The summer of 2008 was brutal on home sellers as more short-sale and foreclosure homes entered the market and average mortgage rates went from 5.75 percent in April to 6.52 percent in June.
The average asking price of a 2,500-square-foot home in Carlsbad for the first three months of 2008 was $850,000 and sold for $810,000. With more competition, higher costs and the declaration of a national recession, the average sales price in Carlsbad dropped 12 percent to $716,000 with a listing price of $741,000.
Attached housing, condominiums and townhomes had a similar price decline of 12 percent from the start of the year to its end. All attached housing up to three bedrooms in Carlsbad went from an average sales price of $418,000 in the first three months of 2008 to $356,600 by year's end.
Attached housing is often the more affordable, second choice for cash-strapped homebuyers. As of this winter, many of the attached homes in Carlsbad are at break-even pricing with current rents and mortgage rates.
For example, a three bedroom condo built in 2002 that recently sold for $300,000 costs $1,850 a month (including property taxes, insurance, HOA fees and a 5.5 percent rate with 20 percent down) to own and rents for almost the same amount. The homeowner also will benefit from the deductions on mortgage interest paid and property taxes, which makes the property more affordable than renting.
Federal Housing Administration
FHA financing became the loan of choice in 2008. Conventional lending standards became stricter this year, requiring more money down, 15 percent as opposed to 5 percent, and higher credit scores, 710 as opposed to 680.
The benefits of a loan guaranteed by the FHA are that it requires only 3 percent down, is less strict on credit score and the money can come from a gift. For the first time in years, the rates for FHA loans were competitive with conventional loans.
A first-time homebuyer was able to take advantage of the healthy foreclosure market in Carlsbad's neighboring cities. A three bedroom house in Oceanside could be purchased for $350,000 with only $10,500 down for a $2,300 total monthly payment.
Carlsbad's luxury market hardest hit
Carlsbad's luxury market was hit hard in 2008. As of Dec. 10, there were only 108 homes sold for more than $1 million in Carlsbad, which is half the number of sales in 2007.
Sales slowed in the first part of 2008 as jumbo loan rates went almost 1.4 percent higher than conforming rates (7.1 percent vs. 5.7 percent) in response to a weakening credit market. In 2007, the difference between conforming and jumbo was negligible.
But rates alone are not to blame for troubles in Carlsbad's million dollar market. A majority of Carlsbad's luxury market is comprised of new construction built in 2002, like developments such as La Costa Oaks, La Costa Greens and The Bay Collection.
Real estate investors that purchased new construction on speculation could not sell their home for a profit and walked away from their investment. The short-sale and foreclosure homes in the new developments created a more difficult market for the traditional seller and set dramatically lower comp sales.
A home in La Costa Oaks that sold for $1.152 million in 2006 through the builder was back on the market in 2008 as a short-sale and sold in October for $890,000. Although this is a distress sale, future buyers expect a deal just as good or better when they purchase.
Expectations for the New Year
The first three months of 2009 will be difficult for those selling property as homebuyers will continue to demand discounts over the last closed sales. As of December, Hank Paulson and the United States Treasury had outlined a new plan to stimulate the housing market by reducing average mortgage rates on new home loans from their current levels of 5 to 5.5 percent to as low as 4.5 percent for a 30-year mortgage.
Large financial institutions, such as Bank of America and IndyMac Bank, also will attempt to stem the short-sale and foreclosure market by negotiating delinquent loans into lower, fixed rate solutions. This action should lessen the number of homes available and restrict supply.
As low interest rates help create demand and supply lessens, the real estate market could begin to turnaround and stabilize.
The average asking price of a 2,500-square-foot home in Carlsbad for the first three months of 2008 was $850,000 and sold for $810,000. With more competition, higher costs and the declaration of a national recession, the average sales price in Carlsbad dropped 12 percent to $716,000 with a listing price of $741,000.
Attached housing, condominiums and townhomes had a similar price decline of 12 percent from the start of the year to its end. All attached housing up to three bedrooms in Carlsbad went from an average sales price of $418,000 in the first three months of 2008 to $356,600 by year's end.
Attached housing is often the more affordable, second choice for cash-strapped homebuyers. As of this winter, many of the attached homes in Carlsbad are at break-even pricing with current rents and mortgage rates.
For example, a three bedroom condo built in 2002 that recently sold for $300,000 costs $1,850 a month (including property taxes, insurance, HOA fees and a 5.5 percent rate with 20 percent down) to own and rents for almost the same amount. The homeowner also will benefit from the deductions on mortgage interest paid and property taxes, which makes the property more affordable than renting.
Federal Housing Administration
FHA financing became the loan of choice in 2008. Conventional lending standards became stricter this year, requiring more money down, 15 percent as opposed to 5 percent, and higher credit scores, 710 as opposed to 680.
The benefits of a loan guaranteed by the FHA are that it requires only 3 percent down, is less strict on credit score and the money can come from a gift. For the first time in years, the rates for FHA loans were competitive with conventional loans.
A first-time homebuyer was able to take advantage of the healthy foreclosure market in Carlsbad's neighboring cities. A three bedroom house in Oceanside could be purchased for $350,000 with only $10,500 down for a $2,300 total monthly payment.
Carlsbad's luxury market hardest hit
Carlsbad's luxury market was hit hard in 2008. As of Dec. 10, there were only 108 homes sold for more than $1 million in Carlsbad, which is half the number of sales in 2007.
Sales slowed in the first part of 2008 as jumbo loan rates went almost 1.4 percent higher than conforming rates (7.1 percent vs. 5.7 percent) in response to a weakening credit market. In 2007, the difference between conforming and jumbo was negligible.
But rates alone are not to blame for troubles in Carlsbad's million dollar market. A majority of Carlsbad's luxury market is comprised of new construction built in 2002, like developments such as La Costa Oaks, La Costa Greens and The Bay Collection.
Real estate investors that purchased new construction on speculation could not sell their home for a profit and walked away from their investment. The short-sale and foreclosure homes in the new developments created a more difficult market for the traditional seller and set dramatically lower comp sales.
A home in La Costa Oaks that sold for $1.152 million in 2006 through the builder was back on the market in 2008 as a short-sale and sold in October for $890,000. Although this is a distress sale, future buyers expect a deal just as good or better when they purchase.
Expectations for the New Year
The first three months of 2009 will be difficult for those selling property as homebuyers will continue to demand discounts over the last closed sales. As of December, Hank Paulson and the United States Treasury had outlined a new plan to stimulate the housing market by reducing average mortgage rates on new home loans from their current levels of 5 to 5.5 percent to as low as 4.5 percent for a 30-year mortgage.
Large financial institutions, such as Bank of America and IndyMac Bank, also will attempt to stem the short-sale and foreclosure market by negotiating delinquent loans into lower, fixed rate solutions. This action should lessen the number of homes available and restrict supply.
As low interest rates help create demand and supply lessens, the real estate market could begin to turnaround and stabilize.