San Diego Housing Bubble News and Analysis

This is what will kill housing prices in SoCal and specifically SD. NO CREDIT, NO SALE!! You can't handle your reset, too bad, go into foreclosure because the easy money spigot has been shut off.

Yeehaw!! This is WHAT must happen to correct the inflated market.

When we have people going back to basics and saving up with 20 % downpayment then prices will come back to normal.

I cannot wait for the credit bubble to deflate so that I can afford a home with a normal fixed rate loan and at a decent price. To me, San Diego homes should cost no more than 300k in most areas and even ocean front property is not worth 2-5 million either.

What is happening to the REOS owned by these subprimers. Will we be able to buy them.Or will the sleazy realtors snap them up for themselves for flipping ??
The market is fixed.They are no deals in my opinion. You can dream

What is happening to the REOS owned by these subprimers. Will we be able to buy them.Or will the sleazy realtors snap them up for themselves for flipping ??
The market is fixed.They are no deals in my opinion. You can dream

Yeehaw!! This is WHAT must happen to correct the inflated market. When we have people going back to basics and saving up with 20 % downpayment then prices will come back to normal. I cannot wait for the credit bubble to deflate so that I can afford a home with a normal fixed rate loan and at a decent price. To me, San Diego homes should cost no more than 300k in most areas and even ocean front property is not worth 2-5 million either.

If every house sold required a 20% down in cash, homes would be about 60-70% off of their current prices.  This would be awesome!, however I don't think we are that smart, patient, or disciplined to behave so responsibly.  Personally though, I think we need to completely revamp home loan standards, but that of course would kill the economy, so who's gonna support it? 

nothing unusual is happening. It's normal for excesses to self-correct and align to the true state of equilibrium in terms of home prices, mortgages, rents, incomes and affordability. This time around there are a lot of excesses and the correcting tidal wave is going to take many people right to financial ruin. These people were either greedy (speculators), dumb (first time buyers) or reckless (HELOC borrowers). When you are these things and start playing with fire it's obvious that you will get seriously burned and we cannot feel any sympathy for these fools. They walked into their own graves due to their indifference, overindulgence and rose colored glasses! My $0.02.

My name here for the last year plus has been "lendingbubblecontinues". Finally, it looks to be coming back down to Earth.

I've often said that housing prices can "gap down" just like stocks, once their liquidity dries up. I truly believe that once it takes an actual down payment (even 3-5%) to buy a house in SoCal again, that the market will effectively seize up, and homeowners will wake up to find their homes are effectively "valued" at 30% less than they were before they went to sleep the night before.

Feel free to disagree, but remember that those who say it will never happen again (like sdrealtor this morning saying we will never see a 3/2 SFR for 250K in decent neighborhood in SD again) are speculating just like I am.

What I do know is that there are a lot of people thinking loans are going to be funded on houses that entered escrow in the last few days that are NOT going to make it.

The market is going straight down the tubes from here and there ain't nothing David Lereah's MOMMY can do about it!

I've grown tired of analyzing the miles and miles of stats that all point to a continued downhill drop in prices.

Here's all that I need to know for now. 3 main points, just like college speech class:

1) 67% of loans made in the first 11 months of 2006 in San Diego were interest-only or negatively amortized.
2) Of that 67%, 30% were neg-amort. loans, a 3 x increase since January 2004 and 30 x jump since Jan '03.
3) Median price in Jan 07' was 5.6 % lower than Jan '06!

We are such an optimistic society, preferring to believe that tomorrow will be better than today! The only real question is whether a market like housing can be continually manipulated over time to consistantly produce a positive output regardless of the fundamentals. I have to assume that the answer is no, and that there is no wizrad behind the curtain running this show.

"We are such an optimistic society, preferring to believe that tomorrow will be better than today!"

I am optimistic... tommorrow the market will be weaker than today!!!

