The #1 Most Important Factor in Selling a Home & San Diego Real Estate Outlook

The #1 Most Important Factor in Selling a Home

San Diego Real Estate Outlook  

                                                By Bob Schwartz, CRS, GRI, San Diego real estate broker

Last week I received an e-mail asking about my predictions for the San Diego real estate market.  When asked real estate opinions, I always tell my clients that the only thing I can assure them of is getting them the best possible price whether buying or selling, for the current market conditions!  I'm not paid for my opinion on the market or its direction.  With that said, I'm certainly not afraid to express my opinion developed over three decades of residential real estate sales in New York, New Jersey and California. 

The reality is, the San Diego California real estate market saw its high point in the summer of 2005.  Since then, the majority of neighborhoods have been in decline!  This is a fact and not an opinion!  Today, many San Diego neighborhoods have had double digit value declines!  From the local San Diego Union Tribune newspaper dated 3-18-2007, here are a few selected median home value declines just since February 2006, for resale homes in these San Diego neighborhoods: La Jolla 15.6%, Pacific Beach 15.8%, North Park 15.8%, Ocean Beach 19.1% and San Carlos 19.1%. 

Keep in mind, the average San Diego median home price is over $550,000.  So, a 15% decline is an $82,500 loss!  With my take on the background of the current San Diego real estate market expressed, my opinion on the immediate future is that we are now in a seasonal sales pick up in activity, which should last for a few months. Then, I believe that the downward trend will re-establish itself and not only continue, but is likely to accelerate as the popular adjustable rate mortgages from the last few years, come up for their first adjustments.  Yes, San Diego housing values could easily be down 25 to 30% from their summer 2005 values by the end of 2007.

According to RealtyTrac in Irvine, California, during the year ended January 31 there were 13,249 homes in default or foreclosure in San Diego County.  This was a 192% jump from the previous year.  The defaults and foreclosures are up of 131% statewide and 42% nationally.  One in 79 homes in San Diego County is in default or foreclosure compared with one in 229 homes for the previous year.

From 2000 to 2005, the average San Diego home appreciated approximately 20% per year or 100% for the five year period.  It's my opinion that because of the zero down, stated income, low start rate loans, and the sub prime loans, San Diego real estate market maintained its buying frenzy for at least two to three years beyond which it would have normally ceased.  Now unfortunately, as with any frenzy, it's payback time. 

At first, many said there was no San Diego real estate bubble. They said it was always a good time to buy real estate; how could you lose investing in real estate?  Now, many of those same people obviously have changed their tune.  Now the prevailing opinion is that our ‘correction’ in San Diego home values is over and both real estate sales and home values will be increasing from here! 

Unfortunately, I must take issue with this majority opinion, considering that San Diego was named the piggyback loan capital of the US just a few years back. I must clarify our current activity pick up is just seasonal in nature.  I believe the full impact of both the sub-prime loans, and all the easy qualifying loans are still a few months off.

It's great to be optimistic!  When dealing with high net worth individuals, it's my opinion that you must give a realistic opinion on the market.  This is most critical when dealing with sellers. Being overly optimistic here could be a sure ticket to an expired listing. 

Our local San Diego MLS is full of price reductions, increased commissions and buyer incentives. For a current ‘real-time’ view of the San Diego MLS homes for sale, you can visit: San Diego MLS listings, if the hyper-link does not work, just cut & paste the following link in your browser:  http://www.brokerforyou.com/san-diego-real-estate-mls-home-listings.htm

How do you tell a seller that a $20,000, $30,000 or $50,000 reduction is necessary when you told them at the listing appointment how strong the market pickup looked?

It’s a fact that 95% of getting a property sold is proper initial pricing.  In this market, it is especially imperative to price properties right from the start. 

I hope I'm wrong and that this San Diego up-tick in housing sales is really the bottom to our market. If not, having a home sit on the market 3 to 6 months or longer in deteriorating market will cause most sellers to lose far more in actual cash value than if they would have priced the property properly from the inception. 

In conclusion, giving a seller a well grounded view of the current real estate market and the critical importance of ‘right-on’ pricing will net more for the seller.  Further, proper initial pricing may avoid a lengthy listing period, marked by large price reductions, and possibly ending in an expired listing.