San Diego Housing Bubble News and Analysis

I've never followed Mira Mesa market, but $266/sqft does not strike me as a great deal. I might be wrong though.

May not be a bad buy at $300K. Anyone with sense should stay away till then.

I remember going to an open house in this neighborhood in 2004 (don't remember sq. footage) and it was priced in the low $700's! A friend of mine was looking to buy off Sean Taylor Lane in 2001 for mid to upper $300K. There is definitely something wrong with this listing. Are they trying to get multiple offers in hopes of creating a bidding war?

They seem to have owned it for a long time and perhaps are listing it to sell (unlike some sellers, who seem to list purely for our entertainment).

If it sells at that price, imagine what it's going to do to the ATTACHED duplexes across the street selling for $500k to $689k (examples of listing just for entertainment value rather than to sell):

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It'll bring a frenzy of people looking, and then someone will buy it for 485k and think they got a deal. Suddenly a Comp will be in the area for 485k, making all future sellers adjust accordingly or sit. The next one will list at 449k and sell at 460k, and then the next one will only get asking, 445k. Suddenly one or two will list at 450k, and sit and the new excitement price point will be 400k. This may take a while, as the market size isnt that big in number, but it will happen. Give it 12 months. Eventually we'll get back to a point where middle managers and associate scientists in the pharma industry (or the like in other industries as everyones money is still green) in the near by sorrento valley that these houses were built for can buy without selling a kidney or their first born.

BTW, that first buyer that will get such a deal on this house .... -20% in a year or so. Look at those buyers 1 year ago in Mira Mesa that thought that they were gonna ride the bounce and bought some 1100sqf 30 year old fixer upper for the low low price of 415k. Now there are what, 50 houses under 400k? and a few "fixers" sitting at 330k. Ouch. The houses may be newer, but that wont save them from what the rest of Mira Mesa is feeling.

Yeah MM is hosed. I live there, about 1/4 mile from the original posted link.

Before SDLookup stopped listing REOs and short sales in their market overview section, I saw that 32% of listings in Mira Mesa were in such distress.

Why did SDLookup stop listing that info?

Nos, If i had to guess, it is because it is too much of a hassle to do. As was posted earlier in a different post the numbers being reported as NOD and NOT dont match those in the MLS. New code has sprung up to try to avoid those magic words which bring too many low ball offers. Code like "owner exempt from disclosure", or similar. I see this alot in MM, clairmont and the "middle class" areas that are hosed. 6 months ago "short_sale" wasnt the bad word it is today.

Sorry, this Mira Mesa house should not worth anything over $400k to begin with. Back in pre-bubble time, this house worth at most $250k. I am being serious. The house is small and not in a really good neighborhood.

Can someone educate me on MM?

Where is it considered "good" and where is it considered "getto"?

Thanks.

selfportrait

----- Sour grapes for everyone!

Generally, I'd consider it in this order: NW, SW, NE, SE. The dividing line is Camino Ruiz and Mira Mesa Blvd. To break it up even more the best would be 1st = North of Calle Cristobal and west of Camino Ruiz. 2nd would be North of Mira Mesa and east of Black mountain (newer houses, built after 1995). 3rd = Summerset Village (north of Mira Mesa and on the west end, next to Camino Santa Fe). 4th would be the area of the house in the OP. 4th would be South west edge of Mira Mesa South of Flander and between Camino Santa Fe & Dancy Road. The rest of older Mira Mesa basically follow the general division I state above. That's how I'd rate them.

Calle Cristobal/Sorrento Valley Road area is the best. NE corner east of Black Mountain is nice but lots are generally tiny.

I can tell you that the above post is correct. Basically those are ranked by the most recient infill projects in reverse ageing order (ie most recient is best, oldest is worst). The western side of MM is newer and nicer, North is better than South.

