Submitted by kicksavedave on March 20, 2007 - 8:31am.
"Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield Hills that had listed for $525,000 sell for just $130,000 at the auction. "
Ouch... now THAT is a crash... something I'd like to see here in San Diego... not holding my breath though.
To those that say it can't happen here, consider that Detroit's auto industry compares to our local real-estate complex. I can easily see properties in less desirable neightborhoods crashing hard.
Actually, I'd say that the real estate industry is just as important to San Diego as the auto industry is to Detroit. The reason that you won't see homes in the nicest neighborhoods (like La Jolla or Rancho Santa Fe) selling for $130,000 (as in the above example from Detroit) is two-fold. First, we're starting from a MUCH higher price plateau so there's much farther to fall. Second, the market for San Diego real estate is much larger than Detroit's. As San Diego's real estate falls there will people from all over the country watching; San Diego will draw buyers from a much larger geographic pool. Detroit, today at least, does not have that level of widespread attraction. Hopefully at least you'll be able to buy 1200 square feet in Chula Vista for $130,000 within a few years - that would not be out of line.
Submitted by Cow_tipping on March 20, 2007 - 10:23am.
I would compare the detroit auto industry almost directly to the Silicon valley's software industry. I often felt that San Jose and the surrounding area is the next detroit. Export jobs to China and India and sell RE for millions using funky loans. Sounds good.
Cool.
Cow_tipping.
Submitted by surveyor on March 20, 2007 - 10:29am.
detroit vs. san diego
in terms of real estate, san diego is a completely different animal than san diego. detroit has a historical tendency to appreciate less than inflation. san diego has a historical tendency to appreciate more than inflation.
in terms of economic activity, san diego beats detroit hands down, with a much more diversified economy of defense, tech, biotech, tourism, and even some agriculture. detroit only has the auto industry and maybe some tourism.
also, in terms of tech, while we are losing our edge, we are still ahead of china and india. detroit lost its auto industry edge to japan a long time ago.
"Detroit only has the auto industry". "detroit vs. san diego. asinine indeed." Is that so?
As of March 2005 Detroit's civilian labor force was at 2.2 million and its employed labor force was at just over 2 million.
For Michigan as a WHOLE, auto manufacturing accounted for 244,000 jobs out of a total employed labor force of 4.4 million. Now, let's make the unrealistic assumption that 50% of that 244,000 was in the Detroit MSA and then double it (back) to capture the effect of all auto-RELATED employment. So, to use round figures, let's assume that Detroit has 250,000 auto-related jobs out of an employed labor force of 2 million. Per the properties of mathematics, that suggests that auto-related employment accounts for around 12.5% of Detroit's total employment... which is a big number.
Now let's look at San Diego. What proportion of San Diego's total employment is tied as directly to real estate as Detroit's is to automobiles? I think Rich Toscano knows the answer to that question, but I think the number is somewhere around 14% or so (give or take). [Obviously, this includes real estate agents, mortgage brokers, title agents, developers and builders, construction workers, etc.] So, I'm still not seeing an "asinine" comparison when analyzing the relationship of auto employment to detroit vis-a-vis housing employment to San Diego. Help me to understand what I'm missing.
I'm NOT saying that Detroit is anywhere near as attractive place to live as San Diego. I'm merely trying to point out that housing-related employment appears to be every bit as important - if not more so - to San Diego as auto employment is to Detroit. So, let's keep the discussion focused and not get off track. Please bring data to the discussion.
It looks like you have numbers to back up your position, but could that only account for the direct employees of the auto companies? I grew up in detroit. Some people worked directly for an auto company, but the majority worked for suppliers to the automotive companies. Again, I have not looked up current stats, but more than half the families I knew were employed by automotive suppliers. 12% sounds about right for direct employees. Having lived in detroit and san diego, my opinion is that the automotive hit in detroit would be more severe than the aerospace hit san diego took in the early 90's.
I also know bloomfield hills quite well. 130k is a very low price, even back in the 80's. I'm not sure where that guy lived, but it was common for home prices to be well above 1M.
