I clearly don’t know what the heck I am doing. I’ve been pounding away at this personal real estate diary for over four years now, but I have been sloppy. My purpose has been equal parts group therapy and public service, yet silly-old-me thought it was the content that ultimately mattered.
This morning I was reading a newish offering in the local real estate blog-o-sphere, and it read like the author suffered from a form of Tourette’s Syndrome – not the one with all the bad words, but the affliction involving repeated use of a favorite keyword or twelve delivered as a sacrifice to the Google Gods.
In four sentences, the author managed to awkwardly interject the community name five times, a particular subdivision name three times, and even pay homage to the Rolling Stones and Qualcomm. (Don’t ask.)
Now, I don’t like to brag (OK, I do), but our blog ranks second on Google, right after a site called something like “Trulia,” for the search term “Scripps Ranch Homes.” Ditto “Scripps Ranch Real Estate.” And I would like to keep it that way.
So, this morning, I want to talk a little about Scripps Ranch real estate trends in Scripps Ranch as they relate to all this talk in the community of Scripps Ranch about some impending “double dip” in Scripps Ranch housing prices. As the Rolling Stones said, “Hey, hey, hey. That’s what I say.” The Rolling Stones, by the way, have never performed in Scripps Ranch, home to distinguished Scripps Ranch schools, but they have appeared at Qualcomm Stadium.
Having reestablished my place as Google’s favorite, let’s get to it. This was initially going to be a sort of point-counterpoint post inspired by a Happy Hour discussion at Chez Berg. First, keep in mind that there is a lot to be happy about at our house. The dog we thought was in his final Scripps Ranch hours due to a ten-day hunger strike, it turns out, had just swallowed a toothpick. Our oldest daughter is spending what remains of our retirement account ($1.97) on a summer intern program at the CBS London Bureau. And our youngest daughter is leaving for college in September, freeing up a room equally suited, as they say in real estate speak, for hobby or play.
But with so much to talk about, we are creatures of habit, and “Happy Hour” at our house simply means “working some more but with beverages present.” So set against the backdrop of a glorious Scripps Ranch sunset, we argued about the idea of a double dip in housing prices, that thing that happens when you think home values have finally reached a low point, and then someone yells, “Not so fast!”
Our discussion began innocently enough as I whipped out this little chart of average home sale prices in an enclave of Scripps Ranch homes, and an enclave which by the way includes the subdivisions of Trails and Sundance. (Source: Sandicor Multiple Listing Service).
These two developments are pretty representative of the larger Scripps Ranch market. It’s what we call a “bread and butter” price range, a first- or second-time move-up product. The homes range from just shy of 1900 square feet to a little over 2500 square feet (more than 2700 square feet for those who converted the third-car garage in the larger, Trails homes). And lest you bop me over the head with the “mix” argument, I went through this same exercise for six different size ranges with essentially the same resulting trend.
First, what this tells us is what we already knew. Prices jumped between 70% and 80% from 2001 to 2005. Since then, we have given back about 25%. So, what does this mean for tomorrow?
One could argue (one being Steve) that if you ignore the stuff in the middle and draw the straight line, you have a moderate 3% to 4% price growth over the course of the decade which smacks of reasonable and sustainable appreciation, with the corollary being that the worst is behind us. Here are the problems I see with that argument, problems gleaned from both the data and a gut check given my real-life experiences with buyers and sellers.
- 2010 shows a marked drop from the previous year. This may not jibe with what you have read, but we are talking about Scripps Ranch real estate here, not the broader county market. This is due to a couple of factors. First, the Federal and State homebuyer cash prizes are no more. Second, much like San Diego was a leader nationally into this “correction,” the countywide numbers you hear include the outlying communities (think Eastlake and Vista) that were leaders locally. Higher average home prices in Scripps Ranch together with the demographics allowed us to hang on a little longer, and I think we may be bringing up the rear where distress sales are concerned. More distress sales mean lower sale prices.
- Here’s the gut check part. We have personally talked to and met with more Scripps Ranch homeowners this year that couldn’t afford to sell (because they owed more than their sale would net) than could. Those with a choice will hang on. Those truly in distress – and those who strategically see no point in standing pat – will be joining the market as short sales or even foreclosures at some point. I sense their numbers in our community are growing, and this can only result in another blip on the trend line. It’s not what I see in the listing and sales statistics that worries me; it’s what I don’t.
- Jobs and interest rates – these are the wild cards. Steve, my little Pollyanna, I am sure will point to the job growth in the San Diego market as a sign that happy days are here again. And interest rates, despite our protestations for many months that they will rise, remain insanely low. But, consumer confidence remains low as well. More importantly, I think we are seeing a healthy societal trend toward more conservative spending habits. People I talk to, and it’s no different at my house, are drawing a more definitive line in the sand between “need” and “want.”
We can’t look to market behavior in past cycles to understand where we might be headed, because this cycle is vastly different. Too many people purchased homes who shouldn’t have been qualified to do so; too many took advantage of 100% or 103% financing and, with no skin in the game, don’t have the same fight in them. Too many opted for loans that were moving targets, and what was once affordable is no longer.
Here is the zinger. A reported 32% of San Diego County homeowners are underwater (owe more than their home is worth), and this number has remained fairly consistent over the past year. If you presume that the “artificial insemination” of demand courtesy of the tax credits had some cattle prod effect, then we can’t see pricing improvement until the underwater loans get flushed out.
Finally (I promise), we will be facing a play-action delay that will be new to us. All the folks who sold short or experienced foreclosure have been sidelined for three to five or more years as they will be unable to qualify for a new loan. This means the demand side of the equation is going to be effected for a while.
That’s my two-cents, brought to you from my office in Scripps Ranch, home of Scripps Ranch High School and the Flying Scripps Ranch Falcons. Check back. I am sure Steve will be posting his counterpoint. I hope he uses a lot of really good keywords!