Anybody have any info on the POS

5111 jamestown rd. MLS#: 076006968

It has been sold twice with a high last year of over 500K

and is now at 389K... probably not worth 200K

(like sdrealtor this morning saying we will never see a 3/2 SFR for 250K in decent neighborhood in SD again)

--------

I'm as much as bear as anyone but I agree with sdrealtor.  You could barely buy at that price even at the previous lows.    $350k to $400k is more like it.  Depending on where the economy goes, prices might stay low for years.  

But if we see 10% mortgage rates again combined with 20% down-payment requirements, then all bets are off.   

I'm expecting entry level housing in Clairemont to be around $275K at the bottom

Don't think it won't go there Perry...this thing is a monster tsunami that is rapidly approaching the SD shore...do not underestimate the extent the credit default problem...

I agree with you 4plexowner.

Some would not consider Clairemont a nice area. I think that there are some nice streets and the location is as central as it gets.

It's now called Clairemont and not Clairemont Mesa anymore.

The central location and the lack of HOA and MR are the major reasons to be interested in this area.

But the POS I mentioned brings clarity to the discussion. It is clear that people bought without looking, and this increased the comps in any area. The stickiness on the way down even for this POS reflects the real losses that a lot of people are likely to take in the upcoming crunch.

Given the fact that NODs are up again for january (see the other posts), I am wondering when to start to lowball offers in these less desirable neighborhoods (I actually like them more than the newer planned communities).

A 20% lowball now a 450K house is still 360K and it is hard to see that value lasting much past a year or so.

anyhow back to work

Very good point, csr_sd. People don't realize how much money they are "loosing" every year holding on to depreciating real estate investments.

The investors out there will be hammered if the downturn lasts a long time. The staying power of investors is not indefinite. There will be a point when they give up and that will be the real turning point for this market.

The investors make this market and they'll be the ones to break it. (By investors I mean the investor landlords as well as the gambling on appreciation, over-extended homeowners).

Whether there is a sharp decline or small decline or no decline one point I like to make is that that housing won't appreciate for 10+ years until 2015.

2015 ... no if we dont see the bottom in 08 and start seeing appreciation by 2010-11 then forget it till 2040. Baby boomers retiring baby ... they will dump their built in the 70's and filled with lead paint and asbestos crap boxes on the market like it was ... going out of style ... wowee ... that tired old cliche even fits ...
Anyway, we may see a bottom in 2008 and start a small rebound in 2011 and turn negative through 2040 or see slow drop till 2011 and continue to see the drop till 2040. There is going to be pain ... and I aint talking about what can be cured by prep H either.
Cool.
cow_tipping.

Boy, the mainstream media found a new story here didn't they. Here is another link

http://money.cnn.com/2007/03/05/news/eco...

The NAR and CAR can't spin their way out of this one. This will hit hard!

Thanks for the advice, Cow. I'm going to sell and rent until 2040. I'll be 95 then and have spent $2,300,000 on rent but I'm sure I'll be happy buying at your bottom.

Thanks again.

Seems like an implosion in Subprime lending. The new lending guidelines are here. I didn't expect it to happen this fast. Looks like powayseller was right.

I'm with you Perry. I knew this was off in the horizon, I did not expect this to come down like a sledgehammer.

I realize some will interpret this as me being a wise guy, but as far as I'm concerned this is all according to the script. It's 1991 all over again, only worse. The only thing that surprises me was how long they were able to hold out. By stalling for so long they have only pressurized the situation. That's why it now appears to be unwinding so rapidly.

I think the pace of sub-prime's collapse will increase in the next few weeks, and the manner in which the survivors underwrite their loans will swing like a pendulum to the other extreme. We will end up going back to 10% downpayments and higher interest rates because these lenders have to undewrite the additional risks that go with a declining market and reduced investor participation.

Think about what this is going to do to the general market psychology, and hence to both volumes and pricing. It will become the corrolary to irrational exuberance.

Bernanke calls for stronger regulation of Fannie Mae and Freddie Mac

By Jeannine Aversa
ASSOCIATED PRESS

11:10 a.m. March 6, 2007

WASHINGTON – Federal Reserve Chairman Ben Bernanke urged Congress on Tuesday to bolster regulation of mortgage giants Fannie Mae and Freddie Mac, and suggested limiting their massive holdings to guard against any danger their debt poses to the overall economy.

http://www.signonsandiego.com/news/busin...

