UT Sunday Home Section article “Is there a buble? Do the math”

[BostonAndOC_RE_perspective]

SDR,
I always appreciate the insight of my elders.

We have a strict ranking and rating system which somewhat separates the quota achievement from the assessment of your ablities by mgt. The type of sales mgt you describe is common at hardware OEMs like Cisco, Juniper, MOT etc. Also software firms. I am extremely lucky that I work in a corporate culture that is the primary case study for a portion of Stanford’s MBA curriculum. Our past CEO was a TIME magazine man of the year.

Besides, only 35% of my compensation is variable, and its what we call a “managed” pay plan. That means no one gets to excced the threshold by too much, ususally accomplished through mid-year quota raising. If that happens, it is recognized as a good thing and you a rewarded with cash/stock etc at review time that more than makes up for any lost comissions from the higher quota.

As a high tech sales guy, I am very fortunate to work in the sales group that I do, because your description of the perils/risk is indicative of the norm.

We have a formal program to develop the “young” studs. Let me tell you, due to the complex nature of what we do, it is not only really tought to find enough qualified candidates at top schools to fill out the program every year, and then it takes them years on average to thrive in a quota-driven position. I wish we had more of them.

But back to RE, I saw figures this morning in the LA Times that I’d like to get your perspectives on:
*******
The median in San Diego, which has been viewed as a barometer of market trends because it was the first county to accelerate and the first to slow, rose 5.7% to $504,000 although sales fell 17.4%. Prices there have declined 2% in the last six months.
*******

Have you seen this actual “decline” in prices?

[lostkitty]

I moved from SDiego to “one of those places back East” myself five years ago. I had been wishing and hoping I could find a way to return to SanDiego weather and my extended family. Finding this site gave me a glimmer of hope that real estate had become as ridiculously over-priced as I thought, and that it was as unsustainable as I thought. However, after reading here for months, I have slowly made the decision that living where I do isnt so bad. Our house is absolutely large and lovely. Neighborhood is gorgeous with Husdon River views and sweeping vistas, the best in the city. Schools the best in not just our city but in the region. Ya, ya, ya, I know Torrey Pines is a good school (I went there), but when scores are ranked nationally, even good ol’ TP is only good ‘for a CA school’… it is not as high as some would think nationally.
We have had none of the increase in real estate inventory which is plaguing so many cities around the country. None. People are still anxiously trying to get to homes before realtors do here – as they always have. Prices do not go up wildly though – even with the demand. Slow and steady.
We also lived in Coronado for a long time. Families would come from back East and were just thrilled when their kids were tested that they were so far ahead academically. I do not agree that San Diego if chock-full of academics on par with the East Coast set. The basic high school education does not compare – just for starters.
Sometimes I look through the photos of RSF/Del Mar homes for sale and am intrigued to see my old neighborhood so grossly overbuilt. Then I see the big beautiful kitchens that look like mine here back east – then the 3Mil price-tag… Reality sets in that in North County… even with my husband’s 160+ salary, and given all the things are kids are involved in musically and athletically, we can afford no more than what our home is worth here… about $550-6k. That amount will currently buy us a POS condo (“piece of s*&t” for the unindoctrinated) in Carmel Valley. No thanks. I keep watching, but am losing any yearning at all to return. I spend 6 weeks a summer there. Maybe that is all I need.

[sdrealtor]

It sounds like you are in a rare and great situation for a salesguy. Hold onto to it but don’t forget my warnings. No matter what the situation, the more you give the more they demand from you. Corporate America with perpetual pressure to produce earnings growth can suck the life out of you.

As for the stats you asked about, they are all hogwash. I place very little creedence in any statistics. The data is garbage and every property is unique. Summary statistics are of very questionable value. Here’s what really happened……Prices peaked virtually every where in SD in Spring/Early Summer of 2004. I have seen several homes sold during that period come back on the market recently and sell for less. My best “guestimate” is that there has already been an actual decline of 5% to 10% depending upon location. Sure there are some exceptions but I’d take that as more the rule than the exception.

[barnaby33]

I can’t effectively answer that so I will shuck and jive and ask another question.

Did San Diego become less desireable? That I can answer. It did so because housing got much more expensive, I would posit that most of the other things like crowded schools and roads are a Chimera(3rd def on dictionary.com).

It got almost that much more expensive in any of the other areas of the country that are desireable as well. So while on an absolute scale it seems like it got a lot less desireable, really it didn’t. I was in boston in Oct 04. I looked at realty briefly through a couple realtors windows. Houses in decent areas weren’t any cheaper there than here. In some cases even more so.

Whats the difference between being squeezed pretty darn hard in Boston, or really hard in San Diego? Thats a question each person must answer to themselves.

Josh

[BostonAndOC_RE_perspective]

SDR,

I’m grateful for your advice. I do subscribe to the rule that no is is irreplaceable, and try to live each day as if I’m competing for my survival (professionally). This is a behavior trait of driven, successful folks I try to emulate.

You’ve confirmed what I see with anecdotal data. Can I ask you to speculate on two more things?
1. What size house do you think I would be able to buy in Carlsbad in 1.5 years for $650K
2. do you think OC and SD prices will diverge much – either up or down?

[BostonAndOC_RE_perspective]

Josh,
Good argument. My theory is that Boston’s initial decline happened sooner due to less investor activity and a smaller sub-prime market (i.e. less mortage fraud). Houses near my office that were $650K a year ago can be had for $525K today – in one of the best public school districts in MA (The local high school sent 19 kids to Harvard out of a senior class of 300). The bubble burst and people got over it. I’ve heard that underwriting criteria tightened up considerably.

So today, one could get a $150K job and buy a house in a neighborhood with some of the best schools in the USA for $525K. It is indeed an interesting dynamic when comparing the situation in SD. I know, I know – the Sunshine Tax. Those poor fools using 50% or more of their take home pay to service their mortgage debt can always console themselves with their annual Sunshine Tax payments.

[sdrealtor]

Carlsbad is tricky because it represents 3 different school districts. Based upon what you’ve said about education for your kids, you’ll want to be in Southwest Carlsbad – 92009 in the portion that falls in the Encinitas/San Dieguito School Districts. In 1.5 to 2 years, I beleive you will be looking at homes that are currently in 800 to 850 range. You can see what that will get you on realtor.com. Basically, its a 4BR 2,500 sq ft home built in the late 70’s to mid 80’s. With a little luck and the assistance of a good realtor, hopefully it would be on a nice size lot (10,000 sq ft or more) and be very nicely remodelled/updated. Based upon my assumptions, with a little more luck it could be a 2,300 to 2,800 sq ft home built in the mid to late 90’s on a smaller lot but in a really nice neighborhood with lots of youngsters running around.

I don’t know that much about OC but dont see how there can be that much difference in the path they take even with the stronger job market up there.

[BostonAndOC_RE_perspective]

SDR,
That sounds pretty encouraging. Thanks for your time and knowledge-sharing.

[Author]

Posts