Housing Tracker update – prices about to go over the cliff in San Diego

[EconProf]

I’m seeing a lot of theories to explain the different prices of housing San Diego vs. Texas. I still claim it is mostly land and lot prices, + a hostile government here that loves to skewer developers. You guys need to talk to some builders to see what they have to pay for lots.
A quick look at Craigslist for Dallas real estate immediately turned up, for under $30k, a big lot allegedly 20 minutes from Dallas downtown, 20 minutes from Fort Worth downtown. Allowing for some exageration by the seller, and this example’s admittedly anecdotal nature, it supports my thesis. I didn’t take the time to drum up more examples, but they seemed to be there.
What would a building lot 20 minutes from downtown San Diego cost? Here’s a start: $300k for a scraper in Scripps Ranch after their fire 4 or so years ago. (SD Realtor: you live in Scripps…is this about right?).
Another example I was involved in 3 years ago. 50 x 140 standard lot in North Park, so-so neighborhood, sold for $600k with scraper house on it. In fairness, I think the same lot now would go for $400k. But even with the current pullback, land and lots here are incredibly expensive.
We’ve got canyons, an ocean, an international border, military bases, and NIMBY’S throughout.

[an]

[quote=DWCAP]
The whole story isnt evident in places like Fresno, or Bakersfield just by saying it is flat, hot and no ocean. Those places boomed becuase of the unaffordable prices in SF or LA. People were willing to commute 90 minutes or more, each way, to own their houses. Those cities bubbled because of coastal unaffordability, which is in part due to mountains and oceans restricting building space. [/quote]
Although you might assume that demand went up, which drive up prices, in Fresno, Bakersfield, etc. due to people from LA/SF commute, but Dalas, Houston, etc are also large cities with great job markets too. Didn’t population in that area went up too? I don’t think people who actually buy, live, and commute from Fresno/Bakersfield/etc are enough to affect the prices. It’s more of the speculator that drove up price. The question then becomes, why didn’t speculator do the same thing over there? Only thing I can think of is tax and supply.

[an]

[quote=DWCAP]
The whole story isnt evident in places like Fresno, or Bakersfield just by saying it is flat, hot and no ocean. Those places boomed becuase of the unaffordable prices in SF or LA. People were willing to commute 90 minutes or more, each way, to own their houses. Those cities bubbled because of coastal unaffordability, which is in part due to mountains and oceans restricting building space. [/quote]
Although you might assume that demand went up, which drive up prices, in Fresno, Bakersfield, etc. due to people from LA/SF commute, but Dalas, Houston, etc are also large cities with great job markets too. Didn’t population in that area went up too? I don’t think people who actually buy, live, and commute from Fresno/Bakersfield/etc are enough to affect the prices. It’s more of the speculator that drove up price. The question then becomes, why didn’t speculator do the same thing over there? Only thing I can think of is tax and supply.

[an]

[quote=DWCAP]
The whole story isnt evident in places like Fresno, or Bakersfield just by saying it is flat, hot and no ocean. Those places boomed becuase of the unaffordable prices in SF or LA. People were willing to commute 90 minutes or more, each way, to own their houses. Those cities bubbled because of coastal unaffordability, which is in part due to mountains and oceans restricting building space. [/quote]
Although you might assume that demand went up, which drive up prices, in Fresno, Bakersfield, etc. due to people from LA/SF commute, but Dalas, Houston, etc are also large cities with great job markets too. Didn’t population in that area went up too? I don’t think people who actually buy, live, and commute from Fresno/Bakersfield/etc are enough to affect the prices. It’s more of the speculator that drove up price. The question then becomes, why didn’t speculator do the same thing over there? Only thing I can think of is tax and supply.

