San Diego area zips in “Top 500” foreclosure zip codes in US

[SD Realtor]

Why is this a surprise to anyone?

Guys all along we have been saying that the outlying areas and the speculative areas are going to get hit first and hit hardest. How many times do we have to post that. Every now and then someone comes in and whips everyone into a frenzy by posting a foreclosure in Torrey Hills or 4S or La Costa Valley but these locations are not going to be presenting miraculous deals until later in the cycle.

It is depressing but it makes sense. San Diego has alot of people in it and a decent fraction of those people make alot of money. The ONLY thing that will accelerate the depreciation in areas where most of us want to live will be a disruption in employment.

For my own selfish purposes I want the prices to dump in Solana Beach or Scripps or wherever but I am resigned to the fact that they will happen at a much slower pace then in Eastlake, Murrieta, or Escondido. Why wouldn’t they? They have higher income occupants, they have much less speculation, they most likely have less toxic loans then these other places AND they have a higher tolerance to live with the toxicity for a longer time.

Am I missing something in that this makes perfect sense and will continue to be this way?

Let me put it another way… why do people think these other places where they want to live would come down very quickly, as quick as these less desireable areas?

SD Realtor

[Coronita]

I would say these folks are probably 20% of the population overall. BUT, i would also say it's the 20% that still spending and keeping the rest of folks employed. Is this a concept that's hard to grasp? Take a look at higher end retail like Sak or Tiffany and Co and compare that to lower end retail like Walmart over the past two quarters. Which did well, and which ended up eating sh*t?

 

Speak of the devil: the 20-80 Rule:

 

Merrill Lynch Downgrades Wal-Mart Stores to "Sell" – Reports

 

NEW YORK (AP) — Shares of Wal-Mart Stores Inc. fell after the opening bell Thursday after Merrill Lynch reportedly downgraded the world's largest retailer to "Sell."

The Dow Jones industrial average component was down 87 cents, or 2 percent, to $43.33 in morning trading.

According to multiple media reports, the brokerage cut its rating on the shares from "Neutral," citing concerns that profit margins are eroding at its U.S. stores as the economy slows. A Merrill spokeswoman would not confirm the rating change, and said they do not release their equity research to the media.

When it reported second-quarter results earlier this month, Bentonville, Ark.-based Wal-Mart cut its profit forecast for the full year. And when it released sales figures for July, the retailer posted a slim gain but warned that increased discounting is hurting profit margins.

Sears profit falls on discounts

NEW YORK (MarketWatch) — Sears Holdings Corp.'s second-quarter profit tumbled 40% after increased discounts at both its Sears and Kmart chains ate into profit margins.

Net income for the quarter ended Aug. 4 fell to $176 million, or $1.17 a share, from $294 million, or $1.88 a share, a year earlier. The year-ago profit included a gain of 14 cents a share from the settlement of a lawsuit.

Revenue including merchandise sales and services dropped 4.3% to $12.24 billion, the Hoffman Estates Ill.-based company

The company cut prices and increased other promotions after demand fell across most categories at both its Sears stores in the United States and Kmart locations. Sears, the biggest U.S. retailer of appliances, has unveiled "Ultimate Appliance Promise," a campaign to spur buying of refrigerators and other appliances, where sales have slowed due to the weak housing market.

 

Meanwhile….

 

Tiffany Sparkles With Latest Results

Whether they enjoy the jewelery is unknown, but traders sure do seem to appreciate Tiffany's stock.

Tiffany (nyse: TIF – news – people ) surprised Wall Street on Thursday morning with better-than-expected sales and pleased traders by upping its full-year forecast for sales and earnings.

For the period ended July 31, Tiffany said profits actually slipped 10%, falling to $37 million, or 26 cents per share, versus $41.1 million, or 29 cents per share in the year-ago period.

The company recorded a 17-cent-per-share charge related to the pending sale of its Little Switzerland business.

But sales jumped 19% to $662.6 million. U.S. retail sales, in particular, were up 20% to $345.3 million in the second-quarter. Same-store sales increased 17% in the quarter. Sales in the New York flagship store rose 31%, partly reflecting strong sales to foreign tourists spending money in Gotham.

______

 

See a pattern here? People on tight income (characterized as your typical discount store shopper) are taking a huge hit. Specialty stores that typically cater to the upper income are actually doing well, if not better. 20-80 rule. The upper 20% of the income earners are still spending, and supporting the rest of the economy. You think if these 20% people get hit, that the remaining 80% will be in any better shape then they are now? I don't. It's going to hit them even harder.

 

 

[surveyor]

🙂

The upper 20% of the income earners are still spending, and supporting the rest of the economy. You think if these 20% people get hit, that the remaining 80% will be in any better shape then they are now? I don’t. It’s going to hit them even harder.

Well, to be fair, saying that the rich will be doing better than the poor in bad times is kind of like saying San Diego is sunny…

Still, point taken.

