State of the Bleeding Edge San Diego Housing Market

[santeeman]

http://www.searchlightcrusade.net/posts/1158969094.shtml
What do you make of this guy?……

I've been telling people that the flat spell on rents we've had locally in San Diego is going to change. Here's the first confirmation I've seen: $1,241 average reflects biggest climb in 4 years The last few years, landlords have been buying in order to sell to a bigger fool. That has now changed. They've got to make money on their investment, and considering all of the ones that bought for too much, they are jacking rents up hoping to make enough not to lose their investment. Expect to see more of it. The article reports vacancy as being an incredibly low 1.8%. Supply and Demand. High demand, low supply. You can stay hitched to the rent escalator, or you can buy from people who have to sell right now. Yes, it'll cost more money per month, but within a few years, rent will be more than the mortgage, even without the consideration of tax breaks for buying. Your choice. San Diego is a bleeding edge market. Most of what I predicted in Looking Beyond The Bubble: What's Next For Highly Appreciated Markets has now come to pass, on the local scale anyway.

[lendingbubblecontinues]

OR you can simply move away…

I’m still not buying it. Especially not while I’m watching the NODs and foreclosures begin to stack up here in beautiful SoCal. Remember- while everyone may want to live here, not everyone entertains the idea of doing so, and even fewer actually make the move. Are these rising rents going to attract new migration?

Now back to my daily dose of healthy schadenfreude…

P.S. I do agree that “in a few years, rent will be more than the mortgage”, but it will be for entirely different reasons than most people currently believe.

[sdcellar]

Well, right now rents are significantly cheaper than owning and we know which way prices are heading for the privilege of ownership, so I’ll keep on waiting for the time being, thank you very much.

[kev374]

I predict rents are going to increase sharply. Landlords are hearing about the state of the market and know this is their opportunity. Rents in my apt. complex increased 10%! With list prices being cut quite aggressively on condos it may make sense buying soon enough, I would say in about a year. I know here in South OC there are 2 bedroom, 900-1000 sqft condos going for $380k or so. In a year I predict these will be in the 320-350k range. PITI+HOA on these will be just a bit more than renting 😉

[bubble_contagion]

A little misleading because the big climb vs. 2005 is 0.61% y-o-y.

Typical pro-Real Estate reporting of the U-T.

Here is the article from the U-T:

“A 3.81 percent increase in the past year to an average rent of $1,241 is the biggest gain in rental rates since September 2002, when average rents increased by 5.68 percent, according to a recent survey by MarketPointe Realty Advisors. It compares with annual increases of 3.2 percent in September 2005, 3.12 percent in 2004, and 3.64 percent in September 2003.”

[santeeman]

This guy is saying he predicted a while ago houses would dive and this is his next prediction….
“What my point? That the next thing that starts to happen is rents rise, and when they do, more buyers move into the purchase market. We've already seen some of this. Also, some sellers have moved out of the market. A few weeks ago, I was seeing active listings total about 23,800 locally, and they're down to 22,500 now. Furthermore, the number of buyers has risen by about ten percent or so in the last couple weeks. Net result: We were at 38 or 40 sellers per buyer most of the summer. Last week it dropped to 34, and this week it's at 33. This is starting to look like it might be a trend, and when the ratio of sellers to buyers drops enough, prices are going to stabilize, the period of best deals will be over, and people are going to rush back into the market. It's got a long way to go, but where I have predicting Spring 2008 as the most likely market recovery point locally, I'm thinking now that it will more likely be some time next year, most likely early summer based upon current trendlines.”

[Bugs]

A 10% annual increase in rents + a 10% annual decrease in sale prices would still take at least a couple years to close the gap; maybe even 3 years. And that’s assuming interest rates or downpayment criteria don’t change during the meantime.

There are limitations in the potential for rent increases, too. No matter what, people have no incentive to spend 50% of their income on housing in this region. Period. And wages aren’t even coming close to keeping pace with these rent increases. Except for the people who were smart enough to withdraw from the market, the market has already absorbed all the first time buyers that came close to qualifying. I don’t see any huge demand (with means) just sitting there waiting to get in. They literally can’t get in at these prices and many of them still wont’ be able to get in at half these prices.

BTW, these rent increases are not universal, regardless of what the article says. I do rent surveys for apartments on a regular basis and there are some areas where those rents have been dead even for the last year and are still down slightly from 2 years ago. Most apartments in this region are not part of professionally managed projects and I strongly suspect they aren’t being adequately counted in these surveys. My point is, people still have options when facing a rent increase in this region.

The bottom line here is that rental tenants should be settling in for the long haul because there won’t be any reason to dive into this market in 2007 and probably not in 2008, either.

[gold_dredger_phd]

My landlord jacked up the rent 25%, so we’re moving into a rental condo or house. If all the landlords in San Diego jacked up rent by 25%, I would ask my boss for a raise to cover this and if I could not get one, I’d just leave the state. There’s no room for the middle class in San Diego.

[poorgradstudent]

I’m not sure about the rents, but I know that a lot of the failed attempts at condo conversion here in UTC are now leasing again. So at least in the apartment market, I doubt rents are going to skyrocket.

[bubble_contagion]

The guy doesn’t have a clue. He writes:

“Net result: We were at 38 or 40 sellers per buyer most of the summer. Last week it dropped to 34, and this week it’s at 33. This is starting to look like it might be a trend, and when the ratio of sellers to buyers drops enough, prices are going to stabilize, the period of best deals will be over, and people are going to rush back into the market.”

In previous years the number of listings dropped dramatically from November to January. Sometimes as much as 50% from the summer peak. The reason is not sales, sellers remove the listings during the holidays. In fact, this year the number of listings, as a percentage, has decreased less than last year.

[bubble_contagion]

mistake

[bubble_contagion]

mistake 2

[santeeman]

Here is the latest numbers on housingtraker actually, the inventory has been going down since July, the numbers now closer to 19k. Maybe folks pulled their homes(off the market), waiting for spring '07?

 http://www.housingtracker.net/askingprices/California/SanDiego-Carlsbad-SanMarcos/

Trend 11/06/2006 1 month 2 month 3 month 6 month –

Median Price $525,000 0.9% -1.9% -2.3% -2.6%

Inventory 19,934 -5.8% -9.5% -8.9% +7.6%

[qcomer]

Looks like a typical dead cat bounce here and pumping by the real estate media confirms it. Real estate bubble busts don’t recover in a period of few months, they take time. Along the way, they take suckers who were standing on sidelines checking listings everyday. These buyers are rady to jump in the markets because they have been stung before, being priced out of market. The smart money always looks at broader real fundamentals. We have a slowing economy, rising rates, possible defaults coming in, etc. And this guy with his tunnel vision, looks at buyer/sellers ratio jumping by 2 points and starts shouting “Its over”.

[Bugs]

When the ratio gets down to 1.5 sellers per buyer then you’ll have a market that will start to move. We’re so far from that right now that the end of this downswing is nowhere in sight.

People seem to think that if they blink they’ll miss their opportunity, which with RE is preposterous. There will be lots of advance warning before the market bottoms out, there’ll be a couple months while it wallows on the low end and then some of the more desirable areas will start moving first. It’ll take months before the other areas and price ranges follow suit. I daresay a savvy buyer will have a 6 month window to buy in at the absolute bottom, and maybe 18 months to buy at prices that are well below the long term trend. Possibly longer.

You’ll either have to be not looking at all or in a coma to miss the next best opportunity to buy. If anything, there will be people who will jump the gun a little and buy low but not at the absolute low. Nothing wrong with that, because it’ll still turn out well for them.

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