For the last three months the average home price in San Diego has increased, and once again ignited the siren call of “buy now before you end up paying more.â€
Obviously, being a San Diego real estate broker I hope that the three month up-tick in housing is really a bottom. However, a little voice in my mind tells me to be cautious of proclaiming a housing bottom.
In media reports on the San Diego housing market, I have yet to see one that advises caution. Here a a few facts  about the San Diego market to consider: One) March through the end of August is seasonally the strongest time for home sales in San Diego; Two) During this time, the state of California has been offering 5% credit up to $10,000 on new home purchases; Three) There is a federal $8000 credit for first-time homebuyers; Four) Unemployment has been rising. California state workers have been forced into furloughs that amount to a 15% pay cut. Five) Prime adjustable mortgage resets are just beginning and may cause many San Diego home owners may wake-up to how deep in negative equity they are.  Six) the government is putting out $2 trillion in new treasury offerings this year. Many believe this to be such an oversupply that it will cause the bid prices on the treasury notes to fall and the yield, which affects home interest rates, to rise.
Seven) The federal reserve has an ongoing program where they buy treasury bonds, and other US debt, in an effort to contain interest rates. How long the government can afford to do this without causing hyperinflation down the road, remains uncertain. Bill Gross, the head of the world’s largest mutual fund predicted that the federal debt as a share of gross national product at 45%, and could balloon to 300% over the next 10 years. A few others believe that Mr. Gross’ scenario could actually play out. But, looking back just a few years, how many of those people would have believed that our housing market would turn into such a disaster?
If we look at the positive factors during the last three months, which I mentioned above, one can see the reasons for San Diego’s bounce in home values. However, if one analyzes all the points noted, the rational conclusion would be one that calls for caution.
In any case it is NOT a plateau – it ‘may’ be a bottom! I am not a doom-and-gloom guy, but real estate is not the investment of the future. ONLY if you can afford a house, even with lost income for several months, and you expect to live in the same area for MANY years should you buy. And an concrete example (my experience renting): the owner bought in San Carlos (public record) in 1998 for $1.4M, sold in 2007 for $1.8M — having collected ~$400K in rents, paid $110 in selling commission, 120K in taxes, $25K in insurance, and about $50K in maint. >> net in (400-110-120-25-50=95K) >> Assuming 100% interest-only loan at 6%: > interest payment: $84K/year> $672K > even at 50% tax savings (net of rent) cost= $536K (part of which will have to be paid at sale IF there is any gain) >> so 95K-536K > net expenses $440K >> IN ESSENCE NO GAIN (if not a loss) >> AND that in a time when prices were RISING rapidly.
San Diego real estate brokers
This is why I know housing is nowhere near bottom. There’s still people like this who believe housing can only go up – any downturn is just a hiccup. Heck, genius Cramer even called a bottom in 2007!!!
San Diego cosmetic dentist
Housing prices and sales will continue to decline. Expect 3 years before the bottom; Commercial real-estate will suffer a steep decline as well.
Orange County attorneys