I wish docteur were still posting, so I could ask him to elaborate on what you are seeing. He saw 2 downturns, yet he says coastal values will stay flat or increase slightly due to building restrictions and wealthy people wanting those coastal homes. He says coastal values have never gone down, but steadily increased over the years. Perhaps he was not following the residential market in the last 2 downturns. Bugs, what happened to coastal values during the last 2 downturns? Coastal to me is within a few blocks of the beach, but I think others define it as a larger area. Could you give some information for both definitions of coastal?
With all that spec building going on, the building restrictions in place are certainly not limiting supply. Supply clearly exceeds demand. And where are the wealthy people who are supposed to gobble up these homes?
I can see how a unique area like RSF Covenant would hold fairly steady through a downturn. It is unique, stunning, and presumably owned by people who won’t lower the area’s property values through foreclosures.
How many wealthy people does San Diego have? Maybe a few hundred, a few thousand? They already have homes. Why would we have an influx of wealthy people to buy these homes? There really isn’t a business reason to come here. San Diego is a beautiful city, but the business community is not drawing new companies or new investors here.
In real estate, a high months inventory is a leading indicator of lower prices. This is a chart I’m working on when I get back from my vacation. High months inventory shows the demand is simply getting weaker, so motivated sellers end up lowering their prices. In areas like RSF Covenant, any house listed would presumably get snatched up pretty fast. The months inventory would stay very low, so prices can stay high. But once supply exceeds demand, pricing power is lost.
How long will builders keep adding to the supply? Do you see any new projects starting, or just old ones in progress?
The lenders are certainly not part of the reason for a sales decline. Investors are still gobbling up the MBS, so lending standards appear to get more lax, as lenders try to keep up volume.
