And the overpriced winner of the day is:
http://www.redfin.com/CA/San-Carlos/233-Bay-View-Dr-94070/home/1919821
Look at those fancy closet doors, the nice sink, and the backkyard concrete paradise! Classy!
233 Bay View Dr, San Carlos, CA 94070
By pkowen Follow Fri, 2 Apr 2010, 12:31pm 4,213 views 53 comments
In San Carlos CA 94070
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Mountain View, CA
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a $160k down in 4 months... damn....Just imagine how many years one has to work to EARN that much money, let alone SAVE THAT MUCH!
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2650 sqft at $373/sqft is not horrible.
especially considering the median for san carlos and 94070 are both around $500/sqft.
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mike, I'm afraid you are drinking the Kool Aid. What about the fact that the median is way out of reality with local incomes? Too, the "Beverly Terrace" neighborhood in San Carlos where this home is located has been averaging $470 (very inflated still but down from the peak) per square feet per sale the past 12 months...and this one isn't even selling at $373 sq ft asking price. People of the Bay Area, the homes up there are way over priced. I know that neighborhood all too well as my relatives bought down the street...and grossly overpaid for a 53 year old POS right at the peak. They'll be house poor for decades because of that poor financial decision. Their 3/2 down the street will drift back down into the $400 - $500s before this is all over...still a lot of delusion and leverage on the peninsula.
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Also...wait until interest rates start reverting to their long term mean. There's an entire generation of people (Gen X, Gen Y, Millenials) who have only seen falling and low interest rates. Debt has been a way of life for many of them. And why not? They've not been held accountable, and their government is also irresponsible and unaccountable. It has been easy to over leverage and get away with poor financial (especially housing) decisions with a huge bull market. Well, unfortunately for a lot of people, and two different sets of relatives of mine up there, the music has stopped (since Oct 2006), and they are left holding the very large debt bag. One family is about $300k down on their purchase in the East Bay, and the other in the above neighborhood is down about $150k. Do you know how much you have to make to get back to break even after losing 20% You have to make 25%. And how about if you lose 50%? Then you have to make 100% back just to get back to break even. These lessons will be painfully learned in the coming years by many who over paid on the peninsula and surrounding areas. Wait until interest rates go up and put downward pressure on home prices...and debt won't be cheap any more...all the Gen X, Gen Y, and Millenials will be staring financial reality smack dab in the face.
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Redwood City, CA
I'd say this one is ripe for lowballing. They have to settle the estate. Judging by the pictures, this is a classic "big lot, but so sloped you get no yard" peninsula house, so it's not as attractive as the sizing numbers would suggest. It probably would rent for around 3k at best. At even ridiculously high historical bay area price/rent ratios (200x monthly rent) you get about 600k for that house.
Given that we're early in the second leg down and the sellers want to settle the estate, you MIGHT be able to get that house for 800k, maybe 750k. Almost certainly you could get it for 850k. But there is nothing to make it stand out enough to warrant bothering with.
This is how my wife and I wound up overpaying for our house (while still paying 35% less than the original listing price.) We watched clueless estate sellers start at the 2007 price and chase it down until they reached the end of the time-frame they had to to sell the house in before having to start insuring it as an empty house or renting it out.
We had bid very low on it on after the fourth price drop and had gotten the "multiple offer" runaround. We told them we weren't upping our offer and walked.
A month later (and another price drop), we resent our offer and it was accepted.
Yah, we paid too much, but we scored the best deal we could at the time. I wasn't thrilled about buying, but the wife wanted to own before having the second kid. (I talked her out of having to own before the first kid.)
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Boulder Creek, CA
Looks like a turd.
I wouldn't pay 500 for it.
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Carlisle, PA
I guess you are paying about 500K for nice weather with a view?
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San Carlos, CA
NagaEater says
$500k? Try $1 mil for a view property.
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At least upgrade your counters before trying to price any where near 1 million. Might need some staging too.
I personally don't think this area is worth that much.
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Here are the Private Agent Remarks on the MLS Listing:
Private : Trust sale, no seller disclosures. All rpts at www.213bayview.com. Owner passed away in premises after short illness. Grt price for the sq footage of this home. Family needs to settle estate, so write up an offer. Allow time for trustees to respond.
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Carlisle, PA
pkowen says
I meant a 500K premium in addition to the home value.
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Yep. That is the premium in a bubble alright. A view is not worth that much.
What they need is to sell the home to a pedophile so he can set up a telescope to watch the youngins at a distance. Might be worth 500k to him.
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San Carlos, CA
Just to be clear, I do NOT think this place is worth $1 mil or even $500k. I wouldn't buy it. But in this area, people remain cuckoo and I suspect someone will.
