San Diegos’ ‘Downward Sales Trend Accelerating’
One reader wants to know if you’ll use a realtor. “I would like others opinions on if they plan on using RE Agents in the future. I know I have grown to loathe them. I don’t want to support anyone who has been a cheerleader for this bubble.”
“Perhaps we can start a list of agents and appraisers who have been vocal about/against the bubble so we can give our business to the right people?”
Here’s a straight shooting guy. “San Diego Housing Market; single family detached and attached: Inventory increases and demand declines continue. Sales finished the month at 2,844 homes sold versus 3,885 sold in March 2005, down 28%. Based on the March pending sales of about 3,100, April is forecast to be down from last April’s 4,134 by 25%. This downward trend in sales began in earnest in the last quarter and seems to be accelerating.”
“The first quarter sales were 6,743 sold versus 8,905 in the same period last year. This is down about 25% year to year. Typically the first quarter makes up about 22% of annual sales, if this holds true this year we are on track to sell 30,650 homes this year.”
“This compares with 41,122 in 2005 and 42,876 in 2004. This is a far bigger drop than I expected, I was thinking more in the 35,000 range which I thought might cause some problems.” “This drop in sales is happening at the same time that inventory continues to grow; we are now at 17,833 about 6 months supply.”
“The average price for the month was $635,775, up 11% from last March. Don’t get excited or misled, prices did not go up. The under $500,000 sales made up 45% of the sales volume versus 55% last year, this mix change pushed up the average price because of the sale of more expensive homes. This is not due to a lack of homes for sale, the under $500,000 inventory stands at about 8,300, 158 days supply, or 47% of total inventory.”
“The rise in interest rates, especially the ARM’s has had a dramatic impact on the San Diego market. Consider that 67% of all loans in San Diego are ARM loans, compared to 35% nationally and that 50% of total loans are interest only ARM’s. The overwhelming majority of buyers in our market are faced with major increases in the cost of home ownership. This combined with the overall San Diego pricing structure is chasing potential buyers out of the market.”
I have been reading Bob Casagrand’s San Diego market commentary since last summer, and he has always been a straight-shooter.
Managed to find the needle in a heystatck (sort of speak)
OT but I just wanted to say that it’s a beautiful day here in Salinas today. And it’s even better because I’m a renter, so my wife and I drove the 25 miles into Carmel today for a wonderful morning to mid-day. The best part is we can’t afford to live there and especially pay the property taxes there but we can drive over and make use of all the amenities free of charge….the best of both worlds…outside dining, beautiful ocean, clean air…..didn’t see Clint today though.
do some calling around for a real estate attorney with a brokers license. sellers commission paid to selling agent (your RE Attorney with brokers license) can only be credited back in escrow if attorney has states brokers license. Attorney will charge by hour. I found one who will do it for $300.00 and a minimum of 4 hours to walk me through signing documents from there you need an escrow company, home inspector, termite and insurance company and a Costco nearby so you can spent sellers 2 or 3 points that would have been paid to your buying agent applied to your closing costs. this should work in california.
Is this one of those situations where your taking a flight to mars first to spit on the sidewalk. This makes absolutely no sense. Why go thru all that. When all you need to do on any deal FSBO or agent represented is ask for a credit back. Your so intent on screwing the agent your screwing yourself and leaving 3% of the purchase price on the table because most lenders will allow for a 6% credit back.
It’s amazing the one’s who are screaming kill the agent are the ones who could use them the most or a good criminal attorney to keep them out of jail once they screw themselves. I’d put odds the agent is cheaper than the attorney.
who said for sale by owner? I’m saying finding a listing on MLS.
You obiviously didn’t read the reply. Try it again
Having purchased FSBOs in the past I assure you that in Ca. the Escrow agents will see that all is ship shape.
Save that money, no one likes paying someone to be a spectator to a transaction. Including the Atty.
@ Salinasron, what is the majority business in Salinas? I was there once on the way to Monterery and PG and the only things i saw there was farm land.
Only thing there is a bunch of ILLEGAL ALIENS. They could put a net arround Salinas and get rid of 150,000 in one go. Then there would be plenty of affordable housing for the REAL US citizens.They should work their way south and east doing the same thing in Gonzales, Soledad, and Greenfield before they tackle Watsonville, San Jose, and San Juan Batista/Hollister. Probably 750,000 illegals
Yea it really doesn’t pay to be an illegal anymore all the good jobs have been sent to the countries they left. Go figue. They would probably be better off moving back woking for an american company.
