San Diego Home Sales Figures – Not All That They Seem
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  San Diego Home Sales Figures – Not All That They SeemÂ
By Bob Schwartz brokerforyou.com ©2006 all rights reserved.
This material is subject to copyright and any unauthorized use, copying or mirroring is prohibited
Reviewing the recently released real estate sales data for San Diego, the lay person might conclude that the June home appreciation figures were down approximately 1% as compared to June 2005. The reality is the decline is probably much closer to three or five times the published figures!
The reasons for this are really quite apparent when one considers the following facts:
1. The appreciation figures cited are the MEDIAN sales prices. The upper-end, luxury home market has been extremely strong in Southern California and is relatively immune to increasing interest rates. It operates totally apart from the rest of the real estate market. The sales of these upper-end luxury estates skew the MEDIAN appreciation sales data.
A far more accurate figure would be the AVERAGE sales price. Alternatively, data should exclude, or make million dollar plus sales a separate category.
2. The reported sales data does NOT take into consideration incentives used by not only major builders, but, in today’s market, by the majority of San Diego home sellers, to entice scarce buyers to purchase their properties.
Just open up the Sunday real estate section of your local paper and the magnitude of these incentives becomes quite apparent. Just a few incentives I noted in my July 23, 2006 paper: $15,000 closing cost credit and $25,000 towards an interest rate buy down or upgrades; $50K to help pay your mortgage; seller pays interest portion of your new loan payment for first 6 months, all non-recurring closing costs, plus 12 months of HOA fees. I could go on, but, you must understand that the builders are not being altruistic. No, they just want to move standing inventory, and move it now before any further declines!
While on the subject of builder incentives, it was just a little over a year ago that the majority of builders were not even co-operating with real estate agents. Now, the builder/agent cooperation has gone 180 degrees plus! Typically, builders offer two or 2.5% co-op commissions. Now, San Diego agents are being invited to catered brunches and offered co-op commissions up to 5%, as advertised in the July 23, 2006, Union-Tribune!
The purchase incentive phenomenon is not by any means the exclusive domain of new San Diego homes. Actually, I would say the majority of individual homeowners are also being forced into the incentive game. Though not many are offering incentives from the start of their marketing, after six to eight weeks on the market the idea becomes more appealing. Even without offering any incentives, the majority of offers are now being presented with buyer incentives built-in as a condition of sale!
A year ago one would be hard pressed to find any individual San Diego home sellers or major new home builder offering incentives. Now, it is just these incentives that also skew the appreciation data.  A $500,000 home sale with a $25,000 interest rate buy-down/closing costs package incentive will be recorded as a $500,000 sale. Yet, the $500,000 sale, in reality was only $475,000 or 5% BELOW the reported sales data!
So if the $500,000 sale was just 1% below the June 2005 median appreciation, you can see that the ‘real’ difference was 6% below last year!
Other factors not being mentioned in the press that are important to our market direction are:
Typically the period from late March through September is the strongest for San Diego real estate sales. What does both a huge and continuing month over month sales decline and now a home appreciation drop, during this ‘hot’ time, portend for the market as it enters the weaker Fall/Winter period? Lastly, the bulk of the interest only, 100% loans used to prop up our market for the last few years, has two or three year time periods until the re-amortization (at the current prevailing interest rates) of the loan balances. The majority of these interest rate adjustments will occur in 2007 and 2008.
In my opinion, this is no ‘return to normal’ or ‘slight correction’ to the San Diego real estate market. By year’s end there will be no denying we will experience a double digit appreciation decline.  A decline that will take years, not months, to work itself out.
*Note -This material is subject to copyright and any unauthorized use, copying or mirroring is prohibited      Â
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About the Author:
Bob Schwartz is a Certified Residential Specialist, San Diego real estate broker with http://www.Brokerforyou.com in San Diego Ca. & co-owner of specializing in domain name registration & Internet domain website hosting. Bob’s San Diego real estate blog is: https://www.brokerforyou.com/brokerforyou
About the Author:
Bob Schwartz is a Certified Residential Specialist, San Diego real estate broker with http://www.Brokerforyou.com in San Diego Ca. & co-owner of specializing in domain name registration & Internet domain website hosting. Bob’s San Diego real estate blog is: https://www.brokerforyou.com/brokerforyou
Official 2nd. Phase of Real Estate Bubble is Upon Us
Federal Reserve Chairman Ben Bernanke told Congress Thursday that the once high-flying housing market appears to be staging a safe landing.
This marks the ‘official’ start of the typical 2nd phase in what is sure to be a major real estate price decline.
1st Phase – Denial. No decline, bubble talk just nonsense, market stable to strong, just back to normal etc.
