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Archive for the ‘california’ Category

The weather has been weird this year, the rains lasting surprisingly long into spring/summer. I watered my flowers for the first time this year. And in other summer signs, the for sale signs are popping up in our East Bay Redwood Heights neighborhood. The next door neighbors are selling surprisingly enough, and we’ve been watching the prep effort on a nice house in the neighborhood, on Jordan Street, in the valley behind the hill we live on. The house on 3253 Jordan St. just listed at $699,000, which while below the peak of a few years ago, is still not cheap by any measure.

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I don’t normally hang out in the peanut gallery and post comments to articles and blogs.  I simply don’t have the time.  But for some reason, I felt compelled to add my 2 cents on a marketwatch article.   The questioner wanted to know if it was possible to assume a mortage of a seller in distress even though their credit was shot from a bankruptcy a year ago.  Since the questioner lived in the Bay Are they were looking for a house in the 500K range (yes that is the low end of the market here).   And they had $2500 a month to spend on mortgage payments.

First of all the answer to the question was weak.   “Talk to a professional”.  And no creative thinking was in sight.  Then the peanut gallery decided to lambast the audacity of someone that was recently in bankruptcy that thought they could obtain a $500K house .. for $2500 monthly payments with no down payment.

Farfetched?  Yes, of course it is.  But it could happen.  So I posted, in the spirit that the only stupid question .. is the one not asked.

BTW, my avatar is named ksf.

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I like to walk. Each neighborhood I move to I walk around checking out the views, the gardens and the architecture .. and of course the for sale signs.

My new neighborhood is rather understated compared to tony Pacific Heights. But there are still some beautiful properties. Today I discovered a secluded area with a creek and a blocked off road. The section blocked off is a one lane road that hugs a very steep hillside that slopes down to a creek. It’s a beautiful treed area. The city of Oakland has some plans for it, they want to open the road and install guardrails. The neighborhood has launched an aggressive campaign against this plan. There are little green postings everywhere with headlines such as “do you want to have to jump out of a way of a car?” and even “what would you prefer: a nice walk or a short trip in a car?”. I must admit it would be ideal to have such a nice walk closed to car traffic. But I missed the deadline to write to the city.

But I digress. When I first moved here, I noticed there were very few for sale signs. It’s an upscale enough area that the homeowners are probably smart enough not to sell in such a poor market. But there are a lot more now. Up the street there is a pending sale, according to the neighbors the house was owned by a man who lived there for 40 years and recently died.  Yours for only $599K.  The one just two houses down from me is listed for $740K.   Of course it has 3 bedrooms rather than two.

I’ve noted the website addresses from the various signs and when I got home I typed them in. Boy these realtors do a lousy job of online marketing.   In 2 of 3 cases I could not find the house on the site. You would think they would do a better job.  Fortunately google helped me out.

The one I did find is interesting (by typing in the website). The possible one foreclosure or fixer in the neighborhood, it’s boarded up. And it’s a steal, only $349K. Here’s the link to it, note the “real fixer upper, needs everything!” comments.

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I must admit I’ve been far too busy to keep up with the media.  But when I walked into a convenience store last Friday and saw this headline screaming up at me from a stack of San Francisco Chronicles I took note.

Up to this point, the inner San Francisco Bay Area seems to had a teflon coating against the declining RE market.  Yes the outer Bay Area is bad for a while, lots of foreclosures and huge price drops.  My personal opinion is that the severe downturn in the outer bay has been hastened by the high cost of energy.  Many in the outer Bay Area commute many more miles to get to places like San Francisco and Silicon Valley where the housing prices have always been higher.   At some point the commute stops making sense.  And let’s not even talk about further out into the central valley, where Stockton is ground zero for foreclosures, driven by speculation gone bust and really not much in the way of jobs.

But the inner bay has been immune, or so I thought, severe building restrictions, an awesome climate, great culture and high paying jobs has always kept prices high and competition for houses intense.  When I bought in 2000, I was incredibly lucky to be the one picked out of 14 offers.  But the cancer of the housing market has spread inward and yes even San Francisco has suffered a double digit decline (11%). 

What’s dragging down prices?  The large inventory of bargain priced bank owned properties.  The individual owners don’t really have much of a chance unless they have something really special that the right person will want.

