For San Diego, the summer of 2005 was the peak in the real estate bubble. Now almost 2 1/2 years into the steady deterioration of San Diego home values, the predominant question asked by most potential home buyers is: “Has the San Diego real estate market bottomed out, or when do you think the bottom will be in place?”
Obviously, no one can accurately predict when any market, especially the San Diego real estate market, will bottom and reverse course, except in hindsight. California real estate agents and brokers are continually advised not to give legal advice or financial planning advice. Perhaps, they should also be advised not to give economic forecast or predictions on market trends. I believe not giving this type of advice is implied by California law.
With that said, what can you comfortably tell prospective San Diego home buyers? Again, this is solely my own opinion and should not be construed to be any type of legal advice or guidance. I feel San Diego agents and brokers can feel comfortable telling prospective buyers where the market has been, and where it's gone and the fact that there are incredible housing buys out there, as compared to just a few short years ago. I think we can tell buyers that the market has changed. They, not the sellers are in the driver's seat. I feel we can tell buyers that in the past, a home was considered a place to live and raise a family and any appreciation gain on the sale of the home was a bonus. Perhaps, such a philosophy is a more prudent way to look at residential home sales.
As agents and brokers, we can provide facts and opinion on the direction of our local real estate market that have been published by other sources. These sources could be Wall Street firms, the National Association of Realtors, the California Association of Realtors and the San Diego Association of Realtors. We can also provide data to prospective buyers showing that the after-tax cost of owning a home, depending on the down payment, maybe very similar to renting a comparable property.
Do you, as a San Diego real estate broker or agent personally think that our market has bottomed and we're about to enter a new upper leg? You could be correct, but, when it comes to prospective buyers, you should keep such comments and opinion to yourself.
Japan is one of the strongest economies in the world and its average home value more than doubled from the early 1980s to 1990. This sounds just like what happened in San Diego from 2000 to 2005. Japan’s real estate market peaked in 1990, and for the past 16 years has remained in a steady downward trend. Just as one example, the average 750 foot condominium in Tokyo has dropped over 42% in value from its peak in 1990.
Now, I'm not saying the same will happen for San Diego real estate values. What I am saying, by citing this actual example, is that no one can accurately predict the bottom of any real estate market except after such a bottom has been in place for at least a couple years.
As for San Diego real estate values, my own simplistic survey done in late 2007, showed that in many areas, the top of the market in 2005 condominium values have fallen by over 20%. In the areas that I looked at, this drop worked out to just under $100,000 for the period.
So, are today's San Diego condominium buyers picking up exceptional values at close to $100,000 less than the same property sold for just a few short years ago? The answer here seems clearly affirmative. However, the real question is whether today's San Diego condominium values will be higher in January 2009 or January 2010 as compared to where they are today.
If I predict recession every year I will get it right eventually.My understanding of economics is that something either goes up or it goes down. There are 50-50 odds to guess right. Some may guess 60% right but will eventually revert back to the mean. Its too bad this is a time when the system has been raped for every nickel and dime for the next few years.
Rebecca
San Diego Dentist
I remember in 2005 that It seems every month the paper reported that real estate sales were down by double digits though the values seem to be holding up. You would think an intelligent person would realize sales cannot drop by such a magnitude without values following.
Bailey
San Diego Family Dentistry
It’s simple. House prices have to come down to pre-bubble level. It’s hard to take for a lot of folks. But that’s reality.
Abby
San Diego California Attorneys
We had similar issues on the east coast – with markets cresting on or around July 4th – 2005 around the coast and in the mountains. The 3rd wave of the economic issues could come in the next 90 days – when we see COMMERCIAL LOANS defaulting. IMHO