Stress

When the bubble burst in San Diego, the city that first saw the end of the bubble, it was greatly effected by foreclosures at the bottom end of the market; the subprime implosion. As subprime mortgages were pulled from the offerings, volume disappeared. Prices had risen to a point that, without subprime mortgages, there were no buyers. So prices had to drop to return to a point where the population could afford houses. The irony is that the subprime mortgages was touted as an "affordability product" that allowed more people to enjoy home ownership. Instead, subprime mortgages made housing unaffordable.

I don't get the sense Chapel Hill saw much of the subprime fallout; I do think that we'll see more of a problem when the Negative ARM loans recast (scheduled to begin this fall) and we will probably see problems with regular-old ARM mortgages now that interest rates are starting to creep up. There will be more stress in the Chapel Hill market in the near future.

5526 Spring House Lane. $154/sqft. $649,000.

Here's an Orange County property that's currently on the market as an REO -- it's a foreclosure -- it's not in the Chapel Hill school district.

It was originally purchased in 2005 for $870K ($206/sqft) and was bought back by the bank (US Bank National Association acting as a trustee for Credit Suisse) for $739K in March of 2008 ($175/sqft).

The reason foreclosures often go for much less than the market price is that banks have rules about keeping non-performing assets on their books. They are in a hurry to get rid of real estate. For some reason, US Bank National Association was not, and is not currently:

Orange County property records show this foreclosure occurred on March 19th 2008. The property did not get listed until March 7th 2009. This property sat unoccupied for a full year before making it to market? It could have been listed once, de-listed, and then re-listed to give it a fresher look. Regardless, the property is on the market for 25% off it's 2005 purchase price and it's still been on the market for 52 days. An obvious question is: if the market won't snatch up a property when it's owners are aiming to price it below market value, then haven't the owners over-estimated the market value?