San Diego Housing Bubble News and Analysis

It's happening already. From what I've observed, the only homes that are actually selling are the ones that are way under last year's prices. All the others just sit on the market.

I think a lot of the banks don't want to lower the comps in the neigborhoods because they know that the rest of their 100% financed borrowers will then have no hope of refinancing and would have a high probability of walking away. Corporate America runs on short-term profitability, so I think the lenders know they are just pushing the inevitable losses into the future by listing the REO's high and letting them stagnate on the market. Little by little, some banks sell houses at what the market will bear and the comps get lower each time that happens. At some point, the banks will have to unload these places en masse unless they want to become landlords for a long time!

Hang in there Matt... many people are still in the denial stage... they also get reenforcement from the realtor. They price their home from sold comps from the spring or even prior to that... they are stubborn... they are emotional... they think spring will save them...they here that it will bottom out in 08... they hear NAR...

The REO account managers you would think, would be smarter but they are not. Also as long as auctions get sheeple to buy at higher prices the account managers will keep the MLS homes priced high and if they don't sell, they pull em off the MLS and send them to auction rather then keeping them on the MLS for a cut rate price....

It will take time but it will happen. It is frustrating.

SD Realtor

It's the lender owned stuff that has me confused. I looked at one over the weekend I was driving by that was having a repo open house, it sat for six months at 400k, didn't sell, went back to the lender. Now that some appliances are missing, lender puts it up for sale at............400k, genius. I am fairly certain it is CFC's and they blame everyone else, including the fed for their woes (and stock price). Market rent is $1700 to $1900, new construction for the same sq ft in walking distance is 300 to 360 with 15-20 in incentives. I told the realtor that there aren't any turnip farms in the area and I have never seen a turnip truck use that street let alone anyone falling off the back near this house, but good luck with that. When they asked what I thought it should be priced at I cited the above info and then said at 350, I would still laugh but I wouldn't need any seizure medicine. At 300 it stood a chance and would be inline with the other ones I'm not buying yet but at least I would give my real name and only change one or two digits of my phone number.

You may be seeing the combined impact of no/low money down loans and California foreclosure laws. People have no incentive to lessen the harm of a decline in prices by dropping their list prices.

Think about two different scenarios:
-You buy 500k$ house with no/low money down to flip, but you apply for your loan with the house as a primary residence. If your house is foreclosed on, it doesn't matter to you whether the market price after foreclosure is 475k$ or 200k$-- in either case, your loss is identical. The only "skin" you have in the game is your credit rating- the bank takes the financial hit. So you list the house above your purchase price, keep paying the teaser rate (which is comparable to rent anyway), and hope that some fool takes it off your hands before your loan resets.

-Compare this with a purchase of a 200k$ house that appreciates to 500k$ and that you now want to sell. All of the sudden, it matters immensely to you whether you sell at 475k$ or 200k$. You actually have some incentive to "chase the market down" and lower your price. A speedy sale becomes important because you actually have skin in the game.

next month, go around and start making low ball offers. really low ball...

i figure, people with equity dont care yet, people without equity cant reduce, bank reo's are in limbo with potential bk's or unknown write off's.

builders might play ball, but if they plan on bk anyway, then no...

having no shame and not giving a rats ass about other people's opinion of me, i plan on doing just that. sept/oct then next year same time. i might drag my friend/re agent along for the ride... force her to grow some balls...

4runner, thats an excellent point, I can see that theory making sense, and I can see how so many up here would practice it. after all, no one here wants to look desperate, and before you know it they have bailed out of the neighborhood when the home goes into foreclosure and they don't have to face as much shame.

One of the guys I know that is going into foreclosure told me his story. He and the wife make about 100k per year combined income. Bought his home for around 250k-300k new.. as it appreciated he refied the heck out of it, and HELOC'ed it, bought and sold a number of cars/suvs, then bought a big dually diesel truck (60+k) and a big toybox(60+k), then bought quads, dirtbikes/riding gear for the whole family(25+k). A year or two later and he realizes that he can't afford all these payments. He decides to try to sell the house. He moves his family out to a rental. The house has been listed for about 6 months... no takers. Three wimpy price reductions later and no dice.. he has now stopped paying the mortgage, and has come to terms with foreclosure. In fact, it doesn't even seem to bother him in the least..

he puts it like this.. "the worst part of it is that I will have a ding on my credit, oh well, the cool part is that we love our rental, and I get to keep all the toys." I told him, yeah, in this country, your credit will be good enough to allow you to do the same thing again in a few years.

Point of my story.. banks and lenders are so stupid to allow these crazy loans and HELOCs up to 100%LTV. There is no way that they know if the home owner is going to put the money into the home. In this case, they have no rights to anything that he purchased with the home equity line. The only collateral they have is the home, which is now worth much less than the total of all the loans. I suspect there are many more like this guy.

How does he get to keep the toys? Does the debt on them just vanish? If you use a HELOC to buy a bunch of crap and you default on the HELOC I would think the lender would take the toys? But maybe not....

Taking the toys is expensive and most likely not worth the trouble.

