So I’ve been lurking for awhile, and figured it’s time to post. I work in corporate finance, have an MBA, and live in Rancho Bernardo…trying to put my arms around the economics of the San Diego market and must sell inventory. Below is how I’m thinking about it, and I’d love any corrections/insights as I know the figures below are rough.
-Total # SD houses 700-750K
-Normal Turnover 3%, current turnover 2%.
-3% translates to 21,000 sales per year or thereabouts.
-Forclosures first 4 months of the year were 1,700. Annualized, that’s 5,100 sales from foreclosures.
-Others who would need to sell would include houses that are vacant, and short sales.
-5,100/21,000 total means a bit under 25% of the market will be foreclosure sales. I’ve heard anecdotal evidence that another 10% of the total are short sales, and of the three houses on my street that are for sale, 3 are vacant.
That math tells me that it’s not unlikely that 40-50% of sales that will occur over the next year will be people who are willing to price very aggressively. Add to that the fact that financing is drying up in subprime, that psychology has shifted, that the 10 year yield is up, and that a lot of ARMs will reset this summer, and you have a fairly toxic mix offset by what is still, by all accounts, a very solid job market.
That’s the state of the market in my mind…the second half of this year will be very interesting. I’ve been renting for three years, and my instincts tell me that even with all that, we are in for a slow, steady, 2-3 year decline of 20% or so unless the economy tanks. That must sell % is a bit scary, though.
Any thoughts/insights, or modifications to the numbers above would be appreciated.
