[Steve Beebo]

Let’s see – Your credit score is not where you want it, you don’t have as large of a down payment as you would like, and your job situation is not where you want it. That means you should be able to get a big loan approved within about 20 minutes!!

But seriously, If I were you, I would keep a close eye on the market, and when your 8 months are up, see if it makes sense to think about buying. Nobody knows exactly what the future holds. But one thing that’s for sure is that there will be an increasing amount of bank REOs hitting the market. In 8 months it might be a pretty good time to buy, or maybe it will be obvious to you that it is not the time to buy yet.

Don’t wait until it’s cheaper to buy than to rent, or you may never buy, at least in some areas. In nicer areas, it will never be cheaper to rent. In areas with much less market appeal, it might be getting closer to the point where it’s cheaper to buy than to rent.

[Steve Beebo]

I’ve heard that lots of homeowners in 4S Ranch are having to eat low-grade dog food for dinner.

[Steve Beebo]

For me, for the price you would pay at Liberty Station, the lots are way too small, and the aircraft noise is WAY too loud.

[Steve Beebo]

The last downturn in SoCal in the early 1990’s was caused mainly by huge layoffs in the aerospace industry, which caused a recession in LA and SD. There wasn’t nearly as much speculation as there has been in the last 3 years. Loan standards for residential properties were tougher in the early 1990’s or late 1980’s than they are now. There wasn’t nearly as many 100% loans as there are now. If in the next 6 months, there were 50,000 layoffs of high-paying jobs in either the telecom or biotech industry in San Diego, that would be similar to what happened in the aerospace industry in the early 1990’s.

The current downturn has been caused more by excess speculation. Prices are going down even though the overall economy is fairly strong in San Diego, with low interest rates and low unemployment. That’s why I don’t foresee huge price increases in the next 10 or 20 years, along the lines of the 20% appreciation for three stright years that we saw from 2002 to 2004.

[Steve Beebo]

That was a good article. It should be mandatory reading for potential flippers. The author is correct, in that flipping really only works when prices are increasing in a particular market. Real estate has been a great investment long-term – and usually much better when holding properties for at least two years to get preferable capital gains treatment. I think that with the current market, so many thousands of flippers will get burned, that we may never again, (or at least in the next 10 to 20 years), see huge run-ups in prices.

[Steve Beebo]

When I said that lower housing prices aren’t “all bad”, I mean that they aren’t bad for everyone. If you bought your property in the last year or two, especially with 100% financing, then it’s very bad, especially if you need to sell or to refinance. But a lot of people have owned their homes, or have traded up from other homes, and their inital investment was made 5, 10, or 20 years ago. If prices go down x% in the next two years, it may not matter to them, especially if they have no intention of selling their property in the next 5 years.

But the appreciation we have seen, especially in the past 5 years, has been ridiculous. Only an idiot would have thought they we would contine to see double digit annual appreication. Even slightly lower home prices would be good for a lot of renters or young people who hope to buy in the next 3-5 years.

[Steve Beebo]

The housing market seems to be weakest in California and the southwest, the northeast, and Florida. That’s a large part of the U.S. population, but it doesn’t necessarily mean that the country is headed for a recession in the next year. Think back to the early to mid 1990’s – The housing market was pretty bad in Southern California, and to a lesser extent in the Northeast, but the U.S. economy was still growing and producing lots of jobs.

In a large part of the U.S. that didn’t participate in housing price run-ups, the housing market is doing much better than we are.

Even in San Diego, where construction and real estate-related businesses may be in their own recession for the next several years, the overall economy may do OK. Lower housing prices aren’t all bad.

[Steve Beebo]

Perry – You’re right that certain neighborhoods have dropped 10-15%, but other areas have not dropped at all..yet.

I’m expecting that when median resale prices from Nov. and Dec. are posted, that prices in the County will then have dropped more than the 1% or so that was shown in Sept.

[Steve Beebo]

“The median price last month for newly built houses and condos and condo conversions locally was $413,500, down 17 percent from a year earlier, with analysts speculating that much of this change was the result of an increase in lower-priced condo conversions.”

This is for new homes only, and condo conversions have got to be a factor.