Probaby the same pay and same working conditions but they may actually be able to take cae of families buy houses and all the other stuff they came over here for.
but no one thinks that is a problem….criminals
OT 2, but Ben wanted to share my interesting mail today. One was from a mortgage broker who learned of my home being for sale from my agent. She was trying to drum up business on our next purchase. Don’t remember being solicited for 1st 2 purchases so I was thinking they’ve got some time on their hands.
The second was even better. A “special invitation” w/2 complimentary VIP tix worth $69…oooh booooy! to a real estate investing conference. The company is based out of Provo, UT and was making the rounds thru central NY and Burlington, VT. Dale West and Wayne Gray are the “multi-millionaire experts” who are going to share their secrets. So I’m wondering how many people think their trolling for suckers.
http://www.financialsense.com/fsu/editorials/mchugh/2006/0311.html I THINIK IT BEHOOVES EVERYONE WHO EARNESTLY SEEKS TO UNDERSTAND WHAT IS HAPPENING TO OUR COUNTRY AND REAL ESTATE TO READ THIS VERY IMPORTANT ARTICLE….IT FORTELLS WHAT THE FED IS …AND WILL BE DOING …GOD SPEED TO ALL…THANKS FOR A GREAT INFORMATIVE SITE….
BUT YOU DON’T NEED M-3 TO KNOW WHERE THE FED IS SENDING THE NEW MONEY–THE FED REPORTS ALL OF ITS ACTIVITY AND BALANCES ON A DAILY BASIS. M-3 DOES NOT TELL YOU WHAT THE FED IS DOING.
I was looking for that article yesterday. Thanks for posting the link. I agree with you that eveyone should read it. It shows how the feds thru the bank examiners can add a new front to the their efforts to contain (and deflte/pop) the housing bubble.
A major point to add to the realtors analysis:
If a house is listed at $1.5 million, but gets reduced to $999,999, the ‘median’ price still goes up, or remains the same.
This important to remember when looking at median price numbers.
Therefore, it is probably a very, very good assumption that the downward trend is accelerating even faster than he assumes.
From my observations, the houses that are selling are the ones that have either been reduced the most, or whose homeowner agreed to a significantly lower sales price- down dramatically from list.
Under my analysis, prices have already begun falling.
It will probably be at least 7-8 months before we begin seeing full-on YOY median price declines.
Of course by then, this will all come as a ’shock’ to the general public, who has a very, very hard time understanding how it happened.
The media won’t alert the public to the coming shock, because the media is restricted to reporting facts of the moment.
It’s pretty hard to explain how homes are already losing value in a three minute package.
No shock there! It will be an anomaly. What will be a shock is when it happens 3 years in a row.
Then the public will finally understand that home prices can fall for an extended period.
It will then be a good time to buy.
I drove into Pacific Beach yesterday to pick up my laundry, and broke into laughter at the sight of a giant yellow weather balloon several hundred feet in the air with “Condos” printed on it. I don’t think the marketing genius behind this ploy understood the symbolism.
“The overwhelming majority of buyers in our market are faced with major increases in the cost of home ownership.”
With the new increase in fed rates, now alot closer to 7%, I think the pain in only starting.
With the Fed trapped between keeping rates low and needing to keep rate high so the governement can keep borrowing money, real estate as we currently know it is dead.
Simmsays…
http://www.AmericanInventorSpot.com
AmericanInventorSpot.com
That shock factor baffles me. How can it come as a shock?
We were talking today about a relative who just backed out of a suicide loan for a 980k mcmansion and it turns out that a couple cousins now want to go ahead and buy the house she backed out of… WTF?
Really? people REALLY don’t do a little research when they are about to sign up for a million dollars worth of debt?
These people researched for weeks and weeks when deciding on a digital camera, and they tried out everyone’s camera that they knew… they did months and months of research when deciding what vehicle to buy… but they do no research beyond talking to real estate agents and mortgage lenders when going full hock into several lifetimes of debt? (based on what they make)
They better not have even the slightest look of shock on their faces when the fertilizer hits the ventilator or I will have to smack it right off….
