History Repeats Itself, especially in San Diego Real Estate. The following is from the DataQuick 1995 archives. This was nine years ago, it will happen again, it is the natural order of the RE cycle.
California Homes Being Sold at a Loss
by Real Estate Analyst John Karevoll
June, 1995
La Jolla, CA.— Fewer California homes are being sold for less than they were bought for, indicating that many potential sellers have decided to stay where they are, a real estate information service reported.
In 30.7 percent of all May home sales, sellers ended up getting less for the home than what they had purchased it for. That loss percentage was down from 32.4 in April and down from 35.4 in May last year, DataQuick Information Systems reported.
Loss sales accounted for a steadily increasing portion of the market from early 1991 until a peak of 42.7 percent was reached in September 1993.
Large newly-built homes that were bought during the 1989 to 1991 sales surge have been particularly exposed, but the problem has spread into other categories as well, said Donald L. Cohn, DataQuick CEO.
” A lot of homeowners have put off selling during the past few years because of declining prices. So a higher percentage of those homes that were put on the market, were put there because the owner was under the gun to sell for one reason or another “. Many of these ‘have-to-sell’ situations result in a loss.
” We may find it shocking that three of ten sellers lose money, but we need to remember that it still means most people are making money, ” Cohn said.
DataQuick monitors all real estate purchasing, financing and foreclosure activity in California and other states and provides information to lending institutions, title companies and industry analysts. The numbers include all ” arms-length ” resale condo and resale house transactions where current and prior sales prices were available.
The median loss was $23,500 on a house sold for $203,000, originally purchased for $226,500.
Hardest hit were homes in areas that experienced the fastest run-up in prices in the late 1980s. In Orange County, loss sales accounted for 45.3 percent of the last three month’s sales (see chart), in Ventura County it was 38.0 percent.
Resale houses
Sales counts & loss percentages
March-May 1994 and 1995
Mar-May Loss Loss
County All Sales# Pct. 95 Pct. 94
Los Angeles 18,217 31.8 pct. 38.2 pct.
Orange County 5,705 45.3 pct. 49.9 pct.
San Diego 5,803 42.6 pct. 44.9 pct.
Riverside 4,208 35.6 pct. 32.1 pct.
San Bernardino 4,266 35.5 pct. 30.8 pct.
Ventura 1,945 38.0 pct. 58.4 pct.
So.Calif. Total 40,144 37.0 pct. 40.9 pct.
San Francisco 1,026 16.2 pct. 24.0 pct.
Alameda 2,828 27.0 pct. 24.4 pct.
Contra Costa 2,486 32.4 pct. 34.5 pct.
Santa Clara 3,650 22.0 pct. 28.9 pct.
San Mateo 1,353 19.8 pct. 30.0 pct.
Marin 526 13.5 pct. 15.3 pct.
Solano 769 31.1 pct. 35.6 pct.
Sonoma 1,099 26.7 pct. 26.2 pct.
Napa 209 9.5 pct. 22.3 pct.
Bay Area Total 13,946 25.0 pct. 28.5 pct.
Santa Cruz 298 12.6 pct. 19.6 pct.
Santa Barbara 440 20.1 pct. 30.9 pct.
San Luis Obispo 393 12.9 pct. 28.6 pct.
Monterey 391 14.9 pct. 21.8 pct.
Coast Total 1,522 16.0 pct. 24.8 pct.
This time the whole thing is going to be much more severe due to the introduction of all the suicide mortgages going bust within the next 1-2 yrs. If homes could decline 35% in the last downturn there is no reason to rule out a 40-50% decline.
Diego, my cousins condo bought in 1990 for $207,000 declined 33.8% to $137,000 by 1995, this was in the upscale area of Rancho Palos Verdes 😉 so it’s not speculation but fact that values dropped that much! Current value at zillow is $660,000 (about 200k off!) and a comp sold a few months for $450,000.
I lived in a townhouse in Aliso Viejo (OC). My landlord paid $170,000 (I don’t know how close that was to the peak) for it and offered to sell it to us for $130,000 in 1994.
Kev, I agree with you. I was just clarifying the meaning of 35% in the original post. Yes, condos can easily drop 35%, if not more.
Back in 1999-2000 I used to live in a nice 1/1 condo in Point Loma, my rent was $600 (which was below market). I think my landlord had bought it in 1987 or so for $50K, and by 1999 it was worth $65K or $70K, at most. My guess is that the same condo was probably worth $70K in 1990 at the peak of the boom.
What I don’t get is all these Realtors and housing market guru’s keep saying , Buyers are waiting of the side lines,
There’s no one waiting on the Side line guy’s . There at the bottom of the price wall looking up wondering how the hell they could really afford these thing’s.
In 1994, you could stomach losing $20,000 and get out. You fore go the next car and pay it off over five years.
With homes in OC having a median of $625,000, that “average” loss likley will climb to $70K or so and could easily push six figures. People won’t be able to stomach and walk away with a $100,000 loss.
That’s a bankruptcy level loss which changes the game.
I read some other archived Dataquick articles today, and saw Ocean Beach median fell 30%, while Poway’s median only fell 10%. Lowest price drops were in Lakeside, Santee, Chula Vista South.
Um PS, no way did Poway only fall ten percent. I personally lived through that one. Someone is cooking the numbers. It was much worse than that. Even inflation adjusted. Poway was a total speculative boom/bust market in the late 80’s and early 90’s.
According to Dataquick’s chart, the price change from the 88-91 high to the 91-97 low, based on resale price/square foot was -10.3% for Poway, Lakeside, Santee, and over -30% for Ocean Beach and Point Loma. How do we explain Dataquick’s numbers? They are not median (which is skewed by sales of bigger homes), but median price/sq ft.
I know nothing of prices in any of those areas during the nineties, but one thing that probably does throw off price per square foot for areas like Poway and Lakeside is the diversity in properties. You have very small to very large lots, horse properties, view lots, not view lots, and I don’t know what else.
Certainly, there are diverse properties in OB/Point Loma, just not as diverse.
Enough of a difference to explain the metrics? I have no idea.
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