[an]

[quote=DWCAP]
The whole story isnt evident in places like Fresno, or Bakersfield just by saying it is flat, hot and no ocean. Those places boomed becuase of the unaffordable prices in SF or LA. People were willing to commute 90 minutes or more, each way, to own their houses. Those cities bubbled because of coastal unaffordability, which is in part due to mountains and oceans restricting building space. [/quote]
Although you might assume that demand went up, which drive up prices, in Fresno, Bakersfield, etc. due to people from LA/SF commute, but Dalas, Houston, etc are also large cities with great job markets too. Didn’t population in that area went up too? I don’t think people who actually buy, live, and commute from Fresno/Bakersfield/etc are enough to affect the prices. It’s more of the speculator that drove up price. The question then becomes, why didn’t speculator do the same thing over there? Only thing I can think of is tax and supply.

[an]

[quote=DWCAP]
The whole story isnt evident in places like Fresno, or Bakersfield just by saying it is flat, hot and no ocean. Those places boomed becuase of the unaffordable prices in SF or LA. People were willing to commute 90 minutes or more, each way, to own their houses. Those cities bubbled because of coastal unaffordability, which is in part due to mountains and oceans restricting building space. [/quote]
Although you might assume that demand went up, which drive up prices, in Fresno, Bakersfield, etc. due to people from LA/SF commute, but Dalas, Houston, etc are also large cities with great job markets too. Didn’t population in that area went up too? I don’t think people who actually buy, live, and commute from Fresno/Bakersfield/etc are enough to affect the prices. It’s more of the speculator that drove up price. The question then becomes, why didn’t speculator do the same thing over there? Only thing I can think of is tax and supply.

[SDEngineer]

[quote=EconProf]I’m seeing a lot of theories to explain the different prices of housing San Diego vs. Texas. I still claim it is mostly land and lot prices, + a hostile government here that loves to skewer developers. You guys need to talk to some builders to see what they have to pay for lots.
A quick look at Craigslist for Dallas real estate immediately turned up, for under $30k, a big lot allegedly 20 minutes from Dallas downtown, 20 minutes from Fort Worth downtown. Allowing for some exageration by the seller, and this example’s admittedly anecdotal nature, it supports my thesis. I didn’t take the time to drum up more examples, but they seemed to be there.
What would a building lot 20 minutes from downtown San Diego cost? Here’s a start: $300k for a scraper in Scripps Ranch after their fire 4 or so years ago. (SD Realtor: you live in Scripps…is this about right?).
Another example I was involved in 3 years ago. 50 x 140 standard lot in North Park, so-so neighborhood, sold for $600k with scraper house on it. In fairness, I think the same lot now would go for $400k. But even with the current pullback, land and lots here are incredibly expensive.
We’ve got canyons, an ocean, an international border, military bases, and NIMBY’S throughout.[/quote]

I don’t think this logic works though. You’re forgetting that lots of places bubbled in this national RE frenzy that took place over the past few years, including many areas that are very developer friendly (Phoenix, Las Vegas).

I think it was a much more complex phenomenon, fed both by supply and demand, and a sort of “mob” investor mentality. Here’s how I saw it play out:

1) Popular “destination” cities like SD, Miami, SJ, and LA experience a economic boom – lots of population moving to those areas from both well-off retirees and high paying jobs. This exhausts the supply of housing on the market, causing prices to rise rapidly, which is supported by those well-off retirees and six figure income jobs. Builders, still reeling from the previous half decade of bubble deflation from the early 90’s, are slow to react and build new homes, exacerbating the problem (timeline 1998-2000)

2) Savvy investors notice this trend and invest into those early stage bubble cities. pushing prices higher yet. (1999-2000)

3) Builders start buying land and planning developments (2000-2001)

3) Less savvy investors “follow the leader” and start piling in (this occurred right as the tech bust happened, so there was lots of capital looking for a place to rest). Prices go even higher. As prices go higher in the original bubble cities, investors start looking at cities with similar profiles and investing in them as well, causing those cities to experience an increase in pricing as well. (2001-2002)

4) Major developments by builders start hitting the market. By this point we’ve had 3-4 years of double digit appreciation in the bubble cities. Both home buyers (afraid to be “priced out”) and investors (afraid to lose out on those double digit price increase that with leverage make the best stock fund returns look meager) snap up the new houses. Builders plan even more developments (2002-2005).

