patrick.net

TOS
Bottom Line:
1- This approach suggests that prices in 2007 should be roughly 10% lower (492,000/ 544,000) than prices in 2005
2- But prices in 2007 should be roughly 39% higher than prices in 1999 (492,000/355,000)
3- i.e. 1 in 1999, 1.53 in 2005, 1.39 in 2007 and 1.65 in 2010
Conclusion: 10% drop corresponds roughly to what has been observed so the methodology is not completely off base…

I will look closely at what you are saying. You may be using national figures which could support your point on a macro level. My reference of course is my own back yard of San Diego Co. The bubble does not just look like a 20% blip, it is a classic hockey stick. To give you an example of a home run, in 1998 I bought a house for 132K. In 2004 I sold it for $440K. It is now a bank owned house that has been for sale for 1 and a half years. In 6 years it tripled. Using 5% compounding the rule of 72 says it should have taken 14 years to double. That house will have to drop to less than 200K to be back on trend now or it can stay for sale til 2018 when prices should catch up to it.

The only part that I don't agree with is your statement that 1999 was a weak year for housing. Housing here anyway recovered in 1996, and stayed very consistent through 2001, and then went absolutely crazy.

Malcolm- in SD yes you may be right. In southbay SF Bay It would be 50% correction using local numbers Sq Ft... Typical Sq ft in 1997 was 100/sq ft this is backed up with Zillow/Domania numbers. Today we are at 350-400/sq ft if not higher.

Space, for both areas that sounds about right to me. I think nationally 10-20% is realistic and I think that is TOS's point. That kind of correction is still going to be really detrimental, but here in CA I think we can literally expect to see decimation of current owners. My gut has always said 40% drop in San Diego I just don't know how steep or shallow that adjustment in present dollars will translate out.

Nationally or locally why would someone buy when even the opposing point of view concedes at least a 10% drop. Why not wait for it, verses jumping in just to be behind the ball. Save the money by renting now, put the difference away and you will be ahead of the game when it is time to buy.

Malcolm, I think you will be much safer in SD then many in the BA.
SD may have less of a correction than BA, not as deep as the north.

There are people that dont believe in the bubble and they never saw downturns and dont understand how or why they happen.
They are not stupid people, infact very educated, just jaded!
Many are from other parts of the nation so they expect to pay higher
prices. They are so brainwashed by realtors... they are beyond reasonable repair. A deep correction will be nice 'shock treatment' for them.

if rates in 1998 were in the 10% …

For your future reference, the rate was 7% pretty much standard. 30 year fixed rate.

Your timing of 2009/10 is right in line with my thinking.

Space, that's an interesting notion, but I see the opposite. San Fransisco has consistently been more expensive than San Diego, and you guys up there have a severe space shortage. As depressing as all the development has been we still have lots of space to build.

SF yes... but the city has had more construction over the past few years now..
Lots of towers going up and new develpment in many pockets of the city., I t was surpising to me as well.

South Bay - not the same story since there is plenty of land and rezoning very easy since we have so many vacant commerical land since 2000. Where you had Anti-Growth city ordiances now development is welcomed.

As I recall Socal is the one with more expensive homes... infact I recall reading how NoCal cities surpassing prices in 2001-02 from CAR web site.

I must say San Diego would be much nicer than Palo Alto... or even Santa Barbara better than places here .... yet prices did surpass without much real reason.... I mean were do I park my yaht??? We dont even have a Ferrari store around here...

Malcolm,

In case you didn't know, 'the city' in Different Sean's case is Sydney, Australia.

I was in Tijuana a few weeks ago, and I can tell you, that is a city on the verge of a famine if there is any disruption to their water. That is absolutely a disaster waiting to happen. Their infrastructure is literally at the breaking point.

Thanks for the update on Pt Loma, nice to talk to someone who knows of what they speak. The EPA had given San Diego a waiver on the untreated sewage because it goes quite far out but I guess you have done some current research on the issue. I don't share your concern on the aquaduct. I don't really know how you can do more than disrupt it with anything smaller than a nuke. I would think no terrorist damage could do more than a week's worth of work to one of those. They are actually pretty amazing structures. Miramar, Lake Hodges, and San Vicente can easily sustain us for months on their own with drastic rationing.

I do agree on a desal plant. I'm surprised we don't just build one next to San Onofre but I suspect there already is one there for the base. In any case, it is the logical way to go, and when it is all done it would shut a lot of people up. I'm a little tired of constantly living with some political crisis like we are going to run out of water.

Everybody in CA is stealing water from the ocean.

What percentage of asking price qualifies an offer as a “lowball?”

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