September 24, 2011

Emerald Hills Haircuts!

Everybody can find some poor fool losing a Lexus or BMW worth of money on their unfortunate adventures in home-ownership. But in the rarefied air surrounding Emerald Lake Hills in Redwood City, you can turn the dream of home ownership into the nightmare of losing 5-10 years of average tech worker salary. Make sure to whisper as we talk about these gems as we wouldn’t want the current buyers to figure out they caught a knife just yet! Let that be an unpleasant surprise for them in a few years.
White hot?  Nope.  Dripping red?  Yes.

This timeless termite-group-hugger finally sold with only a year or so on the market after getting the burbed treatment. Yep, it’s a white hot real estate market for those of you with your own giant puddle to call 1/9th your own. It sold for only $700k (give or take $10k) under the original wishing price! That’s an entire HOUSE in Slummyvale!

But if you’re worried that’s not a REAL haircut, just a dreamer being rudely disabused of his or her little fantasy, let’s take a peak buyer’s banker’s pain and put it on display… a $386k haircut for the bank! There were two loans, so two banks dueled it out to see who would spill the most blood on THAT deal. I’m sure that Pyrrhic victory left the bank feeling like a million bucks!

Too pedestrian? Don’t worry, people with real skin in the game and a much higher price point joined in the blood letting with anot-a-lot-of-money loss of a half million and change. The good news is the sellers stuck to their guns and squeezed and extra $412 bucks for their little slice of hemorrhaging-cash-like-a-diarrhea-afflicted-elephant-heaven. I’m sure that took the sting off of it.Do it for the children!

Yes, there are many ways to lose your mASSarati in Emerald Hills real estate! Come join the party!

Comments (28) -- Posted by: sfbubblebuyer @ 5:08 am

28 Responses to “Emerald Hills Haircuts!”

  1. Divasm Says:

    I was noticing some thread on Redfin talking about how the people buying right now are mostly those trying to buy into good schools – whether they are investors or locals. This is pure speculation, but do you think the fact that the high school that serves this area, Woodside, was the only local high school featured in “waiting for superman”, contributed to some of the value loss? Or would that only be further down in Farm Hills and Cordilleras Heights because these kids all go to private school anyway?

  2. waiting_for_the_fall Says:

    The last house sold for less than the 2002 price.
    When it sells again at a 1998 price, we are close to hitting bottom.

  3. SEA Says:

    611 Hillcrest Dr, the last house, is a fine example of owners discovering the new market.

    March 6, 2006: Listed for $749k

    25 days later, March 31, 2006: Sold for $961k

    Was the listing price that low? Was the final sale price $961k low given the market conditions at the time? Was the strategy to price it over $200k below the final sale price effective?

    Things had changed quite a bit by 2010, when there was not such a quick sale, no over-bidding, and a final sales price below the 2006 purchase price.

    It did eventually sell in 2011 for $812k, a loss of only $149k, plus sales expenses, and so on. May I call that $30k per year?

  4. z2amiller Says:

    Looks like the Lakeview Way property was a full $1MM under the first wishing price on Zillow shows:
    06/19/2010 Listed for sale $2,799,000 –

    That is a Donald Trump-worthy haircut. (Although of course it was only ever worth 2.8M on paper / in the sellers dreams).

  5. The Gilroy Alex Says:

    The generally accepted cost of owning RE in the RBA is $50k a year. Sometimes you lost $60k, sometimes $40k, sometimes only $30k if you’re lucky, but $50k is a good ballpark figure.

    Ross Perot type haircuts coming up!

  6. SEA Says:

    #5- Really it’s a small price for the Pride of Ownership!

    #4- Did you notice that the tax assessment is about $200k (from zillow). I bet that’s going to change Real soon.

  7. nomadic Says:

    #3, May I call that $30k per year?

    Not really, because the events you state were in 2006 actually occurred in 2005. 😉

  8. SEA Says:

    Well that makes it all better!

