There is always Detroit

[davelj]

sdrealtor, you’re right – for the foreseeable future – and it’s been the case for many years – Detroit lives and dies with the US Auto Industry. We don’t really know what the very long term holds for Detroit, although it’s not nearly as favorable as San Diego, that’s for sure.

But where San Diego is concerned, I would argue that our city DOES in fact live and die with the real estate industry in the short term, which I’ll define as the next several years. Despite the fact that San Diego’s economy is no longer identified with any single industry – as it was with defense and the military 15 years ago – our over-reliance on real estate will make it seem like death once this downturn picks up steam. Real estate is that pervasive today.

To give you an anectodotal example, I was thinking of the neighbors in my condo complex. Title executive across the hall. Developer executive on one side. Guy that reps for a high-end blinds manufacturer on the other side. The developer that built the building owns a unit further down the hall. And a few with no connection to real estate sprinkled in. I count among my friends several real estate agents, mortgage brokers, etc. and, of course, several people outside of the industry. But I’d guess that at LEAST 1/3 of the people I know in San Diego have employment that is directly tied to real estate and that’s not even including the people I know in the banking industry, which itself is very real estate-dependent.

Over the next several years we’re going to find out just how diversified San Diego’s economy really is… and I’m betting it’s going to be an eye opener.

[waiting hawk]

What about that realtor a few years back telling his clients that “every one wants to live here” when they took out that 2/28?

[(former)FormerSanDiegan]

Everyone wants to live in Detroit.

?

[robyns_song]

Things aren’t always what they seem…

Part of the reason why real estate went for so little, though, is that the lenders weren’t bidding and the foreclosure sale. The problem with Detroit property is that nearly every property (even in good areas) gets stripped and filled with vagrants as soon as it becomes vagrant. It costs more for the lenders to maintain the property and they always suffer severe theft/vandalism losses. As such, the lenders don’t usually competitvely bid at the sale…they’d rather the property sell to a third party and take the financial loss than take back a property that will soon be destroyed by vagrants and become a liability.

This is something that would not likley happen in San Diego. Don’t get your hopes up about properties selling for little-to-nothing. Lenders have too much invested to let them go for a few thousand.

Don’t forget that the lender still has to approve the bid at Detroit’s sale AND there’s a six month period of redemption in Michigan. So, the person who purchased the property for next-to-nothing might not actually keep the property if the lender doesn’t agree that the bid was high enough or if the borrower is able to redeem the loan in the next six months. Even if the lender approves the loan, the high bidder cannot legally take possession of the property until the 6 month redemption expires. ALSO, a lot of the properties would have sold occupied since an eviction cannot begin until after the foreclosure sale and the redemption expires. This means that in Michigan, you can essentially get a mortgage and live free for at least a year.

[drunkle]

hmm… how long till OCP and Robocop enter the scene…

[DCRogers]

If you want your breath taken away, try this look at the neighborhood that my mother was raised in… likely some of the homes cost nearly as much back then…

http://www.zillow.com/search/Search.htm?addrstrthood=pingree%20street&citystatezip=detroit%2C%20mi

Click on any of the homes to see the bird’s eye view, and then tell me, with a straight face, it’s anything like San Diego will ever be. $500 for a house? Sold! Nothing over 100K! Check out the deals for 40K, 30K, and 20K! Only problem… you gotta live there.

PS: Don’t be fooled by the one house listed at $202K… it’s a Zillow mistake from Scottsdale, AZ… if the actual teleportation has taken place, the owners must be still scrambling to reverse the spell…

[patb]

Detroit has had a major property crash due to the primary industry
crashing, but the national economy is good.

San Diego will do the same thing if the national economy
crashes.

[Happy renter]

San Diego may not crash as bad as Detroit, but it may be hitted harder than LA or OC:

1. Geographical speaking, SD’s location is not as good as LA or OC. OC is the center of both and SD is very far from LA.

2. LA & OC have more industries and job opportunities.

3. SD has much more empty lands to build houses by comparing with LA or OC.

I think these are the main reasons that SD house price has already declined one year ahead of OC while LA still increases.

However, the mortgage industry may hurt OC a little! Furthermore, SD mainly counts on defense and tourism. If the economy slows down because of the housing market, the tourism will be hitted very hard.

[bob007]

good neighborhoods in LA might hold the value. But the trashy neighborhoods will fall.

[kev374]

yeah but that’s Detroit! Detroit was rated as one of the most dangerous cities in the country…it’s basically a dump!

[Cow_tipping]

Submitted by bob007 on March 20, 2007 – 11:28pm.
good neighborhoods in LA might hold the value. But the trashy neighborhoods will fall.

Its all related. If trashy neighborhood drops in 1/2, the good ones will also drop in 1/2.
Real estate is all local, yes but when the credit tightening happens its is a national event. Heck I would expect the higher priced to get hit worse due to the fact that its a larger risk the bank will be taking and its going to be harder for people to come up with the larger 20% or whatever will be needed soon.
In effect, I expect them all to crash, and it will start with the entry level houses and spread to the entire spectrum.
Cool.
Cow_tipping.

[kewp]

“Talk about a popping bubble….”

I don’t think whats happening in Detroit has anything to do with a typical speculative ‘bubble’. More like a localized economic collapse.

San Diego does indeed have a more robust local economy than Detroit. No questions asked.

What worries me in SD, though, is the ‘perfect storm’ of an over dependence on RE, building inventory, shrinking population and the sub-prime implosion. Something has got to give.

[Author]

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