**RING THE BELL** Offically over 20,000 for sale in San Diego County!!!

[gn]

In the beginning of a downturn, there is always a “flight for quality” & the tendency to “dump the dumps”.

This is why the less desirable areas go down first. The more desirable areas only APPEAR to be “immune”. When, in reality, they are just lagging the less desirable areas.

If anything, people who want to buy into the more desirable areas have to wait longer for them to get to the “bottom”.

>> If you were to graph the pricing trends and put them up on
>> a map, I think you’d see the trends are progressing from
>> the outskirts to the center

This phenomenom is not unique to San Diego. For instance, in the greater SF Bay Area, the downturn encroach from Fresno/Merced to Valleyjo/Gilroy to South San Jose.

Similarly, in the greater LA area, it starts from the Inland Empire …

[LA_Renter]

“This is why the less desirable areas go down first. The more desirable areas only APPEAR to be “immune”. When, in reality, they are just lagging the less desirable areas.”

I think LA is more guilty of this right now than anywhere in So Cal. Good insight about the encroach starting out in the boonies. I agree that what is occurring in the Inland Empire right now is a very ominous sign for LA/OC. We are just starting to see the layers of denial begin to crack in the desirable areas.

[LA_Renter]

“Here in LA (Burbank) sales are a little soft but median price increases EVERY month. I’m amazed what people pay for crap here. Unlike SD, there is a severe housing and rental unit shortage in LA.”

I don’t necessarily agree with that. Watch this excerpt from Chris Thornberg about the housing shortage in California and LA. He touches on this in the last two minutes of this segment. He basically points out that there is a shortage of apartments and multi family housing but that really has nothing to do with housing. I live in the the South Bay and there is no shortage of homes to buy right now. Tons of Open House signs every weekend.

[uncomfortably numb]

Keep in mind that only the ‘money value’ of homes went up, not the actual (use) value. As our great-grandparents discovered, hyper-inflationary periods are always followed by deflationary ones, until price (use and money value in sync) and affordabilty come back into balance.

If nothing else, Capitalism is a self-correcting system.

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

I agree with LA_Renter , Ventura is falling fast, lot’s of foreclosures in Valencia (about 200% increase over last year), Listing are pileing up fast in WestLake/Thousand Oaks area’s .

L.A. I think just saw a period where more expensive homes were sold (for what looked like a bargain) and the rest of the sellers are still in denial.

Sales volumes are very low in L.A.

[Bugs]

Here’s why it’s going to spread everywhere – substitution. The amount of the sale price is a reflection of how much the buyer will pay for that set of attributes, and the way most buyers come to that decision is based on what their alternatives are.

If the house in Scripps or Kensington sells for 30% above the same house in Escondido, it’s because those buyers are willing to pay the 30% more for that location. Conversely, the Escondido buyers are willing to make the drive to save the 30%. The premium might vary somewhat depending on overall demand (less during good times, more during hard times), but these two markets are never disconnected from each other.

Scripps has never been worth 100% more than Escondido. The bust-in-progress isn’t going to change that and put Scripps into uncharted territory. That location will still be worth a premium, but in the end it will be quantified in terms of a percentage, not in absolute $100,000 increments. It will never be a market where Esco sells for $400k and Scripps continues to sell for $900k.

One other thing to remember: if an appraiser can’t find enough recent sales data in a neighborhood, they simply expand their geographic radius. Because of that, no neighborhood can exist in a vacuum, desireable or not.

[DaCounselor]

“I totally agree with Bugs on the fact the desire and developed area will be hit just like others. They always commend a premium compare to less desirable areas, but the percentage tend to stay the same.”
________________________________

I would be interested to see the historical data that supports the conclusion that “the percentage tends to stay the same”.

[murray]

Last year 92124 SFR inventory levels were much, much higher (4x !) Very low SFR inventory levels surprise me at this point in the r/e cycle and especially at this time of year…what’s happening? Would be interesting to see a map of inventory yoy changes for various SD areas.

Notably 92124 condo, twnhs & PUD market is softer with relatively “elevated” inventories. Is this “dual market” trend being experienced in other SD areas?

As for certain neighborhoods being spared a r/e downturn this time… >> mid 90’s downturn hammered EVERY community – high end even worse. Areas furthest from employment centers will be hit first and hardest.

