You’re making sense Kris, which should put you directly in the sights of those aiming to whine about the gravy train taking a well earned rest.

The folks in Scripps Ranch chose their location well, whether purposefully or by subjective whim. The bubble contingent should be getting fairly nervous by now. The dire predictions of 35-50% drops in values, with blood running in the street are looking like punch lines these days.

As usual, you’re right on the mark. Your clients are lucky to have you and Steve.

>As usual, you’re right on the mark. Your clients are lucky to hae you and Steve.

It is comments such as this that make you are favorite around here!

Does this mean you will be bringing your investor clients back to San Diego?

Sure doesn’t sound all that bad to me

Is this true, quoted from another blog:

CA has always been desirable, but just because people want something doesn’t mean they can afford it. After all, if it’s so desirable, why are people leaving in droves? CA houses now cost over twice as much as they used to compared to salaries. Despite all that exotic financing, people are simply priced out. Wages have not kept up. So people are voting with their feet, and walking away from ‘desirable CA’. So they are leaving high-priced cities in CA in droves. Last year, per the US Census Dept, 40,000 people left San Diego, 229,000 left LA, 42,000 left San Francisco, 6,800 people left Santa Barbara, and 8,400 left Ventura County. In contrast, 63,000 moved to the Inland Empire last year.

What about the 5-7 year cycle? We boomed for 7-ish, and no we should bust for 7-ish. Or is this time different? We should see a drop each yr until 2012 per the cycle. I know, I bought at the peak of the last boom (1989).

How about addressing affordability? Have incomes doubled int he last 4-5 yr period or was nearly free money handed out to those who could fog a mirror? I think you are not really looking at why the market boomed and now why it will bust. It always has, and always will.

Are those mean or median DOM averages?

Also, I wonder how many of those have been sneakily relisted. I know of at least one in Pepperview Terrace that has been listed constantly for well over a year but currently shows DOM of 106.

Also, how have prices changed? I know several on that same street have sold but at prices below 2004.

Hardly great news for anyone that purchased in 04, 05 or 06

Dommidge – All good points. The Pepperview home you refer to shows no prior listings in the MLS, cancelled, expired or otherwise failed, but I may have missed a FSBO or other non-MLS attempt prior to the current listing. Sneaky re-lists are a reality of any market, so that market times as reported in the MLS are always going to be a bit lower than reality. By the way, what you call “sneaky”, we call “churning” and is often a blatant Board violation for the very reason you call to attention – Market time statistics get distorted – not to mention the untrue picture that is painted for the unsuspecting agent or buyer. That is why any agent worth his salt will run a history on a home if he is less than intimately familiar with a given market.

You are correct that those who purchased in 2004 through 2006 are less than pleased with the current prices in our Scripps Ranch neighborhoods. I think I said as much in my post. In Scripps, our prices peaked during the summer of 2005. Looking at the Sundance development you cited, this bears out. Homes are selling today for less (around 5% less on average, although we are looking at an admittedly a smallish sample).

By the way, DOM I used were mean, not median.

You said: The Scripps Ranch real estate market is just great, thank you, and just different.

Jim, As much as you get some perverse pleasure in assuming that everybody is soon going to have a home worth pennies on each dollar they paid, it simply isn’t so. Yes, the market has retreated from the highs of Summer, 2005. I said this in my post, I said this in my comments, and I was saying it would be so in Summer of 2005, although I will admit I lacked the clairvoyance to know precisely when it would happen.

Our market has been in a correction, and buyers who purchased in the past two years have suffered, but only on paper unless a sale is now necessary. (And, I am not going to get into the area of risky loans). The market, from my perspective in the trenches, is measured but healthy, and I do not agree with your dire predictions that prices will drop for the better part of the next decade. That simply isn’t a rational outlook.

Jim – Not defending Kris (because Lord knows, she does not need it), but let me throw in my two cents. Your position evolves primarily from the “affordability” index. While that is a well publicized statistic, it doesn’t tell the whole story, maybe not even the majority story. Many of the buyers in SD today are locals have owned their homes for more than just the last two years, and thus have equity to transfer to a move-up home. Many of our own buyer clients (and other buyers we see) have owned their homes for 5 or 10 or more years. Most of the smarter ones have not extracted equity for the Mercedes or other major purchases and thus have the blessing of more financial flexibility. These buyers contribute $200k – $500k, or more toward their move-up purchase. While their “salary” may not, on the surface appear to support such a purchase, the strong equity contribution is the great equalizer that is commonly overlooked. Even if they don’t come in with 30-40% down, they have a nest egg they know that may be drawn upon, if necessary.

You missed what I consider to be the bigger issue – the cost of money, better known as interest rates. We have enjoyed an unprecedented period of affordable money, not seen since the 60′s. But if you follow the 10-year treasuries or mortgage backed securities, you would have noticed a slow but steady move to the upside over the past 3 or 4 weeks. Interest rates, more than anything else, I believe, will be the key factor over the next several years. On the good side, we are entering an election year where, if history is any lesson, rates will remain stable. It’s not politically correct to mess with them now. However, while income and affordability are factors, if the FED decides to increase their rate, due to inflation concerns or a better than expected GDP over the next couple of quarters, all bets are off. You would do well to keep your eye on interest rates.

