As time passes, our memories fade. True in life, and true in real estate. So, I thought it would be fun to take a walk down 
memory lane. Today, I want to recall the life of a modest home in Scripps Ranch. We happenened to be the listing agents for this home the first time it began it’s resale life. Since it is located in the Willows subdivision and because I am so incredibly clever (let the hilarity ensue), we will call this home “Willie”.
Willie was born on May 24, 1999. He was an average home, weighing in at 3 bedrooms plus an office, 2.5 baths, and 2540 square feet. His first parents bought him from the builder for $333,000. They were so proud!
When Willie was three years old, his parents needed a bigger home, but they had loved him and taken very good care of him. Here is the first entry on his growth chart:
Sale Date: May 8, 2002
List Price: $534,900
Sale Price: $534,900
Market Time: 4 Days
Poor Willie. In just 7 short months, his new parents had to move because of a job transfer. Next entry:
Sale Date: December 21, 2002
List Price: $535,000 - $585,000
Sale Price: $555,000
Market Time: 10 Days
Wow! Everybody loves Willie! Several years went by, during which time Wille again transformed from house to home. And my, how he was growing… on paper. You see, Willie was (for our purposes here) a triplet. His identical sister (or as we call her, his model match) measured in as follows:
Sale Date: January 22, 2004
List Price: $700,000 - $745,000
Sale Price: $735,000
Market Time: 19 Days
A little later, his identical brother had grown even more:
Sale Date: March 17, 2005
List Price: $799,000 - $849,000
Sale Price: $834,000
Market Time: 3 Days
Willie’s newest parents were so pleased! As they had been closely tracking the progress of the family, they were quite sure that Willie had grown much more when they decided to relocate earlier this year. Afterall, he was “special”. Imagine their surprise when they found the following:
List Price: $829,000 - $879,000
Market Time: 88 Days
Status: Cancelled
List Price: $819,000
Market Time: 120 Days
Status: Active
Poor Willie. His current parents couldn’t wait any longer, and he is now in foster care (tenant occupied) pending adoption. But they couldn’t help but wonder: What stunted his growth? Was he the victim of a “bubble” bath? You see, from the perspective of his current parents, he was not performing up to standards. But, if they would only take the time to reflect on his life in total, and remember the early years, they would see that he has been quite an overachiever. He is young, and setbacks are common in ones development. Willie’s next entry will likely reflect the following:
Growth since birth (7.5 years): 130%
Growth in past four years: 40%
Return on “Investment”: Huge
I suppose it is just all “relative”.
{ 3 trackbacks }
{ 13 comments… read them below or add one }
Christine
10.18.06 at 5:58 pm
Very very clever.. Loved the post.
Kris Berg
10.18.06 at 7:25 pm
Thanks, Christine. Just trying to keep everyone grounded. I bet New York sale price trends would be skewed a tad bit higher than my example!
Jack Tong
10.18.06 at 9:14 pm
and that ultimately is the problem.
the monthly maintenance cost for Willie in 2002 was $2,500 at 20% down and 5.5% 30 year fixed. Add in property tax of $500, and you are looking at $3000/month. A family that pulls in $120,000, or $10,000/month would have no problem paying for Willie and keep him in good shape.
the monthly maintenance cost for Willie in 2006, at least the asking adoption fee, is now $4,400/month at 15% down (the same $111,000 for the 20% down is now only 13% down), 6.5% 30 year fixed. Property tax is now $680/month, so total maintenance for Willie monthly is now $15,000/month. Now we need to find a family that pulls in $180,000, or $15,000/month to have no problem affording Willie.
It really is the same Willie, but how many families in San Diego have $180,000/year to afford Willie?
But no worries. Super Jeff flew in with his zero down, 100% financing negative amorization loan guaranteed at 1% for the first 3 months, dropping that monthly mortgage to $1500/month. Super Jeff just saved the day. Willie is well on his way to finding a new set of parents, or maybe multiple parents with multiple foster childrens.
