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September 2, 2007 at 7:31 AM #82990
Bugs
Participant

Most condo markets are weaker than the SFR markets they share the same geographic areas with.

And no, I don’t think the condo market in CV is anywhere near bottom yet, just like I don’t think the SFR market there is near bottom.

All pricing in all markets is relative to its competition. CV is a wonderful place but there are equally wonderful places elsewhere, and there are areas that are superior as well as areas that are inferior.

Let’s say that a CV buyer was also considering Scripps, but they’d assign a 3% premium (or discount) to Scripps because of it’s attributes. For now let’s just go with the discount. For this buyer, a $900k home in Scripps is competing with $927,000 homes in CV. If Scripps declines by $50k to $850,000 then to this buyer the competing homes in CV have to discount their prices to $875,000 in order to compete.

The number of buyers competing for these homes is finite – there are only so many to go around. Right now those buyers all have options because there are more listings than buyers. The developers will squeeze their output so as to create the impression of a shortage but that’s just a manipulation tactic.

On the lower end, the lesser alternative Scripps home competes with homes in Poway and Rancho Bernardo on its lower end. If those homes decline in value then to many buyers the Scripps home has to lower it’s price in order to compete. The Poway/RB homes compete on the lower end with the more desirable areas of So. Escondido and San Marcos; which in turn compete with the lower ends of their community; which compete with Oceanside and Vista; which compete with Temecula and Murietta; which compete with Hemet and Sun City; which compete with Banning and Moreno Valley; which compete with Victorville and 29 Palms.

Every market segment is ultimately connected with every other market segment in the region. What happens in Temecular and Murietta does eventually influence what happens in CV even though a CV buyer wouldn’t get off the freeway within 50 miles of Temecula.

It’s just a matter of time. We haven’t even come close to peaking out the bad news meter in RE yet. How anyone can reasonably think that we’re anywhere near bottom escapes me.

One more thing: Don’t use developer pricing as a measure of the market – they’re packing those Yugos with so many options and upgrades you’d think you were buying Lexus instead of a Yugo. But it’s still a Yugo and by the time you go to resell that Yugo the value of all those options and upgrades will become invisible.