Don't worry about that. Once the REO is sold short he will get a nice little bill from the IRS. Then he will be selling his toys in short order or they dock 50% of his paycheck to get get their take.

Well, I can't comment on the REO's, but have you considered that perhaps not all those MLS listings need to sell? Perhaps they're just fishing.

My neighborhood (Morgan Hill) has been the target of posts for brown lawns and to an extent it is true...but mostly with the younger families. I am representative of my street...empty nesters that could pay off our houses tomorrow if necessary...just transfer some funds. (NO, I did not inherit from my parents, they are still alive and 80, and the last time I visited, their WAMU statement with >$1,000,000 was sitting out, but that's another problem if WAMU goes down, and yes, the most combined money they ever made was < 70 K annually, they just didn't spend money buying crap). We're here because of family (younger generation) that purchased in the IE due to affordability issues and although we hate the values downturn and we feel like losers because we put down substantial amounts or even paid cash, and paid for builder and other upgrades with cash cash, we're planted here for now and will not sell until the upturn, even if that is ten years from now. Why? Because we don't need to, and we like living by our families.

We (my street's empty nesters) as a group live below our means, drive older paid-for cars, don't take expensive vacations on credit cards, buy clothes on sale, don't eat out very often, hold significant investment portfolios, and wouldn't dream of spending > $2 for a Starbucks drink. (I personally carry filtered water from my house everywhere I go). I recently went to Promenade Mall, was starving, got in line at both Wetzel's and Auntie Annies, and walked away from both lines...I couldn't bring myself to spend $2.69 for a few cents worth of dough. I went to Trader Joes's, bought a bag of Honey Whole Wheat pretzels, ate some, and took the rest of the large bag home.

Perhaps we're a statistically insignificant microcosm of Temecula stratification, but we do represent the majority on my street.

When we bought this house the McMillan sales agent I had know since our first meeting in 1997 told me she was shocked by all the younger people buying with 100% financing suicide loans. We must have sounded like old biddies; she and I knew that the chickens would come home to roost and it would be 1992 again here in the IE.

P.S. for temeculaguy and everyone else on that post about Chick's...one of the first things I did upon hitting Temecula was to dye my hair brown, drinks lots of red wine and coffee, have the implants removed, gain 25 pounds, and buy a Subaru :))

I don't know what just happened with the computer, but I can't get rid of the line "the most money combined money they ever made was $2 for a Starbucks drink. Should read, was <$70,000 . Next line, "I can't bring myself to pay $2 for a Starbucks drink".

What is going on here, I am being truncated now...was $70,000.

TemekuT, thanks for singling me out as the babehound of the board and my aplogies if any of my prognostications of morgan hill made you defensive, Morgan and Wolf creek were built in the boom years and are still building so they make an excellent barometer for the South of the 79 market. Morgan is the highest priced and may feel the jumbo squeeze but that in no way means I don't like it, for the right 2003 price it has a lot going for it. My comments regarding the sterotypical milf population are are always in response to someone else, usually meant in good fun and in no way reflect the actual opinions of the author. I just can't help but poke a little fun at those who are intimidated or disgusted by what they think has become Orange County East. I welcome them to visit the local Walmart if they need to restore their self confidence, I go there just to feel skinny. I am trying to be as apologetic and kind as I can because there is a chance as this thing plays out that I may end up buying on your street and I don't want to piss off the block captain before I even get there.

P.S. chicks with brown hair in Suburu's are hot.

Hey, I agree with you about the O.C. I grew up there and can't stand it now, wouldn't dream of living there. For those OC snobs who malign the IE, Temecula is absolutely preferable for daily living. I also agree with you about the 2003 prices in Morgan Hill, but I just couldn't get hubby to see the light. He agitated until we were in contract for a > 1mil home in Ventana but I peppered him with facts (& veiled threats) until we cancelled that one. Now he's a housing debacle devotee and advising the rest of the family that cash is king, get out of debt, rent for now etc. Too bad he didn't convert until after we bought the house we're in now. I do hope you see the point, though, many of us can afford to live here and wait things out.

Re Walmart, you also forgot it is frequented by parents that scream at "junior" and pinch him/her, while threatening to call the police to put the offspring in jail!

And, I'm not a block captain. I worked for a builder in the Bay Area and was tormented by forced involvement in the HOA of each project and I will not get involved in HOA politics or street gossip. You wouldn't even know I live on this street.

Keep the postings coming. I love your wit.

P.S. I recently received the ultimate compliment. My 30 year old daughter (may I brag for a moment...who, since completing grad school has accumulated 50k in rolling CD's, has regular and Roth IRA's from her teens, and now a 401 K, plus is in Calpers, and also saves 1/3 of her net income, we taught her well) told me I was "hot" for 51. "Really honey, come on. I'm a 51 year old Mommy". "No Mom, I mean it, you're hot!" (my God, I love that kid!)

P.S.S. I couldn't and still can't believe the bling level humungous diamond rings and cleavage the ladies display here. You don't see that much in the truly moneyed Bay Area exclusive enclaves. And, never on the streets in Europe in my experience. I had a Menifee acquaintance volunteer that hers were of silicone and CZ origin.