Downtown condo situation has only been mentioned in passing during this thread – let’s remind ourselves what’s happening there
Over 600 units currently on the MLS and some unknown number of units not on the MLS
Units are selling at a rate of 40 to 50 per month which gives us at least 12 months of inventory – according to Rich, there is downward price pressure when months of inventory rises above 8
Into this already saturated market we are going to add another 6000 units by the end of 2009
Let’s say that we continue to sell 50 units per month until the end of 2009 (30 months) – that leaves us with only 5100 vacant units
San Diego has never experienced a super-saturated condo market so it is challenging to predict what the effect will be – I personally believe these condos will become rental units and rental rates will be suppressed throughout San Diego (remember that prices are set at the margin)
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Since I mentioned a glut of condos/rental units, let me also mention that at least 20% of the current 18,000 (21,000?) MLS listings are sitting vacant – that means there is no homeowner that is going to take these properties off the market and continue to live in them – these properties will either be reduced in price to a selling point (possibly via short sale or foreclosure) or they will become rentals – real estate that won’t sell becomes rentals
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The Bear Stearns mess was mentioned and the $3.2B number was given
As I understand it there are (were?) two funds – one was $5B in size and the other one was $15B in size – the $3.2B loss is ONLY for bailing out the smaller fund – no bailout has been attempted (in public anyway) for the larger fund
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Another piece of the macro picture is the impending retirement of the baby boomers – they make up 25% of our current work force
That’s 25% of our workforce that will want to STOP contributing to their retirement funds and START drawing on their expected retirement benefits (social security, medicare, perscription drug benefit, etc)
This loss of productive workers and growth of entitlement spending could have a profound effect on America’s economy and nobody knows what that effect will be – I have a hard time imagining that it will be positive
As discussed in recent threads, these same boomers have some portion of their wealth tied up in real estate – some of them will need to tap this equity which means sell, refi/cashout (and service a mortgage) or do some kind of reverse mortgage
Leading edge of the boomers will be eligible for early social security benefits starting in 2008