5) The idea of RE as a path to easy wealth starts spreading based on those investment returns (now considered a “trend” even though the trend is only about 4 years old). More investors jump into the fray (frequently just “ordinary Joe” type investors with little investment or economic savvy who attended a “get-rich-quick” seminar). A LOT more money suddenly enters the fray, and we get the hyperinflation of home values that we saw as we approached the peak. “House-flipping” is born as appreciation rates soar high enough that a large profit can be made even after transaction costs just by holding a house for a year. Frequently flippers are just selling to other flippers in a massive Ponzi scheme. (2003-2005)

Vastly simplified, and not mentioning the effect that the banks loosening their standards had on allowing all those “ordinary Joes” to overleverage themselves in investing, but more or less how I saw the bubble unfold.

Why didn’t Texas see all these events? Dunno, but a lot of very similar locations to Texas did. I can’t see the higher property taxes being such an overwhelming factor though, as Texas also doesn’t have a state income tax, which would even it out in terms of dollars spent from the overall budget on taxes.

[SDEngineer]

[quote=EconProf]I’m seeing a lot of theories to explain the different prices of housing San Diego vs. Texas. I still claim it is mostly land and lot prices, + a hostile government here that loves to skewer developers. You guys need to talk to some builders to see what they have to pay for lots.
A quick look at Craigslist for Dallas real estate immediately turned up, for under $30k, a big lot allegedly 20 minutes from Dallas downtown, 20 minutes from Fort Worth downtown. Allowing for some exageration by the seller, and this example’s admittedly anecdotal nature, it supports my thesis. I didn’t take the time to drum up more examples, but they seemed to be there.
What would a building lot 20 minutes from downtown San Diego cost? Here’s a start: $300k for a scraper in Scripps Ranch after their fire 4 or so years ago. (SD Realtor: you live in Scripps…is this about right?).
Another example I was involved in 3 years ago. 50 x 140 standard lot in North Park, so-so neighborhood, sold for $600k with scraper house on it. In fairness, I think the same lot now would go for $400k. But even with the current pullback, land and lots here are incredibly expensive.
We’ve got canyons, an ocean, an international border, military bases, and NIMBY’S throughout.[/quote]

I don’t think this logic works though. You’re forgetting that lots of places bubbled in this national RE frenzy that took place over the past few years, including many areas that are very developer friendly (Phoenix, Las Vegas).

I think it was a much more complex phenomenon, fed both by supply and demand, and a sort of “mob” investor mentality. Here’s how I saw it play out:

1) Popular “destination” cities like SD, Miami, SJ, and LA experience a economic boom – lots of population moving to those areas from both well-off retirees and high paying jobs. This exhausts the supply of housing on the market, causing prices to rise rapidly, which is supported by those well-off retirees and six figure income jobs. Builders, still reeling from the previous half decade of bubble deflation from the early 90’s, are slow to react and build new homes, exacerbating the problem (timeline 1998-2000)

2) Savvy investors notice this trend and invest into those early stage bubble cities. pushing prices higher yet. (1999-2000)

3) Builders start buying land and planning developments (2000-2001)

3) Less savvy investors “follow the leader” and start piling in (this occurred right as the tech bust happened, so there was lots of capital looking for a place to rest). Prices go even higher. As prices go higher in the original bubble cities, investors start looking at cities with similar profiles and investing in them as well, causing those cities to experience an increase in pricing as well. (2001-2002)

4) Major developments by builders start hitting the market. By this point we’ve had 3-4 years of double digit appreciation in the bubble cities. Both home buyers (afraid to be “priced out”) and investors (afraid to lose out on those double digit price increase that with leverage make the best stock fund returns look meager) snap up the new houses. Builders plan even more developments (2002-2005).

5) The idea of RE as a path to easy wealth starts spreading based on those investment returns (now considered a “trend” even though the trend is only about 4 years old). More investors jump into the fray (frequently just “ordinary Joe” type investors with little investment or economic savvy who attended a “get-rich-quick” seminar). A LOT more money suddenly enters the fray, and we get the hyperinflation of home values that we saw as we approached the peak. “House-flipping” is born as appreciation rates soar high enough that a large profit can be made even after transaction costs just by holding a house for a year. Frequently flippers are just selling to other flippers in a massive Ponzi scheme. (2003-2005)

Vastly simplified, and not mentioning the effect that the banks loosening their standards had on allowing all those “ordinary Joes” to overleverage themselves in investing, but more or less how I saw the bubble unfold.

