[sdrealtor]

In 1999, I was still working in High Tech sales/marketing (and getting very tired of life on airplanes). Working in RE has allowed me to watch my young children grow albeit at much lower earnings. Mine was a lifestyle choice and while I am consistently in the 10% of Realtors production wise, I could make more money working in my old career.

In 1999 my new house cost around $450K and was cheap in spite of an 8.5% fixed rate mortgage (I’m a conservative 30 yr guy).

In late 2003, it was about $650K and with interest rates in the mid to low 6’s it was affordable too. Just about anyone that had a good job and lived here more than a year or two had $100K to 200K to put down 20% and buy a house like mine.

In Feb 2004, my house went to $825K and stopped making sense from my perspective. Since then its gone up to about $925K.

If prices went up about 5% a year from late 2003 it would be in the mid 700’s which would make sense to me. Someone whose been here for several years would be able to move up to buy my home (5Br/3Ba 2800 sq ft in very nice master planned community with great schools which is likely their 2nd or 3rd home like it was for me) with 20 to 30% down. With a loan between 500 and 600K the payment would be around 3000 to 3500 which isnt too much for a household income of 150K to 200K. Homes like mine rent for around that very easily.

I know this back of the envelope type logic…but it makes sense to me intuitively.

To answer your other questions. The real inventory spike happened between July and October last year. I’d venture to guess North county Coastal isnt all that different from other areas with the possible exception of Downtown. As for what I attribute the price decreases to….the insanity has ended and we are headed back to a more normalized level which i beleive we should be at (mid 2003 pricing plus 10 to 15%). As for credit tightening, I dont see many 100% buyers anymore. Sales volume is down but the quality/qualifications of those that are buying is substantially higher on average than b4.

[sdrealtor]

Never said it’s different this time. Around the end of 2003 prices still made sense to me re: mortgage payments and incomes for most of the people I knew. At the beginning of 2004, everything seemed to jump $100K to 150K almost overnite. It didnt make sense then (I said so) and it doesnt make sense now.

As for buyer’s being ARMed, while there are quite a few in that situation there are alot more that rolled equity in move ups from what I saw personally. Here’s what’s going on in my area:

I track inventory every Monday in my submarkets when I get back from lunch and have data going back 2 years. Not sure what’s going on anywhere else but in the North County Coastal Area of San Diego where I work detached inventory was 530 homes on Halloween and now stands at 521 homes. Pendings homes sales are down from 173 to 168. Attached Inventory has risen from 294 to 312 and pending attahced sales have risen from 68 to 73. Dettached prices feel like they are around 5% lower versus Fall (10% lower for attached) but we haven’t seen any dramatic Crash here yet. Still lots of homes being bought and sold every day. One thing we are definitely seeing less of are the zero down toxic loan buyers. Nothing controversial here…just reporting the facts.

Does that look like hard and fast you? I think its coming down but disagree on the hard and fast. I think its gonna be more like slow and painful.

[sdrealtor]

Rich,
Let me begin by saying I have firmly been bearish on RE prices since late 2003. While there is no hard data this is what I have see anecdotally.

Demographic Change
Lots of high income people moving to the area who work from home and/or renting office suites. This wont show up in any booming new business or local hiring. Older long time retirees with most of their assets in their homes cashing out and moving to cheaper locales. Wealthier retirees with substantial assets replacing them. Net effect is retiree population stays flat while the composition changes.

Changes to SD
Rich, you really need to get out more. I just spent a nite at the Westin Horton Plaza to get away from the kiddies for a night and was astounded at how the city has changed. The very cosmopolitan city I found was a far cry from the ghost town I caroused during pub crawls in the mid-90’s before getting hitched. Drive around Carlsbad/Encinitas where I moved in 1997 and It is unrecognizable today. Good Restaurants back then were Taco Shops and a good dinner required a drive south to Del Mar or Downtown. Not any more! I grew up back east and SD might have well been on Mars when i told my friends I was moving out here in 1992. Now every one in the USA know what SD is about!

Not that this justifies the price spikes we’ve seen but they certainly are a major factor in rising prices and shouldnt be discounted. As you know, RE is sold on the margin and while every house on my street couldnt sell for close to a $1M, one or two a year can. For the record, I think prices will return to 2003 levels and then settle there for a few years.

[sdrealtor]

Rich,
Let me begin by saying I have firmly been bearish on RE prices since late 2003. While there is no hard data this is what I have see anecdotally.

Demographic Change
Lots of high income people moving to the area who work from home and/or renting office suites. This wont show up in any booming new business or local hiring. Older long time retirees with most of their assets in their homes cashing out and moving to cheaper locales. Wealthier retirees with substantial assets replacing them. Net effect is retiree population stays flat while the composition changes.

Changes to SD
Rich, you really need to get out more. I just spent a nite at the Westin Horton Plaza to get away from the kiddies for a night and was astounded at how the city has changed. The very cosmopolitan city I found was a far cry from the ghost town I caroused during pub crawls in the mid-90’s before getting hitched. Drive around Carlsbad/Encinitas where I moved in 1997 and It is unrecognizable today. Good Restaurants back then were Taco Shops and a good dinner required a drive south to Del Mar or Downtown. Not any more! I grew up back east and SD might have well been on Mars when i told my friends I was moving out here in 1992. Now every one in the USA know what SD is about!

Not that this justifies the price spikes we’ve seen but they certainly are a major factor in rising prices and shouldnt be discounted. As you know, RE is sold on the margin and while every house on my street couldnt sell for close to a $1M, one or two a year can. For the record, I think prices will return to 2003 levels and then settle there for a few years.

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