Home prices drop largest on record(special mention SD) (San Diego: for sale, real estate market)

[tigerclaws]

Here is the yahoo link. Lehman brothers are expecting a 15% drop by 2009 from the highs that were set around 2006.

Home price drop largest on record - Yahoo! News (broken link)

SD is showing a drop of around 9.6% yoy.
Florida is the hardest hit state, with prices in the Tampa and Miami areas down 11.1 percent and 10 percent respectively over the past year, the indexes show. Home prices around San Diego, California, and economically depressed Detroit, Michigan declined by 9.6 percent over the 12-month period

Good for the buyer, bad for the seller. Overall more good for the economy in the long run (since anything artificial and unrealistic is not good for the economy).

[kettlepot]

I don't dispute the percentage drop in the report, as I can see evidence of price declines of this magnitude all around in my own neighborhood since the market peaked in the 4th quarter of 2004. However, what I do find is that the reporting in these indices include a serious time lag, that is not always evident. They rely on reported numbers, but there is the time required for the data to be gathered nationwide, for it to be recorded at the tax assessors, the time required for escrow and closing and the time taken to negotiate the deal. Therefore, these statistics are a better indicator of what the market was like 4 to 6 months ago not today. To judge the state of the market today, requires going out and seeing what's sitting on the market and kind of guessing.

My estimate for San Diego is that from the peak 4Q 2004/1Q 2005 to the trough, we'll see an over all price decline of 20%. I think we are close to bottoming out in 2008 in many areas of San Diego county. After that, prices will probably just sit there for several years at these new lower levels. Already, landlords are finding that they can increase rents faster than inflation, and obviously faster than the declining prices of "For Sale" housing, so the two markets, "For Sale" and "Rental" are moving towards re-establishing their traditional relationship. We are nearer to the bottom than we are from the top.

[tigerclaws]

Hi Kettle,

I agree with you in that the real estate market is a lagging indicator of the economy in general (unlike the stock market or any exchange which is a leading indicator). But the fact of the matter is, reports like these do affect the perception of the people and the perception drives the market so in effect it becomes a self-fulfilling prophecy.

By reading reports like these, buyers will further postpone their purchases. Sellers usually do not have this kind of luxury (many do but a lot of them are selling because of relocation or interest rate reset or other exteneous circumstances) and as a result there should be drops expected for the next few quarters in the least. The only exception is if the job market picks up in San Diego in which case more people moving into SD area which increases the % buyers in the market.

Ofcourse all this logic is complex economics and the future indeed is very difficult to predict.

[NYSD1995]

It's all impossible to predict. My thinking is that people would rather have stability than anything else. After a couple of years of flat / falling home prices, the people on the sidelines will most likely start buying. At some point you face the prospect of renewing a rental lease for another year and making that decision every year gets old.

Right now there is no stability, so everyone just sits outside the market watching and waiting. However, I would say that this is probably the best time to get a killer deal, because once stability comes, prices may be lower, but not low enough to really matter.

The next 1-2 years should basically play out the rest of the cycle, and barring some major local economic disaster, I don't see much happening that's not already happening today - slow market, flat to falling prices.

[Huckleberry3911948]

good post by all posters. good thread
every time this happens in san diego everybody talks like its the first time. its not.
its a 8 - 10 year cycle. no winter no weather, assuming no sumani,
it will be up again. the sky is not fallin, please go home chickin lickin and get some sleep. the folks that really get upset bout this stuff are the ones that do a refi every 6 months to support their consumer habit. kick the habit. its not the season to be jolly its the season to save some money for a rainy day.

[tigerclaws]

I agree, most speculative markets run in cycles. Real estate should not be speculative but was made out to be because of over zealous "investors" (fly by night operators in my books) and access to creative financing. These factors are not out of the market (atleast for the next 3-4 years I guess), so demand is definitely not going to be as strong.

The only demand will be the organic demand from people who are actually living there or new ones who are moving in. All in all, the salaries have to justify the cost of buying a home not to mention stability in the housing markets. Until this is achieved the demand will be flat translating into falling prices (especially in over heated markets like Miami, LV, San Diego to name a few. Detroit is suffering because of loss of jobs).

And I agree with bunky in that as long as you manage your debt wisely you should be fine. Refinancing every once in while to buy the new hydrogen powered BMW (buying a depreciating asset in my mind) will only lead to ruin in the long run

[jcp123]

In a selfish way, I'm glad to hear this. Would love to move to SD, if housing flattens out a little it may open up an opportunity...

[pete4sandiego]

Great information and personal views of the market. I might just add that we can't totaly blame the consumer but instead the lenders who made it possible for them to get access to money. Investing is part of the economic cycle, unfortunately however every Tom, Dick and Harry out there in wanna be investors land tried to dabble in something they know little about...some got lucky and made money, but unfortunately a lot got burned. True investors know the cycle and know when to get in and when to get out, even use different strategies for each different market.

Creative financing predominantly takes places in a down market, not in a hot one. True investors use these creative financing techniques in a market such as the current market. They ride out the storm for 5-10 years and sell high when the market comes back. And the market always does come back.

[tigerclaws]

October foreclosure filings surge - Nov. 29, 2007

More foreclosures are expected in 2008 as more number of resets are expected to happen then. I guess this malady will go on well into 2009.

I feel bad for those people that were ill-adviced by their brokers/agents and who will now have their credits ruined for the next decade.

[sdurbanite]

Originally Posted by Bunky39

good post by all posters. good thread
every time this happens in san diego everybody talks like its the first time. its not.
its a 8 - 10 year cycle.

Exactly! Those who were here in back in '99 should remember when San Diego was one of first cities to experience rapidly appreciating home prices, while other remained stagnant (ie, LA, Seattle, Phoenix, etc). Obviously, the natural cycle is that our home prices will be the first to drop.

San Diego is different from it's sunbelt peers (Dallas, Houston, Atlanta, etc) where home prices will always remain low and fairly stagnant. Can you imagine what this place would be like if home prices averaged between $150,000 and $170,000? What a mess this place would be....