LA_Renter: Properties available to RENT are hard to find – there is indeed a shortage in LA – especially low priced units. (due to estimated 1M illegals in LA?)

[an]

I would be interested to see the historical data that supports the conclusion that “the percentage tends to stay the same”.
Here’s what I find out from Zillow and their graph per zip code. I’m using Mira Mesa and Carmel valley as an example. In 1997, the median was $144k in MM and $239k in CV. That’s a spread of 66%. in 2006, at the peak, MM was @ $537k and CV was at $906k. That’s a spread of 68%. So at least comparing to MM to CV, the percentage stays pretty constant.

Comparing between PQ and MM, the # is further apart. in 1997, the gap is 39% while now, in 2006 it’s @ 24%. Comparing 92126 vs 92128, it’s 22% in 1997 and it shrinks to 7% in 2006. 92126 vs 92122, it’s 25% in 1997 and 15% in 2006. 92126 VS 92037, it’s 115% in 1997 and 99% in 2006. 92126 vs 92127, it’s 34% in 1997 and 31% in 2006. 92126 vs 92131, it’s 50% in 1997 and 33% in 2006. So, as you can see, some area held their premium pretty constant while other lost a premium anywhere between 10-17%. The reason why I use Zillow graph is that their algorithm is the same for all area, so it removes one variable. They also uses the same data in their calculation as well. So it’s as close as you can get to these kind of info. So, yes, when we hit this bottom, area like 92131 might have their 50% premium again compare to 92126 instead of their 32% premium now. But I highly doubt they spike to 100+% because they don’t fall while other less desirable area fall more. At some point, people will ask, is it really worth paying 2X to live in Scripps Ranch compare to Mira Mesa. That’s my 2.5 cents.

[Bugs]

Asianautica’s numbers pretty much bear this out, although median prices is kind of a blunt tool. My point is that a 30% spread during good times won’t become a 100% spread (or more) just because times are hard.

There is no real haven from a broad specturm price correction trend. Everything is connected and what we’ve been looking at is not just a temporary blip.

[an]

I agree median prices is a blunt tool, but I just don’t have that kind of time to go give example of a lot of houses, although DaC can always use Zillow to look at the house on the street that he likes.

[DaCounselor]

Now I’m confused. I thought the argument was that “the percentage tends to stay the same”. The Zillow stats posted indicate that in 5 of the 7 zip code comparisons, the percentage most certainly does not stay the same, or anywhere near it. Where’s the support for the argument?

The Zillow data also relates to a bull market run, when what we really need to see is a bear market run (1990-1997) comparison.

Bugs – what say you?

[an]

Bug never said it’s the same. He said a 30% premium won’t become a 100% premium. I agree with that statement. I was the one who said it’s the same. Let me take that back and say that I agree with Bug’s statement. You’re nit picking at the tree and fail to see the forest.

[Ash Housewares]

Many of you have probably seen this, so I’m surprised it hasn’t come up in this thread:
http://www.firstamres.com/pdf/Cagan_FireBurn_1104.pdf
This pdf shows the change in home prices by zip code 1987-2004 (for LA), and it clearly shows the high end led the market in slowing down during the last downturn, while the affordable areas were still on fire.

I understand the arguments presented in this thread describing how the low end drops out, then the middle, then finally the high end, but it is hard to argue with the data.

I emailed Dr Cagan a few weeks ago asking if he planned on updating the document to the present, and he said he might in a few months.

[El Jefe]

I’m not sure that the comparison is really valid as the cause of the downturn back then was much different than it is now. Back in 1990 the downturn was caused by the national recession, that resulted in huge losses in the high end job market in So-Cal. Lose the high end jobs first and the high end of the market collapses first. Keep in mind that these companies continued to operate, they were just firing senior management/engineers and replacing with new grads or not at all, the low end jobs were not affected nearly as badly, which kept the low end of the market alive for much longer.

This time around the problems are completely opposite, starting at the bottom, not the top. Now the problem is the ridiculous lending policies that enabled people that should never been able to borrow money at all to get free money in the form of 100% no doc financing. Now that these loans are going in the crapper, it takes low end housing with it immediately, following shortly after it will effect the broader economy as the investors that financed this boom lose billions, the shaky economy which will trickle back up the chain to the high end jobs as companies baton the hatches in the economic instability, and finally back to high end properties as the top 1% start worrying about their jobs.

[Author]

Posts