Are we there yet?
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Have we reached the bottom of the San Diego real estate market yet?
All parents know the dreaded phrase “are we there yet” emanating regularly from the back seat …
In this transparent world we live in it’s easy for all the pundits, economic forecasters, bubble commentators, news-writers and bloggers to comment on the latest statistics and credit crisis/meltdowns in real time and give their prognosis on possible timelines. Sometimes it all gets to much, overload sets in and we freeze.
Are we there yet? So for what it’s worth I am going to add to the list of San Diego real estate forecasts and unfortunately it’s not pretty …
San Diego was probably the first County to experience the latest boom and was certainly the first one to bust. In many parts of the County we have seen prices fall from the peak of 2005 by 40 or 50% probably the most dramatic drop in real estate prices ever experienced in living memory. See map of San Diego County real estate prices.
Other posts have and will look at why this happened but for now here is my prediction: For those homeowners who’s home value has dropped by 50% you are going to have to wait for prices to double to get out from being “under water”. This is likely to take between 5 and 8 years. In other words, even if prices have stopped falling and stabalise, short sales are going to be a feature of the real estate market for some time to come.
The one upside is that home prices have at least become affordable for those with good credit and thousands are taking advantage of the new opportunities – in fact over 4,300 homes were sold in San Diego from July 22nd through August 22nd this year.
The only other option for these under water San Diego homeowners is action by the Government forcing Lenders to review all questionable loans (permanent workouts, reducing principal, extending the length of loans etc) – there is already some discussion at this level including some innovative suggestions such as reducing the loan balance in exchange for sharing in future home price appreciation. But even these options will take time – there are millions of loans so stand by on this one. In the meantime watch John H. Vogel Jr. Adjunct Professor of Business Administration at Dartmouth College on the sub-prime mess:
» Posted by Peter
October 20th, 2008 at 8:08 am
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