Indeed, I was only considering how dependent the local San Diego economy was on real estate and related industries. And I still feel the comparison is apropos, when any economy becomes over-reliant on one industry its risky business.
Something thats 'worse' about SD vs. Detroit is that the auto industry didn't build equity for home owners. It wasn't like every resident got a free classic muscle car when they bought a house there. Contrast with San Diego, where lots of folks became REI speculators when they bought into property they either couldn't afford, or re-financed it into oblivion.
Submitted by sdrealtor on March 20, 2007 - 12:13pm.
FYI: I was not commenting on the desirability issue which speaks for itself.
Explanation:
Say Detroit and people think one thing and one thing only regaring industry: AUTO INDUSTRY
Say San Diego and people think many things including: Defense, Biotech, Telecom, Tourism, Sporting Goods/SoCal Lifestyle products and eventually Real Estate.
Detroit lives and dies with the US Auto industry. SD does not live and die over any single industry.
sdrealtor, you're right - for the foreseeable future - and it's been the case for many years - Detroit lives and dies with the US Auto Industry. We don't really know what the very long term holds for Detroit, although it's not nearly as favorable as San Diego, that's for sure.
But where San Diego is concerned, I would argue that our city DOES in fact live and die with the real estate industry in the short term, which I'll define as the next several years. Despite the fact that San Diego's economy is no longer identified with any single industry - as it was with defense and the military 15 years ago - our over-reliance on real estate will make it seem like death once this downturn picks up steam. Real estate is that pervasive today.
To give you an anectodotal example, I was thinking of the neighbors in my condo complex. Title executive across the hall. Developer executive on one side. Guy that reps for a high-end blinds manufacturer on the other side. The developer that built the building owns a unit further down the hall. And a few with no connection to real estate sprinkled in. I count among my friends several real estate agents, mortgage brokers, etc. and, of course, several people outside of the industry. But I'd guess that at LEAST 1/3 of the people I know in San Diego have employment that is directly tied to real estate and that's not even including the people I know in the banking industry, which itself is very real estate-dependent.
Over the next several years we're going to find out just how diversified San Diego's economy really is... and I'm betting it's going to be an eye opener.
Submitted by robyns_song on March 20, 2007 - 4:38pm.
Things aren't always what they seem...
Part of the reason why real estate went for so little, though, is that the lenders weren't bidding and the foreclosure sale. The problem with Detroit property is that nearly every property (even in good areas) gets stripped and filled with vagrants as soon as it becomes vagrant. It costs more for the lenders to maintain the property and they always suffer severe theft/vandalism losses. As such, the lenders don't usually competitvely bid at the sale...they'd rather the property sell to a third party and take the financial loss than take back a property that will soon be destroyed by vagrants and become a liability.
This is something that would not likley happen in San Diego. Don't get your hopes up about properties selling for little-to-nothing. Lenders have too much invested to let them go for a few thousand.
Don't forget that the lender still has to approve the bid at Detroit's sale AND there's a six month period of redemption in Michigan. So, the person who purchased the property for next-to-nothing might not actually keep the property if the lender doesn't agree that the bid was high enough or if the borrower is able to redeem the loan in the next six months. Even if the lender approves the loan, the high bidder cannot legally take possession of the property until the 6 month redemption expires. ALSO, a lot of the properties would have sold occupied since an eviction cannot begin until after the foreclosure sale and the redemption expires. This means that in Michigan, you can essentially get a mortgage and live free for at least a year.
If you want your breath taken away, try this look at the neighborhood that my mother was raised in... likely some of the homes cost nearly as much back then...
Click on any of the homes to see the bird's eye view, and then tell me, with a straight face, it's anything like San Diego will ever be. $500 for a house? Sold! Nothing over 100K! Check out the deals for 40K, 30K, and 20K! Only problem... you gotta live there.
PS: Don't be fooled by the one house listed at $202K... it's a Zillow mistake from Scottsdale, AZ... if the actual teleportation has taken place, the owners must be still scrambling to reverse the spell...
