Monday, June 30, 2008

Oceanside REO: Back to 2002 / 2003 Prices

by Bill McBride on 6/30/2008 10:43:00 AM

Here is another Countrywide REO in Oceanside offered at $359,900 (from Jim the Realtor). This house sold for $469,000 in early 2004, and is now being offered at late 2002, early 2003 prices. (see graph at bottom of this post)

Unlike the low end home discussed last month, these mid-range homes are not as attractive to cash flow oriented investors. Jim says the rent would be $2000 per month (maybe as high as $2500 per month all fixed up). The cap rate would probably be around 4.5%; too low for most investors.

Hey, where is the shower?

The following graph is the Case-Shiller home price index for San Diego, using the previous sales price of this Oceanside property to scale the price ($469,000 in Feb 2004). NOTE: These prices are not for San Diego and are used just to put this property on the Case-Shiller graph.

Oceanside REO Click on graph for larger image in new window.

Although this REO is priced below the current Case-Shiller price - and is being offered at late 2002 / early 2003 prices, this is probably still too high for most investors.

This type of property will probably sell to owner occupied buyers, as opposed to investors, unless the price falls another 20+% (my guess is investors would be interested around $275,000). Although there are many more low end REOs on the market, lenders are starting to price those properties aggressively, and will probably sell many of those properties to investors. These mid-range REOs will probably linger on the market waiting for owner occupied buyers (or even lower prices). Jim did tell me there might be an offer coming in, but he noted: "I'll believe when I see it".