I’m not going to say that the market is OK right now, (it really sucks), but surprisingly, inventory continues to drop, and resale prices of SFRs and condos have not really dropped much at all yet. Inventory usually does tend to drop at the end of the year, but I think a lot of people are surprised that the # of homes on the market has dropped, especially with the slowdown in sales.

I’m looking for a big increase in the number of bank REOs in the next 1-2 years, which is going to depress prices, but I’m sticking to my prediction from last summer that median home resale prices won’t drop more than 10 to 15%.

[Steve Beebo]

There have been several recent sales in Santa Luz for over $3,000,000 – I don’t get it. They’re great homes, I’m sure, but it’s still a Rancho Bernardo zip code. For that price, think what you could buy in RSF, Del Mar, or La Jolla.

[Steve Beebo]

cabinboy – The 17% decrease is for new homes only, which include condo conversions. Up to this month, y-o-y resales have been steady, for both condos and SFRs. When November figures come out, you will probably see the first drops over 2% for condo and SFR resales.

 

Here's an interesting article with comments from a UCLA economics professor:

 

http://www.ocregister.com/ocregister/money/housing/article_1324023.php

 

 "Whether prices go down or stay the way they are, you can pretty much guarantee that whatever the value of your house now, that's going to be the value of your house in 2011." 

 

[Steve Beebo]

Lindi –

When you were describing the Sunset Cliffs area, it sounded like Ocean Beach a little more than Sunset Cliffs.

Hammer – if you’re talking about the south end of Sunset Cliffs, away from Ocean Beach – I think that’s a great area. I don’t think there’s much if any aircraft noise there, like you would get in Loma Portal or Ocean Beach.

The Wooded Area has a nice feel to it, but there is no ocean or bay view, and if I lived somewhere in Point Loma, I would prefer a view. For the price you would pay in the Wooded Area, you could probably get a similar house a 1/2 mile away for the same price, with at least some water view included.

[Steve Beebo]

sdrealtor –

I don’t know how Davidson is doing now – they might be in great financial shape. I only know they were struggling in the mid-1990’s.

And I never said prices would not go down. I just stated that I didn’t believe they would drop anywhere near 30-50%. I think I’m on record a couple of months ago predicting a 10 to 15% drop before it’s over. I may have to update my prediction to 11 to 16% – I’ll think about that.

It seems like there are a lot of interesting things happening in the market. On the one hand, inventory has declined, (like some predicted), but that surprises me. And median prices for resale homes and condos are at the same level they were at 12 months ago, according to the U-T article. The median price for new homes is off 17% from last year, but I think a lot of that is due to low-priced condo conversions.

Even though prices for a lot of properties in established neighborhoods really haven’t declined much, if at all, I do see a lot of weakness in the market in some areas. With interest rates coming down slightly, the ARM resets may not be the #1 problem. I think the biggest problem will be the number of coming foreclosures, especially in newer tract homes, (4S Ranch / San Elijo Hills), and in condos in some areas, (either conversions, or condos in neighborhoods with a lot of converions).

[Steve Beebo]

It’s going to be interesting to see which builders go belly-up in the next three years. The ones at most risk are those that have just started large developments as the market softened, and especially those that bought large tracts of vacant land in the past 12-18 months, because that land would be worth less, maybe a lot less today. When home prices are increasing or decreasing, vacant land moves up or down faster than finished homes.

In the early to mid 90’s, one builder that almost went bankrupt was Davidson Homes. I have a friend who worked for Davidson at that time, and the only reason they didn’t go completely out of business was because they took on a large Canadian company as a financial partner. When the market slowed, Davidson was doing a lot of different projects, but I think the one that really dragged them down was the Mt. Woodson development and golf course. I’m not sure if they still have their Canadian partner.

[Steve Beebo]

Perry –

You’re right that a lot of people have spent their appreciation. You wouldn’t believe how many people I see who have say, bought a house in Clairemont 10-15 years ago for $150,000, which is now worth $500,000, but the problem is they owe $400,000 on it. You look around the house, and they sure haven’t put the money into their house. Where did it go? Hopefully into something partially constructive or productive, like a college education or into a business, but they most likely just blew it.

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