Submitted by Happy renter on March 20, 2007 - 7:43pm.
San Diego may not crash as bad as Detroit, but it may be hitted harder than LA or OC:
1. Geographical speaking, SD's location is not as good as LA or OC. OC is the center of both and SD is very far from LA.
2. LA & OC have more industries and job opportunities.
3. SD has much more empty lands to build houses by comparing with LA or OC.
I think these are the main reasons that SD house price has already declined one year ahead of OC while LA still increases.
However, the mortgage industry may hurt OC a little! Furthermore, SD mainly counts on defense and tourism. If the economy slows down because of the housing market, the tourism will be hitted very hard.
Submitted by Cow_tipping on March 21, 2007 - 7:23am.
Submitted by bob007 on March 20, 2007 - 11:28pm.
good neighborhoods in LA might hold the value. But the trashy neighborhoods will fall.
Its all related. If trashy neighborhood drops in 1/2, the good ones will also drop in 1/2.
Real estate is all local, yes but when the credit tightening happens its is a national event. Heck I would expect the higher priced to get hit worse due to the fact that its a larger risk the bank will be taking and its going to be harder for people to come up with the larger 20% or whatever will be needed soon.
In effect, I expect them all to crash, and it will start with the entry level houses and spread to the entire spectrum.
Cool.
Cow_tipping.
I don't think whats happening in Detroit has anything to do with a typical speculative 'bubble'. More like a localized economic collapse.
San Diego does indeed have a more robust local economy than Detroit. No questions asked.
What worries me in SD, though, is the 'perfect storm' of an over dependence on RE, building inventory, shrinking population and the sub-prime implosion. Something has got to give.
"Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield Hills that had listed for $525,000 sell for just $130,000 at the auction. "
Ouch... now THAT is a crash... something I'd like to see here in San Diego... not holding my breath though.
To those that say it can't happen here, consider that Detroit's auto industry compares to our local real-estate complex. I can easily see properties in less desirable neightborhoods crashing hard.
LOL, comparing Detroit's auto industry to our local RE complex is assinine!
More importantly, comparing Bloomfield Hills to les desirable areas is lax.
Bloomfield is Rancho Santa Fe.
Some of the Detroit area suburbs are quite nice from everything I hear.
That sucks, even at those kind of prices, Detroit is a pit
"LOL, comparing Detroit's auto industry to our local RE complex is assinine!"
Please explain?
Actually, I'd say that the real estate industry is just as important to San Diego as the auto industry is to Detroit. The reason that you won't see homes in the nicest neighborhoods (like La Jolla or Rancho Santa Fe) selling for $130,000 (as in the above example from Detroit) is two-fold. First, we're starting from a MUCH higher price plateau so there's much farther to fall. Second, the market for San Diego real estate is much larger than Detroit's. As San Diego's real estate falls there will people from all over the country watching; San Diego will draw buyers from a much larger geographic pool. Detroit, today at least, does not have that level of widespread attraction. Hopefully at least you'll be able to buy 1200 square feet in Chula Vista for $130,000 within a few years - that would not be out of line.
I would compare the detroit auto industry almost directly to the Silicon valley's software industry. I often felt that San Jose and the surrounding area is the next detroit. Export jobs to China and India and sell RE for millions using funky loans. Sounds good.
Cool.
Cow_tipping.
detroit vs. san diego
in terms of real estate, san diego is a completely different animal than san diego. detroit has a historical tendency to appreciate less than inflation. san diego has a historical tendency to appreciate more than inflation.
in terms of economic activity, san diego beats detroit hands down, with a much more diversified economy of defense, tech, biotech, tourism, and even some agriculture. detroit only has the auto industry and maybe some tourism.
also, in terms of tech, while we are losing our edge, we are still ahead of china and india. detroit lost its auto industry edge to japan a long time ago.
detroit vs. san diego? asinine indeed.
"Detroit only has the auto industry". "detroit vs. san diego. asinine indeed." Is that so?