Make sure to let those cousins know that they, instead of social security, will be funding someones retirment with their purchase.
And while that retiree is basking in the sun at the beach, they’ll be working three jobs, and probably getting divorced, in a vein attempt at making their upwardly adjusting payments.
It’s sad what people will do to themselves just to look ‘cool’ in front of their friends.
If their friends told them to jump off a cliff…
…your cousins would gladly jump without looking…
…grinning foolishly all the way down to the rocks below.
well actually these cousins didn’t ask me a darn thing… and I figure at their age, and the fact that they KNOW I will tell the truth… they can’t HANDLE the truth and they don’t want it.
All the more reason that it will feel kind of satisfying when it all comes down to nod and smile and look away.
The family member who backed out of the deal came and asked me what I thought first… I told her what I learned in that basic economics 1 class they make you take before graduating college… and then I pointed her to a few good websites… She backed out. I know she shared her thoughts with foolish cousins and I know she pointed them to the right places… these fools don’t want the truth. Hard to feel bad for them when they put heroic efforts into avoiding anything that would talk them out of bending over dropping their pants.
From the California State University I went to, Econ 101 is not required to graduate. However, the class will fulfill a GE section/topic which is required, but there are several choices. The only class a student could not get away from was Bio 115.
Introductory economics should be required in either high school or college. It was mandatory to take three sex ed classes during middle school and high school from my district, but economics was optional. In fact, there is no financial class that is required material. I learned more from the old Mastercard commercials about credit than the school system.
(I have the same shock feeling for the computer science program at the university. Object Oriented programming was an elective! I felt this class was more important than several other classes.)
Are they kissing cousins?
Athena, I my day we called that ‘Penny wise pound foolish’ ……I guess with a camera or a car or truck they feel there is an unlimited supply but with the McMansion if they don’t act now they won’t get that second chance….and they are right you know…..it’s not everyday that you can screw yourself royal.
Although I am a licensed RE agent and a realtor I’m not a cheerleader for the for a bigger bubble and do not want to lumped in with the greedy pigs who smile that phoney smile as they lead you to the slaughter. I turned down 2 prospects this week who were refered to me. I told them both that they should consider renting and that there was a stong possibility that the market was heading for a correction. And if they still wanted to buy that they should go with in low ball offers. and I then refered them to some one in my office who I knew would look out for best interest. In all fairness I admit that I’m in a good position finacially and did not need the commision. I used my license to purchase a couple commercial props that I held for a year and then sold for a reasonable profit. But I never bought into the hype and hustle that pass for a profession. One man in my office sold 14 props in a new condo to his friends and family over the last 20 months. 11 of the properties are on the market now and all have been reduced many times. In my part of SW Florida listings have increased 5 times what they were 18 months ago. The MLS hot sheet has twice as many new listings than pending sales. The listings are climbing but not as fast as they were. I think because many are withdrawing thier listing and also the list of expireds is growing. I wonder if many have given up trying to sell in this much slower market.
Sounds like your integrity will spare you from the massive litigation to come when the market collapses.
I just got back from a walk with my kids in the greenbelt zone of the UTC area called La Jolla Colony (If you live within 30 miles of the ritzy ocean area you call your community “La Jolla ______________”). In one of the new (formerly fully-rented apartments) condo complexes they kicked out all of the renters to do the conversion. That was many, many months ago. Tonite I counted many, many of the condos that are incomplete and empty. Meanwhile, they have lowered the prices and started offering the condos for rent in addition to selling them. It’s unwinding. . .
BKLaywer,
let me guess the place: “The Verano”
Haven’t they been advertising these, with incentives, on the radio?
Yup & Yup!
Phil, the prime business here in Salinas is farming. Most of the newer built housing was bought by Silicon valley long drive commuters or locals through the afforable housing program. A 1300 sq. ft. box, 2 story 3-2 was going last year for $685K; while not worth it, given the area and housing available, $250K should be tops.Now contrast that with the median income: $48,000 by some estimates and less then $30,000 by others. Here’s the deal: when they want businesses to come in it’s $48K when they want more low cost housing it’s 30K or less. More to follow…
i know an honest and competent appraiser in petaluma ca,his name is brad guerra….a good real estate broker is david mark-raymond in sebastopol he is with coldwell banker….he knows the area,is dead honest and not delusional can’t say better than that about a broker…i only know about 50 realtors in this area so there are certainly more good ones around
Salinas:
Salinas is in an unusual and extraordinary position, which is why it needs to take extraordinary measures in its General Plan. The Silicon Valley is 30-40 miles away. That means that it is also about 30-40 minutes away, in terms of commute times. The Silicon Valley is one of the most dynamic centers of business expansion in the entire world. The “market” in which Salinas finds itself includes the Silicon Valley. This means that whatever is offered for sale in Salinas is offered to a market that includes over a million people who have an average income almost double the average income of a Salinas resident.
