Ok, its time for a little brouhaha. Havent had much time to do alot of analysis but saw something today that caught my attention and spurred me to run some numbers. Here they are:

I saw some stats in my old office today for annual sales between 1999 and 2009 that got me going. So I ran some numbers. I suspect similar things have played out in other similar market segments. I’m constantly amazed at how well things have held up and here is one big reason why.

Between 1999 and 2005, there was an average of 2,148 sales in my submarket (92024, 92009 and 92011). The numbers were pretty stable each year with blips up in 2002/2003. In 1999, sales were 2,011.

Between 2006 and 2009, there was an average of 1,378 sales in my submarket (92024, 92009 and 92011). The numbers were pretty stable also. In 2009, sales were 1,385.

Sales have been down about 770 units per year for the last 4 years which is 3,080 units or about 1.5 years of demand. That is a huge amount of unmet demand. It is continuing to be unmet and piling up on itself. When, how and if it could ever be met is an entirely different matter but that is a big reason why things have held up.

In 1999 a 30 yr fixed rate was at least 8% so higher rates shouldnt kill it. Inflation adjusting prices back to 1999 arent horribly out of kilter (prices seem to be about 50% higher nominally since 1999). The area, population and average incomes have soared in the last decade. Recent arrivals may not realize this but in 1999 Leucadia Blvd did not connect the 5 to El Camino Real! You had to take Encinitas Blvd or La Costa Avenue to get to the 5. Sure we have some short term pain to get through but how can this not be bullish for the long term? Strong hands recognize this and are digging in for the long haul.

The reality is even more staggering, as sales are down much more than that. Factoring in new homes, sales were likely close to double the resale numbers back then. Between 1999 and 2003 we added several large communities like La Costa Valley, Rancho Carillo, Encinitas Ranch combined with at least a dozen smaller projects easily combining for more than 5,000 units. Between 2004 and 2006, we added La Costa Oaks, La Costa Greens, Bressi Ranch, Bay Collection and several smaller projects accounting for thousands more. There are no more large tracts like that coming to this area now or ever.

We can all agree or disagree as to where the market is going but you cant ignore these numbers.

OK. Take your shots!