New $2 Million Listing

702 University Ave just hit the market at $2,000,000. Looks like a nice place.

For only 30% down ($600,000) and $10,000 a month for the next 30 years this 4 bedroom, 4.5 bath on 1/3 of an acre could be yours.

Mortgage-Interest Tax Deduction for Top Earners to be Scaled Back

In the President's budget was just released and in it is a proposed scaling back on the deductiblity of mortgage-interest for high income earners.

While incremental (it falls to 28% instead of 33-35% for those making over $250,000 a year), this does make high priced Sonoma County homes a less attractive investment.

Ultimately, this will be one more factor driving prices lower.

Case-Shiller Update: $600k Bay Area Home Falls to $357k, Expected to Fall to $303k by September

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This morning S&P released the December 2008 Case-Shiller data. I've updated the graph of a hypothetical Bay Area home valued at $600,000 at the peak of the bubble.

This home has now fallen $242,478 from its peak.

Updating the graph with futures data from the Chicago Mercantile Exchange, we see that the markets expect the home to fall to $326,418 by March, $318,725 by June, and $303,888 by September. Yes, the trading is thin on these contracts but they've done a decent job so far.

If true, we're getting very close to a 50% drop from the peak of the bubble.

WSJ: 30% Down Payments, $69k Homes

A reader forwards two articles from the Wall Street Journal today. The first titled "Jumbo Mortgages, Jumbo Headaches" chronicles the problems of getting a jumbo loan, particularly in California. This line from the article really stood out to me:

ING Direct, a unit of ING Groep NV, is one of the few lenders that is boosting jumbo originations, though it requires a minimum 30% down payment in the most expensive housing markets, up from 20% earlier last year. For condos, ING requires a minimum 45% down payment.

So anyone in Healdsburg looking to sell their home for $1 million is going to have to find a buyer with $300,000 in cash for a down payment. Quite a task in this economy.

The next article is called "In Maricopa, Ariz., a Paradise Found and Lost". It tells the story of a hard hit suburb outside of Phoenix that has seen homes that were worth over a quarter of a million dollars fall to $50,000. Parallels to certain areas of Santa Rosa or Windsor are clear. The last line of the article sums up what I expect to see more of across Sonoma County as the bailouts continue:

Mr. Dominguez believes his Maricopa house now is worth about half the $213,000 he paid in 2006. He can afford the mortgage, but thinks the lender should reduce his payments. "If they're not going to help me," he says, "they can have it."

Is the Low End of the Housing Market Finding a Bottom?

Apparently there is a "feeding frenzy" on homes in the lower-end of the market in Sonoma County.

This article in the Press Democrat reports that once a home is priced below $300,000 buyers are getting into bidding wars trying to secure their first place.

According to one local agent:

"They're coming out in droves because they know there's no waiting any longer for prices to bottom out. There's definitely more buyers than inventory. Anything under $300,000 -- it's gone," said Logan Adams, associate broker with Remax Central in Santa Rosa.

Remember this quote.

As I've shown, the markets expect prices to continue to fall.

And while it's true that a $300,000 is affordable to some with interest rates where they are at right NOW, it is my belief that mortgage rates will be heading up. Other than the government who is really going to buy a mortgage only yielding 5%? That's going to make housing less affordable and prices will continue to retreat.

Finally, take a look at the graph below from economists Carmen Reinhart (Univ. of Maryland) and Kenneth Rogoff (Harvard). Their research shows it takes an average of 6 years for housing prices to stop declining after a financial crisis. If history is any guide that would mean housing would bottom in 2012.


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Auction Info

If anyone is heading to the auctions today in Geyserville or at 515 Tucker Street in Healdsburg, please email any details.

1720 Canyon Run... Back on the Market

1720 Canyon Run is back on the market. Once again, they've moved the price up above the $400k mark at $409,900.

For a history of this property click here and here.

Price Reduction at Healdsburg Commons

609 Center St at the Healdsburg Commons was just reduced in price from $799,000 to $719,000. We'll see if it is enough to get the unit sold.

If you don't feel like paying nearly 3/4 million dollars for this unit [which would mean $144,000 down (20%), and a mortgage/tax/HOA monthly payment of over $4000], it looks like a smaller but similiar unit at the Commons is still available to rent for $1950 a month.

Update: Actually, a total of 4 units at the Grove were reduced in price. Here is a better comparable to the rental: 604 Healdsburg Ave is going for $479,000 down from an original listing price of $549,000.

Redfin CEO – “Real estate is by far the most screwed up industry in America.”

Given how often I link to Redfin’s website, I thought readers might find this 60 Minutes special from 2007 fascinating. Click the image above to watch the video.

I actually think that Redfin’s prices will also come down as further battles are won against the National Association of Realtors and more online discounters enter the market.

724 Revel Rd

Update: After posting this a reader clarifies some facts in the comment section. This was not the case of one agent delisting and relisting a property. As they state: "The new listing you see reflects its status as an REO ("Real Estate Owned" = bank owned property) with an entirely different agent." and "Your contention that an agent could remove a property for two days and put it back on the market as a ploy is also incorrect. The rules for the MLS require a 30 day period off the market before a listing will refresh." Read their full comment here.

Original Post:
Let's revisit a quote from The Wall Street Journal I referenced last month:

Time and again, we saw agents trying to avoid slashing prices. Thanks to Redfin's Web site, we could see when listing agents pulled units off the market and relisted them two days later at the same price, trying to make it look like a new listing.

On Feb 6th a "new" listing showed up on the MLS. To unassuming buyers, 724 Revel Rd might have looked like it was just listed at $945,000 (it sold for $519,000 in 2005).

But then we head over to Redfin and see that the house was initially listed in 2006 and has been on the market for over two and half years. Even more amazing is that it has been listed, relisted, and had its price changed a total of 67 TIMES!

The chart below tells the story. Click to enlarge. Note that Redfin is not allowed to post the prices of past MLS listings so we'll have to use our imagination.

$189,000 Price Reduction

1341 Prentice Dr. just dropped their price from $539,000 to $350,000.

Imagine that... $189,000 less in just one day.

This doesn't show up on Dave's site as an REO. But we're now below what the home sold for in 2004, and slightly below the 2002 sales price. Foreclosure? or someone with equity looking to sell before further declines?

Another Condo Under $200k

The price on 33 Front St. Unit D was just lowered to $199,000. This 3 bedroom, 2 bath shows that the declines continue for the low end of the market.

Also, of note is the condo is $150,500 less than the last time it sold in 2005 and is also lower than its sale price in 2002.

How low will it go?

Has 1720 Canyon Run Sold?

The status on 1720 Canyon Run was just changed to contingent, meaning we might be looking at a sale.

If you remember we covered the peculiar listing and relisting of this home at higher prices to show continued price declines.

It looks like the agent's technique might have worked. By raising the price back to $450,000 and repeating the process of price of lowering it below $400,000 they got someone to bite. And possibly at a higher price than what it was listed for in October.


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