7/13/09 -
Halfway through 2009
More than halfway through 2009 and the real estate market has stabilized in some areas and
continues to decline in others. Units pending and sold show a steady flow of buyers but the pace
of the market remains slow due to the significant numbers of distressed listings and the red
tape and delays involved to get them closed.
In addition to slow transactions, the most common problem among home buyers is ironically an
inability to find the right home that is not already saturated with offers. A prime example of this is
that when the San Diego MLS initiated a new "status" field for listings called "contingent". This
field was added to separate the listings that had offers but were waiting for a bank approval
(Contingent) from listings with no offers and are still actually for sale (Active). Once this went into
effect a few weeks back the "Active" listings dropped by approximately 1/3 as agents moved over
4,000 listings to "Contingent" status.
The banks/lenders continue to move slowly for loan approvals and REO sales. This doesn't
appear to be ending anytime soon. It now takes hard work to find and get into escrow on a home
in today's market. The typical home buyer can expect the process to take from 3-9 months.
Higher end homes seem to have finally started listing at what appears to be attractive pricing.
Seeing newer homes in La Jolla listed for $376 a Sq. Ft. is not something very common.
Typically every market is at different points in the business cycle. Some markets were quick to
decline and have now even had a slight up tick in property values, while other areas are still in
decline. Review the best deals and sales statistics for updated market specific information.
Don't forget, the $8,000 tax credit for new home buyers ends 11/30/09. (New home buyer means
you haven't own in 3 years.) Act soon if you want to take advantage of it.
Halfway through 2009
More than halfway through 2009 and the real estate market has stabilized in some areas and
continues to decline in others. Units pending and sold show a steady flow of buyers but the pace
of the market remains slow due to the significant numbers of distressed listings and the red
tape and delays involved to get them closed.
In addition to slow transactions, the most common problem among home buyers is ironically an
inability to find the right home that is not already saturated with offers. A prime example of this is
that when the San Diego MLS initiated a new "status" field for listings called "contingent". This
field was added to separate the listings that had offers but were waiting for a bank approval
(Contingent) from listings with no offers and are still actually for sale (Active). Once this went into
effect a few weeks back the "Active" listings dropped by approximately 1/3 as agents moved over
4,000 listings to "Contingent" status.
The banks/lenders continue to move slowly for loan approvals and REO sales. This doesn't
appear to be ending anytime soon. It now takes hard work to find and get into escrow on a home
in today's market. The typical home buyer can expect the process to take from 3-9 months.
Higher end homes seem to have finally started listing at what appears to be attractive pricing.
Seeing newer homes in La Jolla listed for $376 a Sq. Ft. is not something very common.
Typically every market is at different points in the business cycle. Some markets were quick to
decline and have now even had a slight up tick in property values, while other areas are still in
decline. Review the best deals and sales statistics for updated market specific information.
Don't forget, the $8,000 tax credit for new home buyers ends 11/30/09. (New home buyer means
you haven't own in 3 years.) Act soon if you want to take advantage of it.
1/20/09 -
Latest Real Estate Numbers For San Diego
The latest real estate numbers for San Diego are showing good signs for the market to stabilize.
The current inventory of homes and condominiums on the MLS for San Diego is 14,652. This is
significantly lower than the high point of almost 20,000 listings from a year ago. Prices have gone
down about 35% from a year ago, and just last month sales showed a significant pick up.
Additionally interest rates are low and the government seems to be stepping up to the plate in it's
efforts to truly stem the tide of foreclosures.
Barring any additionally significant hits to the economy and financial markets and a continuance of
the sales activity, and it's likely the market is close to an equilibrium between buyers and sellers.
Reading the real estate tea leaves is all about looking at the supply and demand of and for
homes. Just like every other object in society, when demand is greater than supply, values or
costs go up, and vice versa when supply is greater than demand.
The decreasing supply of homes, combined with an increased sales pace, and the significant
price reduction from the high point tells me the market is no longer at it's worse. Homes prices
may still have some slight declines in various sub-markets but the days of significant declines are
over (again barring any more significant disruptions to the economy). If the number of homes for
sale drops below 11,000 I would expect to see home values firm up and in some markets
increase a bit.
In reality you won't see "the market has bottomed" in the news until months after it has occurred.
Looking at the sales and listing count statistics will show that fact long before anyone announces
it. Finding good deals now is simply about looking for them. Many homes are listed at prices that
make fundamental sense, i.e. rent vs. own. Be sure not to follow the herd mentality and wait for it
to be common knowledge that the housing market has stabilized. Getting their before it's common
knowledge is the best way to get a great deal on a home.
