RIP: San Diego

[lostkitty]

“Thanks for sharing that and participating in this forum. I invite you to consider my point of view…”

Anything is possible in the outcome of this bubble… However, there are a few reasons I do not think it will go like the last RE estate downturn in San Diego and this time prices will drop significantly instead of flatten or drop only a small percentage:

1. Internet (speed of information flow – zillow changed everything… if you look up a home you are interested and see that the owner bought it two years ago for 550k and has it listed today for 1.3M… you are very likely to say “No way am I paying that!)
2. Percentage of homes bought with ARM’s in the last few years.
3. Prices increases 2&1/2 times higher than the last re peak in relationship to incomes (see Rich’s graph in the bubble primer entitled “Median Home Price Divided by Per capita Income: San Diego – Carlsbad – San Marcos”)
4. Current detractors from attracting new residents to San Diego compared to the last RE downturn: deteriorated traffic, nationally publicized local government problems, and mediocre schools.

[lostkitty]

“Thanks for sharing that and participating in this forum. I invite you to consider my point of view…”

BTW, I took a little self-imposed time-out from this blog. I apologize to sdrealtor for name-calling.
Blogs are little societies of their own – and certainly if we had been at a party and I did not like what you were saying, I would have just walked away and simply ‘thought’ the expletive I used for you in my head – instead of blurting it out.

[lostkitty]

“Thanks for sharing that and participating in this forum. I invite you to consider my point of view…”

Just saw the headlines – so add to my list of reasons this time is different:

5. Increasing wildfires in the west (and much publicized nationally).

[ocrenter]

of the 4 pages of posts on this thread, docteur’s post was the best and most informative.

My personal belief is the inventory will continue to climb until November, and fall dramatically as the “testing the water” crowd get ready for uninterrupted holiday season.

if you look at last winter, listings tapered off from 16,400 to 13,900, a 15% drop off. This season there may be more of this drop off due to increase in the “testing the water” crowd.

what I disagree with is what happens when this crowd says enough is enough and we are pulling from the market for good. I believe they will be replaced by ARM reset “need to sell” folks. There’s a lot of those 3/1 ARM folks that purchased in 2003 and 2004 and all that is coming due this year and next. And soon the 5/1 ARM folks will have to start selling. The big one are folks that purchased in 2004 at the very top of the market, majority using 0 down 2-5 years ARM.

What I think may happen is we’ll see the usual dip in inventory this winter, then we are going to see another brake in record next year. here’s something that may provide some answer: take the total number of sales in 2004 x % of transactions involving 3/1 ARM x 50% (assuming half already sold, will stick it out with the much higher payment or refi to a fixed), and add this number to the lowest inventory number this winter, and you’ll get the new high in 2007.

[sdrealtor]

Homes are not as liquid as stocks LVnewlist. So even though the arrogant seller finds out their house is worth alot less than they thought they cant call Schwab to unload it today. To Docteurs point, many will admit missing the boat and will stay put.

CFO, I appreciate your perspective and find no problems with your logic other than the fact that RE markets are driven by emotion as much or more than logic. My experience is that scientific approaches to understanding it are frequently wrong. Leslie AY hasnt been right in years nor has the UCLA Anderson forecast. I also wouldnt consider moving at these prices due to increased RE taxes. If prices dropped precipetiously I might consider it though I love where I live and really want to pass this great home onto one of my children. However, things change in peoples live and sometimes they need more room, thus they buy the gap at the higher levels instead of waiting.

[Nancy_s soothsayer]

“If prices dropped precipetiously I might consider it though I love where I live…”

Bingo!

Maybe in the next 2 or 3 years, the bloodbath in San Diego will be so appalling that moving away would become the salvation for many. This soothsayer says inventory by 2008 will be in the 40K’s. Foreclosures would be through the roof. Many will be moving to San Antonio and Austin Texas.

My analogy – SDRealtor is Dr. Pangloss and Powayseller is Martin in the book Candide by Voltaire.

Boy, I miss Powayseller’s prolific posts. I’m a big fan.

[sdrealtor]

Sorry Nancy but you are completley off base and took my post completely out of context. Here is what I meant. If prices drop precipetiously, I might consider selling my current home (worth $1M but $400K tax basis) to buy a bigger nicer home in the same neighborhood (i.e. for 600 to 700K) when the increase in RE taxes would not be so great. If I moved today to a home that would be worth upgrading to, my RE taxes would triple or quadruple so I wont even consider it. If I could move up and have taxes less than double of what I currently pay, it would give me food for thought.

I would never ever consider moving to Texas…never…..EVER! The only way I will ever leave the community I currently live in would be in a pine box. Can I buy you a 1 way ticket there?