Why didn’t Texas see all these events? Dunno, but a lot of very similar locations to Texas did. I can’t see the higher property taxes being such an overwhelming factor though, as Texas also doesn’t have a state income tax, which would even it out in terms of dollars spent from the overall budget on taxes.

[SDEngineer]

[quote=EconProf]I’m seeing a lot of theories to explain the different prices of housing San Diego vs. Texas. I still claim it is mostly land and lot prices, + a hostile government here that loves to skewer developers. You guys need to talk to some builders to see what they have to pay for lots.
A quick look at Craigslist for Dallas real estate immediately turned up, for under $30k, a big lot allegedly 20 minutes from Dallas downtown, 20 minutes from Fort Worth downtown. Allowing for some exageration by the seller, and this example’s admittedly anecdotal nature, it supports my thesis. I didn’t take the time to drum up more examples, but they seemed to be there.
What would a building lot 20 minutes from downtown San Diego cost? Here’s a start: $300k for a scraper in Scripps Ranch after their fire 4 or so years ago. (SD Realtor: you live in Scripps…is this about right?).
Another example I was involved in 3 years ago. 50 x 140 standard lot in North Park, so-so neighborhood, sold for $600k with scraper house on it. In fairness, I think the same lot now would go for $400k. But even with the current pullback, land and lots here are incredibly expensive.
We’ve got canyons, an ocean, an international border, military bases, and NIMBY’S throughout.[/quote]

I don’t think this logic works though. You’re forgetting that lots of places bubbled in this national RE frenzy that took place over the past few years, including many areas that are very developer friendly (Phoenix, Las Vegas).

I think it was a much more complex phenomenon, fed both by supply and demand, and a sort of “mob” investor mentality. Here’s how I saw it play out:

1) Popular “destination” cities like SD, Miami, SJ, and LA experience a economic boom – lots of population moving to those areas from both well-off retirees and high paying jobs. This exhausts the supply of housing on the market, causing prices to rise rapidly, which is supported by those well-off retirees and six figure income jobs. Builders, still reeling from the previous half decade of bubble deflation from the early 90’s, are slow to react and build new homes, exacerbating the problem (timeline 1998-2000)

2) Savvy investors notice this trend and invest into those early stage bubble cities. pushing prices higher yet. (1999-2000)

3) Builders start buying land and planning developments (2000-2001)

3) Less savvy investors “follow the leader” and start piling in (this occurred right as the tech bust happened, so there was lots of capital looking for a place to rest). Prices go even higher. As prices go higher in the original bubble cities, investors start looking at cities with similar profiles and investing in them as well, causing those cities to experience an increase in pricing as well. (2001-2002)

4) Major developments by builders start hitting the market. By this point we’ve had 3-4 years of double digit appreciation in the bubble cities. Both home buyers (afraid to be “priced out”) and investors (afraid to lose out on those double digit price increase that with leverage make the best stock fund returns look meager) snap up the new houses. Builders plan even more developments (2002-2005).

5) The idea of RE as a path to easy wealth starts spreading based on those investment returns (now considered a “trend” even though the trend is only about 4 years old). More investors jump into the fray (frequently just “ordinary Joe” type investors with little investment or economic savvy who attended a “get-rich-quick” seminar). A LOT more money suddenly enters the fray, and we get the hyperinflation of home values that we saw as we approached the peak. “House-flipping” is born as appreciation rates soar high enough that a large profit can be made even after transaction costs just by holding a house for a year. Frequently flippers are just selling to other flippers in a massive Ponzi scheme. (2003-2005)

Vastly simplified, and not mentioning the effect that the banks loosening their standards had on allowing all those “ordinary Joes” to overleverage themselves in investing, but more or less how I saw the bubble unfold.