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San Jose, CA
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@ pkowen,
I am one of those cuckoo. I would pay $500k for that house in a heart beat. Yes, that fast.
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San Carlos, CA
@e-man,
I'll backpedal a little and say @$500k, I can't really judge you as 'cuckoo'. I guess it's just a little cuckoo for me. Currently, at that price given this local market it would definitely be a 'good deal'. it will surely sell for much more than that. I, however, am pretty stubborn and still see bay area housing perceived valuation as a bunch of silliness - I have lived in NYC, VA, several towns in MI and also north AL. I've travelled all over this country and a good part of the western world. What people will willingly buy at very high prices here continues to astound me.
Suffice to say I have my own standards for what I will buy. First, it MUST pencil out. I.e., it is equal or less to buy than rent a similar place (using my own variation on what everyone else does - estimating what the rent would be versus the monthly to buy, including tax deductions etc.). Second, as my Dad would say, "the house had to be something in the first place". That's where this one fails for me. Architecturally it's a turd. Finally, along with the house itself and the numbers working, comes the location. And more than just the general area ('it's in the bay area'!), I am talking about everything from the neighborhood to the micro-climate to the lot itself and the way the house sits on it. I have admittedly high standards on that, coming from my upbringing to my education in natural resources and land use. It's fun to have a view (I LOVE a great view, and I currently rent one that is better), but in my estimation this house is not well situated. This is a good sized lot but it is mostly unusable (or appears to be).
Now, let's talk about $989,000. Surely we can all agree that is pretty ridiculous? That was my original point.
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for those saying it's not even worth $500k, that's $190/sf.
how many cities on the Peninsula have prices in that range?
none.
even east palo alto is over $200/sf and oakland is $170/sf.
it's fine to say prices are too high, but most of you are unrealistic perma-bears.
if san carlos gets prices cut in half, then east palo alto and oakland will drop a lot too.
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mel1474's website
Look at this one - it is only $300M - about 300 of the san carlos house :-)
http://money.cnn.com/galleries/2010/real_estate/1004/gallery.commercial_real_estate/6.html
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sfbubblebuyer says
Goes to tell you how much "multple offer" fraud from realtors there is going around in the Bay Area, and its been going on for a very very long time.
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Redwood City, CA
Thomas,
I actually believe there was another offer this time. And I think that guy told them to stuff their 'multiple offers' and walked, leaving them blinking bewilderedly and moaning.
If the info I got from a 3rd realtor (who was brought in to help out the seller's realtor when she had to take a trip to the hospital) is true, the heirs had turned down an offer that was ~200k over ours when they first put the place on the market, because they wanted 'full price', turned down ANOTHER buyer who was offering ~100k more than we did because they were owed at least the 200k bid, and finally scared off the guy who was bidding with us, and he had bid about 35K more than us.
These people really needed to learn that the first offer is usually the best offer. One of the heirs was an east coast Realtor, so you'd think he'd have known better. Sheesh.
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Golden!
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San Carlos, CA
mike says
Yup, in today's penninsula market it's much more than $500k. What should it be? Surely not $998k, to my original point. For reference, in MOST of this country, $100/sq ft is considered pretty high. I had a 2900 sq/ft historic craftsman in a major AL city I bought for $235,000, did restoration and sold for $308,000.
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San Jose, CA
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@ pkowen,
I was just pulling your leg. The fact that a lot of cuckoos in the Bay Area are willing to pay $700k for this home, how do you expect this home to drop to $500k? Well, maybe if interest rate is at 15-20% :D
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With all due respect, it sounds like most of you have only seen the past couple decades of a falling interest rate environment....and more recently quantitative easing. Check out the 300+ year study on home prices in Holland (I have it and know it well)...housing will only keep pace with wage inflation over the long run. Want to know what a reasonable (and realistic, i.e., where it is heading) price for this house is? A price that would include the buyer putting 20% down, and financing with a conventional mortgage for 30 years at a historically average interest rate level. Why does that sound like punishment to most people? Especially in the Bay Area? Because they cannot afford it, and the bubble has gotten way out of hand (read: decades). "The way it used to be" is not 1995 or 1985...housing will revert to very long term averages, which it cannot fundamentally stay above for a sustained amount of time (especially void of funny money easy credit zero interest rate lending and toxic mortgages). Sure, California and the Bay Area included will always be more expensive than the middle of Iowa, but that house will go back to the mid $500 thousands before this is said and done...mark my words. For those of you who have not seen 8, 9, and 10% and higher interest rates, wait and see what happens. The past few decades have been an interesting, unsustainable ride...it is not a "new norm" that will prevail.