I dont disagree with the posts about the value of these houses. They never should have gone for what they did, but they did, so arguing about that is useless. The market was what it was. I saw a 3/2 SFR that sold in 2001 for 198000. It sold in 2005 for ~500k.

I really think the basic late 1970's-1980's 3/2 will fall to the mid 200's. No way you say? 260k with 5% down at 6.25% puts total payments about $2100. That is $300-400 over current rent, but you get the tax deduction to offset the loss equilivent on rent plus oppertunity costs and I think rents will fall alittle. (This is my prediction after all)
Oh,for you would be LL's dont forget that these are 30+ year old houses that have not always been kept up in tiptop shape, theyll need alot of maintaince, especially considering that the main tenants here are either college students or young families with small children. With high turnover and high maintaince, a monthly loss of 500+ (pretax) on a yearly basis isnt really a great investment. If you used the standard 125X rent for my rent, you get 200k. I think prices will stablize about 25% above that. But if you want, go ahead and be a LL, I always need more people chasing my rent.

+1 exactly what I am planning to say... thanks esmith.

Lots in MM are generally small.

Calle Cristobal area, especially its westernmost part (92121 zip code), should be supported by its proximity to CV.

Sure CV has slightly better schools but 200k+ price differential between 3/2 1600 sf's on opposite sides of the canyon can't hold for long. And there are way more houses in CV than along Calle Cristobal.

DWCAP, I think your calculation is a little off. A $260k loan w/ 6.25% rate @ 30 year fixed should yield P&I of $1600/month. With 20% down, you're looking at payment of $1280/month. As you said, a typical 3/2 will rent for around $1800/month.

I agree on the typical renters in this area, but I don't agree on the 125X rent multiple. It does not take mortgage rate into consideration. One example is at the bottom of last cycle around 1997ish (which now looking back, put prices at undervalued), a typical rent for a 3/2 in MM run for about $1200/month. The price of such homes were around $160k-ish. But interest rates were around 9%. $160k @ 9% over 30 years would be around $1300/month mortgage. Today, such house would rent for around $1800/month. So to keep the rent vs monthly mortgage similar to the bottom of last cycle (which is 10% > rent), you're looking at house price of around $320k, not $260k you suggested or even $200k if you use the 125X multiple.

Regarding lot size, I don't think it's that small when you take into consideration the size of the house. The typical lot is around 5000 sq-ft with houses around 1400 sq-ft. I've seen plenty of houses in CV, 4S, PQ, RB, etc, that have lot size around 5000-6000 sq-ft but squeezed houses 2-3X the size.

esmith, 92121 zip code is Sorrento Valley, not Mira Mesa. The road is also called Sorrento Valley Blvd., not Calle Cristobal. The name change at the 3 way intersection with Camino Santa Fe. I don't know which school Sorrento Valley belongs to, but I think it also belongs to schools in Mira Mesa. All houses in Sorrento Valley right now are $650k-$1.1M for houses ranging from 2000sq-ft to 3000sq-ft. Similarly, a 2000sq-ft just down the street on Calle Cristobal w/ a 92126 zip code is currently going for around $550-600k vs $650k+.

Asianautica, the 125x rent multiplier is absolutely still a valuable yardstick. The 3% swing in interest rates is offset by the market psychology and media. Things are different now, they are worse, appreciation is a non factor so rent nuetral is the new buzzword. Why become a landlord in MM is you have to exceed the rent multiplier while you don't have to in another area, in this county and state or not. You don't live there, your wife doesn't care where the rental is, it is all math. Most in-town landlords became such because they moved up and kept their old house as a rental. Pure landlords buy where it pencils out the best. There are many rental markets where 125x can be obtained today and that is where the landlord dollars will go. If you can buy a place today for 250k that will rent out for 2k within days, and it's still there, unsold, then 125x becomes the standard EVERYWHERE. I can almost buy rentals that are rent nuetral (meaning the rent covers the mortgage and the taxes/ins after a 20% down payment, try getting 6% with 5% down on an investment property in a declining market). Most of San Diego County doesn't pencil out for a landlord yet which is why the areas that someone with money wouldn't want to live are falling faster, they were more dependent on investor price support.