BTW, PS sold for more than just money. She built her dream house but realized that it wasnt her dream home because it was not the community she wanted to live in. That is one of the reasons she is happier now living in a townhouse she rents. Not only is she in a better financial position but she is now surrounded by nice neighbors in a nice community rather than living in a beautiful house on top of a mountain in the meth capital of the US.

[LeaSD]

In reading through the posts – we should all remember that in looking at inventory – we should be focusing on months of inventory on the market. So there are two numbers number of listing OVER units closing per month. One may not use just the number of homes closed the month before but probably a moving three month average is best. SD Realtor is right – listing will take a seasonal dip and also will units closings – so the months worth of inventory could decline/stay the same/or increase. I don’t think there is a magic number but if San Diego starts to continually have 8-10 months of inventory it will only continue to put downward pressure on prices. So inventory does not need to continue to climb in the aggregate and by stating that inventories will decline and many homeowners will pull of the market is not neccessarily being bullish about the market. I am a firm believer that a decline is coming but it will be slow – if we look at history SFR markets typically decline relatively slowly because individuals do hang on and are very resistant to downward pricing.

Since the above is my first post and I have been reading this site for a while – I feel I need to make a disclaimer about my opinions and where they come from:

I moved to SD in September of 2004 – have a nice down payment from selling my place in Sacramento. Chose NOT to buy because I felt that the market was overheated. I am employed in the RE industry – I work at a large commercial bank and do real estate finance. My group does short term, variable rate loans for professional developers. So contruction, aquisition/bridge financing, repositioning financing…. just like the individual residential market there is long term fixed rate financing for developers – but that is not my group. I work with all developers, retail, office, industrial and production home builders.

And by the way – I have really enjoyed most of my readings on this site. Could live without some of the squabble but all in all you all seem to do your best to be self monitoring.

[hipmatt]

For every owner out there that is “testing the waters”, there are three or four others who are either going into foreclosure, facing higher mortgages due to arms reseting, actually paying principal on a former int. only loan, or just can’t afford the gas from Temecula to San Diego anymore. Hmm, I think there will be sellers, for a long time.

I think that those who “think” they are testing the waters now, only to pull their homes off the market because they couldn’t get that utmost rediculous price for their home, may be singing a different song in a year or two, when this thing goes full swing. They may wish that they weren’t so greedy in the first place, they still may have realized a great profit.

Some people presume that buying a trailer or moving to texas is the only way to sell a home and still have a place to live around here, but I wonder why they don’t consider renting? I’m renting a beauty(love it)and my parents are planning on selling their home of 15 years to do the same. Take for example the guy who wants that extra room for a gaming room. Say he has a home that could sell for $700k, and owes about $180k. He could take the $500 k profit and just simply invest in risk free CDs. At todays rates, (5.25% easy and probably going higher)that $500k could turn into $600k guaranteed in less than 4 years. While we assume a modest home price depreciation of only 25% in the next 4 years(most people here assume a much larger devaluation of todays home prices), his $700k home is now worth only $525k. He would make $275k in the next 4 years by selling and renting, vs. staying in his house while it drops in price. He could probably rent a home that has that extra room that his heart desires for about the same amount as his current mortgage too. Then, when he feels the market has bottomed, he can repurchase a much larger, nicer home, for even less money, and the next period of home price appreciation will be even more profitable.

[Bugs]

Every rental house is owned by someone and that someone hopes to make a profit at some point. It is reasonable to assume that when the market is on its way down some of these rentals will be sold. There can never be enough rental properties to accomodate everyone in the region, so it CAN’T be the answer for most people.

While we’re at it, the rental market can become just as volatile at the sales market if the supply/demand dynamic changes a lot. The only difference is that a rental tenant can’t make or lose money by participating in that market.

[Anonymous]

What? What the hell is that all about? You can never have enough rental property to supply demand? Excuse me? Call me in 6 months, in the meantime take two asprins and have a good night’s sleep.

[Anonymous]

What? What the hell is that all about? You can never have enough rental property to supply demand? Excuse me? Call me in 6 months, in the meantime take two asprins and have a good night’s sleep.

[Anonymous]

What? What the hell is that all about? You can never have enough rental property to supply demand? Excuse me? Call me in 6 months, in the meantime take two asprins and have a good night’s sleep.

[Anonymous]

What? What the hell is that all about? You can never have enough rental property to supply demand? Excuse me? Call me in 6 months, in the meantime take two asprins and have a good night’s sleep.

[Anonymous]

Accidentally repeated comment

[Author]

Posts