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San Diego real estate library
Real Estate Outlook or A MUST DO for
Sellers in a Buyer’s Market!
By Bob Schwartz, CRS, GRI,
San Diego real estate broker
Last week I was asked about my predictions for the San Diego
real estate market. When I receive real estate questions I am
asked my real estate outlooks, I always answer the same way.
Whether my clients are buying or selling, the only thing they
can be assured is that I will get them the best possible price
for current market conditions. I have had over three decades of
residential real estate sales in New York, New Jersey and
California, and since I'm not paid for my personal opinion on
the market or its direction, I'm certainly not afraid to
communicate that opinion.
Truthfully, the San Diego California real estate market peaked
its high point in the summer of 2005. Since then, a number of
neighborhoods have been in decline! This is a fact and not an
opinion! In today's market, many San Diego neighborhoods have
had double digit value declines! As indicated by a local San
Diego Union Tribune newspaper dated 3-18-2007, the following
resale homes in these neighborhoods have experienced median home
value decline since February 2006. La Jolla 15.6%, Pacific Beach
15.8%, North Park 15.8%, Ocean Beach 19.1% and San Carlos 19.1%.
Keep in mind, the average San Diego median home price is over
$550,000. This generates a 15% decline wich is an $82,500 loss!
With my experience in San Deigo real estate, I can estimate a
good statement on the upcoming future of the market. My take on
the background of the current market at hand is that in the
immediate future we will experience a seasonal sales pick up in
activity. This should last for a few months, and then I believe
that the downward trend will re-establish itself. That trend
will not only continue, but is likely to accelerate as the
popular adjustable rate mortgages from the last few years come
up for their first adjustments. In the end, I believe San Diego
housing values couldeasily be down 25 to 30% from their summer
2005 values by the end of 2007.
During the year ended January 31, there were 13,249 homes in
default for foreclosure in San Diego County, as maintained by
RealtyTrac in Irvine, California. This was a 192% jump from the
previous year and the defaults and foreclosures are up 131%
statewide and 42% nationally. Compared with one in 229 homes for
last year, one in 79 homes in San Diego County is in default or
foreclosure this year.
The average San Diego home increased in value approximately 20%
per year from 2000-2005, or 100% for that five year period. San
Diego real estate has kept its buying frenzy for at least two or
three years beyond when it would have regularly ceased. It is my
belief that this has taken place because of the zero down,
stated income, low start rate loans, and the sub prime loans.
Now unfortunately, as with any frenzy, it's payback time.
At first, most people thought there was no bubble and that it
was always a good time to buy or invest in real estate; how
could you fail if you invest in real estate? Today, many of
those same people obviously have changed their tune. Now the
prevailing belief is that our ‘correction’ in San Diego home
values is over and both real estate sales and home values will
be escalating from here.
Unfortunately, I find it problematical to agree with this
majority opinion, bearing in mind that that San Diego was named
the piggyback loan capital of the US just a few years ago. I
must make it clear that our existing activity pick up is just
seasonal in nature. I feel that the full impact of both the
sub-prime loans and all the easy qualifying loans is however a
few months off.
It's wonderful to be optimistic and when working with high net
worth people, it's my opinion that you must provide a practical
opinion on the market. This is especially critical when dealing
with sellers because being overly optimistic here could be a
sure ticket to an expired listing.
To further explain, our local San Diego MLS is complete with
price reductions, rising commissions and buyer motivations. What
will you do when the initial price you agreed upon with your a
seller ends up being reduced by $20,000, $30,000, or even
$50,000? How do you tell them that the market pickup was looking
very strong, but now you'll have to reduce their selling price?
A very important fact to remember is that 95% of getting a
property sold is accurate initial pricing. It is exceedingly
important to price properties right from the start in this
market.
So I certainly hope I'm incorrect. I hope that this San Diego
up-tick in housing sales is really the bottom to our market. But
if not, having a home sit on this deteriorating market for 3 to
6 months or even longer will begin to make most sellers to lose.
They will lose much more in actual cash value than if they would
have priced the property accurately from the beginning.
In conclusion, giving a seller a levelheaded view of the general
real estate market and the crucial importance of ‘right-on’
pricing will net more for the seller. Also, proper initial
pricing may evade a lengthy listing period, complete with large
price reductions, and possibly ending in an expired listing.
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