably less as its primarily a land value situation which is worth about 225-260k on this busy street for this lot)

Lets look at a larger higher end home on a good street:

913 J AVE CORONADO 89118

http://www.redfin.com/CA/Coronado/913-J-Ave-92118/home/5790736

“Lovely Spanish Estate, just blocks from the beach. Beautiful home on 1 of the most sought after streets on the island J Ave!”

PRICE=$2140000

Here we have a large 4000 sq ft home on a large(by Coronado standards) Lot on a prime street in good condition. However not many upgrades since the 1998 sale.But nevertheless in good cond. They current owners thought they times the “crash “exactly in 2009 and paid $2400000! for the home.   Now comes the haircut-4 price cuts already on current listing.

Lets look at what this property is currently worth:

“THE CALIFORNIA DREAMIN PRICE INDICATOR”

APPROX VALUE ON 01/01/20003= $1290000 + RENOVATIONS(60 AND IM BEING NICE)=

CURRENT VALUE  $1310000

The Coronado bubble will take awhile to play out still. But with inevitable deficit cuts and Military cuts, can the Navy sustain the craziness there?

Expect a 30-50% haircut ahead for Fantasy Island!

La Jolla Dreamin’

Whats not to Like about La Jolla?

A great cove and Beaches

Great shopping and village area

Fast cars and fast chicks

Hey ,it looks so good that I may even want to move there!

But hold on there cowboys, is there trouble in paradise?

Welcome to the La Jolla houses of pain – where money doesnt matter , time stands still and snob hobbin’ is included at no charge!

544 GENTER STREET, LA JOLLA 92037

http://www.redfin.com/CA/La-Jolla/544-Genter-St-92037/home/4913557

A CUTE REMODELED RANCH  – “Completely remodeled home in sought after Beach-Barber Tract, Enjoy walking to award winning schools, Pearl Street venues, upper Girard, Sunday farmers market, shopping, fine dining, cafes, art galleries, local beaches and the Cove. This house exemplifies everything that living in La Jolla has to offer”

I couldnt of said this better myself. 

PRICE – $1049999(JUST REDUCED!)

BEDS-2 BATHS-1

SQ FT- 1052

$/SQFT – 998

LOT-3485 SQ FT

YR BLT -1950

It already looks like a must have! But wait!, theres More!

 ”new water heater”   yes its too good to be true -that is the clincher for me -$1000/ sq ft- no problem!

• Property History for 544 Genter St

  Date	Event		Price	Appreciation	Source
  Sep 16, 2011	Price Changed		$1,049,900	–	SANDICOR #110039813
  Jul 11, 2011	Listed (Active)		$1,099,000	–	SANDICOR #110039813
  Jul 29, 2008	Sold (Public Records)		$890,000	8.5%/yr	Public Records
  Jan 27, 1999	Sold (Public Records)		$410,000	–	Public Records

Ok am I missing something? Is there a gold mine buried under the one bathroom?

So it was  a correctly and sanely priced 410k at the start of the bubble in 1999 and not yet remodeled. But then it was off to the promised land. They remodeled most of the home and sold it in a already falling market in 2008 for 890k , and now the new owner puts in a water heater and picket fence and thinks its worth $1000/sq ft.   ! 

LETS USE THE CALIFORNIA DREAMIN’ PRICING INDICATOR  (EST VALUE ON 01/01/2000 +1/3 OF THE RENOVATIONS AFTER)

01/01/2000  -  $475000   RENOVATIONS- $40K (120K TOTAL)

VALUE RIGHT NOW IS $ 515000

Great comp just 1 block over:

7172 EADS AVE LA JOLLA 92037

http://www.redfin.com/CA/La-Jolla/7172-Eads-Ave-92037/home/6610328

SOLD PRICE – $870000

BEDS-3

BATHS-2

SQ FT- 1335

$/SQFT –657

SOLD ON 06/07/2011 BEFORE THE SUMMER SEASON!

COMPLETELY REMODELED JUST AS NICE AS GENTER ST AND MORE SQ FT AND RMS TO BOOT!

ON 06/07/2011 BEFORE THE SUMMER SEASON! AND THE PRICE WAS WAY TOO HIGH STILL! PREVIOUSLY SOLD FOR 625K IN THE HEART OF THE CRAZE IN 2003.

Welcome to lovely La Jolla- where bubbles live forever and dreams do come true!

Kudos to Dr housing bubble-   http://www.doctorhousingbubble.com/

DEL MAR DREAMIN’

Is it a racetrack Thats open 8 weeks a year?

Is it that beautiful Ocean and Beach?

Is it the great schools,Great weather or that Southern California beach town experience?

NOPE - ITS THE “IMMUNE HOUSING ” THAT HAS HAD ALMOST NO EFFECT FROM THE GREAT REAL ESTATE BUBBLE!

