San Diego Housing Bubble News and Analysis

In general price per square foot is not to linear from the perspective of 0 square feet on upwards. Also ppsf is useful but it does not factor in lot size, orientation or condition of the home, views, ammenities, etc.

As far as CV finding lower price levels, just like all of the other desireable areas, LCV will find lower pricings based on the demand for LCV homes. It is often frustrating about the pace of declines for spots like this. There are inklings of some lower priced sales from the few distressed LCV sales. Our hope is for those to become more numerous as time marches on.

Price per sq ft defintely descreases as size increases due to all the fixed costs that dont depend upon size.

To answer your 2nd question, prime locations in LCV are stilling selling at or near peak prices. There are a ton of folks dying to get into LCV at an affordable price to them and a great home. Unfortunately, there are also alot of folks looking for those same homes who are far less price sensitive. If you are a well paid professional with young kids there probably isnt a better community to live in along the coast. The place is a veritable magnet for Relocated execs also who crave a nice community with nice amenities, great schools and nice homes. Each year a dozen or two execs come to LCV from major markets (SF, NYC, Boston, London, Paris, Scandavian metros, Asian metros). The come loaded with suitcases of cash from sales of their prior homes, big incomes and big relo packages. That wont change. It wont support the market but in a neighborhood where more than half of the people paid about 400K and are dug in with low/no mortgages turnover runs from 40 to 80 homes per year of which maybe half are very desireable. There are plenty of buyers for those homes as there always will be IMO. The other issue is when folks move alot of the longtime owners recognize the long term value and just rent there homes for $1000+ positive monthly cash flow.

I've been watching Carlsbad/La Costa for many years, and while I don't have the experience that you folks do, it seems obvious that while that area will always command a premium over inland areas, homes there will see very nearly as big a decline, if not just as big, percentage-wise. In the late 90's, 2-3k sq ft homes in nice neighborhoods were going for $300-400k, and I just can't see any reason why they won't end up at $400-500k. It will just take a few more years. The coast always echoed inland price drops in the past, and I find the same reasons for well-off people relocating there also existed when prices weren't exorbitant.

Ren,
In the late 90's they were going for 400K new with basically no upgrades or landscaping. I know as I bought one. To get the house livable (paint, flooring, appliances, window treatments and landscaping) too you to about 475K new for a decent home. These were sold just off the bottom of the last cycle. I just cant see any reason why they would end up between 400 and 500K. I know numerous people with means to buy regardless of rates, income etc. The have strong assets, recession proof careers and are waiting for the right house at a decent price (within 10% of current levels up or down). If I know a dozen there's gotta be alot more than that out there.

I'm not saying that a $475k house will be going for $500k. What I'm saying is that I've been watching the market there since pre-bubble (it's where I plan to retire), and for the past year I've been looking on Redfin every few weeks and looking at the sales history. The houses that went for $300-400k (the range I'm looking at) in the late 90's were going for $900+ at the peak, and they're going for $700-800k now.

At the peak, there were plenty of people willing to pay $900k+, but that didn't stop prices from dropping since then. I realize there are plenty of people willing to pay $700k now, but that still won't stop prices from dropping even further, like to $500k, because the downward pressure far exceeds any perceived desirability keeping prices inflated (a desirability which hasn't changed since the late 90's). That kind of price change is entirely within reason considering the size of the bubble, it would match past trends, and still leave a significant premium over inland property. That's my informed opinion, but I guess we'll have to wait a few years to see who's right :-)

The bubble popped in places like Temecula. It's slowly deflating on the coast.

I'm just curious. Do people really think things are going to around $500k (fairly close to late 90ies?). I mean, $500k today isn't exactly the same purchasing power as $400k in the 90'ies.

I mean, seriously, with the dollar so hammered, from an external view, how much has the U.S. dollar fallen since the late 90ies?

It may be an overcorrection, taking into account inflation and the value of the dollar. Personally, I don't see it as much of a stretch. It seems more likely (and more logical) to me that prices will follow past trends and current downward pressures than to only go down another 10% and level out, while every other market continues to tank. It's never happened that way in the past, and I just don't think the coast is that magical.

The changes in the U.S. dollar haven't prevented prices from reaching 2000-2001 levels in other areas, and those areas are still dropping.

Cost per SF tends to drop as the fixed costs get spread over a larger
base, but, Price per SF tends to increase as more hiigher end
finish is applied.

a small 1960's house of 1200 SF, would have carpet or tile floors,
and plaster walls.

a 2005 mcmansion will have spotted owl mosaic and giant crown molds.

at leas tthe corrleation is bigger house higer $/SF on price.
through about 1500 SF, then it starts to rise again on the small end.