Simply crunch the numbers and if it makes sense for you then it likely makes sense for many
others, don't wait for the headlines to tell you prices have bottomed or you'll miss a good
opportunity to buy real estate at prices that are low enough to create monthly costs comparable to
rent (after tax advantages), which is typically rare and only happens every 10-20 years.
Latest Real Estate Numbers For San Diego
The latest real estate numbers for San Diego are showing good signs for the market to stabilize.
The current inventory of homes and condominiums on the MLS for San Diego is 14,652. This is
significantly lower than the high point of almost 20,000 listings from a year ago. Prices have gone
down about 35% from a year ago, and just last month sales showed a significant pick up.
Additionally interest rates are low and the government seems to be stepping up to the plate in it's
efforts to truly stem the tide of foreclosures.
Barring any additionally significant hits to the economy and financial markets and a continuance of
the sales activity, and it's likely the market is close to an equilibrium between buyers and sellers.
Reading the real estate tea leaves is all about looking at the supply and demand of and for
homes. Just like every other object in society, when demand is greater than supply, values or
costs go up, and vice versa when supply is greater than demand.
The decreasing supply of homes, combined with an increased sales pace, and the significant
price reduction from the high point tells me the market is no longer at it's worse. Homes prices
may still have some slight declines in various sub-markets but the days of significant declines are
over (again barring any more significant disruptions to the economy). If the number of homes for
sale drops below 11,000 I would expect to see home values firm up and in some markets
increase a bit.
In reality you won't see "the market has bottomed" in the news until months after it has occurred.
Looking at the sales and listing count statistics will show that fact long before anyone announces
it. Finding good deals now is simply about looking for them. Many homes are listed at prices that
make fundamental sense, i.e. rent vs. own. Be sure not to follow the herd mentality and wait for it
to be common knowledge that the housing market has stabilized. Getting their before it's common
knowledge is the best way to get a great deal on a home.
Simply crunch the numbers and if it makes sense for you then it likely makes sense for many
others, don't wait for the headlines to tell you prices have bottomed or you'll miss a good
opportunity to buy real estate at prices that are low enough to create monthly costs comparable to
rent (after tax advantages), which is typically rare and only happens every 10-20 years.
7/22/08 -
An article in Todays' Union Tribune regarding foreclosure activity showed
foreclosures increased in June.
http://www.signonsandiego.com/news/business/20080722-1200-bn22default.html
The important part of the article is the date range of the foreclosures. Once the full batch of bad
deals goes through the foreclosure process we will then start to see daylight about 6 months later
via declining inventory levels.
"A majority of the loans in default were originated between September 2005 and November 2006
and involved multiple loans on a single property."
We are nearing the end of the "bad deal" loans, the one's causing the incredible foreclosure
activity which is the fuel for the over supply of homes for sale. Homes selling in the latter part of 07
and all of 08 were not sold at bubble prices and therefore won't likely be ending up as
foreclosures. Additionally the lenders reduced what they would lend on the properties and to
whom they would lend to qualification wise.
Additionally, approximately 2400 houses and condos sold in each of the last 3 months, so there
are always buyers. Once the buyers out number the sellers, inventory will decrease. More and
more buyers will get off the fence once the foreclosure numbers start declining and this will create
an inventory decline which, in addition to the drying up of the foreclosure inventory for sale will feed
the inventory decline further. There also won't be much new construction since the builders have
been decimated, so it will take a while for new home inventory to enter the market.
The silver lining to this housing debacle might be that it has a clear bracket of "bad deals", and
they have and are all falling fast. Meaning it's just a matter of working them through the system and
there is only so many of them.
Prices won't go too much lower than the fundamental value of a property because there are droves
of bottom feeders, especially in the housing market...so there is an undisputable bottom, and it's
not pennies on the dollar, it's not much, if any, lower than the best price deals are at today. (the
best priced 3-5% of homes for sale)
A few more NOD's and I think we are on our way. Prices dropped hard and fast which leaves us
with good prices and good opportunities for tangible real appreciation in something everyone
needs and wants, a home.
An article in Todays' Union Tribune regarding foreclosure activity showed
foreclosures increased in June.
http://www.signonsandiego.com/news/business/20080722-1200-bn22default.html
The important part of the article is the date range of the foreclosures. Once the full batch of bad
deals goes through the foreclosure process we will then start to see daylight about 6 months later
via declining inventory levels.
"A majority of the loans in default were originated between September 2005 and November 2006
and involved multiple loans on a single property."