Venture into the areas people with money want to live and want to send their kids to school and the dynamic changes, because the deciding factors change (happy wife, enjoyable life, etc.) people are more willing to overlook the math. For how long that remains is the eternal question on these boards.

One funny think about the park pictures, is not only did they use pictures from the closest park (Lopez Ridge Park - near Camino Santa Fe), there are also pictures of the next closest park (the one on the north end of Camino Ruiz). They seemed to go to great lengths to add pictures to the MLS listing but to avoid showing the actual property for sale.

The 3% swing in interest rates is offset by the market psychology and media.

I thought the psychology and media is pretty bad at the bottom of the last cycle? Isn't that the definition of bottom, is when every average joe say not to buy?

I guess only time will tell if we will see 125X rent multiple again. If interest rate goes through the roof, we might see lower than 125x multiple I guess. That's just my point. @ 250k w/ 20% down & 6.25%, your PITI - tax deduction should be about 1200/month. If you can rent it for 2000/month, that's a 19% yearly return on investment from the very first year. That seems too good to be true as an investment because that 19% can only get bigger from there. If you go w/ a property manager, then your profit would drop to around 17%, but that still seems too good to be true.

AsiaN,
I absoulty agree with you that things pencil out ALOT better if you have 20% down, plus I didnt say PITI, I said total payment, including taxes and PMI and insurance. Joe Buyer is much more likey to get a loan at 6% with 20%down, but I was going low since everyone on here has perfect credit and cant understand why anyone else would have to pay more in interest than the absoulute quoted minimum. Alot of people dont qualify for that great low interest rate, and I bet alot of them are the type of people who want to buy in MM. It wouldnt suprise me if a number of people are trying to buy right now in the 7% range, cause that is what they qualify for, especially in a declining market.
I was trying to use a case where someone was a first time buyer trying to extend themselves just a little to get their first place. I used 5% because most people today dont want to save, or can't, and that is really the lowest I can imagine any lender is willing to even look at. Houses are priced at the margin. Those who can afford to move up will, our own Jimmyle here can atest to that.
We can ask SDR or SD_R or even HLS, but I have a feeling that alot of people are still trying to get somewhere with as little down as possible. MM is one of the hardest hit areas, with a population that is more sensitive to economic matters than most of the near by areas. When this forclosure thing is over, there are alot of people who will want to buy, but have some serious dings to their credit, which will raise interest rates and down payments that they probably dont have.
So sure, I know there are alot of people who have 50k to spend and good credit and can buy now and be happy. But these people are sound investers/owners, and see no benifit of purchasing when the market is falling. Will it fall some more, you bet. Last time I looked inventory was at something like 11 months inventory and the nicest houses in the area are still overpriced by ALOT. Add in that something like 35% of listings are advertising their distress (so the actual number is higher), nearly half the market will be must sells. So as nicer houses in the area come down in price, people will trade up and the lowest houses in the market will have to come down more.
Maybe the truth will be somewhere inbetween my 250's and your 320's, but I am still betting on mid 200's. Rent multipliers put it in the low 200's even assuming no fall in rents. March (next month) 2001 prices (pre bubble)was a median of 265k and everyone here seems to think 2001 prices were the last sane prices. 2001 was a recession, but one that followed the longest expansion of the economy in US history, and included nearly no inflation and falling interest rates. This time around we have stagnant growth in wages for the past 5 years, higher debt levels, increasing inflation, and atleast currently, increaseing rates. I just dont see what will support this area above 125X multiplier +20%. That is 250k ish.

Plus, there are 10 or so houses, not condos, priced at 350k or less currently. If 320k is the bottom like you suggest, we sure are close to the bottom now. I dont think we are.

