An End To The Real Estate Crazy Train
KPIX 5 reports from California. “Realtors are using the words ‘overbid madness’ to describe what’s happening in San Francisco’s housing market. One case in point is a home that was sold hundreds of thousands above the asking price. Shrouded in fog, and swimming in cash a two bedroom, modern home in the Glen Park neighborhood was just snapped up for $2.1 million. The sleek home on Bosworth sold for $600,000 over asking price. Arrian Binnings of Christie’s / Pacific Union told KPIX 5, ‘That wasn’t even our highest offer.’”
“The same house was for sale in 2009 for about the same price. It did not sell after 84 days and was taken off the market. Binnings believes there is an end to the real estate crazy train. ‘The type of growth we’re seeing right now is not sustainable year over year, I expect to see these types of prices tame down a little bit,’ he said.”
The Orange County Register. “When Brian Sperry came across a two-story, waterfront home at the northern tip of Linda Isle last year, the real estate developer knew it presented the perfect opportunity. Forty years ago, the two-story house graced the pages of Architectural Digest. Now it was outdated, a candidate for a teardown – but with 113 feet of bay frontage and a dock in one of Orange County’s priciest neighborhoods.”
“Sperry’s company snatched up the property for a cool $9.5 million. He and his partners plan to spend 18 months redeveloping i, then hope to list it for at least $20 million. They’re building on speculation – no buyer in sight. ‘This will be an incredible house,’ Sperry said. ‘But the risk we face (is) what is that price going to be a year and a half from now?’”
“‘We’re kind of at the groundswell of the next real estate cycle,’ said Paul Habibi, a developer and professor at the UCLA Ziman Center for Real Estate. ‘I don’t see any imminent end to this. The capital markets are only going to get looser as we go.’ Scott Cross, president of SC Homes, is also banking on that vision. ‘We’re diving harder than ever because the market’s just skyrocketing,’ said Cross, whose firm does complete teardowns.”
The Union Tribune. “More than 200,000 property owners in San Diego County could see their property tax bill rise between 10 and 20 percent this year, a new state report says. Those owners have been receiving a break on their property tax bills since housing values plummeted during the Great Recession and were reassessed downward. Now, as values have recovered, tax bills can do the same. There is no cap on how much a property’s assessed value can recover each year if it was reduced during an economic downturn, the report from the state Legislative Analyst’s Office says.”
“‘Nobody likes when their taxes go up but in this case taxes are going back up to where they would have been,’ said Mark Goldman, a loan officer and real-estate lecturer at San Diego State University. ‘They got a break, that’s over with, and so it’s unfortunate but the rules are the rules.’”
“In tax year 2014-15, which starts July 1, property tax bills could go up dramatically because county home values increased 17.1 percent in the 12 months leading to Jan. 1, 2014, the date on which values are assessed.”
The Los Angeles Times. “Bridgette Sullenger knows what it takes to survive difficult times. Sullenger is an ordained minister who works with patients in hospice care. Sullenger also leads group counseling sessions for those left behind. Perhaps that’s why her own financial problems haven’t overwhelmed her. ‘There is a lot in her financial life that just isn’t working out for her,’ said fee-only financial planner Delia Fernandez. ‘I think anyone else being handed this information might want to burst into tears.’”
“Sullenger played along during the real estate investment boom, buying three Inland Empire houses near what turned out to be the top of the market. She rented out two of the homes. As the recession took hold, her tenants lost their jobs and couldn’t afford the rent. Sullenger wasn’t able to find replacement tenants who could pay enough to cover her costs. In 2009, with about $1 million in debt, Sullenger filed for bankruptcy protection. Eventually, Sullenger lost the two rental houses to foreclosure.”
“Sullenger’s income last year totaled slightly more than $79,000. The only debt left these days is the approximately $577,000 mortgage on the three-bedroom Palm Springs home where Sullenger lives with her two children. The question of paying for college one day is a big worry. Sullenger is setting aside less than 4% of her income toward retirement. ‘At her age, she should be saving more like 15% to 20%,’ Fernandez said.”
“Sullenger’s biggest disappointment was her home’s value, which could have ranged from $480,000 to $598,000, based on nearby home sales. Fernandez consulted with experts who valued the house at about $500,000, or about $77,000 less than the mortgage. Sullenger isn’t alone in her predicament. Nearly 20% of Inland Empire homes with mortgages are underwater, which means the houses wouldn’t sell for enough money to pay off the loans.”
“‘The housing crisis is not over,’ Fernandez said. ‘Some people like Bridgette haven’t healed from the downturn and are still stuck in a very uncomfortable situation. Moreover, Sullenger’s story provides a lesson on what it really costs to own a home.’People need to remember that they have to set aside money for maintenance, repairs,” Fernandez said.”
“Sullenger found the valuation of her house discouraging. ‘Do I short sell?’ Sullenger asked. ‘Do I rent it out for a few years and go rent somewhere else? Do I sell and take the difference in a loan? Is that even possible? Do I cry now?’ For her part, Sullenger said she is willing to consider getting out of her home. ‘As difficult as this was to hear, I feel like I know what I have to do now,’ Sullenger said.”
