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30
Apr

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%

San Diego home values

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).