A Reality Check Sellers

Regardless of how beautiful and custom your home is, regardless of the views, granite, luscious landscaping, corner lot, upgraded windows, and your own special decorating touch, there is one inescapable reality you must accept:

Who can afford it?

This is a low wage city. San Diego created a glut of low wage jobs.

Therefore, regardless of how many buyers really want your home, very few can actually afford it. So you are competing with 23,000 other sellers for those few qualified buyers.

This low buying power is going to bring down the value of your home to the level of the low wages of the San Diego workforce.

“The [San Diego] region has effectively made a big investment in ‘low-value-added jobs’ through its support of tourism and now faces problems with a populace increasingly unable to afford housing in the area,” said Marney Cox, lead economist for the San Diego Association of Governments. (SDUT, 8/30/05)

Dear Seller, you have one more problem: people are leaving San Diego, and recruiters are having a hard time attracting talent. The VERY people who have the highest wages, those that would be brought here by recruiters, are NOT coming here.

“California’s population growth last year continued to slow as more people exited the state than moved here, fueled in part by the steady rise in already high housing prices. Howard Roth, Chief Economist for the Department of Finance: “…I worry about that because I wonder how we’ll attract workers from other parts of the country…” (SDUT, 3/3/06)”

” “Corporate relocation specialists say the area’s high costs are making it increasingly hard to find newcomers to replace the companies that are departing.” (SDUT, 6/12/05) ”

Oh, and this is the worst part: home prices have gotten this high, and builders have overbuilt luxury homes, due to a lack of government oversight on risky lending. These expensive San Diego homes were purchased mainly with adjustable loans on low 1-3% teaser rates, including a big chunk of subprime borrowers with incomes. Those teaser rates artificially inflated demand for homes by investors, speculators, and peole like you who just wanted to live in their homes but had to overpay to do so.

Sellers, the only realistic thing you can do, is look at the comps, and price yourself 5 – 10% less. This city cannot sustain the types of housing that has been built.

I wish the City of San Diego, SANDAG, the Housing Commission, or various other agencies would have warned builders or buyers about the inability of San Diegans to afford the huge and expensive homes that were being built. While our city needed $100K – $150K starter homes, the cheapest houses built in Poway and anywhere were $600K and up.

The very sad fact is that those $600K homes must fall in price to $300K, so they can be affordable to the $60K median family income in San Diego.

The city has invested in low wage jobs. Instead of attracing manufacturing, high technology, and biotech jobs, they created jobs in leisure and hospitality, government, education, and retail.

These low wage jobs will be the undoing of the housing market.

When the adjustable mortgages reset and the teaser rates expire and foreclosures increase….when the “housing ATM” is shut off and we lose jobs in retail and hospitality because San Diegans can no longer keep spending more than they earn….when home sales keep falling and construction, real estate, lending, and title companies seriously lay off…..when those laid off people and others struggling to pay the bills join the 44000 people who already left last year, increasing vacancy rates and further lowering sales…. when the buyer frenzy that drove up prices turns to seller fear and panic and buyers disappear (as they do in housing busts), all bets are off.

Any homeowner reading this has reason to worry about their paper profits. How quickly will they evaporate?

Any seller ought to worry about their listing price. Although your house is unique and beautiful, *who* can afford to pay for it?

Schahrzad Berkland