40% off the '04 price in San Juan

This San Juan Capistrano REO is another example of the accelerating declines various parts of South OC are witnessing this summer. With a spring sales season that appears to be slowing up, what does that foreshadow for the rest of 2008?

If it keeps going on like this, be very afraid...

30896 Calle San Felipe, 92675
Asking price: $339,900
Asking price/ sq ft: $237
Income requirement: $84,975
Bank purchase price: $328,000
Purchase date: 4/7/08
Size: 4 beds, 2 baths, 1,421 sq ft (built in 1971)
MLS: S541124 (2 days on Redfin)
Zillow Zestimate: $441,000
HOA dues: $25
Type: Single Family Residence
Style: Mediterranean
Stories: 2 Levels
Lot size: 3,880 sq ft
From listing: Seller put in new carpet and interior paint. 2 bedrooms downstairs and 2 bedroom upstairs. Romantic fireplace in the living room. High ceiling. Good size yard with lots of potential. Direct access garage. Close to schools, park and shops. Only minutes away to San Juan Capistrano Downtown, Mission Basilica church, beaches and Dana Point harbor.


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The notice of trustee sale amount on this property was $516,826 - meaning what was a $480,000 loan swelled more than $35,000 above its original amount because of accrued interest charges and other fees. The lender went on to significantly discount the minimum bid at auction to attract a buyer (generally the minimum bid will be very close to the NTS amount), but even at $328,000 it ended up going back to the bank.

The interior appears to be very workable - particularly by REO standards. Not a bad job at all by the bank in installing carpet and painting.

Judging by comparable properties in San Juan that are currently for rent, we assume you could probably get $2,300 per month for this property. If we were to go by the 160 GRM rule as being a good target for an owner-occupant, they should value this property at about $368,000, which means that at the current asking price, we estimate this would achieve rental parity and would cost either about the same or a bit less each month to own than it would to rent.

That makes this property appear to be a legitimate good buy - though you probably would have to think about how much it would cost to fix up the backyard and make any other necessary changes considering the home is being sold as-is by the bank.

The GRM of this property as it stands with the current asking price is around 148 - good for an owner-occupant, but the price is probably still too high to attract a legitimate cashflow investor.

Assuming the house is sold for the full asking price (though it would not be surprising if it sold for more), it would mean a depreciation of $224,100 or about 40% off the 2004 sales price of $564,000. That is some serious price erosion.

One-upmanship in RSM

HAPPY FOURTH OF JULY!

We previously posted back in March about this rollback condo in RSM. That property is still on the market with a notice of default and notice of trustee sale to its credit, but now it's got some serious competition.

Presenting another 2002 rollback:

108 Flor De Sol #72, RSM, 92688
Asking price: $169,900
Asking price/ sq ft: $206
Income requirement: $42,475
Purchase price: $230,000
Purchase date: 11/13/03
Size: 2 beds, 2 baths, 825 sq ft (built in 1986)
MLS: S537514 (11 days on Redfin)
Zillow Zestimate: $224,000
HOA dues: $250
Type: Condominium
Style: French
Stories: 1 Level
From listing: lower end unitwith 2 bedrooms and 2 baths,inside laundry,walking distance to community lake,shopping center, and more

This property is not showing up in ForeclosureRadar as a preforeclosure, but we assume it is a short sale. It was purchased in 2003 using 100% (85-15) financing.

Judging by the list of nearby properties for rent, we expect you would be able to find a tenant willing to pay about $1,500 a month to live here. That means this property would be worth around $240,000 to an owner-occupant who wanted to buy and achieve rental parity. To an investor, this condo is likely worth about $150,000-$165,000.

Assuming the property can be sold for the full asking price, it would mean a decline of $60,100 off the 2003 price and a depreciation of $2,600 from the 2002 price, not including any sales costs. You also may be interested to know properties like this in the same complex were selling for a bit more than $350,000 in 2005. This one is more than 50% off the neighborhood peak.

A decline like this is not unique to the complex - it's happening to properties all around RSM. We've also noticed more anecdotal examples of 2003 rollbacks in areas like Laguna Niguel, Aliso Viejo and Mission Viejo. Larger properties are coming into the mix as well.

You are now excused to attend to your patriotic duties:

The beating continues in San Juan

Small condos in San Juan are low-hanging fruit in the world of real estate blogging post-bubble, but some of these properties have fallen so far so fast that it's hard not to take a look in every now and then to see what's happening.

Here's an example of one that's selling for $156 per square foot. It's also more than 50% off the bubble-inflated price of just three years ago.

26462 Calle San Francisco #53e, 92675
Asking price: $178,900
Asking price/ sq ft: $156
Income requirement: $44,725
FB purchase price: $406,500
Purchase date: 1/26/05
Size: 2 beds, 2 baths, 1,145 sq ft (built in 1971)
MLS: S538367 (2 days on Redfin)
Zillow Zestimate: $401,500
2007 property tax: $4,346
HOA dues: $230
Type: Condominium
Stories: 1 Level
From listing: 3 bedrooms with 2 baths and 2 car garage on a corner lot.

This property sold for $100,000 in 1989 - right before the 90s decline - using FHA financing. Redfin/Zillow show us this place sold for $406,500 in 2005.

