San Diego Home Values … Good News, But Still Declining
San Diego home values seem to have slowed their rate of decline. From December to January San Diego homes saw a 2.6% decline according to Case-Shiller/Standard & Poor's most recent data. Yet, the San Diego home value drop from January to February was only 1%!
Bob Toll stated recently that, other than in the worst four markets in the country (Southern Cal, Las Vegas, Phoenix, and Florida) they are seeing a firming of the housing market and expect an upswing in activity (and prices) sometime over the summer months. He said that inventories have largely been absorbed in most markets. He said the four afore mentioned locals have a ways to go before stabilization due to their large excess inventories of housing stocks.
Keep in mind, if you reduce housing prices 30% and reduce interest rates from 7% to 5%, you have just reduced the payment level on a 30 year fixed rate mortgage by 45% – what wasn't affordable suddenly become quite affordable.
That's the good news, the flip side, is that for the year San Diego home values fell 22.9%
There are still billions of dollars worth of 'liars loan' alt-a mortgages that have yet to reset and will perform even worse than subprime. You cannot even begin to think of a bottom when we have yet to pass the bulk of these alt-a resets.
Not to mention the hundreds of thousands of units of shadow inventory owned by banks but yet to be put up for sale.
What about declining incomes and employment levels.
It's going to be hard for a bottom in housing to come without a bottom in job numbers and an increase in wages.
Anyone who points to the latest Case-Shiller data as an indication of a housing turnaround is really grasping at straws.
We are merely at the normal "Spring" inflection point. As soon as the normal selling season hype wears off (probably by July) housing prices may resume their crushing descent downward. Housing is an incredibly slow-moving asset class, so don't worry that you will miss the bottom (it may well be 1 – 2 years off).
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Thank you for the clear-eyed assessment of the ‘bottom’. I am not a realtor but I am often guilty of the sin of ‘independent thinking’. I keep hearing that we may have reached bottom, the stock market seems to believe the bottom has been reached, but it makes no sense to me whatsoever that this might be the case.
I have been citing to family and friends the very facts you mentioned – of course residential real estate activity ticks upward in the spring, what about all the alt-A liar loans that are just beginning to move through the bowels of our economy, what about all that shadow inventory we already have which is depressing prices even for good homes in good neighborhoods with excellent schools, what about the utter lack of jobs and downward pressure on wages and non-wage compensation – as well as the commercial real estate implosion. Oh, and the fact that a ‘normal’ recession typically takes 18 to 24 months to find its bottom, and this is anything but a ‘normal’ recession. The bottom may be within sight but we are almost certainly not there yet.
As if that isn’t exciting enough, let’s hope there’s stability in foreign affairs (no major terrorist attacks, no armed conflict in the Middle East) we try to maneuver through this minefield. I’m a big supporter of Pres. Obama, but I also would like to think I’m not viewing him with rose-colored glasses. He has done some very positive things thus far such as inspiring confidence and hope in Americans in these tough times (no small thing, that) and turning away from the belligerence and bull-headed unilateralism of his predecessor. But he’s ‘only’ the president; he doesn’t have the power to magically dissolve the toxic assets and bad debts burdening our economy and he has not been in office long enough for us to even see the results of his policies, let alone judge those results.
Personally, I think the stock market is going to be in for a rude wake-up call later this summer or early fall, and I’m preparing to act accordingly. Sell high, buy back in low. Something I wish I had had the wisdom to do last August.
(Yes, I know what they say about fighting the last war.)
Thanks again for the clear-headed analysis and for tolerating this long comment!
San Diego real estate
No matter how one looks at it, there’s always going to be housing markets that are overhyped. If somehow those markets can support whatever the hype is all about, the real estate price will remain high. If they don’t then house prices will plummet. A typical example of the latter is Southern Cal (San Diego and the Southern OC come to mind). SF is in an unusual situation. RE prices will continued to go up as long as people are willing to blow their money on housing, even if it’s exorbitantly overpriced. Meanwhile, the city’s infrastructure is crumbling. That can only go that far. As more and more middle-class people and families abandon SF, the city will be stuck with the hyper-rich and the indigent, neither of which will contribute much (or anything) to the tax-base. The moneyed rarely have any desire to plow money into their “beloved” city, and the indigent don’t have any. My bets are on “going down”.
San Diego clinical research
It seems San Diego has gone from boom to bust overnight..
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