Saturday, October 13, 2007

A Couple of My Favorite Marin 1.0 Houses

I love watching the "selling" activity of the above San Rafael house. The highest official listing price I have seen for this house was $884,000 in mid-2006 (yes, it's real DOM is that long). So if it were to sell at its current asking price that would be a price reduction of 33%. However, I am fairly confident that at the bubble peak this house could have sold in the low $900Ks and so the true price drop is probably greater than 33%.

* * *

And by the way, this lame 2 br, 1 ba, 699 sq ft, built 1923 POS in Mill Valley has changed listing agents once again and is now listed as "For Sale with Lease Option" (click the link to see the posting history of this house on this blog). This one is a classic Marin flip that flopped -- bought, remodeled, and then put back on the market all within a 5 month span. It is currently listed at $575,000 and it's DOM has been reset to just 4 days. So that is a 23% drop in asking price and a real DOM of about 660 days.

When I first came across this listing on December 18, 2005 the sellers were asking $745,000 or $1066/ft^2. Many price drops later it then languished on the market (seemingly forever) at about $639,000 which is roughly the owner's break-even point (about what they owe; I dug up their loan info). So I wonder what has changed to allow them to drop the price significantly below their debt level? Are they now in the process of capitulation? Or do they think the "lease option" significantly changes the financial situation for them? Would you buy or lease this house at its current wishing price?

This house is in one of the worst locations in south Marin -- it's in Tam Junction, right across the street from a 7-11. Every winter a large pool of water forms in front of the one car garage which can only be accessed by driving around the block on the other side of Shoreline Hwy and then crossing over Shoreline so as to achieve the proper angle to enter the garage. Furthermore, when leaving the garage you then have to back out on to Shoreline and pray you don't get hit by a maniac speeding down the road. Given this, the garage is really nothing more than a storage shed; I guess you can always park at the 7-11.

The sad fact is that during the bubble people really were willing to pay stupid prices for crappy houses like this one. It is somewhat comforting to know that mindset has changed, even in south Marin.

* * *
Many of Marin's housing markets are suffering and houses are in the process of being "marked to market". Since people who like to believe that the real Marin is special and immune to market forces ("marked to myth" as Warren Buffett recently said), I think it is time to divide Marin up into "Marin 1.0" and "Marin 2.0" (obviously, I'm referring to the farcical "Web 2.0/God-let-there-be-another-internet-bubble"). Most of Marin is now or on its way to becoming Marin 1.0. But places like Tiburon/Belvedere, south Sausalito, certain parts of Mill Valley, Ross and Kentfield are still doing pretty well and so are properly classified as Marin 2.0. Or perhaps it is simply sufficient to say that the luxury home market, regardless of its actual location, is Marin 2.0 and everything else is not. What do you think?

25 Comments:

Blogger Lisa said...

Hilarious post!

And when you think that '04 and '05 were huge years for sales, think of all the people sitting in these shit boxes and getting to pay through the nose for it.

And Southern Marin isn't completely immune, either. I have friends trying to sell their home in Tiburon. It's been on the market for 6 months, started off at $2.595M and is down to $2.250M. It's still sitting. So, there does seem to be a limit now to what people are willing to pay.

I've said this before, but I think the bust will be quieter than the boom. No one likes to admit they completely missed the bubble market and their home is worth less. No one likes to admit they bought into something they can't really afford, and now that they won't make any money off it, makes absolutely zero sense to boot.

Oct 13, 2007, 5:02:00 PM  
Blogger Lisa said...

"People who are able to afford to live in Marin County or a place like that are probably in a pretty good financial place to be able to afford the homes."

This is a snippet from the IJ's article about foreclosures in Marin (10/12).

Hmmm...so if everyone here is in a good financial place, I guess that explains why sales have gone off the proverbial cliff. And why the Marin Heat Index has been stuck in the low 30's since last month.

Oct 13, 2007, 5:13:00 PM  
Blogger Athena said...

saw this article today... real estate broker in Marin shot by her husband who then killed himself. They thought to mention that they live in a house purchased in 2003 for nearly 900,000.

Oct 13, 2007, 9:26:00 PM  
Blogger Athena said...

http://www.marinij.com/novato/ci_7171382

system isn't taking it as a link... :-/

Oct 13, 2007, 9:27:00 PM  
Blogger Tom said...

Median household income in Marin is around 82K (above national average), homeownership rate is 52 pct (below national average). That says a lot.

Oct 15, 2007, 6:05:00 AM  
Blogger Lisa said...