If the City of Salinas allows residential developments that are just like what is offered in the Silicon Valley—but that cost less—the people with the most money will buy the houses that Salinas allows to be built. That is what a “market economy” is all about. Some people call it the “Golden Rule.” Those who have the gold make the rules.
The General Plan policies recommended in this letter are an exercise in realism. The “geopolitical” reality is that private developers will attempt to build for the “market,” and the market includes the Silicon Valley. In fact, the Silicon Valley will dominate the market in which Salinas finds itself, and ever more so as time goes on. The Salinas City Council needs to do something, in its General Plan, that recognizes the real situation, and that attempts to protect the interests of its residents…….We are urging the City to take “affirmative action” to make certain that future residential development will result in better housing opportunities for local residents and workers. We recommend a number of different “strategies,” to help achieve that objective…..Provide a mechanism to ensure that new housing is offered to local residents and workers first….. affordable housing(no residency requiement before buying) the 40% inclusionary requirement is achievable (with 10% set aside for very low income persons, 15% for low income persons, and 15% set aside for “moderate” income persons)….
And now we get to affordable housing for the poor…in excess of 3000 sq.ft.and prices to you and me starting at $800K and up. Read on:
“Affordable housing” for persons and families with “very low incomes” shall be defined as housing that is capable of purchase or rental by persons or families with incomes at or below 50% of the median income in this community, with the understanding that a person or family with a very low income should not be required to use more than 30% of that income to meet housing needs.
“Affordable housing” for persons and families with “low incomes” shall be defined as housing that is capable of purchase or rental by persons or families with incomes from 50% to 80% of the median income in this community, with the understanding that a person or family with a low income should not be required to use more than 30% of that income to meet housing needs.
“Affordable housing” for persons and families with “moderate” incomes shall be defined as housing that is capable of purchase or rental by persons or families with incomes from 80% to 120% of the median income in this community, with the understanding that a person or family with a moderate income should not be required to use more than 30% of that income to meet housing needs.
In all cases, when housing is constructed within the community as “affordable housing,” such housing will be capable of purchase or rental by persons of very low, low, or moderate incomes, and will be permanently protected for sale or rental to persons and families with very low, low, or moderate incomes, through deed restrictions or other equivalent and effective methods.
That means up to 40% of a neighborhood can and probably will be affordable housing. You want to buy a house here and not rent….divorce your wife, send her(if she has low income) and the kids in to get the house at the lowest possible value and then move in yourself. Plus, who’s checking….I think a lot of these are being rented out for more than the payment…one gal my wife knows who has a teenage daughter was buying one, the daughter was leaving at the end of the school year and she planned to rent three bedrooms to three separate illegals and make a nice monthly profit.
Thanks Salinasron. I wonder how people can think about commuting 40 miles one way to work in Silicon Valley and with traffic, i am sure it will be more than 40 minutes.
Atleast illegals get live better than we do - something positive out of this.
I believe it’s a single lane highway 101 in and out of Salinas. Without traffic, it’s already an hour drive. Most people in SV don’t know where Salinas is.
wow, sounds very much like the Netherlands…
do they also provide a $ 50.000 free loan for every ‘low-income family’ and free (100% government paid) housing for illegal immigrants?
Oh man, Mr. Casagrand is going to get some nasty hate mail from a lot of San Diego FB’s. Those who don’t send him hate mail, will put their house up for sale…right away. another nail in the coffin.
Anybody seen data about average $ per square foot trends in San Diego County? If the median is up because bigger houses are selling still (although for less than they would have months ago) then it should be reflected in prices per square foot, no?
