Tuesday, February 3, 2009

Price Drop - 1605 Keith Valley Road - Foreclosure

The Hook has a weekly series "On the Block," which allows an intrepid reporter access to a house that's for sale in this slow market. Just two weeks ago writer Mark Davison visited 1605 Keith Valley Road, and told us what he found: "This house's undeniable uniqueness stems from the recent addition of an entire second level and the startling contrasts it created...." And he goes into vivid detail describing what he found.

At the time of the story, January 22, the Asking Price was $410,550. This week, the Asking has dropped to $375,700.

The agent's listing says "$190,000 BELOW CITY ASSESSMENT." As we pointed out in this recent post, the Tax Assessment is an indicator of "value" to the seller or seller's agent, not to the buyer. (And fwiw, unless the new owner challenges that assessment, they're still going to owe what the City thinks the house is worth.)

What The Hook story doesn't mention is the recent troubling sales history for this ca. 1950 house:

$570,063 11/24/2008 Bank
$290,000 12/29/2004 Buyer #2
$250,000 09/21/2004 Buyer #1

The $570,063K is what the bank paid for the house last November, when the house was "sold" at auction. That is, this is the amount that the "owners" who bought it in 12/2004 somehow wound up owing the bank. 100% more than they paid four years earlier.

From the looks of it, this is either a HELOC (Home Equity Line of Credit) or an Option ARM (the adjustable rate mortgage "product" that can lead to piling-on of principal and a resetting to much higher interest rates) gone wrong....And, as a minor aside, how did the house appreciate $40K in three months? Oh yeah: "bubble."

This is one small example of the local bubble, and repeated millions of times, emblematic of how the US came crashing down into Recession and "credit crisis." But perhaps a new buyer will get a home out of this debacle....

MLS #458160

From The Hook:
ASSESSMENT: $565,700
SIZE: 3,595 fin. sq. ft. / 695 unfin.
LAND: 1.10 acres
CURB APPEAL: 7.5 out of 10


Anonymous said...

I wonder when sellers will truly realize that assessments do not correlate to true market value. Just because Charlottesville or the county thinks a property is worth a certain amount to maintain their budget overages doesn't mean that it will ever sell for that.
Is it just me or is this a hopeless cycle in this area?

Jamie-Z said...

Heh, I've been taken the temperature, so to speak, of a few sellers lately. Made an offer on a $200k home that's been on the market for about a year now. I offered $150k. The seller countered at $196k. I wish that I could've laughed in his face, but instead, I politely told my agent not to bother with another offer.

There are an incredible number of houses for sale in the $250k-$350k range -- almost to the point of it being disturbing. Clearly, the majority of single families in CVille cannot afford a $300k house, so it leaves me wondering: "who the hell paid these ridiculous prices in 2005-2007?" Was it newcomers to the area with solid salaries (incoming doctors, lawyers?).

Obviously, new home construction in town continued for a solid year after the population "boom" had slowed, which is why there are a ton of nice townhomes sitting vacant up by Target (among other places). I just wonder how long it will take the builders of places like that to come to terms with the fact that they spent $250k building something that's really only worth about $175k. I'm guessing the companies are going to have to declare bankruptcy before we see a price drop on those sorts of properties.

Once those fall in value, though, the entire market is going to pop.

Hamish said...

Many of the people who paid the high prices a few years ago put no money down and had interest rates at low "teasers," due to reset oy vey right about now. Can't qualify for a refinance because there's no equity.

Across the country house prices are back at 2004 levels. So by this calculation this house should go for $290.

Real C'ville - The Bubble Blog said...

Jamie-Z, as of this past weekend in Cville and Albemarle (not including Waynesboro, Staunton, Greene, Louisa Counties, etc.) there were 155 houses available priced between $250-$350K. As the Spring selling season has just gotten under way, there are sure to be more added weekly. You're right, it's disturbing b/c there are so few buyers and such little movement on the prices.

Just a handful of single family houses sold in the City in January. Sure, it's the slow season. The incredibly slow season.

Hamish, Option ARMs are a problem in this area: the "pick a pay" kind of mortgage which can add to principal. These loans are impossible to modify b/c there's no equity.

This week, the economic stimulus in some form is expected to pass, and on Tuesday, Feb. 10, new Treasury Sec'ty Tim Geithner is expected to announce the massive bank bailout and give details. Sometime after this (one or two weeks) there is expected to be an announcement about a large effort toward foreclosure prevention. Can this help Option ARMs? We'll see. Interesting times.