San Diego Housing Bubble News and Analysis

Tell Them to read this on the union tribune

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

Tell them next to read : "Our house price model indicates that Californian homes are 35-40% above
the price range implied by current and forecast economic conditions
(compared to 13-14% over-valuation nationally). As of August the median
house price in California was $589K, but economic conditions support
prices between $350-380K; material price declines are likely, in our view."

http://www.irvinehousingblog.com/wp-cont...

http://piggington.com/august_case_shille...

When the line starts going up again the bottom just passed.

I don't think its possible to call a bottom except via hindsight. Which is kind of ironic given that everyone claims that about bubbles as well, which obviously isn't true.

Since they are probably unsophisticated folks, you can just suggest a simplistic formula for upper and lower bounds for price. For El Cajon, a price of $100/Sqft or less is a DEAL and $150/Sqft or more is NO DEAL. Any thing in between, let them use their discretion. While obviously trivial in complexity to track market bottom, this should at least save them from getting utterly destroyed.

Unfortunately, realtors are claiming that "This is a great time to buy"

When have realtors ever NOT said this? Save the few that actually recognize the bubble popped.

Think about the used car salesman stereotype.

Now consider that a realtor is basically a used house salesman.

but with less morals!
thus: bottom feeders.......

citydweller - I would advise you to ask them to visit this site and others like it. You can also send them to Jim's website. Contrary to what everyone says there are a few realtors out there who do have views that are not unrealistic.

These friends ultimately will make thier own choice regardless of your advice. However if you have them perhaps view what some other realtors think of this market then maybe that will sway them to hold off.

SD Realtor

I've developed a new approach for giving people advice, whenever they ask me about a stupid investment idea (including buying real estate at current prices in San Diego) the conversation goes something like this:

Person: "I found a company that's offering me a 40% guaranteed return. They invest in XXX, which is [blah blah blah]"

Me: "Go for it, the worst that can happen is you get a 40% return".

Person: "What do you mean?"

Me: "The best thing that can happen is you lose all your money, but you're young so it doesn't matter and you'll learn to avoid these kinds of scams. If you actually do get 40% you're one of the lucky ones at the start of this scheme and you'll end up investing like this until you lose all your money later, at which point it will be more painful. So I suggest you get this learning experience out of the way now."

Really makes people stop and think, much better way to go about it than try to fight them on something they're already mentally invested in.

http://piggington.com/august_case_shille...

I don't think its possible to call a bottom except via hindsight. Which is kind of ironic given that everyone claims that about bubbles as well, which obviously isn't true.

Gotta agree with kewp.

The problem is that the bottom of the market will look very similar to how the market looks now (weak sales, prices plunging, etc). The only difference between the bottom of the market and what the market looks like right now, is what happens after that.

The good news is that the housing market moves rather slowly. One can get in well after the bottom and still do quite well.

The bottom will happen when people stop worrying that this might be the bottom and they might miss the rebound.

Thanks for all the comments and links. I've been reading this blog for several months, and this is the first time that someone I know has been seriously thinking about buying a house. I feel a little uncomfortable advising someone on such a big decision, so I'm glad I was able to pass on these informative web sites. Ultimately, the decision is theirs, but at least if they check out these websites they'll have a better idea of the downside of this market (as opposed to the optimistic spin they are probably getting from those in the REIC)

I would stay out of it. It's not your job to educate people.

Mention the resources casually but it's up to them to follow your advice. Don't put any emotions into this.

There will always be knife catchers. It's just a fact of life.

My two cents on what the bottom will look like this time,

(This time was totally different than last housing downturn, so to look at last downturn and compare it to this downturn is meaningless) This bubble was caused be finance (really it was a finance bubble), when the sub-prime died, the housing market died, the previous downturn was caused when the defense industry was downsized. ie... the people and Jobs are still here for the most part....

so with that in mind, I think it will look like housing prices declined by 20 to 30 % from peak prices, and people talking about there will be no end to the downturn for the next 5 to 10 years(the so called experts), no one will want think the real estate as an investment, and inflation will probably just starting to really take hold so much so that the Government will not even be able to hide it anymore.

Anyway just my two cents.

This bubble was caused by greed, just like the last one. A giant Ponzi scheme. Greed will also cause the next one. It is ALWAYS the same, not totally different in any way. Prices will come back up when the inventory is gone. It's going to take a while, the invetory is just starting to get foreclosed upon.

you know stupid people who believe "professionals" who have vested interest deserve what they get!!!

Similar thing happened with a friend of mine, he bought this home in Irvine for $685k... worse he put all his life savings of $100k into it. Now the ZEstimate on it has it at $655,000 and you know how optimistic those numbers are, in a yr or 2 the guy is going to be in financial ruin. I had urged him not to buy time and again but his argument "I have already waited so long and looks like the market has hit bottom...of course a REALTOR told him that"

the people and Jobs are still here for the most part....

The bubbly ones are gonna go, though.

Asterisk***

Been reading here for a couple/few months...

and when "realtors are bottom feeders" type of statements are made, I cringe.

I've nothing to do with the business, but there are a number of folks who are regular posters that do not deserve to be lumped into malevolent blanket statements such as these.

That is nice of you VOZ but I wouldn't worry about it. I don't think it bothers any licensees who post here. The ones that would get upset couldn't handle this blog, maybe because the shoe fits?

Is there any way to use volume of houses on market and sales transactions to determine when the turning point is? Is the point at which volumes start deceases at a regular basis, and sales start increasing at a regular basis? In other words after about 4-6 months of steady constant increase or decrease, can this determine a bottom? I know that these statistics are very similar to the suply and demand of a market. How can you apply these to this current situation?

Technical analysis is not a blueprint but you have the right idea,jyurasek02. If you hope to be a market timer I would suggest you get to understand listing to pending sales ratios and know you target zip codes very well by this parameter.The ratios are really bad now and almost universaly getting worse so it is a good time to start.Make sure you understand why the ratios are changing.Do comps all the time comparing sales as much as a year back up to the current day. Also watch the cost of owning vs. renting in conjunction with the listing/pending ratios and the "distress" element in the inventory. If you feel like you have your finger on the pulse of that and keep an eye on the economy in general and your own outlook, you will do fine.

Great! Thanks for the feedback. I guess the first step is to start tracking these numbers. How can I gather the correct information to start tracking this information by zipcode? I think some people have some threads doing this sort of thing for Carmel Valley. The only other question I would have is the "distress" element. Would that be the foreclosures and NOT's and NOD's?

Would that be the foreclosures and NOT's and NOD's?

Yes it would be that and short sales. Watch days on market, both for distressed properties and the general market. What you really want to see is how are the distressed properties fairing in the market along with the other observations.

"How can I gather the correct information to start tracking this information by zipcode?"

Without a subscription to the mls or other data source it isn't simple to do. It can be done though. I believe? I cant explain it though because I take the simple route called the MLS.

In any case, the idea is to get your finger on the pulse of the market.
Take Temecula for instance. That is a good area to watch for learning purposes because it is already facing more drastic price declines in response to distress. The deals look good by comparison to 6 months ago, a year ago and beyond but the numbers are not showing any possiblity that those deals are going away anytime soon or even that the declines are over with.There are several posters here who are doing for Temecula what you want to do for other areas.

In most ,if not all San Diego areas, we have bad and worsening numbers but less of a capitulation on prices. All indications are that prices will continue to decline, pretty broadly speaking, before they get better. Most people are of the opinion that "nicer" areas closer to desirable locations like beaches and jobs,like CV, will get hit last. There tends to be less agreement on how hard they will get hit pricewise.