...there are 10 or so houses, not condos, priced at 350k or less currently

There are over twenty SFRs in that range.  And several close to it which I'm sure can be lowballed down.

http://www.sdlookup.com/MLS_Listings-32+...

DWCAP, isn't PITI = P+I+Tax+Insurance? I understand your argument about Joe 6pac not having the best credit and get the best rate. I guess I'm just projecting myself onto this market. Which is why I'm using the lowest rate available right now. Since people on here are not Joe 6pac, and we all are trying to time the entry point, that's what I'm trying to calculate. Make no mistake, I don't think $320k is the bottom by any mean. I think around 300-320k is where using rent as a fundamental, it starts to make a case for buying vs rent. I truly believe we'll undershoot just as we've overshoot. If you look at Rich's chart, 1997-1998 was well under fundamental trend line. But if you're buying a place to live, the line starts to blur after it reaches fundamental, because then there's no saving between rent vs buy and now you're just speculating that price will fall more. There are a million ways this thing can play out. One of them is price drop to low $200k. Another would be massive inflation, which cause price to stay flat for many years to come. That's all I'm saying. Some houses are already starting to hit 2002 price in Mira Mesa, btw.

I guess we are just arguing semantics now, details over substance. I find 14 SFR's 350 or less, you find 20. The point is they are there and there are alot of them. Everyone agrees this area is going down, and hard. If it falls like I think it will (1-2 years), 250k will be ~25% BELOW todays bottom of the market prices, which are already 25%ish below the market peak, if not more. All the lurkers here need to keep that in mind as they consider that great deal they are eyeballing.
I try not to project myself into the market. I dont think I am a good example of buyers today. I kinda doubt most people on here are. The median or average (or whatever you wanta use to denote the normal buyer) isnt as well off and isnt as understanding of the market today. Their wife wants a house and they want her to shut up, so they buy when they shouldn't. Those are emotional not rational reasons to buy and while they influence the market alot, I dont want them to influence me to the greatest extent possible. It is these buyers that will drive this market, not the financially prudent one's who work off economic reality. So I price things in their terms and gage it against inventory and rents. Everything I see says it is gonna fall. And if the true bottom is 240k, and I miss it and have to buy at 255k, eh! Atleast I didnt buy at 510K!

DWCAP, the points that you make sound very intuitive to me. Makes sense.

Would should try to forecast what the average Joe will do. Most people don't understand amortization, taxes, or anything. They have a blurry concept of tax "write-off" (deductions). But in the end, Average Joe wants money in his pocket. When that is not forthcoming in terms of equity, he will quit buying.

When public sentiment makes a 180 it'll be hard to turn the ship around again.

A couple of things:

1. This listing is a short sale (I just talked to the listing agent). So, the listing price may not reflect the current market conditions in MM.

2. However, in the second half of this year, we'll see houses in MM similar to this house listed for under $500k that are NOT short sales.

DWCAP, patient, et al., I think you are onto something here, J6PK may be the key. On the way up, our kind ran the numbers and thought it was out of whack and overpriced in 2003 or 2004. J6PK, kept it going far beyond what we thought was silly. As the numbers reverse, we do the same math and the minute we think it has hit the fundamental balance, from that point it will be another year or two before J6PK realizes it as well, so the bottom won't be the bottom just because our calculators say it is, so it is just as likely to overcorrect as drastically as it rose because J6PK's inability to borrow even when he realizes the time is right. It is very possible that the coming 24 months might have a situation where the stars line up and cash nuetral or cash positive rentals are a reality.

Now I need to find a good local dive bar so I can make some new friends and be able to take the pulse of J6PK.

It took me awhile to figure out what J6PK stood for. I'm a little slow today :)

Stupid question. Where do you folks go to find pretty accurate information about rent, besides just browsing classifieds , craigslist, etc?

selfportrait

----- Sour grapes for everyone!