Hey Berg’s: It is not just about those that “have” to sell. It is about those who bought with an ARM and at 100% financing. They are going to walk away and the banks will have to dump adding more pain. You two are also overlooking the fact there are no first time buyers now, only move up.

I own after selling and buying in 2005, but my mortgage is $1200 a month, so I am not too worried. Look at a salary of $75k and what that buys you with today’s lending standards….not much and you need a down payment.

I think we will see 2001 prices again. So maybe 60 pennies on the dollar from 2005′s peak.

Supply and demand…

PS. I hope to sell this Fall, bank the $ at 5.25% (ING) and let the interest pay my $2000 a mo. rent until 2010, then I will re-enter at the bottom. Not in SD, I am thinking Sonoma.

___

The Union Tribune. “Hindsight, they say, is 20-20. And with the benefit of two years of hindsight, it’s clear that June 2005 was the height of the wacky season for the San Diego County housing market, which has potentially fearsome implications for home prices this summer.”

“Nearly 83 percent of new home buyers in the county used adjustable rate mortgages in June 2005, an all-time high representing about 4,700 homebuyers. Nearly 63 percent of refinancings used adjustable rates.”

“‘An 80 percent rate for adjustable mortgages was so far out of the market that it should have raised red flags for lenders,’ says Raphael Bostic, associate director of the Lusk Center for Real Estate at the University of Southern California. ‘But because of the continuing appreciation of home prices, lenders by and large felt that they were somewhat insulated from any particular hardship.’”

“‘People are not looking at what they are going to have to pay over the long term,’ warned Nicolas Retsinas, director of Harvard’s Joint Center for Housing Studies, in an article that ran in this newspaper that June.”

“Retsinas warned that if the economy hit a soft spot, housing could suffer a ‘painful’ downturn. Which is exactly what is happening.”

…more

“‘Particularly for the subprime market, borrowers took out mortgages that were fixed for two years and then adjusted pretty abruptly,’ said Andrew LePage, analyst with DataQuick. ‘People were already stretching to make their monthly payments, but it increasingly looks like some folks can’t handle the reset.’”

“This summer will see a major wave of adjustable-rate mortgages ratcheting upward. Not just from June 2005, but from following months as well. According to DataQuick, adjustable rates constituted between 76 percent and 80 percent of all new home mortgages between July and September, representing 21,400 purchases.”

“Many of those borrowers will end up in default. Or foreclosure. Between January and April, there were an average of 427 foreclosures per month in San Diego County, and 1,319 notices of defaults, potentially signaling future foreclosures.”

“‘A lot of households will be facing stress in a fairly short time period,’ Knowles said. ‘A lot of tough choices will need to be made. We could see some significant price fluctuations, with a lot of product being put on the market.’”

“Since the beginning of the year, an average of 3,073 homes have sold in San Diego each month. If you add 427 homes into that mix each month, priced for a rapid resale, the supply of cheap homes will inevitably push competing prices lower.”

“Rising foreclosures and declining prices are not unique to San Diego. Even though we led the nation during the housing boom from 2001 through 2005 and the decline of 2006, other spots have superseded us.”

“In California, the worst foreclosure rates are clustered around the Sacramento area, including Stockton, Modesto, Vallejo and Fairfield, according to RealtyTrac.”

“Some areas in Florida, Georgia, Michigan, Tennessee, Indiana, Illinois, Missouri, Texas and Ohio have seen foreclosure rates much worse than San Diego’s.”

“In short, it’s a nationwide phenomenon. The Grubb & Ellis real estate firm warns that there may be more than 1 million foreclosures throughout the country in the next year or two.”

Steve – Who buys the home from the move-up buyer? i too have a tone of equity and can move up, but since that is the only way to make it affordable doesn’t this make it a ponzi scheme, last one in is screwed?

Thanks for the info Kris. Back to that Pepperview house (11294) that sold at a comp busting low price. How much did they ‘pour down the drain’ by owning vs renting in the year or so that lived there? Probably in excess of 10k a month when sales costs are considered? Sounds like it’s quite a risky era to buy in right now, I wouldnt want to get stung the same way. I am thinking a great time to buy might be more like mid 2008, by which time we should have a clearer view of the trajectory this thing is going to take. Most folks dont like making 1/2million dollar bets when the odds are not in their favor.

Dom- Again, no argument. If moving is a choice, purely discretionary, then a case can definitely be made that 2008 will be a better selling environment. Unless you are moving down or moving out, however, you will be making another purchase in a better selling environment, if you know what I mean.

As evidenced by Jim’s comments here, there are as many opinions as there are people about where the market is heading and how quickly. I like your “clearer view” comment, and agree that the next year will be pivotal and telling.