Unfortunately, I do not have data to support my arguments. 🙁
Honestly, I think one of the challenges with analyzing this market is that the data does not exist.
I do have some counterpoints though:
1) Few all cash purchases – Even those who can afford it are going to get a mortage of up to a million dollars because of the tax breaks and low interest rates. It makes it so cheap to borrow that you can beat the cost of the debt with even conservative investment strategies. Therefore the # of cash sales do not tell us anything.
2) How changed are parts of San Diego over the last five years? I can’t speak for San Diego, but I would say that 5 years ago, Oceanside had undergone a prior transformation in the previous 10 years that was not yet priced into the market. Certainly, I think it has overshot a fair price now, but part of the market action in the last five years was also a recognition of the dramatic changes that took place the previous 10 years.
Its also not just caused by the whole real estate appreciaton, but just a fundamental change in who is living there as well and the investments they are making will only continue to drive this demographic change regardless if the bubble bursts.
3) Why have rents not kept pace? I think again this speaks to the demographics. People who buy million dollar houses do not rent (I know, I’m one of them). Rent is not a comparison to owning your own home. Its also speaks to the rationale side people have shown over the last 5 years. Choosing to buy vs. rent has been a much smarter investment. That is a FACT. Now, I know it may be quite the opposite the next five years, but as of right now, that’s where we stand.
Again, I’m firmly on the side that plans to profit from what I believe will be a coming decline, but there is a lot of rationality to what has occured in the San Diego real estate market. Some of the comments from people on this forum sound very emotionally invested in the idea of a market meltdown and their expecation of how its going to play out. I’ve always found that understanding both sides and staying objective is going to give you the best chance to exploit the situation as it unfolds.
The one great thing about this debate, (and markets in general) is that unlike political viewpoints, a real answer to what’s going to happen will soon be forthcoming and we can all see where we were right or wrong…
…by the way…I have some additional bearish arguments to add to the fire as well..I’ve just been holding those off because I don’t think anyone here is going to dispute them. 🙂
