Now that basic housing data is out there for everyone, it's easier than ever to see a bubble's correction in real-time. Fringe, average or below quality suburban development in Orlando appears to be falling the fastest and the furthest thus far.
Led by a tip from a reader in reply to Quality Bring Sticky Prices (thanks, David!), I began researching the Victoria Pines subdivision built by now-bankrupt Engle Homes. These homes appear to have been built in 2005 and 2006, which means the ones that sold were priced at the top of the bubble. Not surprisingly, it looks like many of their original owners are now attempting short sales.
Google Maps Link (there's not much constructed, yet) The development is located off Young Pine Rd to the south of Curry Ford Rd, 1/2 a mile east of the 417.
The Craigslist research was quite striking. What are 2 fundamentally identical 2/2.5 townhouses are priced from $128,300 in an apparent short sale to this hilarious $164,900 "PRICED WELL BELOW RECENT APPRAISAL!!" Nice try, Realtor! Both of these properties are assumed to be around 1071sf.
This seller on Zillow wins the wishful pricing cup, asking a whopping $215,000 for his 2/2.5 1304sf ball and chain. I'm not sure whether it's amusing or sad that he's trying to sell it for more than he paid back in April, 2006 ($213,400).
The $215k townhouse under performing the ZIP, and falling since purchase.
Zillow's estimate today is $164,000, but with lower comps coming soon, it has another 20% to lose fast. Zillow seems to lag many months when prices are changing quickly.
According to David, there's a 2/2.5/1 (garage), 1200sf unit that's been for sale since July, 2006. It's now down to $135,000 with no takers, but I was unable to locate it through the internet. Perhaps I'll drive through the neighborhood if I'm out that way sometime and call a few of the numbers on the lawn.
Rental prices are coming down along with the prices, albeit slowly. This Craigslist search tonight shows 4 Victoria Pines townhouses for rent. The lowest is $925, and the highest is a sole $1200. With a HOA fee and taxes of perhaps $350/mo and a mortgage for $128,300, ($770/mo 30yr at 6%), prices look to be getting close to rent parity.
Let's assume as prices slip another 25%, rent will drop 10% to $850/month for these 2/2.5 condos. You would have to get one at a $500/mo mortgage to break even (can't forget those taxes and HOA fees est. at $350). That's an $83,400 condo, 24% below the $110k you might be able to buy today through a short sale. Then again, if you believe rent will go up to $1200 in a few years and you can afford short term negative cash flow...
We will certainly be watching trends in this development to estimate where the market is heading. Again, readers are welcome to suggest topics and particular neighborhoods/houses to analyze. I would love it if readers would question my assumptions and figures in order to get more accurate results. For example, taxes and HOA fees could be hundreds off.
Rental prices are coming down along with the prices, albeit slowly. This Craigslist search tonight shows 4 Victoria Pines townhouses for rent. The lowest is $925, and the highest is a sole $1200. With a HOA fee and taxes of perhaps $350/mo and a mortgage for $128,300, ($770/mo 30yr at 6%), prices look to be getting close to rent parity.
Let's assume as prices slip another 25%, rent will drop 10% to $850/month for these 2/2.5 condos. You would have to get one at a $500/mo mortgage to break even (can't forget those taxes and HOA fees est. at $350). That's an $83,400 condo, 24% below the $110k you might be able to buy today through a short sale. Then again, if you believe rent will go up to $1200 in a few years and you can afford short term negative cash flow...
We will certainly be watching trends in this development to estimate where the market is heading. Again, readers are welcome to suggest topics and particular neighborhoods/houses to analyze. I would love it if readers would question my assumptions and figures in order to get more accurate results. For example, taxes and HOA fees could be hundreds off.
3 comments:
Thank you, thank you, thank you for delving into the short-sale and pre-foreclosure sinkhole known as Victoria Pines.
Your research finds exactly the same information that mine turned up (which isn't surprising, given that we used the same sources). You mentioned you were unable to find the 2/2.5/1 that's been on the market for almost 2 years and was recently knocked down to $135K. Here's the MLS link to it:
http://beta.realtor.com/search/listingdetail.aspx?loc=32829&typ=7&sby=1&sid=b744f36c769b4ef1b6821ca893e32b9f&pg=2&lid=1065467009&lsn=24&srcnt=407#Detail
The least expensive MLS listing in that development is a 987 sq. ft. model that's nearly identical to the 1071 sq. ft. units, but four linear feet shallower. It's listed as an apparent short sale at $109.9K. Here's the MLS link for that one:
http://beta.realtor.com/search/listingdetail.aspx?loc=32829&typ=7&sby=1&sid=b744f36c769b4ef1b6821ca893e32b9f&pg=1&lid=1096513891&lsn=10&srcnt=407#Detail
And the 1071 sq. ft. short sale you found listed on craigslist at $128K was just reduced a few days ago to $110K:
http://beta.realtor.com/search/listingdetail.aspx?loc=32829&typ=7&sby=1&sid=b744f36c769b4ef1b6821ca893e32b9f&pg=2&lid=1092145396&lsn=14&srcnt=407#Detail
Oh, and about that laughable 2/2.5 listing at $164,900 on CL -- a month ago, when that listing was brand new, I got into an e-mail exchange with the listing agent, asking her what she was basing that ridiculous listing price on. I pointed out there were close to a dozen short sales on the MLS that were priced tens of thousands less. She said:
"Realtors and appraisers can not use homes that are in foreclosures or sold in a short sales as comparable homes due to problems with title, condition and so forth. If you take out the foreclosures and short sales in the community you will find that this home is very competitively priced. I have been in the real estate business since 2001. I assure you that all of my listings are priced competitively and fairly. "
I pointed out to her that there were no non-distressed comps (really, no comps whatsoever, distressed or not) within the last 90 days in Victoria Pines that supported that price. Her answer? A link to a list of recently sold townhomes (on the other side of 417) that were all one-third larger with garages.. and they sold between 175-210, at a significantly lower price per square foot. With that link, she added:
"The comps. in the link above are larger. Square footage can be adjusted for by subtracting the difference in sq. footage and multiplying by 30. There are other adjustments for age differences and upgrades but the $164,900 is a great price and it will appraise at the asking price or higher. "
So what color is the sky in the world you live in?
