San Diego Housing Bubble News and Analysis

It doesn't jive at all...that's why I'm staying WAY CLEAR of this housing market.

Our housing development has over 300 homes here in SD county and there are zero for sale here, too. It is sort of amazing...a year ago I would have predicted there would be signs up all over the place.

There are so many forces manipulating this market. Smokes and mirrors, I say. I like to think of it as water out in the desert.

The housing market is so hot since early this year. In LA, my friend needs to compete with other buyers to buy an old house in good school district. The selling price is higher than listing price now. More people jump in already. In SD, I can see the SFH get sold in few days if their prices are attractive and reasonable.

Unemployment rate is high but some people have savings and wait for a long time to buy house. When the price and mortgage rate are reasonable, people jump in. Also, the economics is stabilized. Small companies starts to hire the talents got layoff from big companies. Big companies still lay off people. Although you won't see the growth from the news, some developments are growing behind.

In my zip code I have noticed a shift in recent weeks, I think the shadow inventory is starting to show up. Albeit, I am at ground zero so it's difficult to compare areas, but many times what I see here, shows up soon after in other areas. The bank owned homes are starting to list at the rate of a 4 or 5 a day as opposed to 4 or 5 a week. The ones nearby that I have followed that were vacant for a long time have just listed. Overall inventory is flat from last month and at a 5 year low, list prices are flat over the last 6 months, no more chunks down but they are coming on the market at a higher rate, selling, and more coming on, I think the bidding wars may end soon.

Maybe the banks are doing it on purpose or maybe they just ramped up the staff to process it. Personally I think that the banks realized rates were low, people were buying and they might as well clear the stuff out, it just took them 2 months to get the ball rolling, the fall/winter may be a much better scenario for a buyer if this trend holds up, then again, the fall/winter usually is anyway.

Keep the optimism. They are called "Green Shoots".

It sure looks like that short sales in attractive areas are getting multiple offers now.

Fall and winter housing price are always lower than spring and summer. On top of this, low mortgage rate, low house price and $8000 tax credit for first time buyer before Dec 1 are the main issues for this heat. Not sure how long this heat can last for. Inflation seems not happen this year. Second stimulas plan is in talk. Money starts to move out from stock to bond. If these factors are good for buyers, the heat can last longer, isn't it ?

My immediate 'hood has a few listings - and branching out to the greater hood (the south part of my zip) there are even more.

Many of these are "wishing" prices though. And they're not selling. There's one around the corner from my house that I really don't get... Easily $150k over market value. Been listed for over 2 months and no price drops. It's literally the talk of the neighborhood because no one can believe how much they're asking.

The stuff that is priced appropriately seems to be selling.

It looks in the areas I track like banks are putting only 1-2 forclosures on the market per week, keeping the supply low. Simple supply and demand.

Who knows what the supply would be if homes weren't being kept off the market.

How long this game can last is anyone's guess.

It seems to be local, where I bought there are a few on the market with nice lots. Where I'm selling the market seems flooded and nothing seems to be moving. I'm hoping to sell before summer is over because I think the market may head down after that.

In my area of SEH in San Marcos two of the three new home builders are closing up their final sales. With the $10,000 new home tax credit, $8,000 tax credit and incentives people jumped like crazy and they cleared them out. This has decreased inventory.
The remaining home builder is building out a few homes at a time creating demand.

Everything around $450,000-$550,000 is sold in a few days and the only homes left are the overpriced.
The banks seem to be putting out 1 foreclosure a week. I am hoping TG is right and that we start getting more bank owned properties on the market by fall/winter.

Impossible!!! How dare you state these questionable bullishness around here!!! /Sarcasm

If it is real bullish, we won't sit here and discuss, just jump in no matter what, like 2006-2007, whatever stocks you picked, you must gain anyway.

They're not making more land....excuse me, I threw up a little bit in my throat....

It can last as long as Frank and Dodd and Schumer want it to.

I think you can sum it up like this,

Homes are not selling at real market prices (at least at low to mid end) so no one will put their home on the market unless they are under duress.

Also I think people with money to invest are starting to grab homes and investment properties (Not BMW's)

Wow you should see the new BMW's being stack up around every BMW car dealer, it is amazing, I think it is more than just a down turn, it's people with money thinking it's now or (maybe never) for investment properties.

I am now hoping to get a 50% off deal on a new BMW (although I was never a big fan), but hey if they are going to be giving them away.

These of course are just an armature observers thoughts.

"not selling at real market prices "

I should say maybe more correctly

Homes at the low to mid end are selling at a substantial discount to their real value.

Over at Zero Hedges site you can find the T2 Partners latest housing market analysis. It's a good one.
I am noticing available rental units starting to really climb in my area. Almost 50% higher than average for this time of year. This Fall could see crashes in all areas of the economy....once more.

Thanks, peterb. That T2 report is a good read, packed with solid housing data.

"Homes are not selling at real market prices"

I actually laughed when I read that. After all that has happened, there are still people who thing the (middle of a) downward leg of the never-ending up-and-down cycle in the housing market is "not real". Only the price increases and peaks are real. It's funny, but it does make me sigh too....

How are you calculating "real value"?

Is it the price you REALly want? I want to earn $10 million a year. But, alas, I am earning less than my real value. Seriously, No-LA-SD-guy, if you are claiming that prices in a market segment are below their long-term trend values, or something like that, then bring the data. For example, the current prices for that market segment and the trend back through at least the bottom of the last cycle (1996), or preferably through a few cycles (so back to 1980, maybe).

OK well I will admit its just educated guess work mostly, but I would say the real value of a home (without adding more than minimum location premium) is the cost to build (including all fees, roads, schools, fire, police etc...) Plus about 7 to 10 percent.

( That is why I corrected that it is not necessarily market value but real value).

Let say your in TG's neighborhood (just to pick one that's easy)

If your building with any quality the structure is going to cost at least $50 to $75 a sqf (flooring alone can set you back $3 to $6 or more a sqf if it's of any quality).

Building on a hill always cost more so add about $10 a sqf.

Add in the fees and roads etc.. and you’re over a $100 a sqf easy.

And that's without any location premium.

I would say when you start to see at least 70% organic sales then you are getting close to real value again.

Again these are just my armature guesses.

As for this X shaped recovery theory ,

I would say yes we won't be getting back to 2005 anytime soon, but I don't know many people driving 26 year old cars either.

Just replacement buying and population growth would get us 70% of the way back at this point.

Replacement of what? And population doesn't increase when jobs are scarce.

Where is the purchasing power coming from? Nothing I see except for inventory manipulation points to higher prices.

No-LA-SD-guy, valuing homes at building cost + 7-10% ignores the value of the land.

In coastal areas, even in severe recessions, the value of land will not be negligible.

You need a way to assign a value to the land. The market is the only way to do that, I think, and that's why I stick to what can be observed - all actual transactions that took place over several RE cycles. If you have a better way, I am interested, but it is hard to beat just observing the market - the whole market, not just the cherries.