Judging by properties on the MLS for rent, we would estimate you probably could be able to rent it out for around $1,350-$1,400 per month - assuming you put in a little money and did the necessary cosmetic fixes.

If we were to look at this property from an owner-occupant point of view and wanted to hit a GRM of 160, then we would value this property at about $216,000, if we assume rental value of $1,350 per month. Rental parity: Check.

But, it is unlikely an owner-occupant would want to occupy this type of space long term, so we would think this property could be appealing to a cashflow investor, if the price were right. As the property is priced now, the GRM is around 133. Not bad, but perhaps not quite low enough.

Take a closer look at the asking price of $178,900. It's $227,600 or 56% below the peak "value" in 2005. If the property sells for the current asking price, it also would mean the condo would have increased in value by a reasonable 3.1% every year since 1989.

41% off in Laguna Hills

Can you imagine paying more than $500,000 for this 1,213 sq-ft, 29-year-old Laguna Hills condo? Someone did in 2006. A relatively small percentage of people in America could have been able to afford this property using conservative (historical) lending standards.

But, more people can afford this place at its current - and much lower - price. The question is whether or not anyone wants it now, or if they are waiting for it to drop further.

22512 Caminito Costa #9, 92653
Asking price: $299,000
Asking price/ sq ft: $246
Income requirement: $74,750
Purchase price: $510,000
Purchase date: 5/1/06
Size: 3 beds, 2 baths, 1,213 sq ft (built in 1979)
MLS: S529863 (32 days on Redfin)
Zillow Zestimate: $391,500
2007 property tax: $4,736
HOA dues: $340
Type: Condominium
Style: Colonial
Stories: 2 Levels
From listing: Condo situated near the Irvine Spectrum in the community of Laguna Village. Master bedroom has access to green belt situated in the back of the property. Two car enclosed attached garage. Kitchen has granite counter top. Inside laundry & good size living room. Property close to the 405 & 5 Freeways. Complex has pool, spa, tennis and basketball courts.

This condo is affordable to a household making around the median income in Orange County. Do you think this is the type of home that a median income warrants (don't forget to factor the granite countertops into your decision)?

This looks like the least-expensive property in the Laguna Village complex. Others include 23235 Caminito Andreta #48, which sold at the peak for $475,000 but went back to the bank for $196,989 and is for sale asking $309,900 (35% discount).

At least two properties nearby are for rent: 23422 Caminito Flecha is asking $1,995 per month, and 23395 Caminito Juanico #298 is asking $2,150. If we assume our subject would rent for $2,000 per month, this property would be valued at $320,000 to an owner-occupant, using a target GRM of 160. Rental parity shows itself again!

Assuming our subject property can actually be sold for the full asking price (remember, this is a short sale that has been significantly discounted), the loss would be $228,940, including 6% sales costs. Not including sales costs, it would equate to a depreciation of 41%.

Another good deal in Laguna Niguel

Yesterday, we profiled a property in Laguna Niguel that is a good real estate investment for an owner-occupant because the monthly cost to own is roughly equal to the monthly cost to rent a comparable property. Guess what: Today's condo is even more attractively priced.

23732 Hillhurst Dr #71, 92677
Asking price: $218,500
Asking price/ sq ft: $218
Income requirement: $54,625
Purchase price: $405,000
Purchase date: 8/29/06
Size: 2 beds, 2 baths, 1,000 sq ft (built in 1975)
MLS: S526568 (48 days on Redfin)
Zillow Zestimate: $327,500
2007 property tax: $2,334
HOA dues: $295
Type: Condominium
Stories: 1 Level
Lot size: 1,050 sq ft
From listing: Don't miss out on a Golden Opportunity to own this magnificent condo with the well planned layout for living ease. 2 Master Bedrooms, 2 Bathrooms. Part of the living room has been converted in a small sleeping room.(maybe illegal) Close to Shopping Center, Bus Stop, Freeway and just a few minutes to the Beach, excellent for this summer time. Community swimming pool. Washer and Dryer hookups. The best of everything. Easy to show. Won't last long. And have you check the price?...Oh what a price!


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"Oh what a price" is absolutely right, because in today's market this property is an excellent value for an owner-occupant. The property is already priced below the $240,000 mark we believe a non-investor should target as a value for this condo, (using a GRM of 160 and a rental value of $1,500 per month). Actually, this property has a GRM of about 146 as it is currently priced.

This means by our rough math, rental parity has been achieved: An owner who puts down a legitimate downpayment would be paying about the same each month to own as they would to rent. Can you believe someone paid more than $400,000 for this place not too long ago?

If we were to instead assume the property could rent for as much as $1,600, then the math gets even better - the property would have a GRM of about 137 as it is priced now. An even better deal! Just be careful - we wouldn't want you to get in trouble for the small sleeping room that is "maybe illegal."

The question is whether you can get this 2003 rollback for the asking price and successfully complete a sale. That certainly is no given considering the trouble with closing short sales - particularly ones like this that are priced significantly below the previous sales price.

Assuming the property does get sold for the current full asking price, the loss would be $199,610, including 6% sales costs. Not including sales costs, it would equal a depreciation of 46% in less than two years.