As of March 2005 Detroit's civilian labor force was at 2.2 million and its employed labor force was at just over 2 million.
For Michigan as a WHOLE, auto manufacturing accounted for 244,000 jobs out of a total employed labor force of 4.4 million. Now, let's make the unrealistic assumption that 50% of that 244,000 was in the Detroit MSA and then double it (back) to capture the effect of all auto-RELATED employment. So, to use round figures, let's assume that Detroit has 250,000 auto-related jobs out of an employed labor force of 2 million. Per the properties of mathematics, that suggests that auto-related employment accounts for around 12.5% of Detroit's total employment... which is a big number.
Now let's look at San Diego. What proportion of San Diego's total employment is tied as directly to real estate as Detroit's is to automobiles? I think Rich Toscano knows the answer to that question, but I think the number is somewhere around 14% or so (give or take). [Obviously, this includes real estate agents, mortgage brokers, title agents, developers and builders, construction workers, etc.] So, I'm still not seeing an "asinine" comparison when analyzing the relationship of auto employment to detroit vis-a-vis housing employment to San Diego. Help me to understand what I'm missing.
I'm NOT saying that Detroit is anywhere near as attractive place to live as San Diego. I'm merely trying to point out that housing-related employment appears to be every bit as important - if not more so - to San Diego as auto employment is to Detroit. So, let's keep the discussion focused and not get off track. Please bring data to the discussion.
davelj,
It looks like you have numbers to back up your position, but could that only account for the direct employees of the auto companies? I grew up in detroit. Some people worked directly for an auto company, but the majority worked for suppliers to the automotive companies. Again, I have not looked up current stats, but more than half the families I knew were employed by automotive suppliers. 12% sounds about right for direct employees. Having lived in detroit and san diego, my opinion is that the automotive hit in detroit would be more severe than the aerospace hit san diego took in the early 90's.
I also know bloomfield hills quite well. 130k is a very low price, even back in the 80's. I'm not sure where that guy lived, but it was common for home prices to be well above 1M.
Thanks davelj!
Indeed, I was only considering how dependent the local San Diego economy was on real estate and related industries. And I still feel the comparison is apropos, when any economy becomes over-reliant on one industry its risky business.
Something thats 'worse' about SD vs. Detroit is that the auto industry didn't build equity for home owners. It wasn't like every resident got a free classic muscle car when they bought a house there. Contrast with San Diego, where lots of folks became REI speculators when they bought into property they either couldn't afford, or re-financed it into oblivion.
FYI: I was not commenting on the desirability issue which speaks for itself.
Explanation:
Say Detroit and people think one thing and one thing only regaring industry: AUTO INDUSTRY
Say San Diego and people think many things including: Defense, Biotech, Telecom, Tourism, Sporting Goods/SoCal Lifestyle products and eventually Real Estate.
Detroit lives and dies with the US Auto industry. SD does not live and die over any single industry.
sdrealtor, you're right - for the foreseeable future - and it's been the case for many years - Detroit lives and dies with the US Auto Industry. We don't really know what the very long term holds for Detroit, although it's not nearly as favorable as San Diego, that's for sure.
But where San Diego is concerned, I would argue that our city DOES in fact live and die with the real estate industry in the short term, which I'll define as the next several years. Despite the fact that San Diego's economy is no longer identified with any single industry - as it was with defense and the military 15 years ago - our over-reliance on real estate will make it seem like death once this downturn picks up steam. Real estate is that pervasive today.
To give you an anectodotal example, I was thinking of the neighbors in my condo complex. Title executive across the hall. Developer executive on one side. Guy that reps for a high-end blinds manufacturer on the other side. The developer that built the building owns a unit further down the hall. And a few with no connection to real estate sprinkled in. I count among my friends several real estate agents, mortgage brokers, etc. and, of course, several people outside of the industry. But I'd guess that at LEAST 1/3 of the people I know in San Diego have employment that is directly tied to real estate and that's not even including the people I know in the banking industry, which itself is very real estate-dependent.
