Some established areas like Del Cerro and San Carlos really haven’t seen much in the way of price declines at all, at least up to this point. (I’m talking about SFRs, not condos – some condos have declined a lot in this area).

You’re right, there isn’t that much inventory, and the reason they have declined less than some other areas is that there isn’t any new housing that has been dumped onto the market in the last several years – this area is all built out. That’s not to say that prices there won’t decline in 2007 – it will probably happen, I’m just not sure how much.

Start by finding how much a similar house in the neighborhood rents for. Then take your 20% down, 80% fixed rate 30 year mortgage, add property taxes and maintenance and subtract the tax deduction. When this number is pretty close to the rent number, that’s a good price. I could see paying maybe a hundred more per month to own than rent if I really liked the place. Oh also, don’t forget that your 20% down payment can earn over 5% annually in CDs these days (you’ll lose 100% of that when you buy), and that if you work for yourself you can write off a portion of your rent for your office. My guess is that when you really do the math, you’ll find that most prices in San Diego are still too high.

My predictions?

* Leaping from condo balconies will gain popularity as a suicide method in 2007

* A rash of mysterious home and condo fires will sweep southern California in 2008

* In 2009, workers in housing-related industries will transition to careers with higher demand for workers, such as strawberry cultivation, garden maintenance, and home cleaning

* Downtown condo HOAs will modify their bylaws to allow balcony vegetable gardens and the keeping of chickens as “pets” in 2010

* 2011 might be a good time to think about buying a house in SD

You might also want to check out Allied Gardens. Prices here are not generally as high as up the hill in Del Cerro (however homes are smaller and in most cases, older). There has actually been a small decline in prices over the last 12-18 months in this area (550k down to about 500k on the median home).

Good points daney143, I totally agree about Del Cerro. I just ran the numbers and with a 30 yr. fixed at 6%, your payment is just under $2800/mo ($450K price, $90K down); with the tax deduction that’s very doable for a household making $100K/yr and maybe even less if they’re thrifty. It is still a little more pricey than renting, especially considering your giving up the income you can generate from that $90K down payment. What’s the median household income here in SD? Also, how many first time buyers will have a $90K down payment?

I still think it is a good idea to wait until all of the weak hands are flushed from this market over the next few years. A lot of people really stretched to get themselves into these houses.

I realize I am being pedantic here but one thing I have noticed in Cali is that nobody tends to include the property taxes as part of the house payment. Of course a smart person would say that it is not part of the house payment, however coming from Ohio and Texas where perhaps the “rates” are higher (though the valuations are much lower) I am conditioned to talk about the house payment, as all encompassing.

I have also noticed a lot more people pay their property taxes as an annual or bi-annual payment (whatever it is) instead of being part of the house payment.