[PerryChase]

Homeowners who have homes drop in value can file appeal for reassessment. I remember in 1990, I got a 20% decrease in my assessed value thus resulting in a 20% decrease in property taxes. The re-assessment is no automatic. Homeowners have to apply to get it. The only problem is the base on which future increases are calculated is not permanent adjusted down. By law, assessments can increase 2% per year compounded annually.

I expect a drop in tax revenue in the next few years. Not only will individual homeowners appeal but so will owners of large hotels and business buildings. That will mean many millions in decreased tax revenue. In the 1990 downturn, SF lost millions from the TransAmerica building alone.

Reporters in the media should periodically ask the County Assessor about the number of appeals. That would clearly indicate a downward trend.

[PerryChase]

The house in question was purchased for $813,908 on 11/12/2004 and is now listed for $726,000. That’s an 11% drop. MLS listing says house was occupied for just 60 days. With holding cost, selling costs, I suspect the loss is already 20%.

Let’s see how long it takes to sell.

[PerryChase]

The San Diego economy is in good shape but certainly not good enough to support all the $500k – $1,500K houses growing like mushrooms everywhere. There are not many who can afford to live in such houses. The wealth was created by selling those houses to each other.

[PerryChase]

Mold is a big issue in older developments. Oftentimes, it’s caused by neglect of the landscaping near walls. As the property ages, the mulch rises to meet the level of the building slab. Because the contruction is wood, the moisture and mold spread in the studs and drywalls. Also people don’t monitor the sprinklers causing overwatering thus exacerbating the mold problem. Gardeners would rather over-water lest owners complain about dead plants — they don’t pay for the water.

Pinhole leaks in the walls and slab leaks are big causes of mold. Drain pipes also settle and crack causing tiny undetected leaks in the walls.

I worry about about all the condo complexes that are 30+ years old. They almost need a complete redo down to the studs. If this were Florida, the mold issue would be 10x greater.

[PerryChase]

There’s a new sucker born everyday. That’s what makes the world go ’round.

[PerryChase]

Thanks for your input. Please keep on updating us on your market.

The house you refer to, isn’t that a 21% drop? The house looks like a really nice single level plan (i love single level). Let’s see if it sells within a month.

I would buy it for $450k.

[PerryChase]

Renting out rooms to meet mortgage payments is a common thing, especially in immigrant households. If you drive around in the evening and see cars parked everywhere, then you can assume that people are renting out rooms, even garages. That phenomenon is best illustrated in Clairemont and Mira Mesa.

The best neighborhoods are places where cars are parked inside.

I know an immigrant family (really nice people) who lives about 15 inside a 4 bedroom house. No wonder they can afford the mortgage and a Mercedes.

Young professional do it too in order to “invest” in the housing market. One of my friends bought a 2bd condo with I/O loan. He has a roomate that pays about $700/month. But he’ll be in trouble once his loan resets. But he can’t/won’t sell now because the market is down.

Selling is no simple task now; buyer don’t want to buy a messy occupied unit. You have to move out and incur more housing costs while your home sits on the market.

[PerryChase]

MLS #: 066034153. Don’t worry, it’ll be back. I suspect it’s off the MLS because it was priced at $507k, below prices of $530k at the development and might affect their sales efforts. I don’t believe it was a “real” listing but simply a ploy to create traffic at the project.

Considering that developers pay 5% broker coop, I think any potential buyer who wants a new house now, can easily offer 10%-20% below the asking price. But why would he want to do that when he can get it at an even lower price later?

I also noticed that flipper in new projects are in world of trouble since the developer is undercutting them by offering incentives. Flippers need to get real and price 5-10% below developers in order to unload their albratrosses. And that, in turn, will prompt a response from the developer creating a downward spiral.

[PerryChase]

I’m not an expert but I think that we’ll see lower housing prices with higher interest rates. The reason is that housing is not part of inflation, but rent is (as is oil). As inflation rise, the Fed will have to combat it. If assets prices are not rising, we need higher rates to attract foreign money on which we depend so much now.
Wages and consumer goods will remain in check thanks to over capacity in Asia. We are entering uncharted territory where some sectors of economy will have inflation whereas other sectors may experience slight deflation (such as consumer electronics). I think the near future will be good for people who have good jobs, low housing expenses and consume little.

The world economy might be saved by China engineering a consumer boom in their market, just like Thailand, South Korea and Malaysia did with their economies after the Asian financial crisis.

[PerryChase]

Yes, those are really ugly buildings in Solana Beach. They eventually all turn into vacation rentals. Rent certainly won’t support $700,000 mortgages — perhaps for a couple of months during racing season. I would also rather buy downtown at that price.

[PerryChase]

I remember on the plane meeting an elderly British lady on holiday. She was telling me about the “good old days” of the early Thatcher years with sky-high interest rates. Remember 18% mortgages? That scenario is great for elderly retirees who own their houses free and clear. They can simply leave their savings in the bank and go on holidays.

[PerryChase]

Yes, I also know middle class families who are living in million dollar houses. They can’t really afford them and are stressing out now. One family I know was “lucky” and they were able to trade up from another house right at peak. They felt that RE could only go up so they bought a $1 million house with I/O loan. I simply don’t think they’ll make it in a downturn.

Someone should also track the divorce rate in this coming downturn. Sad as it is, financial problems generally lead to divorce and broken families. That might happen under a democratic administration who will be blamed for the mess resulting from the excesses of the RE boom. People have very short memories.

[PerryChase]

Hi Equalizer, how to you search the County Recorder’s site for sales information? It did not look self evident to me and I haven’t figured it out yet. Thanks.

Looks like there’re be many unhappy homeowners in this development. The developer is selling for $507k and this owner bought for $662k. With commision and sales cost, it looks like about $200k loss to me. If this was flip, you have holding costs too. Yikes…

[PerryChase]

Thanks for the data MrQuoi. It’s always good to specific examples that illustrate the downturn.

[PerryChase]

San Diego has a long way to go before downwtown is anything like SF or Manhattan. I agree with you peace. But a townhouse in Manhattan? I could never afford one. A friend of mine goes to grad school at NYU and he rents a room in a 3 story house owned by a jewish couple. His rent is $1000 for a 9×10 room. The house is nice but it’s old and musty — could use restoration.

As far as San Diego goes, it’ll take a while to build a community downtown, perhaps 30 years.

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