Pacific Beach Real Estate - Mission Beach Real Estate San Diego County Real Estate
Chapter 1: Introduction to Tom's San Diego Real Estate Market Update
February 2008 - My objective has been and will continue to be to ensure that my clients are completely educated and up-to-date regarding the general state of the real estate market and specifically, the San Diego real estate market. In keeping with that objective, I have attempted to provide periodic "market updates" and inasmuch as the period since September has been one of great uncertainty and upheaval, it is high time to deliver an update to you.
Folks, this update is quite a bit different in both length and content. Because of what has transpired over the last 5 months with the sub-prime mess, general economic conditions, interest rates, foreclosures, the Economic Stimulus Package, etc., I think I have conducted as much research as needed for a typical term paper or dissertation. The problem for me at this point is how to present it in as concise a form that I do not overwhelm you with too much information, data and recommendations but yet arm you with just enough of the same so that you have what you need to make informed, intelligent decisions.
In the end, I urge you to take the 5 or 6 minutes necessary to read and digest the following pages... especially if you are planning to purchase or sell a home or investment property during the next several months.
Some of the topics are listed below. For pertinent San Diego real estate forecasts, you need to read the report:
Income and Wealth: Discussion of how the availability (supply) of income and wealth will help to propel the next home buying wave
Pent-Up Demand: Description of where the other side of the equation... "demand" will come from and discussion about the huge amount of "pent-up" demand that exists and is building
San Diego County: Discussion about where San Diego County figures in all of this. Are we in better or worse shape than the state as a whole, etc?
Note: When you read the report, please be aware that the statistics are not mine. I didn´t dream them up or manipulate them for anyone´s individual gain or skew them to help make a point. They come right from the sources I have listed beneath each page and are there for your confirmation.
Here are a few highlights
What started this whole mess? Simply put, the last market cycle lasted approximately 10 years... 3 years longer than it might have had it not been for the preponderance of unqualified borrowers who were allowed to enter the raging housing game and purchased homes which they could not comfortably carry. They simply over-reached in an attempt to become part of the American dream. They were on the edge and purchased at the market´s peak and many of those facing foreclosure today are those who were pushed into homeownership financed essentially by unaffordable loans. Assurances of continued appreciation which was required so that short term ARMs could be later be refinanced should not have been made and those loans are now resetting. Some of those San Diego homeowners are financially stretched.
The information inside the report will demonstrate that while this is a serious problem, if taken in the context of the entire existing mortgage market, it is confined to less than 1% of all borrowers!!!
Unfortunately, the San Diego media´s mantra is that "bad news and fear sells" and they have done a magnificent job of trumpeting the pain and convincing us all that the world is going to hell in a hand basket. The hue and cry over the end of the world is merely their method to have us believe that this normal market outcome and correction is instead, a universal calamity. The report will suggest that there are various ingredients which portend a better market for buyers directly ahead: historically low interest rates, the best selection of housing in the last 10 years, lower prices, motivated sellers, an increase in the conforming loan limits, etc.
Some additional forecasts, in addition to those contained in the report:
Foreclosure properties will increase in number and interest rates will be in the mid 5% range for most of the year. Should we actually graze into a recession (technically 2 quarters consecutively with negative GDP), then rates will certainly go lower. If buyers for San Diego real estate have not taken action before that point, they should then quickly move out to take advantage.
Recent sales stats in San Diego County suggest an increase in activity and if this continues for a few additional months, we may well see the confirmation of the real estate recovery.
Many "wait and see" buyers who have been sitting on the sidelines are expected to be entering the market to take advantage of the confluence of the market factors noted above and refinance activity will also take an up-tick. Rarely are buyers ever in control of the market in SOCAL but they are now... for the moment. San Diego was at the leading edge of the latest downturn in sales and historically, San Diego generally leads the trends suggesting that we will experience the turnaround first. Recently, our area has been experiencing the smallest decline in sales out of the 6 county SOCAL region. Again, this may suggest that strength is beginning to possibly build. Buyers: While you are presently in control and your "window" is still open, you had better prepare now, get your finances in order and be ready. The "window" will not remain "advantage: buyers" forever.
Buyers: please take into consideration that should you choose to wait for prices to possibly change that interest rates can and, at some point, will change as well. When they do, the cost of buying will increase for the longer term or possibly put you in a position where you may not be able to qualify. There are hundreds of buyers today who were waiting for prices to change and cannot buy because the financing programs that were available then are no longer available today.
Once you have read the report, you may come to the opinion that potential buyers of San Diego real estate may well be at a point in the cycle where those with the desire and means to purchase should start thinking about making the move. The absolute best time is obviously at the cycle´s bottom except that you can never tell until later when it was reached... you know... the old axiom about "the rearview mirror always being more clear than the windshield" ahead. Think about this. Since home prices have always gone to a new level at the next cycle high, missing the absolute lowest point near the bottom of the current cycle is not particularly important. The goal should be to "get it about right." It is about at this point in the cycle where, even in the most depressed markets, consumer psychology begins to slowly change. People who need or want housing look around, see lower prices, affordable financing, lots of inventory, and say: "Hey, this is a smart time to shop." We will look back in time and think: the cycle has done its work!
I would enjoy your feedback on this report and of course, I am always pleased to answer your inquiries. Best of luck during the remainder of 2008.