We are nearing the end of the "bad deal" loans, the one's causing the incredible foreclosure
activity which is the fuel for the over supply of homes for sale. Homes selling in the latter part of 07
and all of 08 were not sold at bubble prices and therefore won't likely be ending up as
foreclosures. Additionally the lenders reduced what they would lend on the properties and to
whom they would lend to qualification wise.
Additionally, approximately 2400 houses and condos sold in each of the last 3 months, so there
are always buyers. Once the buyers out number the sellers, inventory will decrease. More and
more buyers will get off the fence once the foreclosure numbers start declining and this will create
an inventory decline which, in addition to the drying up of the foreclosure inventory for sale will feed
the inventory decline further. There also won't be much new construction since the builders have
been decimated, so it will take a while for new home inventory to enter the market.
The silver lining to this housing debacle might be that it has a clear bracket of "bad deals", and
they have and are all falling fast. Meaning it's just a matter of working them through the system and
there is only so many of them.
Prices won't go too much lower than the fundamental value of a property because there are droves
of bottom feeders, especially in the housing market...so there is an undisputable bottom, and it's
not pennies on the dollar, it's not much, if any, lower than the best price deals are at today. (the
best priced 3-5% of homes for sale)
A few more NOD's and I think we are on our way. Prices dropped hard and fast which leaves us
with good prices and good opportunities for tangible real appreciation in something everyone
needs and wants, a home.
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Prestige Properties & Finance
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07/01/08 -
Three months in a row of respectable sales numbers, Inventory still high,
Financing still difficult....a silver lining?
After a slow first quarter, San Diego had a respectable 2nd quarter of home and condominium
sales. The first quarter MLS numbers show 4,506 sales and the 2nd quarter numbers show
6,936 sales. The inventory has remained about the same, currently at 18,737, meaning more
homes were listed for sale but more homes also sold during the quarter. Financing has remained
on life support.
The silver lining is that even though there is constant negative press about home values and the
housing market, the worst financing market as far as access to loans in 25 +/- years, and
numerous other significant issues going on, homes are selling at a pace that reduces the supply
to only an 8.1 month supply of homes. And this is a 3 month average not 1 odd month worth of
numbers, some sub markets even have less than a 5 months supply of homes for sale based on
that markets monthly sales pace versus number of homes for sale. These numbers don't make it
a "seller's market" by any means but they are pretty decent considering all the circumstances, and
show the true demand for housing is strong.
If the future sales pace can continue to keep pace or be higher than the future new inventory
numbers then eventually the supply will dry up and swing the market the other way. Financing is
the key, buyers are ready and willing, but many are not able to purchase due to the restrictions in
the finance markets.
The market that controls the availability of financing is the same market that suffers from
foreclosures. The finance market is so weak right now that it can't help itself avert it's own future
losses by issuing more credit to bottom the housing market out and allow home buyers to buy the
very homes the finance markets need to sell to keep their loan portfolio's from worsening.
For home buyers it is overall good news as the financing market will get back on it's feet and most
home buyers like today's prices a lot more than they like the prices of 2 years ago.
05/22/08 -
Sales and Foreclosures are up, what does this mean to home values?
The facts: Two recent articles in the Union Tribune tell the accurate tale of two markets in San
Diego.
UT Article: Home Sales Up
UT Article: Foreclosures Up
On one hand San Diego homes and condominiums sold at a much faster pace in April than they
did in Jan., Feb., or March, additionally a quick search on the MLS shows that May's numbers are
closer to April's than the Jan-Mar average #'s. Demand is up.
On the other hand the number of homes actually foreclosed on in May also went up, along with the
NOD's (notice of defaults) and NOT's (notice of trustee's sale), which are future indicators of
foreclosures that will occur in the next 3-9 months depending on the particular stage of foreclosure
the home/owner is at (NOD, NOT, or closer to the Auction Day). Supply is up.
Why does it seem the market is gaining steam in both directions? Because it is.
The reason sales are picking up is because prices are down as much as 35% on some homes,
with many others down 30%,25%,20%, and so on. The average for San Diego home value decline
is said to be about 19% as of now. This has made many homes equal to or cheaper than rent for
anyone who pays income taxes and can write off the interest and property taxes. Effectively there
are many homes currently priced at true fundamental values, i.e. buying a home is equal to or
cheaper than renting the same type of home.
The reason foreclosures are picking up is that when you combine a severe across the board
home loan lender tightening, with a significant drop in home values (19%), daily record high gas
prices, heighten job insecurities, and a few other national and global issues a few years after a
batch of no and low qualifying 100%LTV home loans there is going to be a lot of defaults in the first
few years on them.