FLU-I just try to keep my finger on the pulse of rents in this general area. When co-workers talk about rents they are looking for, I lissen. You would be suprised how much can be learned about peoples finances (usually how terrible they are) in the company break room. I have not found a reliable site that gives good numbers (not really looking).

I just think the last downturns are only a basic road map, not a GPS. Savings rates in the 80's were what,,, 10% of income? Today it is -2%. How does ANYONE save a downpayment with that savings rate? I have a co-worker who still lives at home, but wants to buy a house in MM when the market bottoms. THEY HAVE 0 SAVINGS, none, zip, zilch, nada. They dont pay rent BTW. They just bought a BMW, because "all the credit I have is revolving CC, not structured debt like this, so itll raise my Credit score." Maybe it will, maybe it wont, but a few hundred a month saved for the next two years would do alot more for you to get into that house than 2 years of payments on a carloan.
This is J6p to me. They have good jobs and high incomes, but no savings, no real plan for the future, and no disapline. They know you could buy for 0 down before, so assume they will too. They see 5-6% interest rates over the past month and assume theyll get that perfect rate. They will always get the Maximum tax deduction and the maximum COLA, plus they are just THIS far from that next big raise they so richly deserve.
They piled on in 2004 because everyone was doing it and everyone was making money. RE never goes down, unlike that stupid tech stocks I bought in 1999. Cant live in a stock! remember all that crap? When they cant buy they wont want to. The go getters will leave the State for greener pastures, the workaholics will save like mad or get a second job and save like mad. The planners (alot of piggs) will be lowballing with howeletzers full of the only thing that will be valuable, CASH, and reaping the rewards of affordable house payments and good lifestyles. Joe6buyer, will be talking about the blood bath his cousin took in RE and how smart he is as a Renter. When he hears of the pigg's payments, he'll rush out to get a loan, get rejected in 60 seconds, and start doing the hard work he needed to do 3 years ago. Eventually savings will rise, prices will fall and average joes will buy cause it is time to buy, not because he can or because he wont be able to in a year.

I have no idea of how to track J6P, he doesnt really follow logic or reason, and cant be tracked by ETF's or algarythems like we want. SHORT J6P, hedge watercooler blather, YOY on sedement is +1.6 so buy buy! Cant do it. Be a people person, go talk to someone you dont normally talk to and see what they think. Hell, I could be totally wrong and we could get this Q3 bottom everyone is talking about, but I still dont know where it is gonna come from. $600 rebate checks, I dont think so!
And TG, if you find some good bars in this area by accident, please help a pigg out. I am always looking for new J6P's to get a better n, but I am not above getting to know him through his sister, Hottie2D.

DW, sweet post, excellent insight, And Hottie2d, I'm stealing that term. You might as well credit me with it now, because I own it, these are not the droids you are looking for. Let's see if the jedi mind trick works, either way, good work.

Anything for you TG, "these are not the droids we are looking for...., lets go talk to those 3 boobed blue chicks sunning themselves and see if they have seen some droids. Greetings, I am looking for H2D2, err um, R2D2".
And thanks for the support guys, it is good to know that I am not way off base.

In all seriousness, the one cavat that I have is a worry about family. 1st and 2nd generation Californians may not save worth a wink, but their parents did/do, and they are not above giving it to their children. My parents got their start with a loan from my grandfather, and he was a farmer from Minnesota with 4 kids. They did the same for my brother when he started. I havent asked and dont need it, but I am sure it is there for me too. I wonder how many people are in that situtation. I have no idea but ill bet it is more than I want it to be. That is the wildcard in my opnion. Government bailouts only work if people apply to get a loan. People only apply if they think it is a good idea. Ideas can change overnight, especially when family helps out.

AsiaN, Maybe you are right, I have been known to be wrong in the past. I agree that things will start slowing down in terms of price drops. It has too, NOTHING will get below 125X for long, and that is the low 200's for this area currently. I just think things are gonna be ugly for a while longer, even if not as ugly as it was last year. Sounds like you agree.