HOUSING: Report says prices keep tumbling
Spring sales bump did not slow the decline
By ZACH FOX - Staff Writer | ∞
San Diego County home prices took yet another beating in April as predictions of any recovery keep getting pushed back.
Home prices plummeted for the seventh straight month, down 2.6 percent from March to April, the latest data available, according to Tuesday's release of Standard & Poor's Case-Shiller Home Price Index.
With April's heavy price drop, the year-over-year decline reached its highest level yet, 22.4 percent, for a housing recession that began when prices started to drop in November 2005.
And with inflation growing, the county's average home price is now 33 percent off the 2005 peak, factoring in the weaker buying power of the dollar since then.
"San Diego is one of the most overvalued markets," said Dean Baker, co-director of the Center for Economic and Policy Research, a think tank in Washington, D.C. "Prices are going to keep dropping there, and I just don't see how you get around that. The best thing you can hope for is a slower rate of decline."
Baker said there will be no market recovery until at least late 2009, and more likely not until 2010.
He predicted that San Diego County's housing market will see an additional 20 percent to 30 percent decline in prices, accounting for inflation. That will bring local home prices below 2000 levels in real terms, Baker said.
However, real estate agents said home sales are stronger, which they think might mean an end to price depreciation.
"I think we're OK. I don't think we're going to see much more declines," said Victoria Johnson, president of a mortgage brokerage firm in San Diego. "You don't see offices with record sales if prices are dropping because people will sit on the sidelines."
April's steep price decline hit despite a large bump in number of homes sold. Home sales typically increase as summer approaches.
The county's cheaper homes, defined by the index as any home that sold for less than $379,636, bore the brunt of April's drop, tumbling 3.4 percent in just one month. That brought the tier's year-over-year decline to more than 30 percent in nominal prices for the first time since the start of the housing recession.
High-end homes, those valued at more than $566,964, continued a steady price decline in April, though at a much slower rate, falling 1.5 percent in one month and 15 percent over the last year.
Real estate agents also emphasized the local nature of the market, pointing to price strength in coastal communities.
"We're seeing more people who are ready to enter the market again," said Carlton Lund, a real estate agent in Carlsbad. "They're not quite as afraid."
While sales have increased with the arrival of summer, San Diego County ---- including North County ----- still has to work through a glut of foreclosures.
Over the last five months, notices of default, the first step in foreclosure, in North County have peaked around 1,000 per month, according to ForeclosureRadar. Also, many bank-owned foreclosures are not yet listed on the open market.
"It's not getting better anytime soon. There's still a ton of foreclosures in the pipeline," said Chuck Smiar, a real estate agent in Escondido.
Still, Smiar said he thinks the steep monthly declines seen over the last seven months of the Case-Shiller report will not last because of increased buyer activity.
"I think you're going to see more drops (in prices), but not the big drops," he said. "When prices become affordable across the board, more people start buying."
Smiar's opinion contrasts with Baker, the Washington economist, and with Mark Goldman, a real estate lecturer at San Diego State University.
"The downward pressures are not changing, the same factors that have been reducing prices are still in play," Goldman said. "I think we're going to see more inventory come on to the market than go off it."
San Diego County's large April price declines kept it in the running for steepest home price depreciation in the nation, placing it fifth behind Las Vegas, Miami, Phoenix and Los Angeles. April's decline was the third-steepest nationally month over month.
Further, the county's 19 percent free fall during the last seven months of the report surpassed year-over-year declines for 13 of the 20 cities in the Case-Shiller report. It was also larger than the 15.3 percent year-over-year drop in the national average.
The Case-Shiller report is widely considered one of the most accurate indicators of home prices because it compares sales prices with previous transactions on the same properties.
Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com.
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So Cal Native wrote on Jun 24, 2008 12:27 PM:Not in Carlsbad. Our market has stood strong with no down trends....
Summer wrote on Jun 24, 2008 1:56 PM:I still can't afford a house. All my money goes to gas...
Tuck wrote on Jun 24, 2008 1:58 PM:To SO Cal Native: Which real estate firm do you work for?
Struggling Middle Class wrote on Jun 24, 2008 3:06 PM:It make sound cold to some but this is good news. Prices need to continue dropping until owning a decent home in a decent neighborhood is a real possibilty for those of us who haven't been handed everything in life.
Real estate prices in San Diego have long been subject to a fantasy of true-work-adverse real estate investors, who seek quick empty profits at the expense of the working class (who can no longer afford decent housing).
No fault wrote on Jun 24, 2008 3:12 PM:Everyone wants to blame everything, everyone else, anyone who bought a home, anyone who complains about lost retirement options, etc. Bless those that bought at the 'right time' with the 'right loan' with the time to wait this out before having to move or retire. Many are losing everything they worked for, believed in, and did NOTHING wrong to deserve this 'downturn.' Then again, look at the homes floating down the Missouri, Mississippi, throughout Iowa, etc. The tornado wiped out towns, job losses, etc. Told they didn't need flood insurance, everything is gone. We are at a crossroads where we need to stop greed, bellyaching, accusing, attacking, weeping, etc. Can we each help one other person in need? Reach out, not reach into someone else's pocket? Would God that a new government will really keep the 'change' promises and perhaps many who've worked decades might have a chance of retiring without facing homelessness as a reward.