What does it mean for prices?
In general the best priced 10% of homes listed on the MLS in San Diego are truly fair to good
deals with regards to the fundamentals. These homes, which include a lot of foreclosures being
resold by the foreclosing lender are receiving between 3 and 5 offers each. The best priced 10% of
the market is a seller's market, and you shouldn't expect these prices to go lower based on the
amount of offers they are recieving, unless of course there is consistent further weakening in the
variables that affect home prices (employment, financing, inflation, etc..).
And, since the increase in supply has been met with increased demand, it's essentially a wash at
this point in time and has had no real additional effect on prices. The overall total number of
listings in San Diego hasn't moved in as long as I can remember the stats., roughly 10-12 months,
staying at about 18,400 listings for detached and attached homes (homes & condominiums).
The bottom line:
The inventory of homes for sale including everything, All current MLS listings, foreclosure auctions,
and every other home currently for sale pales in comparison to the number of people who want to
own homes and investment properties. It's all about price.
There are plenty of buyers for homes today at the right prices and an additional supply of these
well priced homes and condominiums (read foreclosures) won't push prices down much further if
at all, unless something gets worse beyond simply the next batch of foreclosures on the horizon.
Real Estate Crystal Ball:
18 months of stagnant prices untill the excess inventory gets absorbed and then back to
appreciation since the supply of new homes came to an abrupt halt during this downtown, and
there won't be much new inventory to satisfy demand. Then we do a 10 or 15 year boom and bust
cycle all over again, except in a higher value range of top and bottom market prices. The next cycle
likely won't be as bad since it will likely take the investment bankers 10 years to forget their past
mistakes before they repeat them in some fashion.
Happy hunting!
04/01/08 -
When to buy a home in the current market?
This of course is a seasoned real estate agent's favorite question. They have the same solid
answer every time. "Now is the time to buy, Real Estate has always gone up in value!" It's true, you
can twist the numbers to show values have gone up every year, but this isn't really the correct
answer.
The real answer lies in the fundamentals of those boring numbers that indicate whether it's truly
a good deal or just a "good deal" in the current frenzied market. The fundamentals would have
said not to buy for the past many years, yet no one paid any attention to them. New "fundamentals"
include imagined things like "demand", no matter how unexamined its origins or the likelihood of
continuance would be.
Where your goal is to come out ahead, the fundamentals should be the deciding factors when
buying any type of real estate. . The fundamentals are basic, easy to figure out, and rarely change.
There are only good deals in approximately 4 percent of the properties currently listed for sale.
However there is still some cost uncertainty in determining “how low they will go” with respect to
home values. Good fundamentals equate to financial logic, but in today’s market turbulence, logic
can take a while to prevail.
To answer the question directly, I would only buy properties at foreclosure prices that make
fundamental sense, and only if I planned to own the property for at least 5 years. Most of the
properties for sale in San Diego County that fit this criteria can be found here.
03/15/08 -
”Mortgage Mess”- What does it mean to San Diegan's?
Regardless of what it’s called, ”mortgage mess, meltdown, collapse, etc.”, it’s unfortunately true.
The free flow of financing to anyone with a heartbeat has turned out to be a bad idea. Home
appreciation quickly turned into depreciation and left millions of homes with loans larger than the
home’s value. In a vast majority of cases the homeowner is simply walking away from the home.
This has had a devastating effect on the finances and confidence of the very investors needed for
liquidity in the mortgage markets to prevent the situation from getting worse. The double whammy
of artificially high home values and loose lending has created a very uncertain market.
However, the delivery of approximately 500 billion dollars of capital from the Federal Reserve to
investment bankers and commercial banks at dirt-cheap interest rates (think 2-3%) has softened
the blow. But the jury is still out on how bad things will get, how fast it will play out, and how long it
will take to be on the boom side of things again.
As a result there will be a severe tightening of lending standards, possibly even beyond common
sense standards, which will restrict the buyer pool even more so than it reasonably should.
For San Diegan's as well as the rest of America it means fewer choices and more difficulties in
obtaining financing, larger down payment requirements, higher rates versus what a normal
market of similar conditions would warrant, and generally a tougher environment for everyone
involved in the short and medium term.
However, long term it represents a needed market correction and once "the bottom" is reached
the fence sitters, buyers waiting and watching for the absolute bottom to hit will provide a healthy
dose of underlying confidence in the value of Real Estate clearing out the bargains and helping the
market return and settle at fundamental values. This will intern help with confidence in the capital
markets for bonds secured by mortgage debt, i.e. your home loan.
