San Diego Home Prices

San Diego real estate double dip

The just released Case-Shiller home-price index showed that home prices fell in 18 of 20 cities in March. The only two cities to show slight increases were Washington, D.C., and Seattle.

The Case-Shiller home-price index  is now below its April 2009 mark.  What this is saying is that home prices have given back all gains they showed from May 2009 through June 2010. This confirms that the U.S. housing market is in a double-dip downturn.

Here is a how a selected few of the 20 cities in the index did over the past year: Phoenix, down 8.4%;  Seattle, down 7.5%; Tampa, Fla., down 6.9%; Charlotte, N.C., down 6.8%; Miami, Fla., down 6.1%; Las Vegas, down 5.3%;  San Francisco, down 5.1%; San Diego, down 4.0%;  Los Angeles, down 1.7%;  Washington D.C., up 4.3%.

Why the big up-tick for Washington?  The Government is the biggest employer in D.C. and they have been increasing Government at a break neck pace.  Originally the stimulus was supposed to go 85% to business and 15% to government. As usual with government projections, the reality was quite different from the projection. Many economists feel that the distribution of the stimulus money was exactly the reverse of the projections, with just 15% going to job creating business. Now we are reaping the results of this policy. The housing market needs a good job market environment providing not only new jobs, but, increased stability in existing jobs.

If you are you surprised by this news, perhaps you should get a free subscription to this blog (look at the upper right side of this page ). On July 7, 2010, I posted “San Diego real estate 2010 2nd. Half Outlook … double-dips” where I predicted the San Diego real estate market was headed for a double dip. In my 12-25-10 post entitled “San Diego Real Estate Market 2011 Outlook“, I said:” I’ll wrap things up by saying I personally do not see any real base building in the San Diego real estate market until 2012.”

The main-stream media likes to foster the ‘good times ahead’ outlook on the housing market, at least here in San Diego. The real estate ‘insiders’ typically interviewed for their opinion on breaking real estate news always seem to be owners/agents of large brokerages and representatives of state and national real estate associations. What do you really expect these people to say? Keep in mind, the real estate industry is a sales industry, where optimism trumps reality.

Did these industry ‘insiders’ raise any red flags prior to the San Diego real estate market top in the Summer of 2005? Here is what they said then: It’s a buying opportunity – This is a pause to refresh – With lessening competition, buyers can get a good buy if they act fast, There is no housing bubble – There is only so much real estate in San Diego. so don’t miss this opportunity to get in now. What are these same insiders saying now about missing the biggest housing market bust in collective memory? Well, they say “Who could have forecast such an economic downturn?”  In reality, the housing market was the leading indicator of the economic melt-down.

California is based in part on fantasy.  It’s a shame to see so many have their dreams and financial portfolios derailed by the fantasy that California/San Diego real estate could not suffer any substantial decline. After numerous government plans to address the housing dilemma, they have all been dismal failures; instead of changing, they continue. The really troubling aspect of this is now the first whispers from government officials that the American dream of home ownership is really not best for the masses. It seems the government is slowly introducing the idea that renting is now the best way to go.

Personally, I say to not give up the American dream of home ownership. It is a pillar of our capitalistic system and makes the U.S. the envy of many nations.  We will recover from this housing bust, but it will not be a sharp turnaround. Our housing recovery will take years of base-building … then slow and gradual housing appreciation will reoccur.