2nd Phase – Consensus is that it is a ‘softening’ market, a great time to buy, just going into a ‘pause to refresh,’ time to pick up a ‘bargain’ when compared to last year! General attitude of ‘it does not affect me; I do not have to sell.’
3rd Phase – Market down 20%+! Buyers very scarce, homeowners realize that a huge percentage of their equity has evaporated! Finally, homeowners realize using their homes equity as their piggybank has a dramatic downside. Â Even a modest drop in interest rates will not prevent the forces that have been set into motion. The ideal weather of San Diego cannot mask conquences of over exuberance about real estate values.
4th Phase – Stabilization of the market, setting the stage for better times.
Note…Phase four will NOT occur in a few months, but may well be years from now. We have had ten years of an up real estate market. The last five years were marked by double digit appreciation propped up by adjustable rate, 100% interest only loans. It’s going to take time to work this out.
To search the entire San Diego MLS, visit brokerforyou. We also have a newer downtown San Diego real estate site as well as a San Diego for sale by owner and Del Mar real estate site.
San Diego Real Estate Market Direction
Below is an article I had published 11/17/05. Now eight months later, with the 1st. reported home drop in San Diego Real Estate in about 10 years, it may be time to re-read this article:
 — A Trend to Go National?
by Bob Schwartz
Bob Schwartz ©2006 all rights reserved.
This material is subject to copyright and any unauthorized use, copying or mirroring is prohibited
Well, just a few short months have passed and a current read of the Sunday homes section of the San Diego Union Tribune shows that though the real estate market does not make discernible moves in a day like the stock market, a couple of months can easily define the local real estate trends.
Here are just a few of the incentives noted in the home section of a very recent Sunday’s paper: 4 percent broker co-op, free plasma screen TV, $1,000 off closing costs, $2,500 in design center upgrades, $10,000 in incentives, one year HOA fees paid, $5,000 in closing costs, $2,000 closing cost credit, washer, dryer & refrigerator included, $25,000 in incentives or cash price reductions, $1,000 gift certificate, and no HOA fees for 2 years!
The grand opening long buyer lines, multiple offers, offers above the asking price and homes selling within days of being listed are just fond memories now. However, due to the huge home appreciation all San Diego real estate has seen, with the average home up 100 percent in the past 5 years, combined with the boom in 100 percent adjustable/interest only loans, the stage is set for what is sure to be mind-numbing depreciation.
This market did not turn on a dime. Back in June our year to date sales were off 6.1 percent. More importantly, our monthly comparison for June ’05 vs. ’04 showed a 12.3 percent reduction in sales. Also, the average days on the market for this same period, showed a 56 percent increase for detached homes and an astonishing 280 percent increase for attached homes! All this at a traditionally and seasonally strong marketing period. These figures were published by the San Diego Association of Realtors and are taken only from properties listed in the MLS.
According to the California Association of Realtors, only about one in 10 households in San Diego can afford to buy a median-priced, single-family resale home with a 30-year, fixed rate loan. Combine the above, with the multiple Fed interest rate increases and the proliferation of EZ qualification, 100 percent interest only financing, and the stage has been set for not just a ‘return to normal,’ but a major change.
When I first entered the real estate business the current philosophy was that if anyone asked, “How is the real estate business” the standard reply was “Fantastic!” A lot has changed in the last 20-something years. Many real estate agents still follow this ‘everything is coming up roses’ mindset. In the San Diego real estate market where I work, the average sale is over $500k. My clientele are very knowledgeable and I have yet to work with one who does not have Internet access at their home.
So, sure it’s great to be optimistic about your real estate market place, but ignoring the obvious trends will cost you in both money and reputation. It was about five years ago that the mantra was that this was a new paradigm and the stock market no longer followed the old rules of valuation. We were soon to reach Dow 20,000! Hopefully, you missed that costly over-enthusiasm. The result was such a drop that five years later we finally may be building a base.
What I’m saying is be up-front and truthful with your clients, especially sellers. In just one hot area here the last few sales showed huge drops in the actual sales price vs. the original listed price. In one case this difference was $100,000 or just about 20 percent of the listed price. The other differences were about 9 percent of the listed price. Personally, I attribute these huge reductions mainly to the agent’s inability to see that our market has turned. When you tell your seller that the real market is fantastic, it’s a little tough to get multiple price reductions.
Yes, we have started on the down leg of the typical ‘Bell Curve’ and the probability of surpassing our approximate 20 percent drop in San Diego home values experienced from 1990 through 1996, seems assured. Plus, as real estate trends seem to start in the West and then move east, any U.S. real estate market that experienced huge price appreciation the past five years, will experience the same depreciation in real estate residential values.