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In the real estate pullout of the Sunday Chronicle, there is a 2 page ad from Caldwell Banker. The basic message is don’t panic, real estate is still a good long term investment. I agree with the message .. but find it scary that they felt if necessary to pay for such a ad.

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I recently went to Palm Springs for four days. We thought there might be opportunities to buy break even properties in the surrounding communities. In California, the land of negative cash flow, it seemed compelling to check it out. Sweetening the deal was that we got to stay for free in a guest house in a beautifully landscaped estate. Well I didn’t find any cashflow opportunities but it was an interesting visit.

I’ve never been to Palm Springs, but if you are considering it, April is a great time to go. It’s not too hot and all the manicured landscaping is in bloom. Palm Springs is where many have second homes, often in gated communities. The social scene is laid back and filled with dinners at the clubhouse, shopping and popping over to Edna’s to have a glass of wine. With all the lawns and golf courses you forget that you are in a desert. However that will change as all new developments are mandated to have zero or desert landscaping.

We found 2br + den homes in gated communities as cheap as $269,000. Because of the amenities, you can rent these for more than the standard $1200-$1400 you would get for a 3 bd in La Quinta or Indio. However the HOA fees can be stiff, ie $430 a month, and suprise, some of these are on land leases which adds an additional $100 or so a month.

When you enter the desert from the west you drive by fields and fields of windmills. At certain times the wind is intense, especially in the spring. That’s why the most desirable areas to live in are in the south, nestled up against the mountain range. They get the least wind.

In our opinion the best place to buy for the long term if you don’t have tons of money, is La Quinta Cove. Right now there are lot of houses for sales in the hi 200k low 300K range, so perhaps a deal could be negotiated. La Quinta Cove is sheltered from the winds on three sides and not far from other communities. Rents range from $1200-$1400.

The numbers do work better for Desert Hot Springs. A community to the north west of Palm Springs, new homes can be gotten for $240-$300K, rents are about the same as above. However I would approach Desert Hot Springs with caution, the winds sometimes cut it off from the communities to the south and there were at least 7 ads in the local newspaper advertising brand new homes, never lived in, for rent. I would research the Inland Empire first before settling on Desert Hot Springs.

If you are a rehabber there are plenty of opportunities in the area, for example, in south Palm Desert we found a couple of houses in the 400K range that could be rehabbed and could sell for at least 100k more. We found a 800K house discounted 100K. The area is growing in population that has money. The rehab and fix strategy would work here. Or even straight flips. I saw several “we buy houses” signs. Perhaps the numbers would work better if a flipper found you a screaming deal.

One comment I heard from a realtor that I wanted to pass along was that he felt that the local real estate market was tied closely to the Bay Area and Los Angeles. When those area economies went down, Palm Spring real estate sales suffered. Whether, with younger folks moving in, that is still the case is a subject for debate.

In the end, I decided, that with my goals, I wasn’t interested in buying in the area.

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Although this is my first post here, I’m going to skip the usual ramble on introducing myself. I’ll get to that later. Besides, who am I is less important than what I say.

A couple of nights ago I went and saw Robert Campbell speak at BAWB . Robert, an economist by training, has claimed to have found the five indicators that can tell a real estate investor when to sell and when to buy. Without coming right out and telling us to sell our San Francisco Bay Area homes, he managed to scare a number of us into thinking seriously about it.

I bought his book at the meeting and read it last night. Only to discover that if I had waited and bought his book on his site I would have gotten his software as well. Darn! (can I swear on this media?)

Two of the indicators are: 1) existing home sales, 2)# of foreclosures. You take monthly #’s and calculate a moving 12 month average. My, I hadn’t heard about moving averages since I studied the stock market. Is this where real estate is headed? Short sales take on a whole different meaning?

So today I went a’googling. It was tough to find the data I needed online. To calculate a 12 month moving average, I need 18-24 months of monthly data. DataQuick news has recent # of sales for many of the California counties (although not Butte, which is where one of my rental properties is located). But it’s ALL sales, not existing home sales. The closest I got was the hud site, but it’s not granular enough. It has monthly # of existing home sales, but for all of the western states (including Arizona). I didn’t spend as much time on the foreclosure numbers, but that seems to be calculated quarterly not monthly.

Of course I found a site that promised me the information for $995. Ouch.

If anyone knows where to find this info let me know. Robert claims that you can ask Real Estate agents for this information .. so that is what I will be doing tomorrow.

TechGrl

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