Author Topic: 2008 Closed - 2019 List property.  (Read 2725 times)

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Offline Soylent Green Is People

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2008 Closed - 2019 List property.
« on: January 16, 2019, 01:39:56 PM »
I get a "new listings" feed from Redfin for specific areas, including my old home town. One property caught my attention today.

The home was purchased in June 2008 - juuuust before the Great Financial Collapse began in earnest. Looking in the Property History, the listing Agent posted that it closed at list - $2,895,000 (MLS) but Public Records show $2,819,000. This is a often used ploy to show how great a realtor they are to prospective clients. "Why I sell all my homes at the highest listed price!" But I digress.

PIQ:

https://www.redfin.com/CA/Laguna-Beach/1061-Canyon-View-Dr-92651/home/4892965

Flash forward 11 years. The newly listed price is $2,948,000. After a 4% cost of sale, assuming they get list price, it's going to close at or near what it was purchased for over a decade ago - using the $2,819,000 real closing price. There has been zero appreciation. Had the property value simply kept up with the rate of inflation alone, it should be worth $3,236,642 (Per CPI Inflation Calculator).

From title records I can see that the home was purchased with a down payment greater than $500k. Imagine waiting 8-9 months to buy this home, deciding instead to buy stocks after one of those giant 2009 market swoons. Deploying $100k in April when Citibank was at .97c would have been the buy of a lifetime. Other stocks of course would have been just as attractive. Who knew this would have been the right thing to do but by the power of 20/20 hindsight. During the 2009 crash only the brave were willing to put their cash back into stocks. I freely admit I was not one of them.

The owner probably had many great years in the property. It's a nice view lot in a premier area. I'm sure they've enjoyed the sunsets and that view every single day. Property value isn't just $$$. Values are also based on intangibles as well - good schools, commute distance, etc. This home just reminded me of how long it has taken 2007-2008 peak home prices to rise back near enough to break even.

My .02c

SGIP

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Offline Kenkoko

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Re: 2008 Closed - 2019 List property.
« Reply #1 on: January 16, 2019, 03:15:32 PM »
The view is amazing!

I was looking at the past history and it was sold for just $44k in 1978  :o :o

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Offline sell4u

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Re: 2008 Closed - 2019 List property.
« Reply #2 on: January 17, 2019, 10:53:13 AM »
Looks like the owner is the COO of a good size real estate development company headquartered here in Irvine. 
Even the best have bad timing.  (I'm sure good timing as well)

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Offline meccos12

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Re: 2008 Closed - 2019 List property.
« Reply #3 on: January 17, 2019, 09:05:12 PM »
I get a "new listings" feed from Redfin for specific areas, including my old home town. One property caught my attention today.

The home was purchased in June 2008 - juuuust before the Great Financial Collapse began in earnest. Looking in the Property History, the listing Agent posted that it closed at list - $2,895,000 (MLS) but Public Records show $2,819,000. This is a often used ploy to show how great a realtor they are to prospective clients. "Why I sell all my homes at the highest listed price!" But I digress.

PIQ:

https://www.redfin.com/CA/Laguna-Beach/1061-Canyon-View-Dr-92651/home/4892965

Flash forward 11 years. The newly listed price is $2,948,000. After a 4% cost of sale, assuming they get list price, it's going to close at or near what it was purchased for over a decade ago - using the $2,819,000 real closing price. There has been zero appreciation. Had the property value simply kept up with the rate of inflation alone, it should be worth $3,236,642 (Per CPI Inflation Calculator).

From title records I can see that the home was purchased with a down payment greater than $500k. Imagine waiting 8-9 months to buy this home, deciding instead to buy stocks after one of those giant 2009 market swoons. Deploying $100k in April when Citibank was at .97c would have been the buy of a lifetime. Other stocks of course would have been just as attractive. Who knew this would have been the right thing to do but by the power of 20/20 hindsight. During the 2009 crash only the brave were willing to put their cash back into stocks. I freely admit I was not one of them.

The owner probably had many great years in the property. It's a nice view lot in a premier area. I'm sure they've enjoyed the sunsets and that view every single day. Property value isn't just $$$. Values are also based on intangibles as well - good schools, commute distance, etc. This home just reminded me of how long it has taken 2007-2008 peak home prices to rise back near enough to break even.

My .02c

SGIP

If you invested the 500K down and the approximate 168K in housing payments for this house per year, at the rate of market returns from 2008 till now, the owner would have 4.162M.  The principal invested is 2.18M so a net profit of nearly 2 million. 

Offline Ready2Downsize

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Re: 2008 Closed - 2019 List property.
« Reply #4 on: January 17, 2019, 09:20:35 PM »
I should think that someone who bought that house in 2008 had plenty of other money and put some of it in stocks as well.

Might not even be a primary residence...….. you never know.

Offline meccos12

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Re: 2008 Closed - 2019 List property.
« Reply #5 on: January 18, 2019, 02:47:00 PM »
I should think that someone who bought that house in 2008 had plenty of other money and put some of it in stocks as well.

Might not even be a primary residence...….. you never know.

They most likely had money in the market too, however they could have had 2 million more.

Furthermore, its actually worse if this was not a primary residence.  Like SGIP said, you can justify paying money to live somewhere, but if this was an investment home, then you should have expected some return.  This would be no different than putting a crap load of money in the market and not seeing it return anything for 10 years.  Not to mention they probably dumped thousands more for upkeep that we are not even considering. 

