San Diego Housing Bubble News and Analysis

Look at this this way.

The mother of all bubble markets (in the SD metropolitan area), Temecula has not hit the bottom. So, I don't see how any part of SD county has hit the bottom.

There is no shortage of fools who are ready to rush out and buy a home in San Diego. It's a long way from the bottom and those who buy now will regret their hasty, emotional, "gotta have it now" desire for owning home and paying way too many $$$$$ for houses. You probably won't see the bottom until 2011-2012 and by then, there will be plenty of houses to choose from. And after the bottom is finally found, prices are not going to magically zoom upward again for a loooooooong time. Any rational, logical person can simply look at all the information that is readily available on all the major, news websites and in newspapers to see which direction the economy is headed for the next few years and what's going to continue to happen in the housing market.
Don't be a sucker and follow the herd while they're jumping off a cliff.

One house does not a market make.

Competivly priced houses are getting lots of attention right now. To assume that other houses wont try to get in on that attention by becoming competivly priced is to misunderstand how housing is priced (comps). Soon, they are not competivly priced anymore and then further reductions are needed to gain the attention. Poway is not amazingly different than MM, RB, or PQ. Pain in one will spread to the others. Also, just because people are looking doesnt mean people are BUYING/CLOSING. Look at Raptorduck, 100+ houses and now a renter. Ill bet he has alot more resources to buy than those 30 something families.

If you dont believe me look at the sales totals on the main page from Rich. Down 33.7% from 2007. If places were bottoming sales wouldnt be getting cut by a third. Sales are slowing, Inventory is high, must sell inventory is high, rates are extreamly favorable already, effects of recession and employment decline are mostly still ahead not behind. That doesnt meet the definintion of any bottom I have ever heard of.

The mother of all bubble markets (in the SD metropolitan area), Temecula has not hit the bottom. So, I don't see how any part of SD county has hit the bottom.

What makes you think that Temecula has not hit the bottom?

esmith,

I drove through an area of Murrieta yesterday afternoon...just a random drive while visiting a friend there. Here is what we saw in span of one two streets. Six to 8 for sale signs and one very nice corner lot home with a huge foreclosure notice in the window and sign indicating it would be up for auction soon. The street that our friend lives on had at least 3. In fact, they were on either side of our friends' house...nice.

The thing is, these homes were new, and very, very nice looking at least from the outside. Even I have to admit that it is tempting. However, I don't believe the downside is fully in because the credit mess has not played yet...not even close in fact. The lending standards are still looser than I think will get over the next couple of years. It is tempting though.

1 - There are very few realty agents whom we allow to be quoted here. I'm pretty sure this individual isn't one of them.

2 - Santee = Poway ??? (see above)

3 - There are 147 active listings for SFRs right now. There have been an average of 17.33 sales/month over the first 3 months of this year. That means we have 8.5 months worth of standing inventory.

4 - Foreclosure.com currently lists 104 foreclosures and 241 NODs for Santee. That number probably isn't extremely accurate, but when you compare it to the rate of sales it should give you an idea of what's coming down the pike over the next few months.

5 - Median price for the closed sales this last quarter was $401,383, which is now only 5.12 x the average annual household income in town ($78,250). By contrast, the median price in 1999 ($191,499) was only 3.6 times the then-median household income level of $53,624. To do that in the here and now, the current medians would have to drop to $281,700.

6 - See #1 above

"You probably won't see the bottom until 2011-2012 and by then, there will be plenty of houses to choose from. And after the bottom is finally found, prices are not going to magically zoom upward again for a loooooooong time. Any rational, logical person can simply look at all the information that is readily available on all the major, news websites and in newspapers to see which direction the economy is headed for the next few years and what's going to continue to happen in the housing market."

This is not just one house.

Another sold earlier this week, "a piece of sh**"...

Though I am hopeful of this happening,so that I can scoop up the house of my dreams for a song. I am afraid that somehow the lunacy maybe struggling to continue. My husband keeps saying these people bidding up this house are stupid, they are keeping the overpriced market from falling.