Any idea how the scale of the sub-prime meltdown compares to the savings and loan fiasco of the 80's?

Kewp - you took the words right out of my mouth. I'm glad to see a tightening on loan standards. I hope this sets the tone for the current crisis as opposed to a massive bail-out of the banks as in days of S&L. The near future should be very interesting.

In order to compare the magnitude of losses between the last spike and the potential losses from the current one you'd have to be able to figure out what's at risk here. Every time someone tries to take a tenative swing at quantifying the number of at-risk borrowers the figures seem to be so high that nobody can take them seriously.

In short, it's so high it can't be real.

I had to laugh the other day. I was reading a thread over on BrokerOutpost.coms's Mortgage Grapevine. A couple of these mortgage brokers were speculating that the federal government would step in and prevent the collapse of the housing market. NOT. Even if the feds wanted to they don't have near enough money to do it.

The savings and loan crisis of the 1980s and early
1990s produced the greatest collapse of U.S. financial
institutions since the Great Depression. Over the
1986–1995 period, 1,043 thrifts with total assets of over
$500 billion failed. The large number of failures overwhelmed
the resources of the FSLIC, so U.S. taxpayers
were required to back up the commitment
extended to insured depositors of the failed institutions.
As of December 31, 1999, the thrift crisis had
cost taxpayers approximately $124 billion and the
thrift industry another $29 billion, for an estimated
total loss of approximately $153 billion. The losses
were higher than those predicted in the late 1980s,
when the RTC was established, but below those forecasted
during the early to mid-1990s, at the height of
the crisis.

Plus 1.16 billions in judgments against the US government, not counting the untold wealth lost in the early 1990s real estate crash. Remember the Japanese lost their asses on such assets as Pebble Beach, First Interstate Building in LA and Rockerfeller center in NYC, not to forget La Costa Spa and the Emerald tower in Downtown San Diego. Remember the 4-seasons in La Costa? The Japanese stopped funding it so it stood as a shell in the landscape for years.

http://www.fdic.gov/bank/analytical/bank...

The S&L crisis began and 1986 and concluded in 1999, or 13 years for clean up. Perhaps the Subprime lending mess will take just as long or longer.

Things change but really remain the same. It's like prime time TV. The script is the same, the characters are different.

"The extraordinary cost of the S&L crisis is astounding to every taxpayer, depositor, and policymaker. The estimated present value cost of the bailout of the Federal Savings and Loan Insurance Corporation (FSLIC) is $175 billion or more.

http://www.econlib.org/library/enc/Savin...

10 years from now, we'll be reading papers such as these on the Subprime Meltdown.

Here is a detailed analysis of the potential subprime loan foreclosures (lots of good data), and the potential loss to home equity owners is estimated to be about $156 billion.
http://www.responsiblelending.org/pdfs/C...

The the authors probably didn't do, it seems to me, is to estimate the impact of a downward spiral -- foreclosure leads to lower price, then leads to more foreclosure. So I believe that it'll be worse than the authors estimated. How fast will it happen? It seems that sub-prime loans enter problematic period fast, about a year. Then if refinancing is shutdown due to tighter lending, we'll likely see real damage later this year and all of 2008.

As far as cost -- the fortunate part is that they're more dispersed among investors of securitized mortgages, plus a few direct actors like NEW. I don't think that the cost of debt default will be a direct hit to taxpayers. But the cost of asset (housing) deflation to the economy is another matter.

And now Bush has Treasury Secretary Paulson traveling the world trying to reassure everyone that the world's economy is on solid footing. Real estate speculation has come home to roost in many countries over the years, notably Britain, Australia and Japan. The powers that be are still trying to figure out last week's "hiccup". Be very careful about thinking it won't happen again. With all the other global market challenges across various platforms we're seeing more and more anomalies. Kurt Richebacher thinks we're in for a long spiral down in real estate as well as other markets. He has a pretty accurate record so it will be an interesting couple of years ahead.