Why didn’t Texas see all these events? Dunno, but a lot of very similar locations to Texas did. I can’t see the higher property taxes being such an overwhelming factor though, as Texas also doesn’t have a state income tax, which would even it out in terms of dollars spent from the overall budget on taxes.

[SDEngineer]

[quote=EconProf]I’m seeing a lot of theories to explain the different prices of housing San Diego vs. Texas. I still claim it is mostly land and lot prices, + a hostile government here that loves to skewer developers. You guys need to talk to some builders to see what they have to pay for lots.
A quick look at Craigslist for Dallas real estate immediately turned up, for under $30k, a big lot allegedly 20 minutes from Dallas downtown, 20 minutes from Fort Worth downtown. Allowing for some exageration by the seller, and this example’s admittedly anecdotal nature, it supports my thesis. I didn’t take the time to drum up more examples, but they seemed to be there.
What would a building lot 20 minutes from downtown San Diego cost? Here’s a start: $300k for a scraper in Scripps Ranch after their fire 4 or so years ago. (SD Realtor: you live in Scripps…is this about right?).
Another example I was involved in 3 years ago. 50 x 140 standard lot in North Park, so-so neighborhood, sold for $600k with scraper house on it. In fairness, I think the same lot now would go for $400k. But even with the current pullback, land and lots here are incredibly expensive.
We’ve got canyons, an ocean, an international border, military bases, and NIMBY’S throughout.[/quote]

I don’t think this logic works though. You’re forgetting that lots of places bubbled in this national RE frenzy that took place over the past few years, including many areas that are very developer friendly (Phoenix, Las Vegas).

I think it was a much more complex phenomenon, fed both by supply and demand, and a sort of “mob” investor mentality. Here’s how I saw it play out:

1) Popular “destination” cities like SD, Miami, SJ, and LA experience a economic boom – lots of population moving to those areas from both well-off retirees and high paying jobs. This exhausts the supply of housing on the market, causing prices to rise rapidly, which is supported by those well-off retirees and six figure income jobs. Builders, still reeling from the previous half decade of bubble deflation from the early 90’s, are slow to react and build new homes, exacerbating the problem (timeline 1998-2000)

2) Savvy investors notice this trend and invest into those early stage bubble cities. pushing prices higher yet. (1999-2000)

3) Builders start buying land and planning developments (2000-2001)

3) Less savvy investors “follow the leader” and start piling in (this occurred right as the tech bust happened, so there was lots of capital looking for a place to rest). Prices go even higher. As prices go higher in the original bubble cities, investors start looking at cities with similar profiles and investing in them as well, causing those cities to experience an increase in pricing as well. (2001-2002)

4) Major developments by builders start hitting the market. By this point we’ve had 3-4 years of double digit appreciation in the bubble cities. Both home buyers (afraid to be “priced out”) and investors (afraid to lose out on those double digit price increase that with leverage make the best stock fund returns look meager) snap up the new houses. Builders plan even more developments (2002-2005).

5) The idea of RE as a path to easy wealth starts spreading based on those investment returns (now considered a “trend” even though the trend is only about 4 years old). More investors jump into the fray (frequently just “ordinary Joe” type investors with little investment or economic savvy who attended a “get-rich-quick” seminar). A LOT more money suddenly enters the fray, and we get the hyperinflation of home values that we saw as we approached the peak. “House-flipping” is born as appreciation rates soar high enough that a large profit can be made even after transaction costs just by holding a house for a year. Frequently flippers are just selling to other flippers in a massive Ponzi scheme. (2003-2005)

Vastly simplified, and not mentioning the effect that the banks loosening their standards had on allowing all those “ordinary Joes” to overleverage themselves in investing, but more or less how I saw the bubble unfold.

Why didn’t Texas see all these events? Dunno, but a lot of very similar locations to Texas did. I can’t see the higher property taxes being such an overwhelming factor though, as Texas also doesn’t have a state income tax, which would even it out in terms of dollars spent from the overall budget on taxes.