Offline Agent Joe

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Re: 2008 Closed - 2019 List property.
« Reply #6 on: September 13, 2019, 11:02:36 PM »
From an investment perspective, higher end homes are often not as good as modest 3 to 4-bedroom homes simply because of lower demand for high end homes. When comparing real estate vs. stocks, just remember you get leverage with real estate (actually I.D.E.A.L.) e.g. you put down $200k on a $1M home. A few years later that home is worth $1.1M, ROI on your initial investment = 50%.

Stocks are nice because they require less expertise and maintenance. Why not diversify and invest in both?
Joseph Du
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Offline nosuchreality

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Re: 2008 Closed - 2019 List property.
« Reply #7 on: September 14, 2019, 07:34:27 AM »
If in June 2008 instead of buying the house, they got frustrated and put their money in Citi at the end of June 2008 closing price of $188.50, today, eleven and half years later, every $100K is worth 37 cents on the dollar or about $37K.

Maybe they would have bought GM, worth zero.



« Last Edit: September 14, 2019, 07:43:40 AM by nosuchreality »

Offline Liar Loan

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Re: 2008 Closed - 2019 List property.
« Reply #8 on: September 14, 2019, 09:21:00 AM »
Looks like the owner is the COO of a good size real estate development company headquartered here in Irvine. 
Even the best have bad timing.  (I'm sure good timing as well)

Real estate developers had some of the worst timing leading up to the Great Recession.  Much like executives in my industry (mortgage), nobody believed the party would ever end.

This guy paid almost $1 million more than the prior owner who purchased for $1,925,000 only two years prior, in December 2005.  This is a sign that he was caught up in the housing mania and wasn't thinking about timing, but rather thinking as a speculator who surely expected his purchase would pay massive dividends.  The fact that he held on through the downturn shows that he had other financial resources to weather the storm, and he probably didn't finance with a toxic negatively amortizing loan.  So I credit him for not costing us taxpayers anything, and hopefully he enjoyed his years of ownership.
« Last Edit: September 14, 2019, 09:29:49 AM by Liar Loan »

Offline Kenkoko

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Re: 2008 Closed - 2019 List property.
« Reply #9 on: September 17, 2019, 03:49:12 PM »
From an investment perspective, higher end homes are often not as good as modest 3 to 4-bedroom homes simply because of lower demand for high end homes. When comparing real estate vs. stocks, just remember you get leverage with real estate (actually I.D.E.A.L.) e.g. you put down $200k on a $1M home. A few years later that home is worth $1.1M, ROI on your initial investment = 50%.

Stocks are nice because they require less expertise and maintenance. Why not diversify and invest in both?

Your username seems to suggest you're a realtor. Therefore, I am surprised you forgot to mention the transaction cost of selling the home.

6% transaction cost will drop the ROI on your sample investment from 50% to just 20%.

If your sole purpose is to invest in Real estate for diversification, why go the inefficient route of actually buying a home? You can buy Real Estate ETFs or REITs. They are better investments.

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Offline Agent Joe

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Re: 2008 Closed - 2019 List property.
« Reply #10 on: October 27, 2019, 12:25:28 AM »
From an investment perspective, higher end homes are often not as good as modest 3 to 4-bedroom homes simply because of lower demand for high end homes. When comparing real estate vs. stocks, just remember you get leverage with real estate (actually I.D.E.A.L.) e.g. you put down $200k on a $1M home. A few years later that home is worth $1.1M, ROI on your initial investment = 50%.

Stocks are nice because they require less expertise and maintenance. Why not diversify and invest in both?

Your username seems to suggest you're a realtor. Therefore, I am surprised you forgot to mention the transaction cost of selling the home.

6% transaction cost will drop the ROI on your sample investment from 50% to just 20%.

If your sole purpose is to invest in Real estate for diversification, why go the inefficient route of actually buying a home? You can buy Real Estate ETFs or REITs. They are better investments.

Yes, I am an agent. I am aware of the selling costs. My example was a just an overly simplified example to illustrate my point regarding leverage (using other people's money to make money). Because of the selling costs, I rarely sell. I am a buy and hold type of investor.

Real estate ETFs or REITs won't give you any control over what real estate to invest in. They are also taxed at much higher rates compared to actual real estate. Dividends are taxed at ordinary income tax rate. Capital gains are taxed at about 15-20%. On the other hand, for rental income, you usually pay little to no taxes legally. Capital gains from real estate sales can be deferred with a 1031. Oh there is also cost basis step up when you pass down real estate to your children.

Don't get me wrong though. Each investment vehicle has its pros and cons. The "passiveness" with stocks/REITs is nice. I invest in both but just prefer to put majority of my capital in actual real estate.
Joseph Du
Cell: 949-393-0835
Email: joe@joenjudy.com
WeChat: MasterJoeJoe
CalDRE: 02066402
JC Pacific Capital

Specialized in new homes and residential real estate investing.

Offline Soylent Green Is People

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Re: 2008 Closed - 2019 List property.
« Reply #11 on: November 01, 2019, 02:49:10 PM »
Just to bookend this thread, when originally posted the home had not yet been sold. Per Redfin the property closed at $2,875,000.

The math does not look good relative to other investments available at the time. Still, that's one heckuva view!

My .02c

 

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