Oak Creek Homes Selling Fast - What was peak pricing?

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a911driver_IHB

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I have noticed over the past few months Oak Creek homes are selling fast. We are in escrow on an Autumn Glen model for just over $1mm. This is the second house on the street sold at that price within two days of coming to market. There are a couple of others slightly larger that have fetched $100-$150k more in the last month. Does anyone know the peak sales prices for Autumn Glen?
 
I went to an open house in Oak Creek over the weekend and the realtor said he sold 7 homes in the last week. I thought he was just making up stores, but maybe he really did (or maybe that's how many homes were sold in the area. I wasn't really listening).



You can do a search on <a href="http://www.redfin.com/search#sold_within_months=36&lat=33.66676463481001&long;=-117.77785778045656&zoomLevel=16&region_id=1977&region_type=1&market=socal&v=2">redfin for past sales</a> and you can get an idea.



Here are some examples:



65 Eaglecreek 1,430,000 4/28/2006

8 Hollinwood 1,375,000 11/13/2006

10 Palmwood 1,375,000 7/28/2006

11 Zinnia 1,350,000 8/29/2005

2 Commonwealth 1,330,000 7/31/2006

29 Sutton 1,300,000 5/23/2007
 
I don't know if it was seven homes, but there is one realtor that has sold three-four.

Man, I hope I am not catching a falling knife, but we need to settle down.

Now 30 year mortgage rates need to calm down. We are using a HELOC for the time being until their is some clarity in the market. I may try to roll 30yr locks every quarter because hindsight will be 20/20. I am also looking into an interest rate swap.

I prey that the fed doesn't tighten way too much. Saudi Arabia adding to production will help keep rates low.
 
oh, and there are no sales on the street we are buying per Redfin. My understanding is that most of the original owners are still there circa 2000.

They bought at $550k, so unlevered return is something like 8.5%. That doesn't give me too much pause. I think I will go short Case-Shiller LA as a hedge.
 
[quote author="a911driver" date=1213702299]I have noticed over the past few months Oak Creek homes are selling fast. We are in escrow on an Autumn Glen model for just over $1mm. This is the second house on the street sold at that price within two days of coming to market. There are a couple of others slightly larger that have fetched $100-$150k more in the last month. Does anyone know the peak sales prices for Autumn Glen?</blockquote>


#--MLS#------Address----------------SqFt---YBlt-----Sold Price-----SP/ SqFt---SP/LP------Sold Date------DOM

1--S527229---10 Preston-------------3,000--2001--$1,055,000-----$351.67---91.74%----6/06/2008--------6

2--S382433---21 Commonwealth---3,000---2001--$1,155,000-----$385.00---97.22%----3/21/2005-------40

3--P597852---21 Commonwealth----3,000--2001--$1,225,000-----$408.33---96.08%----11/25/2007------26

4--S437440---2 Sutton----------------3,000--2000--$1,268,625-----$422.88---98.42%----6/15/2006-------29

5--S455048---8 Hollinwood-----------3,326--2000--$1,375,000-----$413.41---98.28%----11/13/2006------41
 
Is it worth taking another half a million dollars of downside to settle down?



That nut has to be $8K a month or more! Are you kidding me! You can rent stuff on the water for less than that!
 
Although I agree it has downside risk, I really don't think it gets back to 2000 pricing. I think it could have another 15% to go. We plan on staying there until our kids are through high school. It is a great house and a great neighborhood.

We moved here in 2006 from NoCal and sold a house then.
 
[quote author="IrvineRealtor" date=1213704655][quote author="a911driver" date=1213702299]I have noticed over the past few months Oak Creek homes are selling fast. We are in escrow on an Autumn Glen model for just over $1mm. This is the second house on the street sold at that price within two days of coming to market. There are a couple of others slightly larger that have fetched $100-$150k more in the last month. Does anyone know the peak sales prices for Autumn Glen?</blockquote>


#--MLS#------Address----------------SqFt---YBlt-----Sold Price-----SP/ SqFt---SP/LP------Sold Date------DOM

1--S527229---10 Preston-------------3,000--2001--$1,055,000-----$351.67---91.74%----6/06/2008--------6

2--S382433---21 Commonwealth---3,000---2001--$1,155,000-----$385.00---97.22%----3/21/2005-------40

3--P597852---21 Commonwealth----3,000--2001--$1,225,000-----$408.33---96.08%----11/25/2007------26

4--S437440---2 Sutton----------------3,000--2000--$1,268,625-----$422.88---98.42%----6/15/2006-------29

5--S455048---8 Hollinwood-----------3,326--2000--$1,375,000-----$413.41---98.28%----11/13/2006------41</blockquote>


10 Preston is the dead-on comp. It seems like we are about 15% off peak. There is another sale on Commonwealth that is pending.
 