Ren
Trust me on this one. The houses selling at 900+ at the peak were sold for 400K NEW in the late 90's. I dont discount you seeing sales histories with prices in the high 300's to 400 but they were new and required significant improvements to get them livable unless you consider a dirt lot, builders grade carpet, flat white walls and no window coverings livable among other things.

I just checked the MLS for 1999 closed sales to see what sold below 400K that could possibly have sold for 900+ at the peak. The only thing I found was a handful of new homes entered by the builders which arent really sub 400K homes because of what I have been trying to explain.

Enjoy sitting on the sidelines. With you expectations you will never get off them.

sdr

It's hard to find examples because of low sales volume in that area, but my experience comes from watching these sales for years. Here's a couple that are listed now, which don't necessarily show a late 90's sale for comparison, but nevertheless are good examples of the kinds of gains and losses I see all the time:

This seller is deluded to the point of psychosis:
http://www.redfin.com/CA/Carlsbad/7038-V...

http://www.redfin.com/CA/Carlsbad/6995-Z...

It's not like I'm making this stuff up. Regardless of peak price, in my opinion, properties that sold for $300-400k in the late 90's will see the $500's again. That's my opinion, and it's certainly not unreasonable. Could I be wrong? Sure, but past trends and current data say that I'm most likely right.

I did think carefully before responding to your original post, due to your reputation for rudeness (I have no desire to get in a pissing contest), but I didn't think a simple sharing of opinions and knowledge would bring it out. I was wrong. Anyway, you have a nice day too :-)

Ren
Your opinions are unreasonable, you just dont realize it yet. There was once a gal around here that I went head to head with on a nightly basis. Her extreme opinions have already been proven to be horribly misguided. You can call it rudeness if you want but I call it like is. If someone's opinions are based on false assumptions I will take you to task. I've done it with the Bulls around here as frequently as the Bears in the last couple years.

Your 1st example sold for 320,000 in 1996 meeting the 1st part of your definition. However, it sold for 780 in the Summer of 2005. Not only was it never a 900K+ plus home it was never even an 800K+ home.

Your 2nd example on Zebrina sold for a 387,500 new in 1994!!! With modest move-in improvements including landscaping/hardscaping they were into it for 450,000 in 1994 which is essentially the bottom of the last go-round. Furthermore, in 1998 the house next door with the same floorplan sold for $460,000 which is a far cry from 300k to 400k. It sold again for 902,000 in 2006.

Case closed.

sdr

Powayseller was not all there. Please don't compare me to her or her market "analysis", and please don't pretend that your "sideline" remark was anything other than spite and condescension - which are not necessary to get your opinion across. My opinions are perfectly reasonable, but more importantly, logical. That will be obvious even to you in a few years - I'll be sure to bump this thread at that time.

You're holding onto that 900 number for dear life, when you know that it isn't the point - the point is the large range, 320 to 780. I believe examples like that will reach the 500's again.

So it was 450, then sold for 880 in 2004, well before the peak in that area. From the comps it looks like it would have been in the 900's in 05-06, and you can see what it went for in 08 (667). And you think it's impossible for that property to reach the 500's in a few years, with the coastal areas only recently starting their descent, and the market virtually guaranteed to continue dropping during that time? It's already two-thirds of the way there - so now who's being unreasonable?

You're reaching for things to argue about, with someone who really couldn't care less. You think I'm wrong, I think you're wrong. It's going to stay that way, so you're going to have to deal with it. If you want to argue, find someone who enjoys that sort of thing. Or better yet, relax and have a drink.

Ren
No argument that the 320 will get to the 500's but as I said 320 is very different from 400 (25%) as 780 is very different from 900 (15%). You are slinging around big dollars like they are nothing. I remember looking at resales in the 320's in 1999 and ending up spending 400 for new. We felt like we made a HUGE jump and were skipping at least 1 and perhaps even 2 move-up steps.

Regarding Zebrina, the peak in this area for homes like that was Spring 2004. It is inarguable and I can easily back it up. Some other markets peaked at different times but in the Spring of 2004 you could put what ever price you had the guts to on a SFR in this area and get it. After then you could get a similar price but it took some doing and luck to get it. The market was essentially flat in this area from March 2004 through Spring of 2006.

BTW, the coast has been in decline for at least 2 years it just has been alot more orderly. Personally, my home is down just over 20% which amounts to about 200K from its peak potential. That's not just getting started.

Lastly, you are backpeddling. Here's your original quote.

"I just can't see any reason why they won't end up at $400-500k."