  9. The Gilroy Alex Says:

    #6 – Oh, of course! I kinda left that unsaid. I had guys telling me they waited a year to sell their houses, in 2006-2007, and thereby lost $50 or so, and all I did was sort of hang my head and say something like “that’s awful”. I should have perked right up and said “But you got one more year of Pride Of Ownership!”. And gotten socked in the jaw, probably.

  10. madhaus Says:

    Thanks to sfbb for today’s article. Emerald Hills may be subject to the not-good-enough-for-RBA penalty which is why the haircuts are so painful.

    Divasm, Woodside High isn’t exactly a destination school. The local elementary is well-thought of, but after that? Private school or move? I wouldn’t say the loss is due to Woodside being in the movie; I think anyone who knew the area knew what they were getting into with Woodside. The scores aren’t exactly a secret.

    I love this area and wish the schools were better. It kind of bugs me that I live in the endless boring rows of Sunnyvale shacks when there’s such interesting stuff to choose from in Emerald Lake Hills. But then I remember why we bought here, and it wasn’t for the houses’ or the neighborhood’s unique character. Nope, it was those durn Cupertino schools.

  11. Divasm Says:

    I actually have other issues with the neighborhood (other than the schools). We seriously flirted with a short sale in Cordilleras Heights, but ultimately I had some misgivings about the location.

    There’s not a lot of good shopping options close by – there’s a few small centers but you really have to go at least 2 miles down to El Camino to get to anything major. Same thing for gas, there were no gas stations between 280 and the houses at all. And only a mile from that lake, you’re a hop skip and a jump away from super crappy schools and not-so-great areas to walk through at night.

    But I guess if you can afford a huge enough lot to gate it and pretend there’s no outside world, it’s all good.

  12. SEA Says:

    “it was those durn Cupertino schools.”

    What percentage of buyers heavily weight the schools in the purchase decision?

  13. The Gilroy Alex Says:

    8 miles or more to anything “major” here, OK 5 to Home Depot, and as for gates, we’ve got two of them and the rest of the world tries to pretend *we* don’t exist.

  14. DreamT Says:

    #12 – Probably anybody with an experienced local real estate agent, especially late in a bubble or early in a down market, where price stickiness is correlated to school quality.
    Just in today from Fyten: it does look like that old bromide, “good schools support home prices” is true

  15. madhaus Says:

    I’ve mentioned a few times that we worked out way down the school district lists until we could afford something we could stand to live in. The decision went like this:

    Palo Alto: Could only afford Eichlers, pass
    Los Altos: Couldn’t afford SFH anywhere
    Saratoga: Only townhouses in Saratoga school district; not interested in Saratoga address with Campbell schools
    Cupertino: Could afford but houses/neighborhoods at our price point were meh
    Sunnyvale: Could afford homes in CUSD, many nicer homes/neighborhoods to choose from.

    SEA, just the fact you asked that question tells me you don’t have kids. But even buyers without kids should look to preserving their investment (we’re not even going to talk about actually making any money on it) and should look to the better school districts for that reason.

  16. SEA Says:

    Don’t be so sure–one of the assumptions to make the math nice is that buyers buy based on different aspects. If buyers are buying based on the same feature, then the analysis is not so easy, so it is important to know if a significant percentage of the buyers are heavily weighting the same aspect of a given purchase.

  17. MS Says:

    The listing says you can fish at that lake.
    Anyone know if that’s true?

  18. SEA Says:

    Is Gunn worth $27,000? Seems like that place should be sold, if the schools were the big purchase decision.

  19. madhaus Says:

    Clearly living in the trailer park is worth negative $2.7M.

  20. SEA Says:

    Schools are one factor, but not the only factor. Now we must guess how many purchase decisions are based heavily on schools.

    Keeping the iid assumption makes things so much simpler.

  21. SiO2 Says:

    It’s hard to know for sure. But, there’s certain areas where the district line cuts through a neighborhood in a seemingly random path. On the same street, next door neighbors could be in different districts. You see this in east Los Gatos, where part is LG school and part is Union. And in Saratoga, where Moreland and Cupertino meet.