Three months in a row of respectable sales numbers, Inventory still high,
Financing still difficult....a silver lining?
After a slow first quarter, San Diego had a respectable 2nd quarter of home and condominium
sales. The first quarter MLS numbers show 4,506 sales and the 2nd quarter numbers show
6,936 sales. The inventory has remained about the same, currently at 18,737, meaning more
homes were listed for sale but more homes also sold during the quarter. Financing has remained
on life support.
The silver lining is that even though there is constant negative press about home values and the
housing market, the worst financing market as far as access to loans in 25 +/- years, and
numerous other significant issues going on, homes are selling at a pace that reduces the supply
to only an 8.1 month supply of homes. And this is a 3 month average not 1 odd month worth of
numbers, some sub markets even have less than a 5 months supply of homes for sale based on
that markets monthly sales pace versus number of homes for sale. These numbers don't make it
a "seller's market" by any means but they are pretty decent considering all the circumstances, and
show the true demand for housing is strong.
If the future sales pace can continue to keep pace or be higher than the future new inventory
numbers then eventually the supply will dry up and swing the market the other way. Financing is
the key, buyers are ready and willing, but many are not able to purchase due to the restrictions in
the finance markets.
The market that controls the availability of financing is the same market that suffers from
foreclosures. The finance market is so weak right now that it can't help itself avert it's own future
losses by issuing more credit to bottom the housing market out and allow home buyers to buy the
very homes the finance markets need to sell to keep their loan portfolio's from worsening.
For home buyers it is overall good news as the financing market will get back on it's feet and most
home buyers like today's prices a lot more than they like the prices of 2 years ago.
05/22/08 -
Sales and Foreclosures are up, what does this mean to home values?
The facts: Two recent articles in the Union Tribune tell the accurate tale of two markets in San
Diego.
UT Article: Home Sales Up
UT Article: Foreclosures Up
On one hand San Diego homes and condominiums sold at a much faster pace in April than they
did in Jan., Feb., or March, additionally a quick search on the MLS shows that May's numbers are
closer to April's than the Jan-Mar average #'s. Demand is up.
On the other hand the number of homes actually foreclosed on in May also went up, along with the
NOD's (notice of defaults) and NOT's (notice of trustee's sale), which are future indicators of
foreclosures that will occur in the next 3-9 months depending on the particular stage of foreclosure
the home/owner is at (NOD, NOT, or closer to the Auction Day). Supply is up.
Why does it seem the market is gaining steam in both directions? Because it is.
The reason sales are picking up is because prices are down as much as 35% on some homes,
with many others down 30%,25%,20%, and so on. The average for San Diego home value decline
is said to be about 19% as of now. This has made many homes equal to or cheaper than rent for
anyone who pays income taxes and can write off the interest and property taxes. Effectively there
are many homes currently priced at true fundamental values, i.e. buying a home is equal to or
cheaper than renting the same type of home.
The reason foreclosures are picking up is that when you combine a severe across the board
home loan lender tightening, with a significant drop in home values (19%), daily record high gas
prices, heighten job insecurities, and a few other national and global issues a few years after a
batch of no and low qualifying 100%LTV home loans there is going to be a lot of defaults in the first
few years on them.
What does it mean for prices?
In general the best priced 10% of homes listed on the MLS in San Diego are truly fair to good
deals with regards to the fundamentals. These homes, which include a lot of foreclosures being
resold by the foreclosing lender are receiving between 3 and 5 offers each. The best priced 10% of
the market is a seller's market, and you shouldn't expect these prices to go lower based on the
amount of offers they are recieving, unless of course there is consistent further weakening in the
variables that affect home prices (employment, financing, inflation, etc..).
And, since the increase in supply has been met with increased demand, it's essentially a wash at
this point in time and has had no real additional effect on prices. The overall total number of
listings in San Diego hasn't moved in as long as I can remember the stats., roughly 10-12 months,
staying at about 18,400 listings for detached and attached homes (homes & condominiums).
The bottom line:
The inventory of homes for sale including everything, All current MLS listings, foreclosure auctions,
and every other home currently for sale pales in comparison to the number of people who want to
own homes and investment properties. It's all about price.
There are plenty of buyers for homes today at the right prices and an additional supply of these
well priced homes and condominiums (read foreclosures) won't push prices down much further if
at all, unless something gets worse beyond simply the next batch of foreclosures on the horizon.