I don't see how short-sales and foreclosures won't bring down prices. Agents say they can't be used for comps, but if they're the only comps, then what? There's not a single unit there listed without at least one, and in some cases, several, drastic reductions in price. AND ABSOLUTELY NOTHING IS SELLING.
I feel the inevitable result for this listing is a default -- or, at the very least, a fired agent when the listing contract runs out and there's still no sale.
I mentioned in my first post that I considered renting in Victoria Pines as a "try before you buy" -- on the theory that if I don't want to live in a rabbit warren of townhomes, then at least I won't be out thousands of dollars in closing costs, fees, and most of my down payment. I also thought, as a renter in the development, I would be well-positioned to buy as I saw prices further erode, and more people lapse into foreclosure.
One Sunday, a couple of months ago, I spent a couple of hours walking around the sprawling development (which I had already visited a number of times as various phases were completed and came online -- at the time saying to myself 'there's no way in hell these units are worth $185K').
Anyway, as I was out and about, I met a lovely young couple. The man turned out to be on the condo board. My first question was about HOA reserves. He said Engle had set them up with an additional year's worth of money to meet expenses (this was shortly before I learned Engle had gone bankrupt). Seems like they're going to need it. I don't know who's paying the HOA fees on all those empty units. I counted at least 11 vacant homes on lockboxes (many of which are on the MLS). I asked him about owner/renter ratios (a huge deal in getting the best interest rate -- a fact I picked up during my experiences buying/selling in San Diego a few years back). He said it was about 50/50 -- which today would be considered borderline. Lenders like to see higher owner-occupancy rates.
I asked about foreclosures. He said there were more and more all the time -- and that there were about to be a lot of the larger 1200-1400 sq. ft. units (with garages) going into default shortly. He pointed out that the 11 units on lockboxes that I observed did not accurately reflect the number of units that are looking for new tenants or owners. Victoria Pines HOA recently decided to ban the posting of 'for sale' signs in front of the units (to keep looky-loos like me out of the gated development, looking for what's on the market). His female companion pointed out that they were one of the first buyers two years ago, and they'll never get their down payment back.
Also, the staggering 340/mo. HOA fee is coming down by $100/mo. because they're ditching the included cable TV and internet.
Still, that's a hell of a monthly HOA, and it doesn't include taxes. So, I think you're dead-on in predicting that to achieve rental parity with the more modest units, prices will eventually have to fall to the 80-90K range. I wouldn't be at all surprised if that's the post-bubble price for the smaller units -- with the larger ones fetching low 100's. That would amount to a 50% haircut -- and a much-deserved one too. I do have sympathy for those who put money down and will never get it back, but there's absolutely nothing special about the design or construction of these townhomes -- and the neighborhood is certainly nothing to write home about. Safe, probably, but bland, bland, bland -- even for suburbia. And how about those lovely power lines, huh? Heck, the only reason I was interested was because it's only 6 miles from work, versus the current 17 mile slog.
Anyway, thanks again for digging around, and for making it all the way to the end of this post. Keep up the good work.
I don't think the MLS links in my first post are going to work, so here are the MLS numbers, in order:
For the $135K unit: o4702515
The 109.9K short sale leader:
o4832831
And the usta-be 128, now 110:
G4628601
I drove down to the Victoria Pines development the other day. As you noted, it is very, very, very bland, even for suburbia. And quite a drive from anywhere interesting, and it doesn't offer anything special. Then again, I've become very skeptical of the suburban model, and most of the sprawl we've built in the last 30 years would be described similarly.
Then again, as an investment, 80k-90k could be a very attractive place to "call the bottom" and step in as a landlord. The cash flow on 20% down and a 30 yr conventional mortgage would be positive with stable renters in place. Right now, the price is still high (even that 110k one ((G4628601)) appears to be still for sale, meaning it's overpriced) and there's a glut of rentals on the market. Keep in mind the $349 monthly fee will be nearly half the cost of ownership. Not a very good combination, but there is light at the end of the tunnel once prices fall a bit more and the piles of vacant houses shrink as population starts growing again.
I'll be keeping an eye on this development as a barometer for the newly built stock that isn't faring well.
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