Lets take a example here:
http://www.redfin.com/CA/Del-Mar/2593-Via-Pisa-92014/home/4435479

Decent 2500 sq ft del mar house with some views and also some street noise. modestly renovated to a contemporary style.

what due you think is the true value of this home?

owner has it listed for a bubbly 1.175 m

it sold for 800k end of 2002
it sold for 535k end of 1998.

here is the value – lets take average crazy appreciation during this time between sales in 98 and 2002 – lets round it to a approx value of 650k on 01/01/2000. Lets figure 100k in renovations (take a third of that, because that is the most any renovation is worth and that is being generous, All homes need renovation every 10 years or so anyway- it is part of being a homeowner)

The California Dreamin’ value indicator:

Value formula is approximate pricing on 01/01/2000 plus 1/3 of all renovations since 01/2000

current value is :
650k on 01/01/2000
+ 33k(100K) for renovations

value is 683k . that is what this home is worth -700k tops.

And it may take 3-7 years for this to play out . but it will. It always has. It is The golden rule of bubbles-just like the laws of Physics.

to quote Mike from the movie Rounders:
” Listen, here’s the thing. If you can’t spot the sucker in your first half hour at the table, then you ARE the sucker “

The Brainwashing of California

This Makes Bernie Madoff seem like Mary Poppins

The Anatomy of a Ponzi scheme:

This is not the Holland Tulip Mania in the 1600′s

This is not the South Seas Bubble  in the 1700′s

This is not the Railroad Boom and Bust of the 1800′s

and how about that Roaring twenties thing in the 1900′s?  How did that pan out?

What happens when you combine Greed , a ton of speculation,crazy pyschology of the masses and a Federal and State Goverment that backs this philosophy?  The answer is California Housing.  

Prices in the 60′s – normal
70′s- normal
80′s normal -except a couple bubble years at the end
90′s -normal after crashing for the late 80′s bubble- then started going nuts in 1999
2000- biggest bubble in modern times next to the tulips.

what has happened since the 90′s ?

Population- yes it has increased signifcantly.
Average family income- has actually DECREASED during this time.
Perception- keeping up with the Joneses explodes to all time levels.
unemployment- was 5-6% late 90′s now its over 12% but actually in the low 20% range including the underemployed.
Credit- was easy money in the 2000′s now its difficult to get a jumbo loan.

HMMM with these facts how is it that MANY upsacale coastal areas are immune again? they werent immune in the early 90′s.

Oh yeah I forgot:
great weather
great schools
they dont build beach property anymore
everyone wants to live there
etc, etc.

Maybe I was wrong, Maybe its immune

 So Cal is the epicenter of the global collapse .

Unlike in many other parts of the country, So Cal has a social lifestyle where typically they to try to keep up with the Jones’es mentality and spend to their hearts content to show that they belong in that lifestyle.
though many from that area are unaware or were against this- may be at first , after being around this lifestyle for awhile, they too succumbed to society and fell onto the path of destruction buying new fancy cars and McMansions that they could hardly afford. So Cal saw housing prices increase in 2002-2003 to above many previous lending guidelines. Banks and lenders needed new types of lending to deal with these new housing prices that were previously unseen before. Out comes the interest only, sub prime, and Alt A loan programs and then the bomb starts ticking……
1-Southern Californai Buyers and investors begin using these loan programs thereby exploding demand and pricing for their local product and giving many a lot of “equity”
2-with these new loan products,easy qualifying and new found wealth -they start thinking that real estate maybe “the money ticket” and begin looking for other options to target as their local market is getting a bit hectic for their taste
3-their first Target- “Las Vegas”. Previously for the last 30 to 40 years, Vegas had seemed immune to bubbles and recessions posting slow but steady pricing growth in all econmic conditions. The So Cals come to Vegas in 2003 and find a typical house to be 1/2 to 1/3 Value of their similar sized So Cal House. It looks like a great deal- they start buying and the buying speeds up. Others moving to Vegas from other parts of the country,world and the locals are now beginning to get caught up in this early frenzy- though shocking to most of them at first . If they want to buy a house- now is the time. Almost overnight it becomes national headlines- causing a new fuel of buying from around the nation and world. Stories of campouts for new home lotteries and quick flips of 100k and more are around everywhere by 2004.
4-Ok so Vegas is now becoming to crazy to buy -the So Cals look for a new target -and its Phoenix and after that its becomes Albuquerque and then Sunny Florida.
5-Before you can blink a eye -the loans that were first made because the So Cals needed a way to afford their lofty values become commonplace countrywide leading to all sorts buying , developing(Hi Rises,condo conversions), and investing that only prolong the madness .
6- in Early 2006 the Subprime bubble bursts in Las Vegas first as inventories rise to record levels and buying softens. The bursting then spreads to Phoenix ,So Cal and other first hit targets of the bubble.
7-This Causes the first stage that leads to the US Economic Crisis – which leads to the World Economic Crisis that we are currently experiancing to various degrees.

How Long can this game go on? Probably at least 3-5 years

With the Goverments continued interference in the housing crisis many areas continue to be stuck in a super bubble.

BUT WHAT HISTORY HAS SHOWN WITH ALL MAN MADE BUBBLES AND PONZI SCHEMES- IT IS A CERTAINTY THAT IT MUST COMPLETELY DEFLATE. THERE ARE NO EXCEPTIONS, THERE IS NO IMMUNITY