Over the next several years we're going to find out just how diversified San Diego's economy really is... and I'm betting it's going to be an eye opener.
What about that realtor a few years back telling his clients that "every one wants to live here" when they took out that 2/28?
Everyone wants to live in Detroit.
?
Things aren't always what they seem...
Part of the reason why real estate went for so little, though, is that the lenders weren't bidding and the foreclosure sale. The problem with Detroit property is that nearly every property (even in good areas) gets stripped and filled with vagrants as soon as it becomes vagrant. It costs more for the lenders to maintain the property and they always suffer severe theft/vandalism losses. As such, the lenders don't usually competitvely bid at the sale...they'd rather the property sell to a third party and take the financial loss than take back a property that will soon be destroyed by vagrants and become a liability.
This is something that would not likley happen in San Diego. Don't get your hopes up about properties selling for little-to-nothing. Lenders have too much invested to let them go for a few thousand.
Don't forget that the lender still has to approve the bid at Detroit's sale AND there's a six month period of redemption in Michigan. So, the person who purchased the property for next-to-nothing might not actually keep the property if the lender doesn't agree that the bid was high enough or if the borrower is able to redeem the loan in the next six months. Even if the lender approves the loan, the high bidder cannot legally take possession of the property until the 6 month redemption expires. ALSO, a lot of the properties would have sold occupied since an eviction cannot begin until after the foreclosure sale and the redemption expires. This means that in Michigan, you can essentially get a mortgage and live free for at least a year.
hmm... how long till OCP and Robocop enter the scene...
If you want your breath taken away, try this look at the neighborhood that my mother was raised in... likely some of the homes cost nearly as much back then...
http://www.zillow.com/search/Search.htm?...
Click on any of the homes to see the bird's eye view, and then tell me, with a straight face, it's anything like San Diego will ever be. $500 for a house? Sold! Nothing over 100K! Check out the deals for 40K, 30K, and 20K! Only problem... you gotta live there.
PS: Don't be fooled by the one house listed at $202K... it's a Zillow mistake from Scottsdale, AZ... if the actual teleportation has taken place, the owners must be still scrambling to reverse the spell...
Detroit has had a major property crash due to the primary industry
crashing, but the national economy is good.
San Diego will do the same thing if the national economy
crashes.
San Diego may not crash as bad as Detroit, but it may be hitted harder than LA or OC:
1. Geographical speaking, SD's location is not as good as LA or OC. OC is the center of both and SD is very far from LA.
2. LA & OC have more industries and job opportunities.
3. SD has much more empty lands to build houses by comparing with LA or OC.
I think these are the main reasons that SD house price has already declined one year ahead of OC while LA still increases.
However, the mortgage industry may hurt OC a little! Furthermore, SD mainly counts on defense and tourism. If the economy slows down because of the housing market, the tourism will be hitted very hard.
good neighborhoods in LA might hold the value. But the trashy neighborhoods will fall.
yeah but that's Detroit! Detroit was rated as one of the most dangerous cities in the country...it's basically a dump!
Submitted by bob007 on March 20, 2007 - 11:28pm.
good neighborhoods in LA might hold the value. But the trashy neighborhoods will fall.
Its all related. If trashy neighborhood drops in 1/2, the good ones will also drop in 1/2.
Real estate is all local, yes but when the credit tightening happens its is a national event. Heck I would expect the higher priced to get hit worse due to the fact that its a larger risk the bank will be taking and its going to be harder for people to come up with the larger 20% or whatever will be needed soon.
In effect, I expect them all to crash, and it will start with the entry level houses and spread to the entire spectrum.
Cool.
Cow_tipping.
"Talk about a popping bubble...."
I don't think whats happening in Detroit has anything to do with a typical speculative 'bubble'. More like a localized economic collapse.
San Diego does indeed have a more robust local economy than Detroit. No questions asked.
What worries me in SD, though, is the 'perfect storm' of an over dependence on RE, building inventory, shrinking population and the sub-prime implosion. Something has got to give.