San Diego Real Estate to Drop 20% in 2009?
With the industry talk of a possible San Diego bottom to the real estate market, is now the time to buy San Diego homes? It’s very possible they are correct! Who can really say? Everyone likes to be optimistic. With three years of a falling San Diego real estate market and home values that at 40 to 50% off their 2005 market highs ,we might see a market turn in 2009.
Sadly, I have my personal doubts on a significant San Diego real estate market reversal in 2009. I sincerely hope I'm wrong on this, and there is, in fact, a rebound next year.
Though it's not talked about much, there is another huge number of homes that may be newly heading into foreclosure which may accelerate the housing value decline. (There is a large number of regular adjustable loans resetting next year – for more information read: (Jumbo Financing and the Impact on The San Diego Real Estate Market.) If this occurs in the numbers forecast, San Diego home values could be down another 20-30% in 2009.
So, is it correct that if you buy today and plan to hold for at least five years you'll come out way ahead? Being just a local San Diego real estate broker and not an economist, I really cannot answer this question with any conviction. All I will say is that my three decades of real estate experience, and knowledge of the San Diego housing market, I can assure my clients that I will endeavor to achieve the best possible value, buying or selling, San Diego homes.
Prior related posts:
San Diego Real Esate Sales Increase
San Diego Condominium Sales Price Appreciation
29% of Homeowners Have Larger Mortgage Than Home’s Value
Real Estate Record Home Price Declines
San Diego Real Estate – 5th Largest Decline Through July
Southern California Home Prices Drop 34% in August
San Diego California Home Sellers Lose Big
The San Diego California Real Estate Great Depression
Yale Professor … House Price Decline Could Be Worse than Great Depression
Survey Says Home Values Must Fall Another 14%
California Home Sales Up 43.4% – Home Prices Down 40.3%
Home Value Loss … Homeowner Perception vs. Reality
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Owning a home is not the be all and end all. In fact, for a fair number of people renting is a much better choice. A house can be an albatross that is hard to dispose of. It certainly limits your mobility. The government is making a mistake trying to maximize home ownership with it’s easy money policies.
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Future inflation will not manifest itself in the ways it did in the past. There will not be wage inflation due to a global labor market. The new inflation will result in higher prices for goods and services, but this won’t be offset by higher wages. So you will see an erosion of your standard of living. Housing prices won’t appreciate at the inflation rate because people won’t be able to afford higher prices for housing due to the fact that their incomes aren’t increasing at the same rate. Employers don’t need to increase wages because lower cost labor is available abroad. This is unlike the situation in the 1970s when there was both wage and price inflation. Now we will get only price inflation.
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Property prices are only beginning to tumble. They will stabilize when they finally hit or surpass equilibrium value as determined by their P/E Ratio.
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When I saw how the housing prices were going up, up, up and most peoples’ salaries didn’t pay enough to afford them, I knew the market was going to crash three or four years ago. Some real estate dealers and owners were just so incredibly greedy. They ask for a sales price or rent not based on how much they really need to charge to recover their expenses and make a reasonable profit, but on getting the maximum money for themselves, without regard for the effect on society.
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At the start of this debacle I thought the bankers had found a cheap and dirty way to get into the real estate business. That is: take the extra cash from the unwashed, leave them with debt and rent them the house they thought they were buying. As it turns out, either the American financial guru’s were asleep in Econ101, or the science of Economics is crap. I never could figure out the “consumer based economy,” apparently, neither have the financial folks. J.P. Morgan once quipped; “I can hire half the workers to kill the other half.” To his credit he never tried. Lenin and Trotsky one-upped Morgan by proving that they could talk workers into killing capitalists for free. I don’t know how this will turn out, but I am not sure that poverty is as bad as advertised.
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The 80/10 loan: You bought a house you can’t afford. Why should the bank bail you out? Jeez, you took out 2 loans because 1 bank knew you could not afford the house you wanted.
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The genesis of this meltdown is the outrageous decriminalization of usury by the United States Congress which allowed predatory lending at stratospheric interest rates, and the perversion of the Internal Revenue Code, rewarding layoffs of American workers, outsourcing of their jobs to the cheapest wog-land labor market, and the offshore relocation of fat-cat corporations with little or no tax liability. Home buyers are mostly what are known in the securities business as unsophisticated investors and when they have gotten sucked into adjustable rate mortgages just so they could get a tiny piece of the American Dream, little did they know that this most predictable of economic disasters would be laid mostly upon them. Congress is a club of millionaire whore lobbyists, run by big-money lobbyists. Example of how we’ve been screwed: the infamous Senate Bill 256, which forbids the discharge of medical and credit card debts, condemning its victims to a lifetime of fiscal misery.
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To those who think only low income people are losing their homes. WRONG….middle-class folks are losing their homes MORE than low income folks are. I think it makes some people feel good to try to put a rationale on this that it has to be people with low income, than to accept the fact that it is middle income folks more so.
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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”.
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They are raising interest rates to shore up the banks. They don’t care diddlysquat about the struggling homeowners. The rising interest rates now will cause more with adjustable mortgages to go into default. This is just a temporary slowing and even if the slow figure holds, the bottom line is more people are going to default despite bailing out Fannie Mae which is basically giving money to the foreign investors like China and Russia. Let them default! The price of housing NEEDS to go down another $200,000! Why should our tax dollars and the Federal Treasury print monies to devalue our dollars to keep people in overpriced housing they could not afford to begin with? They can walk away now and buy cheaper homes.
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