Isn't the median home price around $800K, or 10x the median household income? Good luck with that.

And with exotic financing going away, and jumbo loans difficult to qualify for, the 48% of the county that is renting probably won't be able to buy a home here. So exactly who is going to save Marin's market?

It's hard to find a decent CONDO for less than $500K.

Oct 15, 2007, 8:58:00 AM  
Blogger marinite2 said...

I've said this before, but I think the bust will be quieter than the boom. No one likes to admit they completely missed the bubble market and their home is worth less.

Bingo!

As usual, Lisa sees throught the fog.

Yes, the bust will be a silent one. No one likes to admit that they were wrong or lost money or their myths and beliefs were in error. You don't hear realtors drawing attention to the bust. The IJ no longer writes nearly as much as they did about housing. The housing bulls that used to contribute to this site have long since gone away in hinding.

Oct 15, 2007, 9:43:00 AM  
Blogger marinite2 said...

Median household income in Marin is around 82K (above national average), homeownership rate is 52 pct (below national average). That says a lot.

That makes clear the fallaciousness of that IJ quote Lisa pointed out to us, and that we have to endure time and time again from local housing bulls.

Oct 15, 2007, 9:50:00 AM  
Blogger Eric said...

I just made an offer on a house in San Anselmo that had two other offers. So unfortunately, I had to go over asking even in this market. So, San Anselmo is definitely a 2.0 market.

Oct 15, 2007, 1:21:00 PM  
Blogger Eric said...

Well, I didn't get the house. Apparently, somebody had a better offer than me all round even though I was putting down 40% cash and bid 5% over asking. I would think the credit crunch would take its toll but is hasn't seemed to yet.

Oct 15, 2007, 7:08:00 PM  
Blogger susan said...

Eric, sorry that you didn't get the house. It is frustrating that over-bidding is still happening in this market. Regarding the house you were bidding on, I assume it was a good value. Was it priced to reflect the current market? Good luck in your search.

Oct 15, 2007, 9:15:00 PM  
Blogger Westside Bubble said...

Good post, and similar to what's happening in Santa Monica. Well-priced houses sell fast, and others sit, some slowly reducing their prices.

Oct 15, 2007, 10:54:00 PM  
Blogger Tom said...

Lisa, that's what I was getting at ie traditional metrics seem to no longer apply. My mom bought a home in San Anselmo in 1960 for around 18K. In those days no s&l would give a mortgage for more than 2.5 times someone's annual income, but Marin prices were also comparable to other parts of the country.

It's obviously a different ballgame today for a number of reasons. Yes, Marin is a desirable place to live, but partly, maybe even mainly because we've restricted development. Things would look a lot different today if the 580 freeway had been extended out to West Marin like they talked about when I was a kid.

Anyway people have a right to live anywhere in the country they want. What they don't have is a right to affordable housing anywhere they want to live. The very thing so many of us love about Marin is what will keep so many from ever owning a home here.

Oct 16, 2007, 6:48:00 AM  
Blogger Frank said...

Even Marin is special, it is still feeling the same pain. According to S.F. Chronicle:

“Even in expensive areas like Marin County the crisis is beginning to be felt. One of the Bay Area’s highest-priced ZIP codes, 94920, in the tony Belvedere/Tiburon area, was home to nine foreclosures - including a $1.3 million ‘Bel-Aire tract home’ with ‘floor-to-ceiling windows … and French doors leading to the pool.’”

Oct 16, 2007, 8:19:00 AM  
Blogger Lisa said...

Tom:

My first house in Fairfax was brand new, well built and I bought for just under 3x my gross income, and I don't make a huge salary. It was still possible to buy at 3x income if you had a decent, well-paying job. And that was for a good home, not some crappy POS.

Flash forward 11 years, and now we're at 10x gross income. What happened? We all know. Lending standards went out the window.

Well, now they're making a comeback. Sales have gone off the cliff because fewer and fewer people can actually qualify for these prices.

And buying at 3x income is no cake-walk, as I remember. Money was very tight. I can't imagine how these FB's are sleeping at night.

Oct 16, 2007, 9:26:00 AM  
Blogger Holland said...

Just hear the term “silver tsunami”. The baby boomers are retiring in drove in the coming years. There will be big strain on the social security system. Where will the demand come from for housing? Immigrants or the super rich?

Oct 16, 2007, 9:45:00 AM  
Blogger cajun100 said...