    In these cases, there’s about a $150k difference between one school and the other. So I have to think that the district is playing a huge role in those purchases. Even for a buyer w/o kids (or with private school kids) who is hoping to preserve value, that $150k means more interest and more property tax every year.

  22. madhaus Says:

    I’m with SiO2 on this. The price difference in that part of Saratoga is astounding, given the difference between Cupertino vs Moreland, then dropping to Campbell.

    The difference north vs south of Fremont Ave in Sunnyvale isn’t anywhere as striking, because Cherry Chase Elementary is scoring in the same range as West Valley, and both areas get Homestead High. So the $50-60K difference is entirely due to Sunnyvale Middle vs Cupertino.

    Or check out that dicey area in Menlo Park/EPA near 101 (Willows?) where some houses have Menlo schools vs Ravenswood.

    Sure school district isn’t the only thing that sets house prices (hello busy streets, railroad tracks, Superfund sites, freeways and airports!), but ceteris paribus it makes a huge impact.

  23. SEA Says:

    #22- So 5% +/- 5% for a favored school district? This sounds like a good weekend topic, complete with divided streets (right sides of wrong streets) and sales histories.

  24. madhaus Says:

    Well, you better get cracking on writing it, then.

  25. SEA Says:

    I’m the wrong person, since I’d rather just keep the iid assumption.

  26. z2amiller Says:

    @madhaus(and @burbed) – first things first, you need new hosting for, it is frequently timing out or getting connection reset on loading the page. Which sucks because I just had an epic comment all typed up and lost it.

    Anyway what I can remember of my comment –
    @madhaus, why the Eichler hate? I live in a neighborhood of Eichlers and Eichler clones (Since I’m in down-market Mountain View, we can’t even afford real Eichlers here). I actually like the character of the house and neighborhood a lot.

    I suppose Eichlers and their ilk don’t handle neglect as well. Also the real Eichlers are mostly built on the slab foundations which can buckle and crack in this clay soil which especially sucks when your radiant heating pipes are in there. There are a few homes in this neighborhood with hellish HVAC monstrosities on their roofs, clearly a retrofit for central air, or their radiant heating pipes got cracked up in the shifting soil. (My clone has a real crawlspace so I get to deal with raccoons and stuff instead). Also I guess common to houses of that vintage are the flat roofs which can hold water and leak. And the roofs that somehow have a negative R-value, coupled with floor to ceiling windows, which gives that nice greenhouse effect in the summer, and you really get to test out that radiant heat in the winter. But aside from that, the houses have a lot of character. 🙂

    As for the school districts – I think it is a risk to pay the $100k premium or whatever because houses on one side of the road are a better school than the other. At least in Mountain View, the top elementary schools are full up because families with kids are targeting homes in that area. So even if you drop the big bucks on a house right next to a great elementary school you might still end up going to a lower ranked one. To combat that, I think the school district is slowly shrinking the enrollment area of the most popular schools, and the houses most at risk are the ones with the enrollment plans like “Addresses 102 through 138 except for the jerk at 116 on the west side of South Third Street who’s children have birthdays on odd days can go to Bubb Elementary”

  27. SiO2 Says:

    Your point about boundaries is valid within a district. For example, in Fremont Unified (in Fremont, not Fremont High in Sunnyvale/Cupertino), Mission San Jose High is the best one. So many people moved there that the district shrank the attendance area. Then, the people who had paid a premium for MSJ got shafted – even if they don’t have kids, their property value is now down. Or in your case; people in MV Elem thought they would go to school A but are actually going to school B.

    But across districts is different. It’s unusual for the districts to change – e.g. a house that was in Los Altos Elementary moves to Mountain View Elem or vice versa. Such a change requires consent from the people subject to the change via election, the source district, and the destination district. Even people without kids would never consent to changing to a lower-reputation district due to the property value impact.

  28. SEA Says:

    I say that while correlation does not suggest causation, in the RRRRReal RBA, the schools are the best.

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