I respectfully submit that you are ignoring all the data that is in front of you that shows:



- The top tier properties aren't immune

- The resets in Alt A and A grade paper haven't happened yet

- The moveup ladder is totally broken

- You can rent equivlent properties for 50% of your post tax cost of owning

- All the metrics are getting worse, not better



I know you're in escrow. 2000 prices were over heated, or so the conventional wisdom went back then. How you can take a odds on chance of losing 250K-500K on an asset that will cost you $8k a month you can rent for $4K is insanity. In the face of that, if you decide it's still a good decision for your family, go get 'em kid.



I can't imagine what half a million dollars would do for your kids college fund. I don't care how much money you make.
 
Although I don't directionally disagree, I don't think we are going back to 2000 pricing. That would mean, as an asset class, there was no financial return, which is not the case. Real estate can return somewhere between treasuries and equities over the longer term - hence, this is about 8.5% unlevered. In Orange County, this house isn't the top-tier. There are plenty of homes in Irvine listing (but slowly selling) for $1.75mm plus. My post-tax equivalent is theoretically about $4k per month (I think you are assuming no money down in your $8k). You cannot rent a comparable house for $2k per month.

So, on average, I am willing to bet that it will be about $100-$150k of equity burn and maybe up a little - inflation adj. - after 15 years (our time horizon).

Interest rates remain a large risk.

This neighborhood won't trade if prices drop markedly more. The basis for most of the comparable homes is about $550k.



So, this is the push and pull of this terrible market. Trust me, it is a difficult decision.
 
One other thing. Your analysis of a potential $500k loss is mitigated by the fact that my max is the equity in the house. I won't have $500k in it for the foreseeable future.
 
You are ignoring the oppourtunity cost of your capital. I know you aren't financing the whole thing (because it's functionally impossible to get a loan that isn't under the cap) but that million dollar house has 1.75% property tax, a healthy HOA, and mello roos on top of it. I thumbnailed your cost of ownership at $8K a month with 20% down (roughly 6K P&I;, 2K in taxes/hoa/mello roos) and I know you can rent that place for $4000 a month.



I used to foreclose on people for a living in the early 1990's. I'm not wasting your and my time here because I think it's fun to poke the bear, so to speak. I realize this is a tough decision. IMO you are making the wrong one, and it will cost you - maybe a little, maybe dearly.



If you think the market will back up another 15%, why not just write a check to my favorite charity:



<a href="http://www.jesuit.org/SupportingOurWork/WaysToGive/default.aspx">http://www.jesuit.org/SupportingOurWork/WaysToGive/default.aspx</a>



And wait it out? You'll be out the same money, get the tax deduction, and have some insurance over the slide that is continuing unabated?
 
This just in:



<a href="http://mortgage.freedomblogging.com/2008/06/16/that-didnt-take-long/#comments">http://mortgage.freedomblogging.com/2008/06/16/that-didnt-take-long/#comments</a>



<img src="http://mortgage.freedomblogging.com/files/2008/06/blog-1foreclosure0617.jpg" alt="" />



You wanna get on that freight train? Go get 'em kid.
 
[quote author="no_vaseline" date=1213712814]This just in:



<a href="http://mortgage.freedomblogging.com/2008/06/16/that-didnt-take-long/#comments">http://mortgage.freedomblogging.com/2008/06/16/that-didnt-take-long/#comments</a>



<img src="http://mortgage.freedomblogging.com/files/2008/06/blog-1foreclosure0617.jpg" alt="" />



You wanna get on that freight train? Go get 'em kid.</blockquote>


CHOO CHOO!!!
 