I see the number of listing dropping drastically instead of rising. Though I do see the "plain vanilla median" dropping.

My kids are calling to me constantly "there's another one", "there's another one" "these ones have kids"..........this is 2:oo in the afternoon on a Tuesday! Whole families are available @ 2 o'clock during the middle of the week?........

I am hopeful this is spring bounce......

Well, if you still have any doubts, here is just one more piece of information that tells you where the economy is headed which translates into more foreclosures, job losses, etc etc etc

http://apnews.myway.com/article/20080408...

Just because a certain number of people refuse to accept reality doesn't change reality. If you choose to go ahead and buy a home now, be my guest but my educated guess is that if you do, you will be back here within a year moaning about how much the value of your house has dropped (just like the guy from Temecula that we told not to buy but he did because he wife just had to have a house..................he came back on this board around six months later and his home value had already dropped over $50k+)

"5 - Median price for the closed sales this last quarter was $401,383, which is now only 5.12 x the average annual household income in town ($78,250). By contrast, the median price in 1999 ($191,499) was only 3.6 times the then-median household income level of $53,624. To do that in the here and now, the current medians would have to drop to $281,700. "

I read the median was in the 300k range, at present. Not far from 281k....

I really hope the 281k is correct and that's what happens, but where are these people comming from?

My realtor isn't the only one saying Poway is getting 5/6 bids on a house. I've read it here too.

Thanks ex-sd good article, I'll show it to my hubby.....

Thanks Ex-SD for the encouraging words.

jpinpb: Simply put..........................."It is what it is".
The temptation is to make an emotional decision when buying a home despite knowing better. If you can detach your emotional feelings from the "gotta have a home, NOW" syndrome and make a logical, rational decision, you'll have a lot more money when you get old and gray. Those who don't will simply look back and say, "I should've...............I could've..............I would've:.....................If only I had used a little common sense. There will always be greater fools in any marketplace for any item. One can choose to be a follower or an independent thinker who looks at all the available information and attempts to make a logical, rational decision. I have always chosen NOT to be a follower and it has served me well. :)

I don't believe all these people feel they are NOT being logical. They know they are buying in a buyers market. They are paying rent. If they come from an area in San Diego where their rent is in the 2k range, they are still close to the payment on this house, and they NOW have a tax write off.

I too am an independant thinker. I question EVERY one even myself.

I needed to hear a good argument on why I am wrong in being worried about my "lowball" offer not being accepted and that maybe I misjudged. I thought maybe other areas, all the "better ones" are still correcting but maybe some are done. I needed to hear that I am wrong for that

This is probably the strongest "spring bounce" I've seen since 2004/2005, but we have to consider why.

Ever since 1996/1997, people have watched housing prices soar out of their reach. For the first time in over 10 years, people are seeing prices drop -- in many cases, by 30-50%. This will naturally bring more people into the market.

If you look at the sales histories of a number of houses, you'll see multiple foreclosures on the same homes during downturns. This is just the first wave of knife-catchers.

You'll know we're near the bottom when you **don't** see multiple families looking at an over-priced 1970s tract shack that's "on sale" for $450K.

Just MHO. :)

your wrong.

"You'll know we're near the bottom when you **don't** see multiple families looking at an over-priced 1970s tract shack that's "on sale" for $450K."

We don't.......even the great ones @ that price.....

Houses that are selling round here are sub 400k.....that is why I am thinking maybe SANTEE and others like it ARE bottoming out..........

BUT I AM WRONG........right?

Little lady,

It is starting to seem to me that you dont want to hear the answer that will be given here. You keep asking the same question, ignoring the answers given, and then keep asking to be proven wrong. If you dont want to hear the answer, dont ask. If you have become emotionally involved in this house, or want to own again, then admit it and move on.

1st, I dont see houses selling in Poway for ~300k. Show me those 300k SFR comps......
http://www.sdlookup.com/Closings-92064-P...

