By Bob Schwartz, CRS, GRI, San Diego real estate
broker
�2007
Broker For You
All rights reserved.
Last week I was asked about my forecast for the San Diego real estate market.
When I receive real estate questions I am asked my real estate outlooks, I
consistantly answer the same way. Whether my clients are buying or selling, the
only thing they can be guaranteed is that I will get them the best possible
price for current market conditions. I have had over three decades of
residential real estate experience in New York, New Jersey and California, and
since I'm not paid for my personal opinion on the market or its direction, I'm
certainly not afraid to convey that opinion.
Truthfully, the San Diego California real estate market peaked its high point in
the summer of 2005. Since then, a number of neighborhoods have been in decline!
This is a fact and not an opinion! In today's market, many San Diego
neighborhoods have even had double digit value declines! As indicated by a local
San Diego Union Tribune newspaper dated 3-18-2007, the subsequent resale homes
in these neighborhoods have encountered median home value decline since February
2006. 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. This
produces a 15% decline amounting to an $82,500 loss! With my history in San
Deigo real estate, I can produce a fair hypothesis on the upcoming future of the
market. My take on the background of the current market expressed is that in the
immediate future we should experience a seasonal sales pick up in activity. This
should keep on for a few months, and then I believe that the downward trend will
re-establish itself. That trend will not only continue, but is likely to
increase as the popular adjustable rate mortgages from the last few years come
up for their first adjustments. In the end, I believe San Diego housing values
couldeffortlessly be down 25 to 30% from their summer 2005 values by the end of
2007.
During the year ended January 31, there were 13,249 homes in default for
foreclosure in San Diego County, as maintained by RealtyTrac in Irvine,
California. This was a 192% jump from the previous year and the defaults and
foreclosures are up 131% statewide and 42% nationally. Compared with one in 229
homes for last year, one in 79 homes in San Diego County is in default or
foreclosure this year.
The average San Diego home escalated approximately 20% per year from 2000-2005,
or 100% for the five year period. San Diego real estate has kept its buying
frenzy for at least two or three years past when it would have normally ceased.
It is my belief that this has taken place because of the zero down, stated
income, low start rate loans, and the sub prime loans. Now unfortunately, as
with any frenzy, it's payback time.
Originally, many said there was no bubble and that it was always a good time to
buy real estate; how could you fail when investing in real estate? Today, many
of those same people obviously have changed their tune. Now the existing opinion
is that our �correction� in San Diego home values is finished and both real
estate sales and home values will be increasing from here.
Alas, I find it problematical to agree with this majority opinion, considering
that San Diego was named the piggyback loan capital of the US just a few years
past. I must clarify that our general activity pick up is just seasonal in
nature. I believe the complete impact of both the sub-prime loans and all the
easy qualifying loans is still a few months off.
It's great to be positive and when working with high net worth individuals, it's
my opinion that you must provide a truthful opinion on the market. This is
especially critical when dealing with sellers because being overly optimistic
here could be a sure ticket to an expired listing.
To further explain, our local San Diego MLS is complete with price reductions,
increased commissions and buyer motivations. What can you do when the original
price you agreed upon with your a seller ends up being reduced by $20,000,
$30,000, or even $50,000? How do you tell them that the market increase was
looking very strong, but now you'll have to reduce their selling price?
A very important fact to remember is that 95% of making a property sold is
correct initial pricing. It is especially important to price properties right
from the beginning in this market.
So I certainly hope I'm wrong. I hope that this San Diego up-tick in housing
sales is actually the bottom to our market. But if I'm right, having a home sit
on this deteriorating market for 3 to 6 months or even longer will begin to make
most sellers to lose. They will lose far more in actual cash value than if they
would have priced the property correctly from the beginning.
In conclusion, giving a seller a practical view of the existing real estate
market and the critical importance of �right-on� pricing will net more for the
seller. Also, proper initial pricing may avoid a lengthy listing period, marked
by large price reductions, and possibly ending in an expired listing.
ABOUT THE AUTHOR
Bob Schwartz, is a Certified Residential Specialist, CA licensed real estate
broker with www.Brokerforyou.com. Bob
has over 27 years of residential real estate experience, authored a number of
published articles and served as an expert witness for
San Diego legal firms. You can contact Bob via
e-mail at brokerforyou@gmail.com or visit his highly popular
San Diego real estate website at:
http://www.brokerforyou.com
This work is protected under copyright and may not be published in other works without express written permission
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