Real Estate Crystal Ball:
18 months of stagnant prices untill the excess inventory gets absorbed and then back to
appreciation since the supply of new homes came to an abrupt halt during this downtown, and
there won't be much new inventory to satisfy demand. Then we do a 10 or 15 year boom and bust
cycle all over again, except in a higher value range of top and bottom market prices. The next cycle
likely won't be as bad since it will likely take the investment bankers 10 years to forget their past
mistakes before they repeat them in some fashion.
Happy hunting!
04/01/08 -
When to buy a home in the current market?
This of course is a seasoned real estate agent's favorite question. They have the same solid
answer every time. "Now is the time to buy, Real Estate has always gone up in value!" It's true, you
can twist the numbers to show values have gone up every year, but this isn't really the correct
answer.
The real answer lies in the fundamentals of those boring numbers that indicate whether it's truly
a good deal or just a "good deal" in the current frenzied market. The fundamentals would have
said not to buy for the past many years, yet no one paid any attention to them. New "fundamentals"
include imagined things like "demand", no matter how unexamined its origins or the likelihood of
continuance would be.
Where your goal is to come out ahead, the fundamentals should be the deciding factors when
buying any type of real estate. . The fundamentals are basic, easy to figure out, and rarely change.
There are only good deals in approximately 4 percent of the properties currently listed for sale.
However there is still some cost uncertainty in determining “how low they will go” with respect to
home values. Good fundamentals equate to financial logic, but in today’s market turbulence, logic
can take a while to prevail.
To answer the question directly, I would only buy properties at foreclosure prices that make
fundamental sense, and only if I planned to own the property for at least 5 years. Most of the
properties for sale in San Diego County that fit this criteria can be found here.
03/15/08 -
”Mortgage Mess”- What does it mean to San Diegan's?
Regardless of what it’s called, ”mortgage mess, meltdown, collapse, etc.”, it’s unfortunately true.
The free flow of financing to anyone with a heartbeat has turned out to be a bad idea. Home
appreciation quickly turned into depreciation and left millions of homes with loans larger than the
home’s value. In a vast majority of cases the homeowner is simply walking away from the home.
This has had a devastating effect on the finances and confidence of the very investors needed for
liquidity in the mortgage markets to prevent the situation from getting worse. The double whammy
of artificially high home values and loose lending has created a very uncertain market.
However, the delivery of approximately 500 billion dollars of capital from the Federal Reserve to
investment bankers and commercial banks at dirt-cheap interest rates (think 2-3%) has softened
the blow. But the jury is still out on how bad things will get, how fast it will play out, and how long it
will take to be on the boom side of things again.
As a result there will be a severe tightening of lending standards, possibly even beyond common
sense standards, which will restrict the buyer pool even more so than it reasonably should.
For San Diegan's as well as the rest of America it means fewer choices and more difficulties in
obtaining financing, larger down payment requirements, higher rates versus what a normal
market of similar conditions would warrant, and generally a tougher environment for everyone
involved in the short and medium term.
However, long term it represents a needed market correction and once "the bottom" is reached
the fence sitters, buyers waiting and watching for the absolute bottom to hit will provide a healthy
dose of underlying confidence in the value of Real Estate clearing out the bargains and helping the
market return and settle at fundamental values. This will intern help with confidence in the capital
markets for bonds secured by mortgage debt, i.e. your home loan.
11/14/08 -
Where is the bottom for San Diego Housing?
With all of the upheaval taking place in the financial, housing, employment, energy, and other U.S.
and World markets it can be difficult to see through the fog to understand what makes sense,
especially when it comes to buying a home. “Have we hit the bottom?” you might ask.
Unfortunately the answer sometimes isn’t simply a yes or no. Once a market gets near the peak
or the valley (the high value or the low value point) for the current Real Estate or market cycle, the
sub-market variables will begin to take over. Housing moves as a whole when prices are rising or
falling by larger percentages such as the period from 2006 to 2008 when they were consistently
falling each quarter. Once the majority of the reduction in overall market value has happened the
sub-market fundamentals begin to take over.
There are 60 different cities in San Diego and many variations to the housing stock and
homeowners within them. Each city’s prices have fallen different levels and even more so they
have fallen differently on different home types within each city. Essentially there are a few hundred
sub-markets between the U.S./Mexico border and Camp Pendleton, San Diego’s southern and
northern borders. Within each sub-market there have been major price reductions, with some
price reductions more severe than others.