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San Jose, CA
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Quant HF Mgr says
Yes, I did see interest rate at 8% in the early 2000. I will mark your words. I hope I live long enough to see this house goes down to the mid $500k.
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Quant HF Mgr says
Yes i been here a few decades, long enough to have seen you cant burn a candle at both ends. You cant expect employers to keep feeding higher salaries, due to housing costs, given they can easily set up shop in other states and keep operations going. And very oftern lured with tax incentives and freebies. Thats why many local companies in SV have many more people outside of SV than locally. So either prices fall easing up on job outmigration or migration takes a full swing as prices to up which in the end game will fall permenant to a very few local employees. Sure to be plenty of inventory and price reduction then.
Is Intel really hiring that many people in Hillsboro, Or ?... may be so...
http://www.indeed.com/jobs?q=Intel&l=hillsboro%2C+or&start=100
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i say that house will be $50M - mark my words. stupid prediction why? because it'll probably happen in 3010.
put on a timeline on it. when will this be all said and done?
here's the other thing.
i never believe anyone that is so strongly convinced of their predictions ("mark my words!").
in fact i automatically assume they don't know what they are talking about - because they're too dense to identify the hundreds of times they've been wrong before with their predictions.
if you're so good at seeing the future, you'd be rich and you wouldn't be on this board arguing with a bunch of nobodies.
Quant HF Mgr says
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Perhaps you feel like a "nobody", Mike, and for that I feel sorry for you. I enjoy the posts at Patrick.net and do not consider the readers "a bunch of nobodies", nor am I arguing with anyone. The great thing about the internet is, you have no idea who you may be trading comments with...could be a guy who runs a multi-billion hedge fund with a legendary investor...you just never know. But it is probably more comfortable to assume I'm "stupid" and "not rich". :-)
I'm all for your prediction of the home being worth $50M some day: care to produce a study or any hard scientific or quantitative data on which you base your prediction? After all, my "prediction" isn't much of a stretch, considering how home prices have historically (over long periods of time) only kept pace with [wage] inflation...hence I referenced the 300+ year Holland home price study. Professor Robert Shiller's work demonstrates the same phenomenon here in the U.S.
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San Jose, CA
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@ Mike,
Your prediction is way off and too nservative. If history is any indication. This home should worth $50M in 200 years or less, not 1,000 years :-)
@ Quant,
I don't care who you are, and I don't care if you work for Warren Buffet. The old man is the greatest investor of all time, but he has been wrong at time. Of course, he was right a lot more times than he was wrong. As Mike indicated above, if you're so confident with your prediction, tell us when this home will go down to the mid $500k. 5 to 7 years?
I am willing to make a bet with you. Tell us when this home will hit the mid $500k. The loser will have to take the winner and his/her spouse out to lunch or dinner at a restaurant of the winner's choice. Are you up to the challenge and willing to put your $$ where your mouth is :-)?
I was taught that it's easier to make an enemy than a friend. It doesn't hurt to have a new friend who is willing to admit that (s)he's wrong at time :-)
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i am a nobody. my ego isn't big enough to assume i'm a somebody.
the great thing about the internet. is you are judged solely on your post. not your title, or your position in life or your appearance.
it's a bit of a meritocracy and to be blunt you don't come across as all that bright.
you're not a billionaire. you're not smart enough.
you're not rich either. again, not smart enough.
i think you're probably poor and not anywhere near rich:)
Quant HF Mgr says
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he won't take you up on his bet.
guys like this don't have much going on in real life and pumped themselves up online.
if he met you, the jig would be up that he's got nothing going on.
E-man says
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San Carlos, CA
Quant HF Mgr says
Did you all see the Shiller article today on NYT?
http://www.nytimes.com/2010/04/11/business/economy/11view.html?ref=todayspaper
I still think much of the bay area is way overpriced due to the cuckoo effect. I was hit pretty hard by Uncle Sam this weekend. No mortgage, no kids, no write-offs. So it does get one looking at making changes. Specifically, I am looking harder at buying. But short of moving to the dregs of the bay area or somewhere that's nice but too damn far away from work -- I doubt a reasonable option is going to pop up. I still refuse to pay $500k (or more) for a dump even if it means I don't get to itemize.
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San Jose, CA
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@ pkowen and Quant,
I think you guys are comparing apples to oranges. This home is 2,650 sq.ft., not 1,500 sq.ft. Imagine if this home were listed for $700k, how many offers do you think they will get?
The SF Bay Area has a lot of smart people; they're making good money, need the deductions, and don't want a long commute. So homes will always be expensive. I don't think home prices will go up in the near future, but I don't see them dropping another 30% from here.
