I strongly agree that some segments of the market and some individual properties will do better than others. I strongly disagree that there is any safe haven anywhere in the market that will be isolated from the regional trends.
Although these different segments do march to different tempos, ultimately they are all connected. If the bottom end of the market does fall out it absolutely will affect the middle which in turn will undermine the upper ends of the market. You will not see $130,000 beaters in Barrio Logan and $2,000,000 tract homes in Carlsbad.
No matter what anyone says, we have a lot more poor and moderate income folks in this region than we do wealthy business owners and trust fund kids.
It also doesn’t matter how many people in La Costa can stay put if the number of must-sell transactions climbs beyond a token level. It’s the ratio of must-sell transactions to total volume that will determine the pace and extent of decline. Remember, must-sell transactions include other factors besides financing; like probate, divorce, relocations, employment, and retirement.
Our volume for 2007 so far looks to be significantly lower than 2006 was, and 2006 was a lot lower than any year between 1998-2006. If 2007 keeps on its present pace we may be on track for a total volume equal to that of 1996. This, despite the fact that we’ve added a ton of inventory during this upleg – with more in the pipeline – whilst adding very few to our population. All this means that the must-sell transactions will have an outsized effect on the trends.