To me that says $450,000. Now you are trying to say they'll go down to the 500's which while I feel is very unlikely, I certainly wouldnt rule out as impossible. One again the difference between 575 and 450 is HUUUGGEEE!

To quote the Professah!

In God we trust, everyone else bring data.

I'd add real data not made up manipulated data.

In terms of time, I believe it is just getting started. I don't think it will be as steep a decline as it has been, and I don't think it will be more than another 20%, but that wouldn't surprise me.

I believe what I said was this - homes that were going for $300-400k (I'm referring to homes that actually cost that much in a finished state) in the late 90's will end up at $400-500k. I stand by that, and I can see $400-$500k homes reaching the $500's again. To use percentages instead, maybe another 15-20% on the coast, in the next 2-3 years.

For posterity, what's your prediction?

I hope you weren't referring to my posts - I've posted only actual sales, comps, and my own predictions. Nothing more.

My prediction has never changed since Day 1 when I arrived here over 2 years ago. My prediction was 30% off the peak (+/- a couple %) with a bottom in 2010 or 2011.

I always think of things in terms of my own home which is pretty representative of the overall market here. I believe it is down roughly 20% so far. I see another 15 to 20% from where we are today. Measuring of the peak numbers I see another 10 to 13% down from here.

The problem with your posts are they are too loosy goosy for me. The difference between 300K and 400K in the late 90's was huge. Probably two steps up in size, location and desirability. Throw on 200% gains and you are comparing 900K homes in the same class as 1.2M homes. It's like comparing a basic Santa Fe Trails home with a very nice Arroyo Vista home. Its too big a spread.

You said that you see the nice 4BR 2 to 3K homes in the area going into the 400 to 500K range and I dont see that. Those homes were 400K+ in the late 90's and I have trouble seeing them under 600K let alone 500K.

When all is said and done I believe you will still have to pony up at least 600K to get a a nice 4BR between 2500 and 3000 sqft around that is not impaired in some way (i.e. backing to a busy street, trashed, under power lines, tiny yard etc.).

I know alot of people looking for homes in the most desireable comunities here that are the real deal in terms of income and assets. If I know 10 personally there has got to be at least another 90 that I dont know and thats being conservative. There are several million folks in SD county and I think folks tend to minimize how many are doing fine and will continue to do so. I think they also underestimate the strength of the hands that many of these homes around here are in. When prices are at the bottom I have always contended that it will be very difficult to find the house you want. There will be alot more people waiting to buy those homes then there are people forced to sell them.

I have no doubt the difference between a 300k and 400k house was huge. I'm not saying that a 300k house had the same gain or will eventually have the same loss as a 400k house. I only use the ranges because it can be more visual than percentages.

Nevermind, let's just move on and bump this in a few years...

One thing that annoys me on this forum is poorly worded predictions. Be bold, make a clear prediction on a specific size/type of house. Then make the the threat of bumping the thread.

Ren - you can bump this thread all you want, but the fact is, your predictions are not clear at all so it won't prove anything. Earlier you said "$400-500K". Later you said "see the 500s", which means 599K. That's a predicted range of 400 - 599K for a house of non-descript size and location, except to say that they sold somewhere between 300 and 500K 15 years ago.

Here's one of mine. It aint bad for Sept 8, 2006:

http://piggington.com/95_of_us_economist...

Here is a good example of a clear prediction:

I'm not familiar with the area, but if you show me a few nice, unimpaired 4BR houses between 2500 and 3000 sqft under 600K, I'll know sdr is wrong.

If you show me any house under 500K, I still won't know if you have actually predicted anything.

I, too, think sdr underestimates the substitution effect on this area but I appreciate his clear predition. He's a bit rough, but he means well. I thought his sideline comment was kind of funny, actually.

My 2-step suggestion:
1) Grow thick skin.
2) Make better prediction.

Thanks sdduuuude,
That is exactly my point. There are too many poorly worded predictions and I dont want to see the "psuedo kreskins" of the blog return with see I was right comments about these broad statements. We all know the direction and have for years around hear. We make money in this world by beating the market not matching. That is the skill not posting a link to some article confirming your biases or making a broad statement that you will be able to find a data point that sorta supports it.

Yeah Ren, sometimes I get a bit pissy and thats just me. Its how I get my points across in a crowded noisy blog. I do mean well and wish in my heart of hearts only the best for people (except the dishonest slimebag jerk offs that I despise of which no one on this blog has ever qualified as). The truth is I do mean well and hope everyone here gets the home they want without having to witness the collapse of our economy and the destruction of the lives of foolish/greedy but other good people.

sdr