Even if you can, it’s not simple to interpret the numbers. The reason is that you still can’t compare the price per square foot of a smaller home to the price per square foot of a bigger home (although I’m sure it gives you a slightly more accurate picture). As home get bigger, the price per square foot tends to get smaller.
So my theory is that if you only look at the median price, this may skew the price up if only bigger homes are selling, but if you are looking at average price per square foot, then if only bigger homes are selling this will skew the price down.
I’ve got a question for those familiar with the California situation. I bought in Irvine in ‘96 (at the bottom) and have accumulated quite a bit of equity (when I re-financed a couple of years ago, my bank was bewildered that I didn’t want to extract any cash).
Prices have peaked in the OC, and are starting their descent. I’d love to sell, sit it out for 2-3 years, and move up in my next purchase. However, my property tax base is very low (250k), and goes up only 2%/year (prop 13). Selling now and getting back in (move up, w/ cash purchase) would mean that my property taxes would be 8-10k/year instead of my current 2.5k. That would be an additional $100k over 20 years in property taxes.
Is there anyway around this?
Thanks for your thoughts/advice
If you are 55 or older you may have a solution. If either spouse is over age 55 (when the old home is sold), PROP 60 allows replacement of a primary residence with a new home of equal or lesser value (but see below) within the same county and transfer of the Prop 13 assessed valuation from the old home to the new property. This is allowed once in your lifetime, and a spouse who has done it before ‘taints’ both spouses.
PROP 90 allows counties to elect to accept transfers of Prop 13 values for moves from other counties when a primary residence is replaced with a less expensive (but see below) home. If you are over 55 and move into a county which accepts Prop 90, you may take your old, lower Prop 13 value, regardless of from which county you move.
Using Prop 90, you can sell your $400,000 San Francisco home [assessed value $80,000] and move to a new $300,000 home in San Mateo; the new San Mateo assessed value will be $80,000!
I’ve got a question for those familiar with the California situation. I bought in Irvine in ‘96 (at the bottom) and have accumulated quite a bit of equity (when I re-financed a couple of years ago, my bank was bewildered that I didn’t want to extract any cash).
Prices have peaked in the OC, and are starting their descent. I’d love to sell, sit it out for a 2-3 years, and move up in my next purchase. However, my property tax base is very low (250k), and goes up only 2%/year (prop 13). Selling now and getting back in (move up, w/ cash purchase) would mean that my property taxes would be 8-10k/year instead of my current 2.5k. That would be an additional $100k over 20 years in property taxes.
Is there anyway around this?
Thanks for your thoughts/advice
Prop 13 has some loopholes. If you’re over a certain age (62?) and/or live in certain counties, there’s a framework for keeping your lower price when you get a new place.
Thanks for the tip. Can you point me to a place I can get the full story on this? Guess I could phone up a realtor, but I’m living in Hanoi.
http://www.wwlaw.com/prop60.htm
If you are 55 or older there are some prop 13 loopholes for property taxes
Here’s the actual text of Proposition 13. Here’s the stuff that I had dimly and imperfectly remembered:
“However, the Legislature may provide that, under appropriate circumstances and pursuant to definitions and procedures established by the Legislature, any person over the age of 55 years who resides in property that is eligible for the homeowner’s exemption under subdivision (k) of Section 3 of Article XIII and any implementing legislation may transfer the base year value of the property entitled to exemption, with the adjustments authorized by subdivision (b), to any replacement dwelling of equal or lesser value located within the same county and purchased or newly constructed by that person as his or her principal residence within two years of the sale of the original property.”
“In addition, the Legislature may authorize each county board of supervisors, after consultation with the local affected agencies within the county’s boundaries, to adopt an ordinance making the provisions of this subdivision relating to transfer of base year value also applicable to situations in which the replacement dwellings are located in that county and the original properties are located in another county within this State.”
I know I’ve seen that they have made some of these county groups, but that, as they say in the math books, “is left as an exercise for the reader”.
You’re calculating your new property tax based on a current value of what?
If current value is $1 mil, then after the correction, a similar house would be worth $500K. Your property taxes would double, but you’d have $750K in the bank (minus your capital gains taxes). You’re still out ahead by selling and renting, right?
There was an entire forum thread on Bob Casagrand’s report over at piggington that got a little heated. It’s worth a read.
pvb -
This is how I understand it…
You can carry your prop 13 valuation with you if you’re over 55 and you sell your primary residence and purchase another of equal or lesser value in the same county. You can do this only once in your lifetime (prop 60).
