Monday, July 17, 2006

Report on The Estates at Lincoln Crossing

Following an exchange of comments this weekend, John in Rocklin made a visit to The Estates at Lincoln Crossing in Lincoln. As you can see from this Google Earth image, the development has been inundated by flippers:


The following pictures and note come straight from John.  Thanks for the great info!

Max,

We went by The Estates at Lincoln Crossing and got your photos for you. Guess what? The builder does not allow sign posts on the property, so the photo of the street scene is not representative of the Flipper problem. You WILL notice the street is TOTALLY VACANT. We spent about 1 hour on Sunday afternoon at 3 PM and saw ONE person at their home. It was a bay area Flipper mowing his lawn. He decided to rent the house, since he could not sell it, and was working on the house so the renter could move in.

Hillwood Loop is a ghost town. So how do you know a house is sold? The developer puts a sign on the lawn stating "Home Occupied, Please Do Not Disturb". Why is that necessary? The homes on Hillwood Loop sold in April and May, 2006. Contrary to what the signs said, I have not seen a single home that appeared to be actually occupied. Note the photos of the builder signs, then look at the front door handles. They all have "door knocker" flyers stuck in the handles, probably selling pools or such. No one has gone in or out of these front doors in days, if not weeks or months. Note the FSBO sign in the window, placed there because the seller is prohibited from putting out a street sign. Nice touch by the builder. Hmmm. Does he care? Not when he is still finding new buyers, who won't see the disguised problem.

The builder's web site says all 138 homes in The Estates are sold, except 4. Hmmm. There are about 61 homes constructed on Hillwood Loop. You pulled the MLS stats: 26 are listed for resale RIGHT NOW. There are some homes the builder appears to still own (cancelled sales?) and some more that are FSBOs. This means at least 50% of the homes on this street are actively trying to be flipped. That is a BIG percentage. Stay tuned.

John






7 comments :

Anonymous said...

This is funny because friends of mine in Eagle ID (originally from SoCal) just rented a house in the last day or so in Lincoln from a flipper who owns 3 houses. I believe it's a brand new ~2500 sq ft house that he's renting for $1700 a month. I'm going to try and find out if this is the community.I'll let them know it's going to be quiet there (LOL)!

JR said...

Imagine: You "tied up" a $700,000 house 6 months ago, to flip for $850,000 and make $100,000 after costs. Instead, you're going to get $1,700 a month in rent, which means a negative cash flow of $50,000/year. And if the down cycle mimics 1991-95, you will have to carry it for 5-years before the house recovers its value. Minus $250,000 before you get out. Assuming a neighborhood of rental properties even recovers its value. Better take the $100,000 loss now and run the other way.

And imagine the people who bought there to occupy their homes. All of a sudden, 90% of your neighbors are moving in and out every 6-12 months. Ouch.

Anonymous said...

if half the houuses are for sale,does that make it a balanced market?

Tako John said...

JR said...

Imagine: You "tied up" a $700,000 house 6 months ago, to flip for $850,000 and make $100,000 after costs. Instead, you're going to get $1,700 a month in rent, which means a negative cash flow of $50,000/year. And if the down cycle mimics 1991-95, you will have to carry it for 5-years before the house recovers its value. Minus $250,000 before you get out. Assuming a neighborhood of rental properties even recovers its value. Better take the $100,000 loss now and run the other way.


The trouble is that this isn't 1990! The price spike was 1/3 as high relative to incomes as today, so you'd need to find someone with a $150K income to just happen to want this one.

This down cycle has the potential for sudden, sharp, and dramatic price changes. The only other option is for a 15 year Japan style stagnation, but I don't foresee that happening with the US consumer credit situation. The Japanese saved (and save) a huge percentage of their income, while we've had negative savings this year.

Anonymous said...

JR: Your calculus is based on one house. Now multiply by three for a flipper who wanted to triple his pain in this development.

Anonymous said...

I have a friend in the Sacramento area who works for a company (I forgot the name, sorry) who is a huge supplier of building materials for developers in the area. He told me things are really slowing down where he works and the builders keep telling him things are great and he's like, where's all the orders for material then. The greed out here is making people nuts. With all the forces lining up, like the economy, the dollar dropping, real estate down the crapper, etc., I think this state and our country are for a very rough next 5 to ten years, if not "permanently".

Anonymous said...

Visited area last week and observed "many" homes vacant.
Saw one home vacant and partially stripped.
Next door neighbor indicated home had forclosed and the owner had stripped it before he moved out.
Not a pretty sight.