San Diego Real
Estate – A Trend to Go National?
By
Bob Schwartz, Broker, CRG,GRI
Just this summer it was almost impossible to find
a new
San Diego real estate development that
cooperated with real estate brokers. If you could find a developer co-opting, it
was most likely way below the traditional 3% rate.
Just a few short months have passed and a current
read of the Sunday homes section of the San Diego Union Tribune shows that
though the real estate market does not make discernible moves in a day like the
stock market, a couple of months can easily define the local real estate trends.
Here are just a few of the incentives noted in
the home section of a very recent Sunday’s paper: 4% broker co-op, free plasma
screen TV, $1,000 off closing costs, $2,500 in design center upgrades, $10,000
in incentives, one year HOA fees paid, $5,000 in closing costs, $2,000 closing
cost credit, washer, dryer & refrigerator included, $25,000 in incentives or
cash price reductions, $1,000 gift certificate, and no HOA fees for 2 years! To
view all
San Diego MLS listings, visit: http://www.brokerforyou.com
The grand opening long buyer lines, multiple
offers, offers above the asking price and homes selling within days of being
listed are just fond memories now. However, due to the huge home appreciation
all of San Diego real estate has seen (with the average home up 100% in the past
5 years) combined with the boom in 100% adjustable/interest only loans, the
stage is set for what is sure to be mind-numbing depreciation.
This market did not turn on a dime. Back in June
our year to date sales were off 6.1%. More importantly, our monthly comparison
for June ’05 vs. ’04 showed a 12.3% reduction in sales. Also, the average days
on the market for this same period, showed a 56% increase for detached homes and
an astonishing 280% increase for attached homes! All this at a traditionally and
seasonally strong marketing period. These figures were published by the San
Diego Association of Realtors and are taken only from properties listed in the
MLS.
According to the California Association of
Realtors, only about one in 10 households in San Diego can afford to buy a
median-priced, singl-family resale home with a 30-year, fixed rate loan. Combine
the above, with the multiple Fed interest rate increases and the proliferation
of EZ qualification, 100% interest only financing, and the stage has been set
for not just a ‘return to normal’ but a major change.
When I first entered the real estate business the
current philosophy was that if anyone asked “How is the real estate business”
the standard reply was “Fantastic!” A lot has changed in the last 20-something
years. Many real estate agents still follow this ‘everything is coming up roses’
mindset. In the
San Diego
real estate market where I work, the average sale is over
$500k. My clientele are very knowledgeable and I have yet to work with one who
does not have Internet access at their home.
So, sure it’s great to be optimistic about your
real estate market place, but ignoring the obvious trends will cost you both in
money and reputation. It was about five years ago that the mantra was that this
was a new paradigm and the stock market no longer followed the old rules of
valuation. We were soon to reach Dow 20,000! Hopefully, you missed that costly
over-enthusiasm. The result was such a drop that five years later we finally may
be building a base.
What I’m saying is be up-front and truthful with
your clients, especially sellers. In just one hot area here the last few sales
showed huge drops in the actual sales price vs. the original listed price. In
one case this difference was $100,000 or just about 20% of the listed price. The
other differences were about 9% of the listed price. Personally, I attribute
these huge reductions mainly to the agent’s inability to see that our market has
turned. When you tell your seller that the real market is fantastic, it’s a
little tough to get multiple price reductions.
Yes, we have started on the down leg of the
typical ‘Bell Curve’ and the probability of surpassing our approximate 20% drop
in
San Diego home values experienced from 1990
through 1996, seems assured. Plus, as real estate trends seem to start in the
West and then move east, any U.S. real estate market that experienced huge price
appreciation the past five years, will experience the same depreciation in real
estate residential values.
Bob Schwartz is a Certified Residential
Specialist,
San Diego real estate broker & is owner of websitetrafficbuilders, an
Internet
search engine optimization firm specializing in
domain name registration & Internet domain website hosting. Bob received his
BBA majoring in real estate & computer programming. Bob is an expert witness for
major
San Diego law firms,
and directs a multi-state high traffic network of 15 legal directory sites. Bob
has two free link exchange programs. One is for 15 legal related sites and the
other is for 4 real estate sites. You can also apply for free, website awards
that add credibility to your site. Email Bob if you are interested in any of
these programs
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reserved - If you wish to re-publish this article
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