ps –

Personally, I’m not seeing a 12% reduction in Carmel Valley prices in the last year. Maybe 0 to 6% in established areas 5 to 15 years old. Maybe a little more in some of the one to two year old tracts in the eastern part of CV.

The eight factors you mention make some sense to me. The weakest areas in the next couple of years are definitely going to be newer tracts with large Mello-Roos fees, although I’m not looking for anything like 35-50% drops.

The main reason I’m responding to your post, though, is the comments on the RSF Covenant area being immune to price drops. I noticed that someone else made this comment a week or two ago, and my experience is that the Covenant area did drop in price quite a bit in the early 1990’s. I don’t think that anywhere in San Diego is immune to price drops. When prices fall, they fall everywhere, just like when prices increase, they increase everywhere. One neighborhood may increase or decrease faster than another area one year, but the next year they will probably adjust so that the overall increase or decrease over two years will most likely be similar. It’s the principle of substitution.

In RSF, it maight have been true that some of the homes in outlying areas outside the Covenant fell by a higher percentage from 1990 to 1995, but I know for a fact that Covenent prices also dropped a lot. I recall doing REO appraisals in the early to mid-1990’s in the Covenant area, and there were quite a few REOs in that area. A bank that I worked for in the early 1990’s had several REOs in the Covenant, and I can recall some houses fell in appraised value by more than $1 million over several years, say from $3.5M to 2.5M.

I don’t really have any info on lender tightening, maybe a mortgage broker could say. Maybe the realtors would have info on why cancelled escrows. I do know that lenders are scrutinizing appraisals a lot more this year – doing more appraisal reviews. I suppose banks know that with prices trending down, that they’re going to have to look more at the loan collateral, instead of looking mostly at borrower’s credit scores. After all, a lot of people with good credit walked away from their houses in the early to mid 1990’s, after seeing their equity go upside-down.

I personally think that actual sale prices are not the best indicator for a falling market. Although they are the most direct factor pointing to declining prices, they inherently lag behind other factors such as inventory and days on the market. They also do not provide a large enough sample set, in my opinion. Of course, there are inherent weaknesses in choosing the other indicators as well, but these weaknesses rest squarely on the shoulders of those in charge of the database listing services. It is worthwhile, then, to also look at the data pertaining to expired, cancelled, and withdrawn listings.

As strange as it may sound, the prices have already dropped 15-20% in the eyes of consumers. It just takes hard data and market forces to catch up to this perception.

I agree in the two-tier pricing going on. Some sellers have got the message and others haven’t. As an example, there is a seller of a 3500sf house in Rancho Dorado in San Marcos. Original selling price back in the spring was 975K to 1.05M, despite that fact that comparable listings in the neighborhood were selling for roughly 850K. After twice weekly open houses and five months on the market he has dropped his asking price to 799K.

I suspect that over time more and more sellers that are unrealistic will have to come back to reality provided that they: 1. have to sell; 2. unless the find a clueless buyer that has no idea what’s going on out there.

“some sellers were getting the higher price.”

As someone who has been watching the CV market very closely for a couple years, I can say that that is definitely true. Every time I see a “sold” where the seller got peak pricing, I get a bit disgusted with whatever agent these chump buyers are using. Buyers can’t be expected to be intimately familiar with the current situation. I would be, and most readers here would be, and if you have any sense you will be. But a lot of people don’t have sense, and therefore don’t familiarize themselves enough with the market. Or maybe they don’t really have the time to do so, and they figure that that’s what realtors are supposed to be for. The only mistake they make is to trust a realtor to have the buyer’s best interests at heart rather than their own. (Before I get angry responses, let me make it clear that I believe that there are plenty of honest agents out there. But there are also unethical ones. It’s the unethical ones I’m talking about.) So the realtor gets enough money to send his kid to college, and for what? For letting their client pay way too much for a house.

Sometimes, if the house is really a great house in a great location with a great view or something, I can almost let it slide. But when an entirely pedestrian property gets bought for a price that is reminiscent of the recent panic buying (and especially when plenty of other similar properties could be had for far less), I feel like a great injustice is being done.

Realtors: Do you have any system at all in place to check such unethical behavior? Do you feel angry or betrayed when you see such things? Under what circumstances, if any, would you say something to a buyer’s agent who let his client pay too much?

I’m a little late to this thread but I agree with Steve B. RSF and La Jolla didn’t get it as bad as the areas on their periphery, but they did take some losses. I wouldn’t characerize any area or any price bracket as being immune; some are just more vulnerable than others.

PC,
Me thinks you are a bit naive! Real Estate transactions end up in mediation, arbitration and litigation every day. The dollars involved are too big for people not to seek out legal remedies.