Seventy Percent Off
Chuck Ponzi March 10th, 2009
I remember clearly when I began blogging in 2005 that the general consensus in SoCal was that prices would never fall. And, if they did, it would probably level off, maybe drop a few percent for a few months, but again resume its upward trajectory at 10%-20% per year which was seen as “normal” appreciation. It didn’t matter that household balance sheets ex-housing were in terrible shape, or that housing was fueling all kinds of consumption that created an overheated economy, nor did it matter that earnings were at best flat unless you worked in real estate or finance. The irrational belief of perpetual gains with no effort was practically assumed by 100% of the populace.
So, it seems kind of strange that 4 years later, I am posting about prices that have fallen from the peak more than 70%. Yes 70% of peak value, 30% of original value or less. No matter how bad your stock portfolio is, I would find it hard to believe that you could have lost more than buying a home in some places in SoCal.
I have family who live in the Victor Valley area, so from time to time I chatted with them about what was happening in housing there. I learned long ago to shut up about where I thought things would go… nobody wanted to hear it, so I wouldn’t say it. Needless to say, I took my examples from that area, in fact, all from Hesperia which is a kind of commuter haven for Inland Empire jobs; many moved out of the smog-choked IE to live a more rural lifestyle and have a house that could be afforded. When demand temporarily outstripped supply (for about 2 or 3 years), prices skyrocketed. The Victor Valley had been depressed since the 1990s, so any sign of life was welcome in the locals’ eyes. Too bad that this has not only petered out, but left the area saddled with several years’ supply of homes.
I’ll have to tear through these pretty quickly otherwise this post would quickly turn into several pages of information:
70% Loss
The first one comes to us from 16570 Chestnut Street in Hesperia. Sold on December 19, 2005 for 270,000, it is now for sale for $81,900.
71% Loss
The next ones come from 18375 Carob St. Sold on July 3rd 2006 (Just in time for Independence Day) for $299,000, it is now for sale for $86,900.
also, 16349 Mission St is 1600 sq ft of homey goodness sold on September 13, 2006 for $330,000 and is now for sale for the low price of $94,900.
You can’t forget 17575 Redding St which was sold on May 13th, 2005 for $277,000 and you can snap it right up for $79,000.
72% Loss
The next one is a doozy: 10401 Victor Ave was sold on October 19th, 2006 for $318,500 and is now for sale for $90,000. An interesting tidbit is that it sold for 119K in 1990 and is now 24% below the sales price 19 years ago.
73% Loss
This is getting crazy! What about 7871 Maple Ave? It is now for sale for $89,900 and sold on October 3 2006 for $330,000.
74% Loss
The next 3 all had 74% losses so far: 13351 Sunny Ridge St for $90,000 down from $344,000 in 2006; 8466 Buckthorn Ave for $89,800 down from $347,000 in 2006 and 8288 Madera Ave for $79,000 down from $300,000.
76% Loss
With this next one, I thought I was pushing it (but no, see below for more): 8311 5th Avenue sold at the peak for $334,000 and the bank is now trying to get $93,900, or a 76% loss.
Winner!
Here’s a doozy: 81% off peak pricing! It’s crazy at this point.
8862 Glendale Ave which sold at the peak in June 2007 for $390,000 and is now for sale for $69,900… I don’t know if fraud was involved with this one or any of the above.
Notable mentions:
In addition, there are some additional honorable mentions that are currently on the market:
and a gimme: almost back to 88 pricing! I’m sure the bank will take it if you ask!
Can’t forget! Below 1988 pricing: The lost double decade. 7484 Glider Ave was sold for 91,500 in 1988 and is now for sale for $70,900. That’s 21 years with negative 1.2% return compounding!
Also, one could have lost more with 10370 Redwood Ave which sold for 250,500 on June 28, 2005 and is for sale for a paltry $70,000. and is unbelievably 44% below the 1990 sales price of $126,000! That’s gotta be one of the worst. It’s a compounding 3% negative return for 19 years.
Still think California real estate is a good long-term investment?
Sphere: Related Content
Incredible! and there are thousands of cases as these in Socal.