Or, you can carry your prop 13 value with you (again if you’re over 55) if you purchase a home in a county that participates (Prop 90). I think there are only 7 counties that allow this transfer - Alameda, L.A., Orange, S.D., Santa Clara, Ventura.
I believe you must purchase your new home within 2 years of selling the old.
Hey Ben,
San Diego has more than 60 listings that use the word “reduced” in them.
I say: “San Diego condos for everyone!”
Guess I’ve been lucky, over many years, but I don’t share many bloggers’ anathema toward agents. All the ones I worked with were as honest as I would have expected and they did a good job. The most recent one, in an area in which we’d like to buy once prices tank, disclosed a substantial defect in a house that apparently isn’t called a latent defect in the rule book and is peculiar to the area outside Florida where we’ve been looking. We’ve been fortunate to have worked with loyal agents; it’s a shame they all aren’t. I suppose you have to have good instincts about judging a person’s character when you meet them.
Chip,
You touch on an excellent point. Every professional relationship involves an inherient conflict of interests. Your doctor makes money if you have surgery; your lawyer makes money if you sue; your stock broker makes money if you trade; etc. Yet, it’s hard to go it alone in every area. Do you get better advice if it’s free or if it’s paid for? No easy answer to that one. You could eliminate the conflict if you pay either way, but who would want to pay the doctor for an operation they don’t need and don’t have?
At the end of the day you choose the people you rely upon for advice. If you are not a good judge of character, then you had better find someone who is, and hope they have no reason to steer you wrong.
Doctors and Lawyers are professionals. They have real educations, real codes of conduct, real penalties, etc. Realtors are not professionals in this sense as much as they wish to put on the airs.
You couldn’t be more wrong
Their level of eduction is irrevelent to the point of their character, although may have some impact on the wisdom of acting on their advice.
Still, formal education doesn’t appear to me to have any positive effect on character. Many striking examples of ethical failures were committed by people with degrees, codes of conduct, etc. You still have to choose your advisors carefully, no matter how many degrees they hang on the wall.
Here’s something we got in the mail from a “former” friend who’s a fairly new Realtor. The bubble conversations got too annoying for us, and the wife/Realtor was always trying to sell us a house when we got together, so we don’t see them very much these days. She sent us her “real estate” Christmas card last year, instead of a regular card. We thought that was tacky. Our husbands used to be best friends.
Here’s the spin from her most recent postcard:
“Why do most local experts predict that San Diego will not experience a real estate recession in 2006?
Simply put: Suppy and demand!
[that's actually in bold on the postcard]
-A healthy economy, job growth, and a very desirable location stimulates demand.
-San Diego will continue to be short 100,000 housing units county-wide.
-There will continue to be a lack of developable land.
-Environmental constraints and trasportation requirements will limit housing growth.
-Builders will be releasing new homes in phases to keep sale prices stable.
-Cost of construction is sky-rocketing, so new home prices will be higher, keeping resale prices high.
…Experts predict that San Diego’s economy will outperform the rest of California and the tation in 2006…”
No mention of slowing sales and almost record-high inventory. Needless to say, we WILL NOT be using her services when we decide to buy.
I hope you’ve kept that postcard :D.
I can envisage scenarios where you could do quite a return effort with it this December :twisted:.
Just read the RE section of the Sunday paper(Sarasota Herald Trib), now in 2 sections, and not one mention of a slowing market/increased listings. Major articles on sales in the highend luxury market.
mail it back in 6 months when YOY will show big neg !
dumb biatch
trasportation = transportation
tation = nation
Spelling errors are mine, sorry!
realtors- why bother ?
I’ve made pre internet transactions w/o them- it’s easier now
I don’t know him, but this Naples realtor appears to be a straight-shooter. Check out his monthly assessment:
http://www.naplesinsider.com/CurrentReport.htm
Can anyone direct me to a glossery of abbrviations? I can figure out most but OT and FB escape me. Thanks, JJ
Comment by JungleJim
2006-04-09 05:25:38
Can anyone direct me to a glossery of abbrviations? I can figure out most but OT and FB escape me. Thanks, JJ
OT = off topic FB = F*cked Borrower