Remember the saying that 10% of the people own 80%+ of the wealth. That would only leave 20% for the rest of us. Also, 10% of the people in the Bay Area are millionares. 56% of the people in the Bay Area own their homes (ok, the banks own them). That's why when I look at the median household income and affordability, I only look at the upper 30% to 40% of the index. Hope that makes some sense for you guys.
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San Carlos, CA
@ e-man, yeah you make sense. I guess I missed the size of that house, given it looks so crappy in the pics. You are right, that's a lot of sqft (to be verified by buyer?). ;)
It is the level of 'premium valuation' that I think is at question for me. The peninsula will definitely bear a premium for the foreseeable future. But how much? Houses I see here for $800k are literally $80k (at most) in my home state. Income in my CA zip is around $100k and in where I grew up, it's more like $40k. So, like I've said in the past there are a couple things I come back to again and again -
1) When most of the country is maybe 3x median income and (insert prime location here) house costs are 10x, seems like an unsustainable bubble. I'll grant a premium, but not that much.
2) This factor of desireability, where many want to move 'in' to the prime space (like where I lived in the upper west side NYC, or in this area parts of SF and places like Palo Alto, Woodside, Portola Valley) is hard to quantify. There are a lot of these people, but how many? I think of it as two bars on a chart. First, the number of people with the money and desire to move in to the prime area and who will therefore bid it up. They create an upward pressure that makes the median income less useful. They may have a bucket of cash but not that amazing of an income (previous house equity, parental loans, all the things we hear around here) The second bar on the chart is the number of 'desireable' properties in the prime area. I think both bars go up and down with market fluctuations.
The question for me is (and this is really what I care about), what do I do about it? I have ranted a bit but I do not have hard feelings about all of this. I would *like* to find a good house (or condo, or really cool: a loft) near my work. I know that what a 'good house' means has to be much less here than in say, Detroit. I am a student of the market, and feel I have been correct to date in 'watching and waiting'. Next move? Not sure.
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San Carlos, CA
SF ace says
Yeah, well I am thinking about individual zip codes not the entire SFBA. In some areas of the 'greater' SFBA median income to house costs actually match pretty well. Medians may not mean much, but I believe they mean something. I agree it ain't Fresno. I have lived in 5 states, from small towns to medium and large cities (including NYC) and frankly this area correlates more closely to NYC than anything else.
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San Jose, CA
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@ pkowen,
A lot of old money in the above mentioned fortress areas. With the help of Prop 13, people leave their homes behind for their kids and grand kids when they pass away. I totally understand your frustration and some others on this board. May I ask which zip code are you looking to buy? Looking at your logo, are you a stock day trader?
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San Carlos, CA
E-man, yeah, I get it wrt the old money. Day trader? More like a decade trader! That's the Shiller chart.
I tend to look basically from RWC to San Mateo. Or really anywhere within a decent commute of RWC, including by Caltrain. Sometimes I think of going up to SF ... This week I've browsed a bit in 95125 and 95112 because I used to live and work in those and feel I know them pretty well, and they are ok. I see you are in Milpitas.
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San Jose, CA
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That's right. That's the irrational exuberance chart.
Alright, I'll be on the look out. I've been talking to a guy that's buying bulk REO's in the Bay Area. If I come across some decent deals, I will post it on here. I don't buy them in the above-mentioned areas because they don't cash flow. Don't give up hope yet.
On a side note, Goldman Sach trades have been treating me well. It looks like the stock is setting up a cup with handle, but in the last several days, there is lack of volume for it to break out above $180. Am I reading it correctly? If it broke out, would the next resistance be $193? I am still learning the art of trading. Thanks advance for the tips.
Btw, I am not a day trader.
HAPPY TRADING!
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San Carlos, CA
E-man, afraid I am not a good stock trading reference for reading the technicals. I generally stay away from financials. I know a bit about the tech industry, but I trade very little. I was one of those who just did the 401k and let that fill up on big cap mutuals over the years rather blindly, which was fine as everything went up. Now I am undoing the results of that laziness. I have been moving a little toward commodities ETFs - but I am definitely a long trader.
I'll always take a good tip on property to check out! Thanks.
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Quant HF Mgr says
Housing prices in well-established neighborhoods are NEVER in line with median incomes, nor do the need to be in order to have stable prices. Most of the people in that neighborhood have likely owned for many many years and have much lower payments than new buyers, if any at all.
This fact highlights one of the benefits of buying: protection from inflation. If you expect a house in a desirable, well-established neighborhood to be in line with the median income for that neighborhood, you will be renting forever. It almost never happens. The only thing that matters is the median income of the buyer pool, since they are the "demand" side of the whole "suppy and demand" thing.
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That was an informative post, thanks very much.
(13 :-)