September 3, 2007

All RE is Local (Sep'07 edition)

(c) copyright, View from Silicon Valley, 2007.  All rights reserved.



We last published an edition of, "All RE is Local" back on April 2, 2007 (http://www.viewfromsiliconvalley.com/id318.html). We dropped the series at the time since nearby properties were selling so fast that it seemed pointless to track days-on-market, price changes or if the buyer moved in /rented out /left it empty after closing.

This was unfortunate, since these missives generated a lot of interest. (Judging by the comments received.)

Not long afterwards, we started a new series describing open houses and apparent flipper projects visible on "Sunday afternoon."  This series filled in pretty well but as recently as, "Another Lazy Sunday" on August 10, 2007, (http://www.viewfromsiliconvalley.com/id349.html) we found literally ZERO houses for sale. 

Since this was a couple weeks after ~1,600 square feet sold for $1.999M in about five days, enough was enough.  Even more astonishing, "1,600" was soon tented for termites and a family moved into this "palace" last week--- it's not being torn down to make way for a McMansion!

What's the point?  Clearly, everybody will continue to buy everything that ever comes up for sale around here.  At any price.  Forever.  Let's bag it and move somewhere else!

Driving home from a short family jaunt on Castro Street in Mountain View this afternoon, however, we saw several open houses.  They re-opened the pool, we might as well test the water.

The following were all within a few blocks of one another and a few blocks from our place.  They're not in our school district, but in an adjacent and very, very highly-rated, one:

5) A 3/2.5 with 2-car detached garage, 2,291 square feet, on a 11,761 square foot lot, built in 1942 and asking $1.898M.  (Seeing two cars in the street plus an old pick-up packed full of stuff sitting on the side we assumed there was no garage.  While writing this missive, I discovered a garage listed in their flier.)  RE taxes were only $3,084.  At the implied $257K assessment, this place has not sold in a loooong time.  The Zestimate is $1.649M.

There was one other visitor also walking through the house.  Her facial expression was nearly as unhappy as we would have felt after buying this house for $1.9M.  We would be hard-pressed to justify even half the $1.65M Zestimate. 

4) A 3/2.5/1-car garage, 2,600 square feet, on 4,000(!) square foot lot, built in 2004, asking $1.995M.  It last sold in 2002 for $500K and sported a 2006 RE tax of $10,022 (This tax bill implies an $835K assessment, so something is fishy here).  The Zestimate is $1.4605M.

This was the only place asking us to remove our shoes.  It was manned by an agent and "the owner who also acted as the builder."  This owner hovered over us as we looked around.  We were underwhelmed with the layout, closet space and finding all the bedrooms in the basement.

The flier claims there was a 1-car garage but I still haven't figured out where it was "hidden" on this 4,000 square foot lot.  We might buy this as a bungalow for college students but would be hard-pressed to justify moving in an actual family.  (I deduce the $500K listed on Zillow is half what the pre-split lot sold for in 2002.)

3) A 4/3/2-car garage, 2,519 square feet on a 14,374 square foot lot built in 1952.  We would include asking price but the Intero flier omitted this detail.  Zillow shows only 2,293 square feet, apparently telling us the re-build is now ~10% bigger.  It last sold in 2003 for $925K.  The Zestimate is $1.800M, again not reflecting the "new" house now sitting on this property.

Interestingly, the single-sheet flier was on plain paper and in black-and-white.  All the other fliers were color and on heavy stock and/or multiple pages.  In the past, black-&-white fliers were a sign the agent was tired of laying out big bucks for expensive fliers while the house failed to sell.

We might buy this house, but tactically would wait another few weeks.  If this house wasn't selling before the credit crunch, it doesn't figure to move any faster now.

2) A 4/3.5/2-car garage, 3,000 square feet on a 10,000 square foot lot listed at $2.75M.  Zillow does not show this address but says they adjacent house sold December, 2005 at $1.25M.  The current Zestimate is $1.787 for that property.  (Hang on, I'll explain.)

The RE harpie on patrol was quick to project friendliness, asking names, etc.  We surveyed the house while ignoring her and dodging the back-up agent sidling up from the rear of the house.

As we were leaving, I tried to deduce something about the quality of construction by asking if the owners had ever lived there.  The agent replied, in a moderately-irritated tone of voice,  it was "new construction."  When I tried to clarify who tore down the old house and how it was re-built (with a follow-on question planned about permits), the harpie loudly insisted, "this is totally new construction."

My facial expression apparently indicated doubt and she got downright cranky.  Through clenched teeth, in a none-too-nice tone of voice, she spit out that the lot was sub-divided and the 10,000 square feet (then I noticed the perfect round number) were used to build a second house.  "There has never been a house in this spot."

OK, harpie excluded, we liked this house-- but $2.7M?  Are there still folks around with this type of cash (and/or cash flow) who haven't already bought a house?  Call me when you'll take less than a million --and throw in a three-year third-party home warranty while you're at it.

For those of you not yet bored to tears, we saved the "best" for last:
1) A 5/4/2-car garage, 4,100 square feet on a 14,000 square foot lot built in 1999.  This house last sold in 2005 for $1.2M.  Zillow says it's 3/1 and 1,248 square feet but, even so, Zestimates $1,579,963.

It turns out this house will go up for auction on September 29!  The agent initially denied it was a flipper.  I then pointed out I had seen this house (since it's along one of my jogging routes) go up for sale about two years ago, sell and then get torn down.  He smoothly changed his answer to say the owner re-built (a house built in 1999??) and asked $2.7M, but with no bites.  The agent claimed they lowered it to $2.4M but still couldn't sell.

The agent claimed "somebody is going to get a great deal" on this house.  There was no "reserve price" or buyer's premium.  He said the only commission is his 1% and 3% for the buyer's agent. (OK, there's another $60K off our price.)  He seemed to think the winning bid might be $2.0M, which he implied was about what the owner spent on the property.  (In other words, $2.0M, or a little less, is the reserve price...)

We didn't particularly like this house but if they'll take a check for ~$900K, we could probably close a deal by the 29th...

Conclusion:  OK, these are more like observations than conclusions but here you go:
1) Among all these houses we only ever saw one other party looking.  (And she looked angry!)

2) Except for the first house, these are ALL flipper projects.  What percentage of purchases over the last two years assumed there would always be a greater fool?

3) In past missives, Zestimates were consistently higher than sale prices.  Today's asking prices were higher than the Zestimate.  Whom do you suppose will turn out to be "wrong"?

4) Who would ever pay $1.9M on 5), 4) or 3), after 1) sells for $2.0M?

5) Who EVER resorted to an auction in one of Silicon Valley's highest-priced zip codes?