For example in Eastlake where they built 1,000’s of new homes for the past many years there
were lots of buyers during the boom and now there are a lot of foreclosures from the bust. These
factors have driven down prices faster and created a market where one can buy a 3 or 4 year old
home with as little as 3% down and have monthly housing costs very similar to what they already
pay in rent. Many of the homes for sale in this area receive 3 or more offers on them because of
those basic facts, essentially many housing types in Eastlake have reached the valley, price wise.
On the other hand there is Rancho Santa Fe having only 11 home sales via the MLS compared to
it’s 260 homes for sale. Eastlake had 51 home sales in October compared to it’s 274 homes for
sale. Clearly Rancho Santa Fe has not reached it’s bottom yet, whereas Eastlake looks to be on
solid ground. One market has a 2 year supply of homes at current prices and the other has a 5.5
month supply, thus they will have different market bottom periods, and so every other San Diego
sub-market.
So the answer to the question of “Have we hit bottom” is Yes, and No….it just depends on where
and what type of home your looking for. More specifically it depends on the deal your getting, even
Rancho Santa Fe has good deals, it's just that most of the homes aren't good deals yet.
The best view to take is that if you find a home that makes fundamental sense when comparing
renting versus owning or with income vs. expenses for investors, then you can count on it being a
good investment over time an unlikely to go much lower in value or for any real length of time.
It’s very important to note that there are other benefits to buying a home and every extra benefit
conceivably costs something, when trying to compare rent vs. own you may want to look for similar
costs and not necessarily exact matching costs.
Where is the bottom for San Diego Housing?
With all of the upheaval taking place in the financial, housing, employment, energy, and other U.S.
and World markets it can be difficult to see through the fog to understand what makes sense,
especially when it comes to buying a home. “Have we hit the bottom?” you might ask.
Unfortunately the answer sometimes isn’t simply a yes or no. Once a market gets near the peak
or the valley (the high value or the low value point) for the current Real Estate or market cycle, the
sub-market variables will begin to take over. Housing moves as a whole when prices are rising or
falling by larger percentages such as the period from 2006 to 2008 when they were consistently
falling each quarter. Once the majority of the reduction in overall market value has happened the
sub-market fundamentals begin to take over.
There are 60 different cities in San Diego and many variations to the housing stock and
homeowners within them. Each city’s prices have fallen different levels and even more so they
have fallen differently on different home types within each city. Essentially there are a few hundred
sub-markets between the U.S./Mexico border and Camp Pendleton, San Diego’s southern and
northern borders. Within each sub-market there have been major price reductions, with some
price reductions more severe than others.
For example in Eastlake where they built 1,000’s of new homes for the past many years there
were lots of buyers during the boom and now there are a lot of foreclosures from the bust. These
factors have driven down prices faster and created a market where one can buy a 3 or 4 year old
home with as little as 3% down and have monthly housing costs very similar to what they already
pay in rent. Many of the homes for sale in this area receive 3 or more offers on them because of
those basic facts, essentially many housing types in Eastlake have reached the valley, price wise.
On the other hand there is Rancho Santa Fe having only 11 home sales via the MLS compared to
it’s 260 homes for sale. Eastlake had 51 home sales in October compared to it’s 274 homes for
sale. Clearly Rancho Santa Fe has not reached it’s bottom yet, whereas Eastlake looks to be on
solid ground. One market has a 2 year supply of homes at current prices and the other has a 5.5
month supply, thus they will have different market bottom periods, and so every other San Diego
sub-market.
So the answer to the question of “Have we hit bottom” is Yes, and No….it just depends on where
and what type of home your looking for. More specifically it depends on the deal your getting, even
Rancho Santa Fe has good deals, it's just that most of the homes aren't good deals yet.
The best view to take is that if you find a home that makes fundamental sense when comparing
renting versus owning or with income vs. expenses for investors, then you can count on it being a
good investment over time an unlikely to go much lower in value or for any real length of time.
It’s very important to note that there are other benefits to buying a home and every extra benefit
conceivably costs something, when trying to compare rent vs. own you may want to look for similar
costs and not necessarily exact matching costs.
| Licensed by the California Dept. of Real Estate. License #01153458 An equal opportunity Real Estate & Finance Company. All information deemed reliable but not guaranteed. |
| Prestige Properties & Finance, a Real Estate & Mortgage Broker 2658 Del Mar Heights Road, Suite 207, Del Mar, CA 92014 Ph. 858-484-3446 :: Fax 858-484-3577 |
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Home Buying 101
Home Buying 101 Terms
Get the Best deal
Foreclosures 101
Pre-Foreclosures 101
Short Sales 101
San Diego Market Opinion
San Diego Market Stat's
Best Real Estate Deals!
