There are so many wildcards right now it boggles my mind.
The biggest of which IMHO is interest rates. We have already shut out the subpar buyers with tighter lending standards. Substantially higher interest rates from here would be a death blow to the perma-bulls. A month ago I would have said that rates are going to go down to record lows and possibly reignite the market. They went down but couldn’t hold.
I don’t buy the ‘seller holdout’ theory. Entire communities were built at the peak of the market (e.g. Encinitas Ranch, La Costa Oaks to name a few) and are already underwater. Sure some folks can ride it out but whole communities?
I have more confidence in the built areas like La Jolla and Point Loma. Good deals will happen but they will be far in few between. I think the drops in the rock solid ‘built areas’ will max out at 30%.
In the newer areas we could see price drops approaching 50% especially if they are in the lesser school districts. Those with the best schools will fair better.