2nd, the economy is slowing, even the federal reserve just published their growing fears about it. Slowing economy means slowing jobs and incomes and that isnt good for housing. Even if housing is on par with rent, which it isnt close, 1997 era shows that a premium on flexablilty and limited liability can be observed in the housing market. As such, housing isnt turning around until jobs/incomes do.

3rd, inflation is picking up. Recient interest rate cuts have not been observed in inflation readings, and the numbers all seem strangly low. Inflation without wage inflation hurts housing prices.

4th, 5-6 months of inventory is considered healthy. More than 7 is unhealthy. Poway currently has 8-9 months. Foreclosures and short sales are killing the market, leading prices down. Until this stops, it is accelerating not stoping, prices will continue to fall.

5th, sales are off by more that 1/3. This is a huge number and will lead to longer times on the market and more reductions necessary to move.

6th, locations around Poway are experiencing the same if not more pronounced problems. Poway, PQ, RB, MM, Esco, and Clairmont are all in the same market. Poway cant bottom and hold until the locations around it do as well. These competing locations are still falling, and Poway will too.

There, 6 reasons why you are wrong to think this is anything more than normal spring activity. Look at the charts, activity ALWAYS picks up in March and April and this year is pathetic but no differnt. If you dont like these reasons you wont like ANY reasons and should just go out and offer 110% of full price on that house you want so badly. That will give it to you for sure. If you really think the market is at bottom, why are you low balling? It is only up from here right?

There are two options as I see it:

1. Buy a house now and then (in say about 2011, but who knows) see if April 2008 was really the bottom.

2. Continue renting and (in say about 2011, but who knows) see if April 2008 was really the bottom.

I see option 2 as having almost no risk (and I hate saying no risk)

I see option 1 as being fraught with risk and speculation.

Just my opinion.

BTW Here's a crappy graph I made using general figures of per capita income (which I just interpolated from Rich's graphs so it's not accurate, or could be totally wrong. Is it really just about $33,000?). I mapped what the price of a median house should be based on the historic peak price to income ratio, the historic median price to income ratio and the historic low price to income ratio and then increased the income by 4% each year to show what each price range should be in the future.

It's not the most accurate graph (or pretty for that matter), but I hope it shows how much more this market could go down.
ptoi: Price to Income Ratio

With as much uncertainty in our economy, that itself is enough to make purchasing a home a back burner priority. If this thing didn't turn into a recession scenario, it might make it more tricky, but when I look into the crystal ball I keep seeing one more chip added to the stack opposite of housing's favor.

A couple have probably hit the bottom. Some are not at the bottom but if they sell they won't sell for less again and some will hit the bottom between now and the bottom and some will hit the bottom at the bottom and some won't hit it until after the bottom. This is county wide and also includes condos and detached houses.

What makes you think that Temecula has not hit the bottom?

esmith, TemeculaGuy is our residence expert on Temecula & he wants to buy in Temecula one day. Currently, he's still very much "on the fence". What does that tell you ?

Here's the thread that I mentioned earlier where the buyer lost over $50k in around only six months. When he bought, he thought it was a GREAT DEAL!

http://piggington.com/harveston_down_the...

"What makes you think that Temecula has not hit the bottom?"

I am still going with Temecula Valley is within 10% of the bottom IMO.

Maybe a few screaming deals here and there if you are in the right place at the right time etc....

As bad as everyone thinks Temecula is doing (and make no mistake it is bad..), We went out to eat Saturday night in the Mall area at an Italian restaurant , Place was completely packed (again was like this two weeks earlier as well), had to wait 40 Minutes to get a table for two !!.

I think this is a tale of two economies (for the moment anyway),

There are those who are involved in the real estate economy who are doing horrible,

Then there’s everyone else who seem to be doing OK (so far).

O.K. Maybe someone will indulge this maybe not.