Its true wrote on Jun 24, 2008 3:21 PM:Anyone who has taken economics knows an item is only worth what someone is willing to pay. Unfortunately, these no-money-down loans is what screwed up the market because people could then buy something they could not afford. So, it's a combination of irresponsible buyers and stupid bank lenders and the ones who suffer the most pain are fiscally conservative.
To Struggling Middle Class... wrote on Jun 24, 2008 3:27 PM:Don't assume if you own a home that you have had everything handed to you in life. I do agree with things have gotten so out of hand but I have never had anything handed to me just because I own a home.
eric wrote on Jun 24, 2008 4:16 PM:buy now, you lose.
Waaaah wrote on Jun 24, 2008 6:35 PM:FYI Struggling Middle Class: Not everyone who bought a house was "handed everything in life." Living within your means and not trying to keep up with the Joneses with Hummers and 60-inch plasma tvs really pays off.
To Eric wrote on Jun 24, 2008 6:37 PM:what if you buy now and live in the house for 30 years? You don't honestly believe a house purchased now will be worth less in 2038, do you? Flipping Houses = Over. But good, sound real estate will never go out of style.
Joe Investor wrote on Jun 24, 2008 6:46 PM:This is good news. I have a ton of cash to invest. I'm gonna wait 12 to 18 months. When the blood is on the street I'll be there to clean up. I'll take advantage of the banks (not homeowners who are struggling). Gotta roll with the big boys. In the mean time I'll be working out, fishing, bowling, whatever.
Yeah wrote on Jun 24, 2008 7:31 PM:I bought on a 30 yr. fixed and I am not leaving my lovely little perch. Perfectly happy.
The Truth wrote on Jun 24, 2008 10:08 PM:Why would you interview the orchestra as the Titanic sinks???
What else will mortgage brokers and realtors say--"The market is going to get real crappy and you'd be an idiot to buy a home"? Of course not!! It's in THEIR best interest to push homes and loans!
Truth is one would be either in a compromised position or desperate to buy a home now. As most people know, this (the summer) is the best time to sell a home as families can move easier. This fact is producing better sales numbers for the real estate folk (which is what they're trying to cram down our throats right now). Their pitch is "buy now while prices and rates are low."
My advise is to wait until the END of the summer as more people trying to sell their home means more supply and less demand, which equals LOWER PRICES! Most "experts" see an additional 10-15% price reductions in our future--why rush into anything?
Carlsbox Resident wrote on Jun 25, 2008 2:30 AM:Truth is right. I can not sleep. Someone please buy my box in S.East Carlsbad. I am so upside down and pricees keep dropping here. I better plan on handing in my keys. there are no buyers yet.
jvc wrote on Jun 25, 2008 2:54 AM:When are rents going to tumble?
Up in Temecula wrote on Jun 25, 2008 2:55 AM:Yup, bought our home in 2003, and its now officially worth less that what we bought it for. We were hoping it wouldn't happen, but oh well. At least everyone else is a screwed as we are.
nc wrote on Jun 25, 2008 6:06 AM:The bottom is not here...Come back in Dec or Jan.
VW wrote on Jun 25, 2008 6:44 AM:To: SO CAL NATIVE
Which tribe are you from?
VW wrote on Jun 25, 2008 6:48 AM:You go, "YEAH"!
Happiness is what it's all about and when you can realize that, you have it all.
VW wrote on Jun 25, 2008 6:49 AM:Hey Joe Investor:
How about spreading a little my way, I want to buy a house!
Anybody know where wrote on Jun 25, 2008 8:06 AM:I can go to get the taxpayers to bail me out of this month's apartment rent?
New Buyer wrote on Jun 25, 2008 8:45 AM:I'm just in the finishing stages of buying a home. Yeah, prices are probably going to drop some more, but I got into a house that was available now at a really good price. And I got a good interest rate.
You can wait for the prices to drop, but interest rates are starting to make a comeback so you have to average it out over the long run at which will end up costing you more.
Personally, I feel that normalcy is returning to the market. Houses are returning to a fair market value. Now those that bought at a higher price are going to argue this, but the average person can better afford to buy a home and settle down at these prices.
For those that already own a home and the value of your home is less than what you paid for it, get it re-appraised so you can lower your property taxes. That will help you out some. And as the median income increases, prices on the homes will begin to increase as well.
As for the price of rentals to drop, not going to happen. Renters know that more people are going to be renting so they are going to raise their prices and gouge the public. It is unfortunate but it has already been reported to be happening. Supply and demand.
Best of luck to everyone out there.
SW Carlsbad Resident wrote on Jun 25, 2008 8:57 AM:Coastal (especially with a view of the ocean) will always hold a strong value. It is an emotional buy versus the "dime a dozen" "commodity" homes inland. Glad we bought there in 2006 versus inland.