Here in Mill Valley, I have watched most of the flipper activity move in the last 6 months from a lot of questionable junk to fairly sure things in the upper price range. I have 2 in sight from my deck -- both will sell (rather quickly if local activity holds) in the $2.5m to $3m range. However I would rate these as superior properties, and considerable added value is being put in place. The acquisition costs for the flippers were in the $2.5m range. So there is still risk in playing this game.

Some flippers are undaunted, though -- I have been watching a couple of dimwitted realtors work on a 1903 frame house on very busy E. Blithdale Avenue -- which I know they paid $1.1m for recently: a potential financial disaster.

So Mill Valley may be at about 1.5 on our scale of 1 to 2.

Oct 16, 2007, 10:29:00 AM  
Blogger Holland said...

I just did a search on properties in San Anselmo including houses being sold recently. The total houses have been on the market are 56 and 16 out of that were sold. That represents less than 30% of the inventory has been sold. There are price reductions among some of the houses. How would that explain San Anselmo a 2.0 market? Please give me some good reasons to support the 2.0 theory.

Oct 16, 2007, 1:55:00 PM  
Blogger Holland said...

I did another search on properties of Mill Valley including houses and condos. There have been 125 properties on the market and 25 out of that have been sold. This represents 20% of the inventory has been sold. This is far from a 1.5 buying frenzy.

Oct 16, 2007, 2:01:00 PM  
Blogger marinite2 said...

Hey, I just put my Mill Valley house on the market for $1. Guess what? There was a bidding frenzy like you wouldn't believe. All is well with housing it seems. My house is definately 2.0.

Oct 16, 2007, 2:17:00 PM  
Blogger marinite2 said...

How would that explain San Anselmo a 2.0 market?

Some parts of San Anselmo are 2.0. Some parts are not. You can't generalize like so many people wish. But that is not going to stop those in denial.

Oct 16, 2007, 2:27:00 PM  
Blogger Frank said...

Today's Marin heat index is 0.32 which says it all.

Oct 16, 2007, 2:30:00 PM  
Blogger Eric said...

"I just did a search on properties in San Anselmo including houses being sold recently. The total houses have been on the market are 56 and 16 out of that were sold. That represents less than 30% of the inventory has been sold. There are price reductions among some of the houses. How would that explain San Anselmo a 2.0 market? Please give me some good reasons to support the 2.0 theory."

Most of the houses you see on the MLS have either something wrong with them or are overpriced (or both). Buyers I would say are more discriminating at this point so in that sense that market has cooled. But nice houses at market rate are still selling at or above asking price usually the first weekend.
Visit a few of these houses on the MLS and you'll see why nobody is buying them.

Oct 16, 2007, 9:14:00 PM  
Blogger Tom said...

Lisa, you must be a very savvy negotiater to have been able to buy a brand new home 11 years ago at 3x income. When I bought my home
25 years ago I paid over 5x income for a POS. The loan I assumed was an ARM at 12 pct with 6 point spread either way ie theoretically as high as 18 pct! Fortunately we were in a period of falling interest rates, but I kept paying the same payment ie as if the loan was 12 pct. So every six months when the loan adjusted I got a double positive whammy ie lower interest rate, and required payment based on faster amortization since I had been paying the same payment I started out with.

The point of that is to say I mildly disagree with your take on lending standards. To me the problem is more the financial illeterates who know how to play their sob stories for the press. For every one of them there are ten other people who understand what they're doing, and have been helped by the revolution in the mortgage industry. No, I'm not in any way, shape or form in either the RE or mortgage business - in fact I think real estate is a horrible investment, in particular in the currect Marin market. But I do understand that most people have a desire to own their own home. I'm just no longer one of them.

Oct 17, 2007, 6:01:00 AM  
Blogger Lisa said...

Tom:

Yes, I bought on the outskirts of Fairfax, brand new home, for 3x gross income in 1996. Would have loved to be closer in (San Anselmo or Greenbrae), but couldn't swing it on my income.

And back then, lenders wouldn't loan much more than 3x gross income. And you had to make a downpayment and have cash reserves. I had zero credit card debt, but the lender didn't like that I had a car payment, for crying out loud.

Everyone I know who bought recently is in at 6x+ their annual income. Tiny downpayment and adjustable I/O loan, because that's the only way they could "afford" their house. I don't know what they'll do when their teaser rate periods are up. These folks all had CC debt and were not good savers. But they're all in $700K- $1M houses.

I loved owning a home, but I made sure I bought something that I could afford. And I sure love renting now, and looking forward to the next house, when it makes financial sense to buy again.

Oct 17, 2007, 9:17:00 AM  

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