[Calm]

Have a listen to Brookfield Homes May 4th phone conference with Wall Street Stock Analysts: http://events.streamlogics.com/brookfield/may04-06/index.asp

You’ll hear the CEO and CFO talk about the difficulty they’re experiencing in the San Diego market. If I understood them correctly, they’re experiencing purchase contract cancellation rates of 25 – 30% this year, approximately double their average rate.

Cal

[Calm]

Oops, sorry, I didn’t realize that article was for subscribers only.

Due to copyright laws, I can’t post it here. It’s in yesterday’s NY Times newspaper.

Sorry,

Cal

[Calm]

nin_sis

Keep renting or find some place else to buy your first home. This is not the time or place for a first time buyer to be taking such a big risk. The people who are telling you that real estate can only go up are forgetting (or don’t know about) the serious drops that occured in the past.

I purchase a nice home in Connecticut in 1987, during an overheated market very much like San Diego last spring. I owned the home for 13 years. It was a nice starter home in one of the most desirable towns in the whole NY City metro area. After 13 years and $100,000 of repairs and improvements (furnace, roof, deck, etc.), I sold it. I broke even. That’s right $0 appreciation over 13 years.

Put your money into well-diversified mutual funds (both foreign and domestic stocks) and enjoy the renting lifestyle. If you want to play homeowner, find a friend who is a homeowner and go spend every Saturday mowing the lawn, weeding the garden, fixing the faucet drips, etc, etc. Also, ask them to show you how much money they’re spending on trips to Home Depot, the plumber, pest control services, etc., etc.

If you’re really set on owning a home, get some (if you don’t already have them) remodeling skills/experience. If you can upgrade a home with your own hands on your own time, you can increase its value well beyond your costs.

[Calm]

Starfish,

We’re in the same boat. We sold our home a year ago and we’re trying to time the market.

While I don’t think a drastic decline is certain, a reversion to more normal pricing is probable. That can happen two ways (or more); either prices come down quickly or they stay flat for a long period as values rise to meet current prices.

In the meantime, the cost of renting is much more favorable than buying. At a multiple of 28.5 (take the price of a residential property and divide it by the total annual rent), we’d have to see five years of mid-teens percentage appreciation just to break even.

As for the asking price data, it’s very hard to conclude anything from that data. It’s subject to so many questionable factors. The source of the data, realtors, is not without a huge conflict of interest.

Stick in there, it may take another year before prices start to decline. In the meantime, you have the lifestyle of a renter, never a bad thing.

Best of luck,

Cal

[Calm]

Rich, an alternative way to get back to the mean would be for prices to be flat (at the current levels) for a long time. Does residential real estate do that? Cal

[Calm]

I’m enjoying the spirited responses. I’d be interested to hear your insights on how the “reversion to the mean” phenomenon could play out in our (San Diego) market.

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