I was waiting for a downturn but it never happened….

[bubble_contagion]

Today I saw some friends that bought three years ago and were actually hoping for a decline in prices to move up. I consider them average San Diegans that base their opinions about the market on articles from the U-T, the local TV news and from conversations with colleges and family. Their comment about the market was “I was waiting for a downturn but it never happened….”. I believe this is the sentiment of most people out there. Who can counter them, it has been two years after the prices peaked and the declines have been minor compared to the run up (At least in the median price that most people follow). On top of that the median has started to move up in recent months. A lot of people now feel they are out of the woods with respect to the bubble.

[woodrow]

Public sentiment has only recently changed – it takes awhile for significant drops in the reported numbers. We still haven’t begun to feel the sting from subprime going away, and foreclosures are continuing to accelerate.

I think we’ve seen ~ 10-15% drops across the board already (obviously some neighborhoods have been hurt worse than others) but the next year to 18 months is when we’ll see bigger drops.

Patience.

[masayako]

Patience. Sellers are still in denial.

I checkout some open house the past Sunday. Sellers are still expecting unrealistic prices for their POS box house. $640k for a 1900sqft mid-80’s park village house with small lot. I just laugh and walk away. Talked with the seller agent, even she thinks the seller is out of whack. I told her, the house won’t attract any buzz unless it goes down to $500-550k max. She agrees. Oh well. Patience.

By the way, as I have sold my house 1 year ago and happily renting a house at RB right now, I become less and less wanting to buy into the mortgage trap. I mean, come on, why buy a POS depreciating house when I can make the most of my money investing in stocks/bonds/CDs?

Don’t you know that buying a house nowadays really mean “long term” renting anyway? You do know that the house is not really yours until you pay it off, right? Also, if you are looking for equity, sorry, you are looking at the wrong place. You won’t have any in this post-bubble housing market. I just lose all reasons to buy a house at this point. 🙂

Really happy renter,

Masayako

[little lady]

I don’t know about your area, but Santee and Lakeside has LOTS of homes under 400k to low 300k, now listed and I haven’t seen that in about two years………granted they are fixers and foreclosures, (all but a few) but it was unheard of even last year……..

[WhatGoesUp]

I heard someone say, you’ll know it hit bottom when people aren’t talking about how great of an investment real estate is.. simple, and I think there will be other signs – but paying attention to the sheeple sentiment is probably a decent indicator.

[4plexowner]

At the bottom, not only will the sheeple NOT be talking about real estate being a good investment, they will be talking about what a HORRIBLE investment real estate is and how stupid anyone would be to buy right now

One of the likely scenarios IMO is that in 2008/2009 the REIC and sheeple will believe that the worst of the correction is over because there is a lull in the reset of ARMs (see Credit Suisse chart)

Then the Option ARM resets start in 2010 and continue through most of 2011

In 1929 market crash terms, we are currently in the first downleg of a huge correction – in 2008/2009 we are likely to see a cyclical upturn that the REIC and sheeple will paint as being the end of the correction – the second leg down occurs in 2010/2011 and absolutely crushes the sheeple and REIC

This seems to be the way the bear likes to work – big downleg followed by a noticeable (maybe even exciting) upleg – this upleg sucks in the last of the bulls’ money and then the bear wipes out the bulls with the final downleg

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

I am kind of in the same boat as your friend, Would like to upgrade to nicer costal area but we are waiting for a downturn which seems to be taking forever to occur. Still think it will happen IMO over the next two years. If it never happens I will feel a little disappointed but we have a nice place in Temecula and we could go on living here just fine thanks.

[LA_Renter]

To me this correction is playing out like clock work. A very slow clock. I think people have stock market expectations in regards to the downturn. We all saw the Nasdaq pop and the relentless fall. History shows that property market bubbles do not behave that way. IMO if the economy holds you will see what we are seeing now (low volume, high rate of NOD’s/foreclosures, slightly falling home prices) year in year out into the next decade. If we go into an economic slump you will see steeper nominal price declines. The rent verses own equation really starts to stand out in a market like this. Given the current home price to income, home price to rent fundamentals combined with stagnant to falling prices, there is absolutely no financial gain of buying a home right now. It is the worst possible thing you could do with your money right now in a strict financial sense. Now for people with a very long term outlook that don’t look at this as an investment and can find a home they are happy with and can afford, who cares. For people that are still stretching themselves to the hilt to squeeze into something they normally wouldn’t want because of some fear of being priced forever 1) dude you already are priced out 2) you just made the worst financial decision of your life (that can be backed up using hard data).

Keep in mind that we have not seen the true impact of the ARM resets and won’t have a true idea of how this will play out until late 2008. If you want see what we are facing refer to the Credit Suisse Arm reset schedule. If that chart is accurate we have not begun to see the worst of this yet. We have only seen the roller coaster stop going up. IMHO.

http://www.bubbleinfo.com/statistics-2007/2007/3/15/arm-reset-schedule.html

[SD Realtor]

This is why depreciation cycles take several years. They creep. Outlying areas, less desireable areas and types of housing, speculative and flip areas, and highly overbuilt areas get hit first… It takes awhile for the more desireable areas to get hit. More then likely your friends are looking in an area that has not got hit yet.

SD Realtor

[kev374]

prices have dropped quite significantly, however the median doesn’t reflect that. The lower end of the market is dead and the only volume that is happening is on the upper end units. This explains the precipitous drop in sales volume while the median is relatively unchanged.

So don’t look at median, look at the the S&P Case Shiller index. It maps price trends on the same exact house so it’s much more of an accurate measure.

Also look at *list* prices. You can see aggressive price cuts already in some of the lower end units. Last year sub 500k 3bd/2ba SFRs in South OC were unheard of, in the last couple months they are slowly but surely showing up.

[blahblahblah]

And don’t forget the hidden bias introduced by seller kickbacks. These are rampant from what I’m hearing — many cases where buyers have no money at all and the seller gives then $5-15K so that they can purchase the home.

[SD Realtor]

In the past 8 escrows I have been involved in 6 of them had non trivial credits going back to the buyers. This is not reflected in the sales price. Concho is right.

SD Realtor

[Anonymous]

Aren’t buyers foolish to go along with large credits? They will have to pay higher RE taxes for years to come.

[no_such_reality]

Aren’t buyers foolish to go along with large credits? They will have to pay higher RE taxes for years to come

1% of $50,000 is $500.

Hmm, I get $50,000 today. And pay an extra $500 on the taxes at the end of year. And next year, and year after that…

Care to calculate the NPV on that cash flow base on inflation? Hint, assuming they spend $30,000 of it and the rest just earns enough to pace inflation, breakeven on the NPV is just short of 55 years out. If they don’t do anything with it, the $20,000 pays the taxes for 30 years.

[g2006]

I was looking to buy a condo in carmel valley. Looked at Airoso and was wondering whether to buy or not and finally Airoso is sold-out.

Andalucia is now increasing prices.

Looks like carmel valley is still strong

I agree for carmel valley (in less than 700K condos/homes) downturn never happened

[Author]

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