A friend of mine bought a house in 1990 for 154k(clairemont).
It probably dropped to 110k. It went back up to about 450k in 2005. Now it would go for 350K. His taxes are low and he has a tax write-off on the palty sum of a mortgage that is left since he refied to a 15 year mortgage several years ago. His payment has been close to rent even after refying to the 15 year(I am not sure of the exact details). He will only have taxes and insurance after he pays his mortgage off. How much money did he lose? I am against drastically over-paying myself but just wanted to add this perspective.

VC is not down nearly as bad percentage wise. He might get there but I think we can't make much of a case against his situation yet except that his aquisition price was at least 50K too high.

Clients of mine are in escrow on a property that with 20% down will cost them about $1200/month. The same unit is for rent across the street for $1450. Will it go down lower? Perhaps, but who cares at this point. I know my clients dont.

I should have pointed out my friend had a civil service job. Employment is a huge factor, as mentioned. If not that then definitely another safety net, family or savings or just buying a really cheap house or another pan "B". My friend had plan 'B" "C" "D" ect.

DWCAP

Your missing what I am saying, but that is okay.....

"1st, I dont see houses selling in Poway for ~300k. Show me those 300k SFR comps......"

He didn't say this, he said they were mirror markets, not prices....simular housing stock....although the same kind of house doesn't go for much more up there(he said they have the exact same model that I sold in Santee up there) and they were getting multiple offers...I knew this would wrinkle feathers....not everyone feels the same way and I could give a rats...you know.....

This is my first offer, and lowballing because I thought the market was crap and I in the perfect situation. It was NOT a house I have any attachment to. I felt like if I didn't get it so be it...there are more comming. It just was in the same neighborhood and if I got it at that price I would be pretty sure it wasn't gonna fall a signifagant amount less,(that I wasn't sure when the market recovered it would be worth) like the fellow in Temecula we've been reading about. After seeing this ridiculous amount of activity- and I MEAN RIDICULOUS......I began to suspect maybe the end is near or here....I needed some validation.....some sure proof that it isn't turning around...I am second guessing myself....I know Piggingtonians are sure the worst is yet to come.......and they have proof......now I feel better, thanks y'all

Rustico - Too weird. I know someone exactly like this in Clairemont, the same scenario. His name wouldn't by chance be Chuck?

I do have friend named Chuck, different neighborhood.

How much did he overpay? Compared to what? Imagine if he had put that money into Microsoft stock. Assuming a 20% down, he put down 30k. Now I dont have the exact multiplier, but if I remember right 10k in 1991 in microsoft stock is now worth 900k. So, it could be worth 2.7mil if he invested another way. That is about 9 times more than the value of his house. Sounds like a bad investment to me.

My point isnt that anything that wasnt the best investment ever is underperforming or anything. My point is that hind sight is 20/20 and we all remember the successes. Imagine if he had lost his job back in 1996. There is no way he could have known that he wouldnt lose it in 1991. So in 17 years things worked out for him. Good for him. I have a feeling that it is a safe bet that in 2025 RE prices will be nominally higher than now. Id guess that cars, tennis shoes, and lollipops will be more expensive too.

Work inflation into this guys return and it isnt all that great. We need to take into account the fact that this investment also fulfilled a basic need of shelter, so the return has been better than the numbers show. But still, to me this shows that in the long run housing acts like gov bonds, sure it all goes up but the return just isnt that great.

OK. For a minute there I was thinking the world was shrinking. I know someone who bought in Clairemont in 1990 for 150k. Dropped slightly in the early/mid 90's. Went up to 450k during the boom and now down to 350k. He refinanced and did a 15 year loan I forget when. He has savings. He's got a civil service job and wife is a teacher. He's probably due to retire in about 10 years or so, thereabouts, maybe less. Pretty conservative. They are not major consumers. They do travel quite a bit.

DWCAP - I see your point. When I went back to school something possessed me to buy some AAPL. Not much. Didn't have too much $$$ but picked it up for 30 something. Hindsight is a killer. Should've taken a loan and bought some more stock back then. Crystal ball wasn't working too well. Just did it on a whim.

Of course, the place did provide housing and that is worth something.