The coastal areas are not as bad, although they have also taken a hit with up to 30-40% drops.
But in the end it’s all about supply and demand…and the coast will hold up better as expected and will come back quicker than IE..that’s because the Russians are coming..lol
Just “Redfin” Hesperia and laugh/cry. This is the stuff worth listing. The dirty secret is the stuff that is unsaleable.
You forgot:
http://www.redfin.com/CA/Hespe.....me/3670097
I know, there were so many that I could only select a few or it would have taken me a week to write the post.
There was no cherry picking; there is plenty to choose from. As far as I’m concerned, I’ve thought about investing in Hesperia because rents for a house that is 80K will often rent for $900/month. That’s less than 100X gross. That’s pretty decent, but the saying… fools rush in comes to mind.
Chuck
I’m not BSing. I’m really intimately familiar with Wrightwood/Phelan/Victorville having been a multiple landlord since the mid 1980s. There’s basically 3 dwelling units for every 2 potential profitable renters. I can’t tell you when that changes, I can only warn that it hasn’t changed. I finished selling all my nonpersonal real estate in the area April 2006. I’ve seen a handful of opportunities worth spending more than 2 minutes researching. None have yet gotten further than that. Let’s look again in 6 months.
Agreed. I would only invest if I could assure profitability at 50% occupancy.. and then it’s a crapshoot. I probably will never actually pull the trigger. Everytime I think about it, I think about the other present investment opportunities that don’t require as much time or effort and have a better payback. It just doesn’t make sense.
Hasn’t stopped my parents from trying to catch a falling knife. I tried to warn them, but they’re older and wiser than I. Oh well.
Chuck
Yeah, I check things out on Redfin everyday just for kicks and noticed a few weeks ago that the inland areas are in depression in terms of home prices. The problem is that the rest of the areas are still massively overpriced.
Orange County and San Gabriel Valley to name a couple of areas that the depression has apparently not hit yet.
Another area I like to track is Rancho Cucamonga. Some sellers there have “gotten the memo” and some have not.
prices seem to finally be decent in that area. Having worked for a utility covering that area I’ve noticed most of the folks in the neighborhoods listed are old retirees mixed in with young desert rats with toys galore. It’s been about a year since I worked up there, but I imagine all the people with the “toys” have left. I’m guessing the market is going to depend on the retired once again, but with the lower income ones being forced to look out of state the last few years, are there new retiree’s to pick up the slack? I’m intensely curious what if any changes the people who were planning on retiring within the next 5 years are going to do now that boom times are long gone. I know “history is out the door”, but I wouldn’t say that about the high desert area.
Here’s my favorite:
http://www.redfin.com/CA/River.....me/4934263
Mar 06, 2009 Price Changed $49,900 — MRMLS #I08133833
Feb 21, 2009 Price Changed $73,900 — MRMLS #I08133833
Feb 09, 2009 Price Changed $76,900 — MRMLS #I08133833
Jan 30, 2009 Price Changed $77,900 — MRMLS #I08133833
Jan 16, 2009 Price Changed $79,900 — MRMLS #I08133833
Jan 07, 2009 Price Changed $81,900 — MRMLS #I08133833
Dec 23, 2008 Price Changed $85,900 — MRMLS #I08133833
Dec 11, 2008 Price Changed $87,900 — MRMLS #I08133833
Dec 01, 2008 Price Changed $89,900 — MRMLS #I08133833
Nov 18, 2008 Price Changed $92,900 — MRMLS #I08133833
Nov 07, 2008 Price Changed $94,900 — MRMLS #I08133833
Oct 28, 2008 Price Changed $99,900 — MRMLS #I08133833
Oct 24, 2008 Relisted — — MRMLS #I08133833
Oct 23, 2008 Off Redfin — — MRMLS #I08133833
Sep 17, 2008 Listed $104,900 — MRMLS #I08133833
Aug 21, 2008 Sold $96,800 -29.4%/yr Public Records
Jul 15, 2005 Sold $285,000 35.6%/yr Public Records
Oct 31, 2002 Sold $125,000 — Public Records
So, an 82.5% decrease in less than four years, and still unsold even after 12 price reductions.
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