I went to the REDC auction at the LA Convention Center today, October 28, 2007, and I put all the numbers into a spreadsheet for a bit of data crunching fun. Here's what I found.
First, some background. Today's auction is for properties in the Los Angeles, Orange, Ventura, Kern, and Santa Barbara counties. San Luis Obispo and Tulare counties are included. But there is only one property auctioned for each, so I excluded them in my data computations.
I started with the spreadsheet provided by REDC, which was downloaded from the REDC web site. (The spreadsheet is no longer available, now that the auction has ended). I then entered the high bid for each property from the auction. A 5% buyer's premium is added to each high bid for the final purchase price.
REDC's spreadsheet provides a column for "Previously Valued To", which it defines as "the higher of (a) the appraised value of the Property in connection with the most recent mortgage on the Property, (b) the most recent asking price, (c) the assessed value or (d) the mot recent broker price opinion." So while the "Previously Valued To" price is neither the asking price nor the "market price" in today's market, it does represent a price at which someone, at some point in the past, thought the property was worth.
The most obvious comparison is the ratio of today's auction purchase prices to REDC's valuations. But I would not see this ratio as a "discount" of the auction. Since REDC's valuations are mostly appraisals from when the property was last sold, it probably represent 2005-2006 valuations rather than October 2007 valuations. Therefore, I see the ratio as more of a value drop from the market prices of a few years ago to today's prices.
I understand that not all transactions will go through. Perhaps the lenders will reject some prices as too low. Perhaps some borrowers will not qualify for financing. Even though not all the properties will be sold, I believe the purchase prices are still valid -- as a measure of what buyers are willing to pay today.
Finally, just a few technical details -- I made sure the spreadsheet contains the last minute additions to the auction (there were four), deleted the properties that were removed from the auction, and ignored the properties that do not have an REDC valuation for comparison. I also dropped the only property in Tulare and in San Luis Obispo, since there are not enough data there to make the numbers meaningful for those two counties.
So here are the numbers. For each county, I list the Best Deal (the most value drop -- largest price drop as a percentage of the previous value), the Most Resilient (the least value drop -- retained the most of the previous value), and the Average Value Drop.
Santa Barbara County: 5 properties (4 SF, 1 Condo)
Best Deal: 613 W Tunnell St, Santa Maria, 93458. Highest Bid: $180K, Purchase Price: $189K, REDC Valuation: $389K, Value Drop: 54.41%.
Most Resilient: 2017 South Lassen Dr, Santa Maria, 93458. Highest Bid: $310K, Purchase Price: $325,500, REDC Valuation: $384,900, Value Drop: 15.43%
Avg Value Drop: 27.26%
Ventura County: 7 properties (7 SF)
Best Deal: 2270 Snow Ave, Oxnard, 93036. Highest Bid: $315K, Purchase Price: $330,750. REDC Valuation: $525, Value Drop: 37%.
Most Resilient: 779 Spalding St, Thousand Oaks, 91360. Highest Bid: $410K, Purchase Price: $430,500, REDC Valuation: $565,900, Value Drop: 23.93%
Avg Value Drop: 27.61%
Kern County: 15 properties (15 SF)
Best Deal: 6617 Peggy Way, Bakersfield, 93309. Highest Bid: $130K, Purchase Price: $136,500. REDC Valuation: $265, Value Drop: 48.49%.
Most Resilient: 1205 Evadonna Rd, Bakersfield, 93307. Highest Bid: $180K, Purchase Price: $189K, REDC Valuation: $219,900, Value Drop: 14.05%
Avg Value Drop: 32.53%
Los Angeles County (all): 46 properties (37 SF, 2 Duplex, 7 Condo/TH)
Best Deal: (see below)
Most Resilient: (see below)
Avg Value Drop: 27.27%
Los Angeles County (Lancaster/Palmdale only): 12 properties (12 SF)
Best Deal: 38851 Juniper Tree Rd, Palmdale, 93551. Highest Bid: $160K, Purchase Price: $168K. REDC Valuation: $327,900, Value Drop: 48.76%.
Most Resilient: 2103 West Ave J-6, Lancaster, 93536. Highest Bid: $260K, Purchase Price: $273K, REDC Valuation: $359,900, Value Drop: 24.15%
Avg Value Drop: 32.16%
Los Angeles County (excluding Lancaster/Palmdale): 34 properties (25 SF, 2 Duplex, 7 Condo/TH)
Best Deal: 1644 East 109th St, Los Angeles, 90059. Highest Bid: $160K, Purchase Price: $168K. REDC Valuation: $325K, Value Drop: 48.31%.
Most Resilient: 215 West 7th St #806, Los Angeles, 90014. Highest Bid: $275K, Purchase Price: $288,750, REDC Valuation: $320,200, Value Drop: 9.82%
Avg Value Drop: 25.55%
Orange County: 21 properties (8 SF, 13 Condo/TH)
Best Deal: 25652 Rimgate Dr #6F, Lake Forest, 92630. Highest Bid: $155K, Purchase Price: $162,750. REDC Valuation: $287,900, Value Drop: 43.47%.
Most Resilient: 17401 Breda Ln, Huntington Beach, 92649. Highest Bid: $590K, Purchase Price: $619,500, REDC Valuation: $699,900, Value Drop: 11.49%
Avg Value Drop: 25.41%
According to these numbers, Los Angeles (excluding Palmdale/Lancaster) and Orange counties have held their property values the best -- which is exactly what one would expect. But I was surprised by the 25% number, indicating that there are neighborhoods in both counties that have lost a quarter of their value in just the past year or so. I certainly do not see a 25% drop in MLS asking prices. And Palmdale and Lancaster have lost almost a third of their home values!
Then again, one has to remember where this data comes from -- foreclosures. The distribution of foreclosed properties typically exclude the more affluene neighborhoods. For example, there were no auctions for properties in Malibu or Newport Beach. So the real value drop for the counties, as a whole, would be much less than 25%.
REDC has two more auctions next weekend, Nov 3rd and 4th, for the Riverside and San Bernardino counties, respectively. I won't be attending those auctions to get the numbers. However, I suspect the value drops there would be similar to Palmdale and Lancaster.
http://www.lululand.com/article.php/oct_28_la_redc_auction_results