These new set of parents will be looking at another 40% gain within the next 4 years as they plan Willie’s growth to $1.2 million dollars in 2010. Super Jeff will be there once again to offer zero down, 150% financing with negative amorization option ARM with adjustments every 2 weeks at 100 years, able to be carried cross-generations.
Becky Berg
10.18.06 at 11:33 pm
Like the post, Mom! Very cute
P.S.: Does our house have a name, too??
–The Real Estate Orphan
Kris Berg
10.19.06 at 6:28 am
The bigger question, Becky, is why are you commenting on my blog instead of doing your homework?
Kris Berg
10.19.06 at 6:44 am
Jack, First of all, after about a thousand comments from you, my spam filter decided to take on a life of its own and mark your latest comment spam (artificial intelligence? :)). I have safely retreived it from among the bad guys, ironically most dealing with “lower your mortgage payment” offers. Sorry for the delay in posting.
More importantly, very funny response. I should point out that Willie’s “birth” parents had some help from Super Jeff as well. They got in with 10% down. The difference was that they could afford the home and the loan. Our super hero, half man, half octopus (he has all those ARMS!) offered them a way to get into the home they could afford even though they were not flush with cash. When (if) subsequent parents used Jeff’s powers for evil instead of good (to get a bigger baby than they could really feed), that is where the problems started. Ouch - this metaphor is giving me a headache.
Steve Berg
10.19.06 at 6:50 am
Jack: Once again, you are correct in your assumptions and calculations to the extent that your scenario assumes a first time homebuyer and/or a buyer with limited down payment. However, the reality today (fortunate or unfortunate, as it is) is that there are many thousands of potential homebuyers out there who, through years of ownership of their existing home and its’ accompanying appreciation/debt reduction/equity building, have the ability to buy Willie with a much more substantial down payment. Lest we not forget that while there are many buyers of homes during the past year (or two) who may not have benefitted from the appreciation curve of the past 6-8 years, there are tens of thousands more who have and can now bring a much greater down payment to the table, if necessary. Willie will be okay.
Responding to daughter Becky’s comment: I agree with your Mother - get your homework done AND clean your room!!
Jack Tong
10.19.06 at 9:00 am
good point Steve. So Willie has transitioned from being a step up to final/forever home status. During the same 4 years, true starter homes also jumped in price, and their status were elevated to step up homes. In order to fill the void, condo conversions joined the ranks and became the new starter homes.
At which point do we stop? when Willie costs $1.2 million, those condo conversions would be $500,000. Would new couples be buying up tool shacks to use as their starter home?
Steve Berg
10.19.06 at 10:25 am
At which point do we stop? Well, based upon the market adjustment we are currently experiencing, I would say we are getting there. As the market adjusts back to equilibrium over the next year (or two) Willie will be at a price that will likely serve as both a step up and/or a final/forever home (if there is such a thing in California). We have spent a lot of time and words on the current market adjustment but at some point (we can all speculate when) there will be equilibrium. Whenever this occurs, the big difference, in my humble opinion, is that we will have an extended period of stability, more akin to a “normal” market with reasonable appreciation, nothing like what we have seen during the 2000-2005 period. That ship has obviously sailed.
Phil Hoover
10.19.06 at 9:44 pm
Geez, Kris ~
That’s enuf to give me the Willies
(sorry, couldn’t hep mysef)
Phil
Kris Berg
10.20.06 at 4:28 am
Groan…
Brian Brady
10.23.06 at 10:51 pm
Willie’s problem is that he eats so darn much now (the monthly mortgage payment) that the average potential parent (buyer in San Diego) can’t afford the feed bill (doesn’t have the income).
Willie is not alone. He has tons of brothers and sisters who have grown obese from their eating habits. Sadly, I think the “market” imposed diet will last another 12-18 months before Willie is fit enough to get a new mommy and daddy
Kris Berg
10.24.06 at 7:12 am
Brian, Well said. And, congrats on the big Carnival win!