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Copyright © 2006 by
Bob Schwartz
San Diego
real estate broker
Certified
Residential Specialist
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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 forecast for the San Diego real estate market.
When I receive real estate questions I am asked my real estate opinions, I
repeatedly answer the same way. Whether my clients are buying or selling, the
only thing they can be guaranteed is that I will get them the best possible
price for current market conditions. I have had over three decades of
residential real estate experience in New York, New Jersey and California, and
since I'm not paid for my opinion on the market or its direction, I'm certainly
not afraid to express that opinion.
Truthfully, the San Diego California real estate market hit its high point in
the summer of 2005. Since then, the majority 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! In line with 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
creates a 15% decline and an $82,500 loss! With my experience in San Deigo real
estate, I can produce a fair hypothesis 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 should 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-clarify itself. That trend will not only continue, but is likely to increase
as the popular adjustable rate mortgages from the last few years come up for
their first adjustments. So, San Diego housing values could effortlessly be down
25 to 30% from their summer 2005 values by the end of 2007.
For the duration of the year ended January 31, there were 13,249 homes in
default for foreclosure in San Diego County, as indicated 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 in the region of 20% per year from
2000-2005, or 100% for the five year period. San Diego real estate has continued
its buying frenzy for at least two or three years past when it would have
normally ceased. It is my belief that this has occurred 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.
In the beginning, many people thought there was no bubble and that it was always
a good time to buy real estate; so how could you ever lose when investing in
real estate? Today, many of those same people clearly have changed their
opinions. Now the current opinion is that our ‘correction’ in San Diego home
values is over and both real estate sales and home values will be growing from
here.
Alas, I find it problematical to be in agreement with this majority opinion,
bearing in mind that that San Diego was named the piggyback loan capital of the
US just a few years back. I must clarify that our existing activity pick up is
just seasonal in nature. I believe the complete impact of both the sub-prime
loans and all the easy qualifying loans are still a few months off.
It's awesome to be optimistic and when dealing with high net worth people, it's
my opinion that you must provide a truthful 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 full with price reductions,
increased commissions and buyer enticements. What can you do when the original
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
correct initial pricing. It is especially imperative to price properties right
from the beginning in this market.
So I certainly hope I'm incorrect. I hope that this San Diego up-tick in housing
sales is actually the bottom to our market. But if I'm right, 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 far more in actual cash value than if they
would have priced the property accurately from the start.
In conclusion, giving a seller a levelheaded view of the existing real estate
market and the essential importance of ‘right-on’ pricing will net more for the
seller. Further, proper initial pricing may evade a lengthy listing period,
marked by large price reductions, and possibly ending in an expired listing.
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