This Santa Margarita property-turned REO proved to be poison for its previous owner. The street name, Hemlock, also happens to be the name of a deadly plant. Odd coincidence, or cruel twist of fate?
15 Hemlock #199, 92688
Asking price: $193,900
Asking price/ sq ft: $194
Bank purchase price: $251,121
Purchase date: 1/16/09
Size: 2 beds, 2 baths, 1,001 sq ft (built in 1987)
MLS: S565997 (1 day on Redfin)
Zillow Zestimate: $238,500
HOA dues: $247
Type: Condominium
Style: Contemporary
Stories: 1
From listing: Gorgeous! End unit, bright interior, Priced to SELL! 2 bedroom, 2 bath, wood floors, fresh white wood blinds, custom paint, Large enclosed patio with high fence. Detached one car garage with built-in work bench and storage shelving. Close to RSM beach club,lake and shopping center. 
The lower end has really been clobbered, and by this point we are guessing most of the drastic price declines are over for this subset of housing.
We'll estimate you could rent this out for about $1,400 a month. An owner-occupant looking for a general breakeven point would want to pay about $224,000, assuming a GRM of 160. Since the asking price is below that threshold, on the surface we would say it achieves rental partity.
However, it is unlikely this quasi-apartment would be a long-term living solution. We could see an investor becoming interested if the price were low enough, and it doesn't appear to be there yet for this type of property in a location that is far from major job centers.
The previous owner paid $400,000 in 2005 using 90% financing from Expanded Mortgage Credit Wholesale. This lender - now defunct - did a lot of subprime and Alt-A. In late 2006
, he liberated $29,150 of his downpayment with a $389,000 refinancing through First Franklin. We've seen many more egregious examples of re-fi abuse than this, so we'll let it pass in this case without too much criticism.
The property went into default in mid-2008, and went back to the bank earlier this year.
Assuming the condo sells for the full asking price, it would mean 52% off the bubble price of $400,000, and 41% off the 2004 price of $330,000. Those are some serious discounts.
Thursday, March 05, 2009
More than 50% off in RSM
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3 comments:
We almost bought one of these condos for investment purposes exactly a year ago. We didn't buy, thank goodness. At that time they were listed at > 250k.
OK.
My PITI + HOA calc comes to: $1,700.
Of which, only about 900 is deductible. Since 10,800 doesn't exceed a MFJ standard deduction, so there is very little tax benefit (if any).
Therefore, stating that it is rental parity is incorrect, especially considering that you'll need maintenance and upkeep and that most apartments are in better condition than this condo are. In addition, I think that $1400 might be quite high for your thought process. I'd say $1250 would be more correct in this market and for the next few years. Therefore, there is still a very big difference between renting and owning.
Remember, historically, renting has been MORE EXPENSIVE on a monthly basis than owning due to the simple fact that it offers much more flexibility. It is a historical anomoly of the past 8 years that it is cheaper to rent than own. In the 90's it was much cheaper to own than rent, and that's not even a very good measurement. If we went back to the valuation of the 70s, we'd still need to fall another 40% from here.
Chuck
Chuck - Excellent points - thanks for the clarification on the rental parity issue.
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