4/1/2010 -
Has the bottom already past?
13 months past the low point in median home prices (February 2009 - $285,000)
and home values seem to have largely stabilized, increasing over 5% since the
"bottom" in February of 2009. Inventory is not very high, with only 10,044 homes
listed on the San Diego MLS for sale. The "flood of homes for sale" has never
really materialized and the banks have begun to process short sale approvals and
REO sales quicker and closing times have sped up as a result.
New California tax credits overlap Federal tax credits for the month of April,
providing home buyers who open escrow in the month of April a double tax
incentive to buy a home Tax Credit Details .
Home prices are likely to remain at their lows in the short run and will pick up when
positive economic news begins to come out about the economy.
The following information is often more important than recent sales prices of
comparable homes when pricing your next home and will help you determine
whether a home is a good deal or not.
1) Cost Per Sq. Ft. - When market prices fluctuate by large amounts the market
tends to lose sight of the fundamental value of assets. A home is the most common
large asset in the market place. The cost to create that home by buying a piece of
land and building a home on that land is what actually establishes the cost value
for a home. When the listed sales price for an existing home is equal to, or lower,
than the cost to buy the land and build a similar home, you can be very confident
that the listed sales price is a good price and a good investment.
2) Rental Costs -Comparing the monthly rental cost versus the monthly cost of
owning a similar home (minus tax deductions), helps establish the income value of
any home. If it is less expensive to own a home than it is to rent a similar property,
then buying is an obvious good deal based solely on the home's ability to pay for
itself. (This factor is best applied to homes under $1,000,000, but also works on
many homes above that price point.)
Most importantly - Use Logic, Not Emotion...Because It's Best at the Worst
Time - Markets for most assets move up and down based on the news of the
moment. And the news of the moment is simply a report of what has already
happened, not what's going to happen. With real estate, prices generally go down
when the number of homes sold is lower than the month prior; and prices go up
when the sales numbers are reported higher than the previous month’s. Most home
buyers thinking about buying a home choose to do so when they hear good news
about housing and pause when they hear bad news. Therefore home prices tend
to be at their lowest when the market seems at its worst, which is in fact the best
time to buy. An excellent recent example of this is February 2009 (the low point for
San Diego median home prices) which was the period when the economy appeared
to be in its worse shape, and it was the best time to buy!
Has the bottom already past?
13 months past the low point in median home prices (February 2009 - $285,000)
and home values seem to have largely stabilized, increasing over 5% since the
"bottom" in February of 2009. Inventory is not very high, with only 10,044 homes
listed on the San Diego MLS for sale. The "flood of homes for sale" has never
really materialized and the banks have begun to process short sale approvals and
REO sales quicker and closing times have sped up as a result.
New California tax credits overlap Federal tax credits for the month of April,
providing home buyers who open escrow in the month of April a double tax
incentive to buy a home Tax Credit Details .
Home prices are likely to remain at their lows in the short run and will pick up when
positive economic news begins to come out about the economy.
The following information is often more important than recent sales prices of
comparable homes when pricing your next home and will help you determine
whether a home is a good deal or not.
1) Cost Per Sq. Ft. - When market prices fluctuate by large amounts the market
tends to lose sight of the fundamental value of assets. A home is the most common
large asset in the market place. The cost to create that home by buying a piece of
land and building a home on that land is what actually establishes the cost value
for a home. When the listed sales price for an existing home is equal to, or lower,
than the cost to buy the land and build a similar home, you can be very confident
that the listed sales price is a good price and a good investment.
2) Rental Costs -Comparing the monthly rental cost versus the monthly cost of
owning a similar home (minus tax deductions), helps establish the income value of
any home. If it is less expensive to own a home than it is to rent a similar property,
then buying is an obvious good deal based solely on the home's ability to pay for
itself. (This factor is best applied to homes under $1,000,000, but also works on
many homes above that price point.)
Most importantly - Use Logic, Not Emotion...Because It's Best at the Worst
Time - Markets for most assets move up and down based on the news of the
moment. And the news of the moment is simply a report of what has already
happened, not what's going to happen. With real estate, prices generally go down
when the number of homes sold is lower than the month prior; and prices go up
when the sales numbers are reported higher than the previous month’s. Most home
buyers thinking about buying a home choose to do so when they hear good news
about housing and pause when they hear bad news. Therefore home prices tend
to be at their lowest when the market seems at its worst, which is in fact the best
time to buy. An excellent recent example of this is February 2009 (the low point for
San Diego median home prices) which was the period when the economy appeared
to be in its worse shape, and it was the best time to buy!