And, to the "struggling middle class", own-up to your own successes and/or failures. I bet you got a government rebate check recently. Guess who "handed" that to you...it was me and a small group of others who did not get a rebate check and pay an inordinate portion of taxes.
carlsbad resident wrote on Jun 25, 2008 9:09 AM:So Cal Native - Sorry to burst your bubble. Carlsbad is also down mucho. Don't let the real estate cheer leaders( always a good time to buy ie. make a commision or our market is holding up Ha ha )fool you.
Opening Doors to a Better Future wrote on Jun 25, 2008 9:10 AM:I work with Buyers only and I tell them that they are the only ones who can determine if "now" is the perfect time to buy a home. It's about the Buyers ability to buy a home based on credit, income, and their financial situation. There's a great selection of homes right now and if they are in a position to buy - I'm here to represent them (in their purchase). The market will always be changing - up or down - that's the nature of real estate. The perfect time to buy real estate is when you are ready.
Observer wrote on Jun 25, 2008 9:26 AM:You're right Carlsbad resident. A couple of bank-owned properties in our neighborhood are priced about 40 percent below the bubble peak prices -- and they've been sitting there for months...
clm wrote on Jun 25, 2008 10:09 AM:People are funny. When prices were going through the roof, you couldn't get a person to admit that the upward spiral couldn't last forever. Now, in a down market, it is hard to find a person that can't see light at the end of the tunnel. New Buyer is right. You don't have to wait for the average prices to drop to bargain hunt right now. Interest rates are headed up. Numbers are starting to line up. Many inland area homes are now selling for less than the cost to build. Investors have reentered the market. Multiple offers on lower priced properties are becoming common.
This is Southern California, not some isolated freezer box in North Dakota or dust bowl in Kansas. They aren't making any more Mediterranean climate or warm water beaches two hours from mountain skiing.
Cycles come and go, but with each one we get less and less available land to build single family residences. With this last one, there are now no more undeveloped, cheap beaches. By the next one, there will be no more close in areas. Even inland areas will be well established with far fewer bad mortgages that can drag down a market.
The naysayers should be much more interested in trying to figure out how they can get into a home soon instead of hoping everyone else loses theirs.
Steve wrote on Jun 25, 2008 1:19 PM:In this current market I would rather rent for $1,000 a month, put away my down payment along with $1,000 every month instead of a $2,000 mortgage, and if a killer deal comes along I'll be ready to pounce on it and if it doesn't I'll still be ahead of the market...Unless the prices start going through the roof again...yea right.
The Truth wrote on Jun 25, 2008 4:16 PM:Don't do it "New Buyer"!!!!!!
Cancel escrow!! Don't buy a home now. This is an ex-loan officer talking here!! Here are some basic numbers to consider:
You buy now for $500,000 with 20% down you finance $400,000 on a 30yr fix at 6.25% w/a piti payment of $3,200....
---OR----
You buy the same home in early Spring 2009 for $400,000 with 20% down you finance $320,000 on a 30yr fix at 6.5% w/a piti payment of $2,500....
Again...get out while you still can!
Steve said it best: (paraphrasing) Why own at $2k when I can rent at $1k? You save $1k a month and after 5 years with some minimal investing/compound interest, you've got $100k to put down!
Karl wrote on Jun 25, 2008 4:57 PM:I lucked out and bought in 1996 when not to many others were buying. The real estate market has and always will have up and down cycles. This last up we had is the longest I have seen in my lifetime which I believe was extended by the no down ARM shaky loan madness. In past down trends some folks went upside down but not to the extent we see now. Because of the length of the upward trend and the shaky loans I think I can accurately predict a protracted down cycle.
The blogger that said "The perfect time to buy real estate is when you are ready." is absolutely correct if he means on a fixed loan that one can afford. The winners in this mess are the folks who are not greedy and plan to live in their homes for a long time.
Good luck and Peace to all.
To the truth... wrote on Jun 25, 2008 5:38 PM:I really don't think $100K is enough to put down. You need way more than that
JSten wrote on Jun 25, 2008 6:54 PM:Apparently my comment of this morning was not up to NCT standards. They shoudl read up on Dung Beetles
Floyd wrote on Jun 25, 2008 7:48 PM:I think I'll call a Realtor[tm] to see if the real estate bubble has burst yet.
Re Joe wrote on Jun 25, 2008 8:37 PM:Joe you sound like a smart fella But what if you low ball now & they accept? I`d like to get together & discuss life in general. I like long walks on the beach at sunset ( we`ll sneak some adult beverages ) since the politicians have ruined that enjoyment for everyone. Bruce.
Lucky wrote on Jun 26, 2008 6:01 PM:Those Realtors don't know anymore than the man on the moon! All they're interested in is making money like any other business person. In 2006 I sold a 2 bedroom 1 bath in Long Beach for $523K to husband and wife realtor's. The AARP magazine stated the bubble was going to burst and I acted on it their prediction. Lucky guess?
Common sense wrote on Jul 5, 2008 7:05 AM:Why would someone believe a guy in Washington D.C. about the San Diego market over people who actually work in the local industry? I just don't get it.
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