[quote author="Masterofdamoney" date=1213734065][quote author="no_vaseline" date=1213712814]This just in:



<a href="http://mortgage.freedomblogging.com/2008/06/16/that-didnt-take-long/#comments">http://mortgage.freedomblogging.com/2008/06/16/that-didnt-take-long/#comments</a>



<img src="http://mortgage.freedomblogging.com/files/2008/06/blog-1foreclosure0617.jpg" alt="" />



You wanna get on that freight train? Go get 'em kid.</blockquote>


CHOO CHOO!!!</blockquote>


I have not been impressed with the foreclosures in Oak Creek. Given the basis in most of these Autumn Glen models, I don't expect ore than a foreclosure or two.

It really comes down to this, find a house in a neighborhood my wife will live in and I'll rent it.

We are renting in Greentree in a 3,800 sqft. house. House is ok, neighborhood leaves something to be desired.



I'll squeeze your opportunity cost calculation again. My monthly nut is $7k gross, after-tax is about ($4.5k), rental would be $4k if you could find one and deal with term risk, so net cost is about $500 per month + money pit of owning a house.



Irvine will hold up better than the OC statistics because of the school system so I don't think its the next Ladera or RSM.



I have been following those foreclosures. Most are nothing you would step into. Even the ones that you would, are still trading high after the bank owns them. Closely watched a few in Turtle Ridge.



I think the truth always lies in the middle but I am crossing my fingers a bit on this one.
 
[quote author="a911driver" date=1213703754]I don't know if it was seven homes, but there is one realtor that has sold three-four.

<strong>Man, I hope I am not catching a falling knife, but we need to settle down</strong>.

Now 30 year mortgage rates need to calm down. We are using a HELOC for the time being until their is some clarity in the market. I may try to roll 30yr locks every quarter because hindsight will be 20/20. I am also looking into an interest rate swap.

I prey that the fed doesn't tighten way too much. Saudi Arabia adding to production will help keep rates low.</blockquote>


This says it all. You dont "need" to settle down, you "want" to settle down. By your tone the first part of that sentence I can tell you are somewhat scared of your decision as well. The largest HELOC I am aware of is 500K and that was when times were good. You must be ploppin down over 500k of your own stash? I hope you have at least double that in the bank right now.



Your kids don't give a rats ass whether you buy or rent. Do you think they'd want their parents to have a mortgage, or fund their education expenses? You'd better have all your ducks in a row before you buy a tract home for more than one million bucks! If you do, congratulations, and best of luck to you.
 
[quote author="no_vaseline" date=1213709279]2000 prices were over heated, or so the conventional wisdom went back then.</blockquote>


Vase, why do you think 2000 prices were over-heated?



In the year 2000, the CS index ranged between 100-110, approximately at the same price level they were 10 years prior in 1990... The 90's RE recession overshot to the downside, so the couple of year run-up between mid '97 to 2000 was correcting that imbalance, not a sign of an over appreciated market.



Or to look at it another way, if you take Jan 1987 prices and inflation adjust them, you'd have right around a 100 CS index number in January 2000, which coincidentally is pretty much exactly what it was... Again, not suggestive of an overheated market at that time.



I do agree with you though, 911 is taking a big needless gamble. Applying the same inflation adjusting method and using Jan 1987 as a start, it would suggest that prices have another 30-35% to fall from March's price levels.
 
The inflation adjusted graphs show the median prices houses should be at the 2002 price levels. Anything above that was bubble. Anything below that from this fall on will be an over correction. ...That is unless some stupid politician steps in and f-s up the situation by rescuing stupid people who knew damn well the price was too high.
 
[quote author="a911driver" date=1213737151]





Irvine will hold up better than the OC statistics because of the school system so I don't think its the next Ladera or RSM.



</blockquote>


I know what you mean. It's different here! The naysayers try to clump us into areas like Mission Viejo and Tustin... You just don't see the soccer moms driving around in HELOC'd out luxury cars and SUV's in Irvine like you do in those other cities.



I think most people in Irvine have pretty high savings rates, and I would bet most don't even own a credit card.



Buying now might be a good idea, before people start figuring this out and run the prices up again...
 
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