[SDEngineer]

[quote=EconProf]I’m seeing a lot of theories to explain the different prices of housing San Diego vs. Texas. I still claim it is mostly land and lot prices, + a hostile government here that loves to skewer developers. You guys need to talk to some builders to see what they have to pay for lots.
A quick look at Craigslist for Dallas real estate immediately turned up, for under $30k, a big lot allegedly 20 minutes from Dallas downtown, 20 minutes from Fort Worth downtown. Allowing for some exageration by the seller, and this example’s admittedly anecdotal nature, it supports my thesis. I didn’t take the time to drum up more examples, but they seemed to be there.
What would a building lot 20 minutes from downtown San Diego cost? Here’s a start: $300k for a scraper in Scripps Ranch after their fire 4 or so years ago. (SD Realtor: you live in Scripps…is this about right?).
Another example I was involved in 3 years ago. 50 x 140 standard lot in North Park, so-so neighborhood, sold for $600k with scraper house on it. In fairness, I think the same lot now would go for $400k. But even with the current pullback, land and lots here are incredibly expensive.
We’ve got canyons, an ocean, an international border, military bases, and NIMBY’S throughout.[/quote]

I don’t think this logic works though. You’re forgetting that lots of places bubbled in this national RE frenzy that took place over the past few years, including many areas that are very developer friendly (Phoenix, Las Vegas).

I think it was a much more complex phenomenon, fed both by supply and demand, and a sort of “mob” investor mentality. Here’s how I saw it play out:

1) Popular “destination” cities like SD, Miami, SJ, and LA experience a economic boom – lots of population moving to those areas from both well-off retirees and high paying jobs. This exhausts the supply of housing on the market, causing prices to rise rapidly, which is supported by those well-off retirees and six figure income jobs. Builders, still reeling from the previous half decade of bubble deflation from the early 90’s, are slow to react and build new homes, exacerbating the problem (timeline 1998-2000)

2) Savvy investors notice this trend and invest into those early stage bubble cities. pushing prices higher yet. (1999-2000)

3) Builders start buying land and planning developments (2000-2001)

3) Less savvy investors “follow the leader” and start piling in (this occurred right as the tech bust happened, so there was lots of capital looking for a place to rest). Prices go even higher. As prices go higher in the original bubble cities, investors start looking at cities with similar profiles and investing in them as well, causing those cities to experience an increase in pricing as well. (2001-2002)

4) Major developments by builders start hitting the market. By this point we’ve had 3-4 years of double digit appreciation in the bubble cities. Both home buyers (afraid to be “priced out”) and investors (afraid to lose out on those double digit price increase that with leverage make the best stock fund returns look meager) snap up the new houses. Builders plan even more developments (2002-2005).

5) The idea of RE as a path to easy wealth starts spreading based on those investment returns (now considered a “trend” even though the trend is only about 4 years old). More investors jump into the fray (frequently just “ordinary Joe” type investors with little investment or economic savvy who attended a “get-rich-quick” seminar). A LOT more money suddenly enters the fray, and we get the hyperinflation of home values that we saw as we approached the peak. “House-flipping” is born as appreciation rates soar high enough that a large profit can be made even after transaction costs just by holding a house for a year. Frequently flippers are just selling to other flippers in a massive Ponzi scheme. (2003-2005)

Vastly simplified, and not mentioning the effect that the banks loosening their standards had on allowing all those “ordinary Joes” to overleverage themselves in investing, but more or less how I saw the bubble unfold.

Why didn’t Texas see all these events? Dunno, but a lot of very similar locations to Texas did. I can’t see the higher property taxes being such an overwhelming factor though, as Texas also doesn’t have a state income tax, which would even it out in terms of dollars spent from the overall budget on taxes.

[Huckleberry]

Excellent post SDEngineer!

I would agree that the run-up was more based on speculation than fundamentals such as taxes…

[Huckleberry]

Excellent post SDEngineer!

I would agree that the run-up was more based on speculation than fundamentals such as taxes…

[Huckleberry]

Excellent post SDEngineer!

I would agree that the run-up was more based on speculation than fundamentals such as taxes…

[Huckleberry]

Excellent post SDEngineer!

I would agree that the run-up was more based on speculation than fundamentals such as taxes…

[Author]

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