Sunshine Coast Price Drop: How low will they go?

[Skook]

A new listing caught my eye the other day. When it popped up, I said, “Oh, you’re back! I wondered what had happened to you.” Here is the listing - crooked pic and all.

The main entrance shown in that listing pic is accessed from the back of the house via the driveway. The image directly above is what you see from the street.

I used to walk by this home once or twice a week on my regular walkabouts when I lived in West Sechelt from January, 2009 to March, 2010. On my first hike down Mika Rd, I noticed its ‘For Sale’ sign, lack of occupants, no landscaping and assumed the developer had just completed it. In hindsight, the lot was likely bought by a builder and when the home was completed he put it on the market with the hope of making a tidy profit. Unfortunately, the US banking crisis and stock market meltdown were just around the corner.

When I stumbled onto SC Realter Gary Little’s interactive map in the fall of 2012, I headed over to West Sechelt to see what was on the market and discovered this house still hadn’t sold. I been following it off and on ever since until late last fall when the listing disappeared. So, when I saw the new list price the other day, I thought this was worthy of Google search to find its complete listing history which you can see in the table on the left below. The assessment data on the right shows that since 2011 the land value has dropped a total of -$13,000, the improvements -$20,000 for a total drop of -$33,000; and, yes, this home is now priced below assessment.

(June 15, 2014: I was updating this post and goofed and removed the spreadsheet showing the listing history of 6220 Mika Rd. I have had to post that updated spreadsheet below as a “New Reply” - click here.)

Of course, anyone now attempting to sell their homes in this neighbourhood will face the same scenario and here’s another example. The home below was listed back in January, 2012 at $758,000. I have no idea how many if any price drops it went through before it was relisted in February, 2013 at $688,000. The home sold in August, 2013 for $625,000 for a total drop of -17.5% from original list price. My guess is that it sold at or just under the 2013 assessment. The buyers were smiling I am sure; however, when they opened their 2014 Assessment that smile likely disappeared.

There has been some vacant lot activity in this street, too.

Lot 36 Mika Rd was on the market last year at $199,900. It was relisted Jan 24, 2014 (V1044195) at the same price. It sold mid-Feb for $197,000 - a drop of -1.5%.

Lot 67 Mika Rd is currently on the market. The lot sold at the end of July, 2012 for $192,500. As you can see in the image below, it was back on the market 6 weeks later (Sept 10, 2012) at $197,500. Did the sale fall through or is it a flip? If it is the latter and sells for list, the flipper will have earned a pittance on the investment if you deduct all the expenses in the initial buy and subsequent sell. Or, maybe financial circumstances prevented building that dream home.

I was curious to know the development history of this area because the Lot 79 listing says “Pacific Ridge Estates” which I have never heard mention of before. The Lot 47 listing says it is in “Oracle Heights.” So, I began a Google search and was coming up with nothing which told me activity in the area was prior to 2005/06. I decided then to visit Google Earth and look at the timeline of satellite shots and the earliest available is November, 2004. I snagged that view and compare it to the most recent satellite shot, July 2013, in the image below.

On the July 2013 pic, I have added the street names and have indicated the locations for the homes and lots described above. I have added two red lines as well. These indicate the point where different district lots meet which made me think that different developers/land owners were behind the development of this area. By the way, there is another lot between 6220 Mika (A) and Lot 36 (D) - the one with the path beaten through it.

For the Oracle/Mika Rd lots east of the red line, the land was originally part of a larger parcel belonging to the owner of the large property to the south. As the November 2004 satellite image shows its development was well underway with roads and services in and homes built before work began on Oracle Heights Phase 1.

The upshot of my research is this: that the lots in the areas outlined in orange (Oracle Height Phase 1) and purple (Pacific Ridge Estates) in the zoning map below were completely sold out by 2006. So, the ones that have not been built on were bought by “investors” to be flipped at a later date based on their expectation land value would continue to rise. The price tag for the lots back then was likely between $175,000 - $200,000 and if you factor in the GST, Land Transfer tax and years of paying property taxes no one putting these lots on the market after 2007 will have made or will make any return on their “investment.”

As well, judging by whom I met on my walkabouts, many of those who built in this area are baby boomers. If they hoped the value of these homes would continue to rise and finance their retirement when they were ready to downsize and sell they are hooped. For not only have assessments fallen year-after-year since 2011, they also face competition from growing number of resale listing with continuous price drops as any new projects like the Sangara development ‘Silverstone Heights’ which has priced its yet-to-be-built homes in the 30 lot subdivision at $479,900 to $579,900 which is $19,000 to $119,000 lower than that new list price for 6220 Mika Rd - the property that prompted this post.

So, what do think the builder of 6220 Mika Rd should do? Well, I think he and everyone else needs to read RFM’s excellent post ‘Pricing Property in a Declining Market.’

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Note: the subdivision outlined in blue is Oracle Heights Phase 2. It began marketing its lots in July 2006. Four of the 28 lots (30, 31, 34, and 35) have never sold. As of today, they have been listed for 2,739 days : 7 years 184 days and counting.