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Real Estate Outlook or A
MUST DO for Sellers in a Buyer’s Market!
By Bob Schwartz, CRS,
GRI ©2006
www.brokerforyou.com All rights reserved.
Last week I was asked about my forecast for the San
Diego real estate market. When I receive real estate
questions asked my real estate outlooks, I consistently
answer the same way. Whether my clients are buying or
selling, the only thing they can be certain 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
saw 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 even had double digit value
declines! According to a local San Diego Union Tribune
newspaper dated 3-18-2007, the subsequent 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 Diego real estate, I can
generate a good hypothesis on the upcoming future of the
market. My take on the background of the current market
expressed is that in the immediate future we should
experience a seasonal sales pick up in activity. This
should keep on 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. Yes, San
Diego housing values could effortlessly 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.
Contrasted 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 escalated in the region of
20% per year from 2000-2005, or 100% for that five year
period. San Diego real estate has maintained its buying
frenzy for at least two or three years past when it
would have regularly ceased. It is my belief that this
has happened 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 purchase
real estate; how could you fail when investing in real
estate? Today, many of those same people clearly have
changed their opinions. Now the existing opinion is that
our ‘correction’ in San Diego home values is finished
and both real estate sales and home values will be
escalating from here.
Alas, I find it problematical to be in agreement with
this majority opinion, taking into account that San
Diego was named the piggyback loan capital of the US
just a few years past. I must explain that our
prevailing activity pick up is only seasonal in nature.
I feel taht the full impact of both the sub-prime loans
and all the easy qualifying loans is however a few
months off.
It's great to be optimistic and when working with high
net worth people, it's my opinion that you must give a
rational 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, increased commissions and buyer
enticements. What can you say when the initial price you
settled on 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 imperative to price properties right from
the beginning in this market.
So I certainly hope I'm wrong. 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 cause most sellers to lose. They will lose much
more in actual cash value than if they would have priced
the property accurately from the inception.
In conclusion, giving a seller a realistic view of the
current real estate market and the essential importance
of ‘right-on’ pricing will net more for the seller.
Further, proper initial pricing may escape a lengthy
listing period, marked by large price reductions, and
possibly ending in an expired listing.
AbOUT
THE AUTHOR Bob Schwartz, is a Certified Residential
Specialist, and a CA licensed
San Diego real estate broker with. Bob has
over 27 years of residential real estate experience,
authored a number of published articles and served as an
expert witness for
San Diego lawyers. You can contact Bob via
his highly popular
San Diego real estate website.
---This work is protected under copyright and may not be
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