This morning, the San Diego Union-Tribune reports on the forecast for local housing by Moody’s Economy.com:
The report, released yesterday, projects prices for new and resale single-family homes to drop 8.5 percent in San Diego from the market peak at the end of 2005 to the first half of 2008, when the market is predicted to hit bottom.
Then, from local analyst Nathan Moeder of The London Group:
Think about how much equity and paper wealth has been created for these people over the last five years. So an 8 percent decrease is not a big deal.
Not a big deal? In the minds of each and every seller, I beg to differ. Clients of ours, the young military couple who purchased with 100%, interest only financing one year ago and now are being redeployed only to find that they need to come up with $25,000 to sell their home, think this is a very big deal. Another client who purchased a $700,000 home one year ago and is forced to move due to personal circumstances thinks this is huge. The lovely woman who lost her husband some time ago but has finally found the courage to make the necessary change is severely impacted. She doesn’t see her equity as paper wealth but as her key to financial security and independence. Finally, don’t think for a moment that the folks who have owned their home for ten years and cashed that equity check to put their children through college or even take the fancy vacations and buy the fancy cars think this is not such a big deal. It may be harder to feel sorry for them, but they are impacted nonetheless.
The discretionary sellers will be fine and, from a historical perspective, so will be the others. For most, however, this pill is going to be difficult to swallow.