This material is subject to copyright and any unauthorized use, copying or mirroring is prohibited
60% Jump in San Diego Foreclosure Notices!
Notices of default – the first step toward mortgage foreclosure – jumped 60 percent in the San Diego region in the first three months of this year, compared with the first quarter of last year DataQuick analyst John Karevoll characterizes the increase, the largest since 1992, as “a potential blinking yellow light on the dashboard.”
Softer market means adjusting selling price
Real Estate: Softer market means adjusting selling price
BY ANNE STRAUB
FOR FLORIDA TODAY Selling a home in a buyer’s market takes flexibility and patience, and Arlette Wallace is demonstrating both.Wallace put her West Melbourne home on the market at $407,000, then lowered the price to $394,000, then dropped it again, to $382,900.
“You have to do what you have to do,” said Wallace, who plans to leave Florida and move near her family.
She compares today’s real estate market to the stock market of the 1990s when frenetic activity pushed prices to unrealistic levels, and the bubble burst.
Washington Mutual cuts 900 jobs
Washington Mutual Inc., one of the big players in the California mortgage market, said on 7-13-06, it is cutting another 900 jobs to save money, and outsourcing some of that work.
The cuts are the latest in a series of major layoffs at Washington Mutual, which has struggled with slowdowns in the mortgage industry and is trying to slash overall costs. The layoffs were announced internally Wednesday.
In May, the Seattle savings and loan cut 1,400 jobs, and in February it cut 2,500 jobs. In 2004, the company also cut 2,500 jobs.
The latest cuts are in the company’s retail banking and home loans group.
View every home in the San Diego MLS visit brokerforyou today!
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Home Value Drop Larger Than Shown!
Some, reading yesterday’s post on the 1% San Diego home value may at first think that it’s only 1% as reported. But, the ‘real’ story is that for many months now, the top purchasing incentive used both on resales and new construction has been the big incentives. Yes, it is almost standard to offer closing costs, a year or two of HOA dues, kitchen appliances and more to move the properties. The 1% price drop noted in the lasted Dataquick report DOES NOT take these incentives into account in their sale numbers. I would venture to say there purchase incentives may add an additional 1-2% to the ‘real’ value decline.Â
Search every San Diego MLS listing at www.brokerforyou.com San Diego homes.Â
San Diego Home Prices Fall!
For June ’06, the median home price in San Diego fell for the first time in nearly a decade and sales tumbled in Los Angeles County, according to just released real estate figures.
The median price of all homes sold in San Diego last month fell 1% from the same month last year to $488,000, according to DataQuick Information Systems.
The importance of this, is that the traditionally strongest real estate marketing time is from May through August. For a price drop to occur now,
can only be a harbinger of a much more pronounced drop as we enter into Fall/Winter.
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I’m not selling my San Diego home, but have sold all my investment properties.
If one considers the BILLIONS in adjustable loans due for their first adjustment in 2007/8 combined with the huge percentage of 100%loans used to purchase at the height of our market….you have to worry!
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But, than again what is so bad about a 20-30% decline in values if we are coming off 100% increase over the last five years?
I’ll answer my own question….nothing so bad as long as you were not speculating, purchased beyond your means or refinanced you property at 90% or more of its high value.
Newer real estate sites: La Jolla real estate – Del Mar real estate – Poway real estate – Sacramento real estate – San Francisco real estate – Orange County real estate – San Jose real estate – Los Angeles real estate
Real estate bust evident
Growing evidence of real-estate ‘bust’
Fallout for consumers and corporate profits, eonomist says
By Chris Oliver, MarketWatch
Last Update: 11:35 AM ET Jun 29, 2006
HONG KONG (MarketWatch) — Evidence is mounting that the global property cycle is turning down, as rising interest rates and heightened inflationary pressures combine to put the brakes on demand for real estate, according to a Morgan Stanley report.
The shift ushers in an end to what’s been a six-year rally during which the twin forces of globalization and financial innovation fed an upturn in the property cycle that became a worldwide phenomenon, said economist Andy Xie, in an Asia Pacific strategy report released Thursday.
“Due to deflation shocks, global inflation has been low, which allowed major central banks to keep interest rates very low, in turn fueling property,” Xie said. “As inflation picks up simultaneously around the world, interest rates are rising everywhere, and the property boom is turning into a bust.”
The economist singled out Japan’s real-estate market as a notable exception, but he cautioned it might not be far behind in following global prices downward.
Two San Diego real estate sites of note are: downtown San Diego real estate and San Diego for sale by owner.
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