Prices are already dropping, sales are down to the tune of 40% in June 06 vs June 05, and inventory is rising. The bubble has popped. Nationally, it appears orderly, but in overheated markets like this, it is not orderly at all, the ship has turned and by the end of the year, the layoffs in construction and retail will really pick up, ARM adjustments will lead to more inventory….

As far as the banks, that is a wild card. I suppose they can refinance their borrowers, but ultimately they will not give away money. They are not non-profits or homeless advocates.

The only hope is that the ARM holders can find a loan they can afford. That will save the bubble a little longer.

You forgot to mention that our economy is totally dependent on rising home values to fund consumer spending. Even flat home prices will cause a recession, as consumer spending cannot continue without rising home prices from which to obtain the money that is not coming from wages. Real wages have been flat for over 10 years, so the rising home prices were used to supplement income. That gig is up.

Global banks are raising interest rates, Japan is ending the carry trade.

The party is ending.

Its unfolding a bit fast, but think about it. Even if we didn’t have job losses and even if everyone who took out a mortgage could somehow keep their jobs, interest rates are up quite a bit from their 04/05 lows. That alone spells doom for the RE speculator crowd. Again lets go out on a limb here and assume that for every house there is a greater fool. Todays greater fool can qualify for a much smaller loan than yesterdays, even with the most exotic of programs. In RE market terms this is unfolding FAST!

I remember a year ago when one of my co-workers thought 07 was going to be ground zero(I was a bit incredulous.) It may still be, but its looking like fall of 06. Time tables are moving up.

Interest rates are up, check.
Job market is flat, check.
Credit standards are rising, check. (This is the last nail in the coffin.)

What I came to love about Rich’s analysis was that it was conservative. He showed you the facts he had but drew fairly conservative conclusions. The more reading I have done, the more this becomes apparent. Besides anyone who is reading this blog is a contrarian, so Chris you are still ok.

Josh

The big point you are missing (perhaps intentionally), is that a substantial chunk of SD RE assets are vacant investment properties. The owners have no emotional investment, other than the sticker price, and moving is a non-issue. They will unload these as soon as they realize the markets turned. Expect the frenzy to increase as the speculators move from profiting to minimizing losses. This is turn will put pressure on everyone with an exotic loan to bail out or eventually foreclose.

True, folks that have been here since pre-bubble days and aren’t dependant on the RE industry will probably stick around. I don’t think anybody doubts that.

i feel that zillow is overvaluing houses. houses on sale priced well below zillow value are still sitting on the market.
This one for example :10151 PRAIRIE FAWN DRIVE in rancho bernardo.
Zillow value $804,741 – $1,010,397, zestmate $894,157

now is being offered 740,000 down from 775,000. i do not know when they dropped the price but still is not selling.

last sale 10/29/2004: $734,500

My house is 200k below what it would realistically sell for and my next door neighbors is 100K too high.

I didnt check last week but it has pretty much been the same for several months. It is also off on BR/BA count, garage count and sq footage. When I increase the sq ft by about 200sq ft, correct it to a 3 car garage, add 1 bedroom and the extensive upgrades to my house the zestimate goes down 100K!

I have to agree with SD Appraiser. Zillow is all over the place — high in some areas and low in others.

It is worthless as far as giving an accurate picture of value is concerned, especially in a market such as we now find outselves. Total rubbish.

The home next door to me just went into escrow at a sale price that was more than $ 300,000 above the current Zillow value. I’m sure when that sale closes in a few weeks, the value of my home will magically increase and jump another $ 300,000 (or more).

Here’s another example: Scott Street and San Antonio Place in Point Loma have a row of houses right on the bay. Zillow lists two properties I am interested in (not on the market) one at $ 801,000 (a double lot) and another at $ 1.13 Million.

Both properties have a private dock (there are only five homes on San Diego bay with a private dock) and the minimum value of either of them is easily north of $ 6 Million (I would buy either one of them at that price in a New York minute).

Those values Zillow has for that area are probably based on very old sales (because no one sells in that area except maybe once every few years). The last listing on San Antonio Place was a new home (which was recently pulled off the market – why I have no clue) which was listed around $ 7 Million and another spectacular home to the west was listed at $ 9.95 Million (off the market also).

The most recent comp I have in the area with access to a private dock was a home that sold about two years ago for $ 5 Million plus in overbid. That homes shares a private dock. Zillow has the home next to it valued at $ 1.01 Million. I WISH I could buy that home at that price.

Zillow isn’t even close in value on any of the homes in that area, which number in the dozens.

Only a fool would rely on Zillow’s valuations.