[quote=Jazzman]BG, here’s some numbers. I haven’t cherry picked, and these are all “immune” La Jolla and post bubble prices.
Dec 29, 1988 Sold (Public Records) $620,000 Jul 09, 2012 Sold (Public Records) $1,085,000 75% more expensive over 24 yrs
Dec 28, 1999 Sold (Public Records) $650,000 Jul 03, 2012 Sold (Public Records) $1,045,000 60% more expensive over 13 yrs
Mar 01, 1995 Sold (Public Records) $275,000 May 25, 2012 Sold (MLS) $1,110,000 300% more expensive over 17 yrs
Oct 12, 2000 Sold (Public Records) $795,000 Jun 19, 2012 Sold (Public Records) $1,125,000 42% more expensive over 12 yrs
Jan 25, 1995 Sold (Public Records) $375,000 Jul 03, 2012 Sold (Public Records) $1,268,000 238% more expensive over 17 yrs
Oct 10, 1991 Sold (Public Records) $568,000 Jun 11, 2012 Sold (Public Records) $1,275,000 124% more expensive over 21 yrs
Mar 10, 1988 Sold (Public Records) $340,000 Jul 02, 2012 Sold (Public Records) $1,280,000 276% more expensive over 24 yrs
Jun 30, 1989 Sold (Public Records) $530,000 Jul 24, 2012 Sold (Public Records) $1,350,000 155% more expensive over 23 yrs
Jan 20, 2000 Sold (Public Records) $810,000 Jun 01, 2012 Sold (Public Records) $1,335,000 65% more expensive over 12 yrs
Av 148% more expensive, av time span 18 yrs. . . [/quote]
Jazzman, I didn’t look at any of your recent sold comps because there were no links provided. They appear to all be equity or “traditional sales” since they were all last purchased well before the boom years.
An avg of 148% over 18 years (didn’t check your math) is only 8.2% appreciation per year assuming all these sellers did absolutely nothing to their properties during the pendency of their ownership . If all of these properties are in LJ, they are all likely 35-80 years old. Doing nothing to a LJ property, even a property owned only five years is NOT the norm in this area. The typical homeowner in LJ likely spends $100K ++ on remodeling and upgrades (windows/roof/exterior doors/landscaping, appls, etc) in an 18-year-long period of ownership. Because the Coastal Commission review is involved to remodel on many of the lots there along with the City (and SDG&E and adjoining owners for overhead easements), it is NEITHER CHEAP NOR FAST to have anything permitted in most areas of LJ.
You’re assuming these owners bought the same homes 12-24 years ago as the homes in the sold comps you are seeing today.
Nothing could be further from the truth. In many cases, these properties have a different footprint and are twice as big as well as highly upgraded over what they represented when they were last sold.
[quote=Jazzman] . . . How do you get to the low to mid six figures, to seven figures in less than two decades …post bubble?! Interest rates? Wages? Inflation? Population? So I don’t think it’s that prices were always high, just things have changed. Perhaps prices weren’t allowed fully to correct? If so, how does that bode for the future? And the biggy …does it mean homes are still over-priced? I rest my case 🙂
Yes, I’m well out of it, but I hope that doesn’t exclude me from the debate.[/quote]
Assuming arguendo that a steady 8.2% annually is too much profit to make on a residential property in SD’s finest neighborhood, what percentage of avg profit per year do you think an owner SHOULD make upon sale?
Let’s take your “reasons for LJ property inflation” one by one … all references will be to buyers of single family homes in LJ.
Interest rates?
If you’re referring to mtg interest rates, why should one assume everyone who purchases in LJ cares about them? What is the percentage of all-cash sales there? And, of the percentage of buyers who DO take out a mortgage, why do they bother doing it? Do they NEED one to purchase the property? Or do they want to write off a certain amount of MID from their income taxes? How many buyers take out a 20-50% LTV mtg for a personal residence in LJ, only to retire it a few months/years later when they receive a stock option payout or don’t need to deduct the MID anymore?
Wages?
Why should one assume that the typical buyer in LJ cares about wages? Are they a worker-bee? Or are they an executive or biz owner or medical/dental/legal professional who is paid according to how many clients they brought in and/or success of the company/firm? How about buyers who are actually royalty from another country or celebrities buying second homes? The list goes on …
Inflation?
Inflation really hasn’t come into the play in the 24-year time period you gave here EXCEPT possibly late 1995 thru 1998 (for San Diego Co RE). This is when SD Co recovered from a few large defense contractors shuttering their doors or exiting the county.
Relatively speaking, $620K in ’88, $568K in ’91 and $530K in ’89 were HIGH PRICES back then!
Even if small fixers, $275K and $375K in ’95 are very, very good deals and reflect the deep RE recession that SD was currently experiencing at that time.
Population?
The population of LJ (SFR’s – not PUDS or condos) really hasn’t changed in 35+ years. There is only so much land there and the prime SFR areas were built up long ago. There is only ONE LJ in the world. Why on earth would anyone expect it to “correct itself??” :=0
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I have a question for you Jazzman … Was LJ proper where you were looking for a SFR to buy before you got frustrated with the local market there and left SD? And if so, and you had been successful making an acceptable deal there, would it have been the first property you owned in a CA coastal county?
