IMO bottom is no sooner than 2011 – more likely 2012 and then flat for several (or many) years
these are the main factors I consider in my analysis:
> the ARM reset chart – resets have barely started and look at the effect already – Option ARM resets in 2010/2011 could be very nasty due to years of negative amortization
> another 5000-6000 condos downtown by end of 2009
> typical real estate down cycle is 6 or 7 years and peak occurred in mid-2005’ish
> 20 to 40% of current MLS listings are vacant – these properties will continue to drop in price to a selling point or they will become rentals
> good jobs and people are currently leaving San Diego – families with six figure incomes are leaving the city because they can’t afford to live here in a financially conservative manner (ie, own a house instead of a house owning them)
I take the factors above as given – the effect they will have on San Diego’s market can be debated
There are many more factors that will play into the current downturn but they are challenging to analyze:
> rising interest rates in marketplace (due to increase in perceived risk of holding US dollar/debt?) vs Fed’s desire to keep rates low
> ongoing outsourcing of US jobs
> need for baby boomers to access the equity in their real estate for retirement (starting as early as 2008) – note that the MSM started telling boomers this week that they NEED the illegal immigrants if they want someone to sell their houses to
> psychological effects of real estate bubble bursting – historically, after a financial bubble bursts, it takes a full generation before the public will come back to an asset class – gen X and Y may watch the boomers lose their asses in real estate and decide that they don’t want to own real estate EVER