[stansd]

I think people think of these types of questions as binary-that there is no overlap between an Escondido or Temecula buyer and a 4S buyer.

Sure, most people have an area they are interested in and stick to it. That said, if you can get the same house in Temecula as 4S for less than half the price, you will see people make that trade-off, which will pull buyers out of the desirable areas.

Nicer areas will hold up better, but the relative price difference can only go so high-prices in very different areas will, to a significant degree, move in tandem.

Stan

[SD Realtor]

Stan I highly disagree…

“if you can get the same house in Temecula as 4S for less than half the price, you will see people make that trade-off, which will pull buyers out of the desirable areas.”

This is already the case today in some cases. For all of the people I have taken over to 4S all of none of them would even consider places like Temecula. It is highly impractical and people are not going to trade a commute from 4S to Sorrento Vally for a ride out to Temecula.

I am not saying nice areas will not depreciate. They may even match the depreciation percentage wise of less desireable areas. However the timing will not be the same, as this is clearly evident. I also still believe, and of course this is only my opinion that in some nice areas the depreciation will not match the less desireable areas percentage wise.

SD Realtor

[Coronita]

The upper 20% of the income earners are still spending, and supporting the rest of the economy. You think if these 20% people get hit, that the remaining 80% will be in any better shape then they are now? I don't. It's going to hit them even harder.

Well, to be fair, saying that the rich will be doing better than the poor in bad times is kind of like saying San Diego is sunny…

Still, point taken.

 

I actually meant this for the comment, quote:

Give Carmel Valley some time. Sooner or later businesses will start leaving San Diego because they cannot attract talent here due to high cost of living. Then all of a sudden someone who was comfy in CV in a 4000 sqft making 200k a year is out of a job looking to move.

 

Implied here is that when most of the 200k people have a forced mass exodus, because businesses will start leaving, you'll be able to step right in and pick up property pennies on the dollar.

I don't disagree that there will be a correction. BUT…Let's be realistic. If there is a mass job loss from your high wage earner across the board, and they can't find work here and have to leave, how will own situation be relative to these folks?

Either

1) You make a lot more than these people.

or

2) You make nearly the same as these folks, didn't lose your job, and haven't already bought, and have saved enough.

or

3) You make much less then these folks, but miraculously didn't lose your job and have saved a lot more than these folks to weather the storm.

#1 folks can take advantage of this situation if it happens, because of the economic pecking order…But, I would say you aren't in category #1 if you are complaining about affordability. You would say things are irrational and ridiculous.

 

#2 folks: Ok. So in this case, I would consider two situations.

2a) If you believe the high-income profession is diversified in SD:Yes, it is possible for a subset of high-wage earning profession to experience job loss. The lose of a group will bring some price pressure, but there would be plenty of other professions still getting paid. I have trouble with the pennies on the dollar theory, because other folks in from other high wage professions which are are arguably in better shape then #3 folks would definitely scope up the bargain before #3 folks. If 3000sqft CV homes were around 400k-500k, I would pick up one, my relatives would probably pick up a couple of vacation homes, and my wife's relatives in china would probably do the same.

2b) If you believe the high-income profession isn't diversified in SD and most get wiped out together. OK. Let's face it, in this case most people who are these high wage earners would have similar professions and/or skill sets. A limited of #2 folks can differentiate yourself from others, but for most of us, we aren't really that much different from our pears. So if your peers are going to find it difficult look for employment here, so will you. This is what I refer to as being mutually screwed.

Personally, I think the demographics in SD are #2a, and not #2b (unlike the bay area). That's why when you saw the dot com explode, you didn't have a massive issue here in SD, while you did in the bay area.

#3 folks: Well anyway, let's assume #2 folks across the board gets wiped out. I'm trying to have a hard time understanding how mass job losses at this scale in the high income earners won't have significant impact in lower income earners. The economy isn't independent. High wage earners lose job and move==> less spending elsewhere here ==> everyone in retail also at least equally affected. Less people paying taxes ==>city/local/gov/teachers/and every other public workers also at least equally screwed.

 

Again, not saying things aren't going to come down. Or that theres not opportunity ahead. But lets be realistic here. Generally, people that make more/save more can weather storms better.

 

[JWM in SD]

“Again, not saying things aren’t going to come down. Or that theres not opportunity ahead. But lets be realistic here. Generally, people that make more/save more can weather storms better.”

Yes, unless they lose all their money as a result of being invested in an imploded hedge fund.

[Coronita]

"Again, not saying things aren't going to come down. Or that theres not opportunity ahead. But lets be realistic here. Generally, people that make more/save more can weather storms better."

Yes, unless they lose all their money as a result of being invested in an imploded hedge fund.

….And that would be a fool…..

Plus, my understanding is that to really invest in a hedge fund, you have to be more than just an upper-middle-class income earner. So how many of these folks in the $100-200k salaried folks have access to hedge funds? I would say very few. You would barely make the criteria to even qualify. Of course some of them could have been flippers themselves. Lot's of idiotic possibilities here.

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