The Most Asked Question About The San Diego Real Estate Market

By Bob Schwartz, San Diego real estate broker - San Diego real estate blog

For San Diego, the summer of 2005 was the high point in the real estate bubble.  Now almost 2 1/2 years into the steady deterioration of San Diego home values, the predominant question asked by most potential home buyers is: “Has the San Diego real estate market bottomed out, or when do you think the bottom will be in place?”

"The only function of economic forecasting is to make astrology look respectable" - John Kenneth Galbraith (1908 - 2006) Obviously, no one can accurately project when any market, especially the San Diego real estate market, will bottom and reverse course, except in retrospection. 

California real estate agents and brokers are continually advised not to give legal advice or financial planning advice.  Perhaps, they should also be advised not to give economic forecast or predictions on market trends.  I believe not giving this type of advice is implied by California law.

With that said, what can a San Diego real estate agent or broker comfortably tell prospective San Diego home buyers?  Again, this is solely my own opinion and should not be interpreted to be any type of legal advice or guidance.  I feel San Diego agents and brokers can feel comfortable telling prospective buyers where the local market has been, and the fact that there are incredible housing buys today, as compared to just a few short years ago.  I think a San Diego real estate agent can tell buyers that the market has changed.  Buyers, not the sellers, are in the driver's seat.  I feel San Diego real estate agents can tell buyers that in the past, a home was considered a place to live and raise a family and any appreciation gain on the sale of the home was a bonus.  Perhaps, such a philosophy is a more prudent way to look at future residential home purchases.

San Diego agents and brokers can provide facts and opinions on the direction of our local San Diego California real estate market that have been published by other sources.  These sources could be Wall Street firms, the National Association of Realtors, the California Association of Realtors and the San Diego Association of Realtors.

San Diego agents can also give data to prospective buyers showing that the after-tax cost of owning a home, depending on the down payment, maybe very similar to renting a comparable property.

Even if the San Diego real estate broker or agent personally thinks that our market has bottomed and we're about to enter a new uptrend, they should not express these opinions to buyers.

As a real world example of a protracted real estate value depreciation one just has to look toward Japan. Japan is one of the strongest economies in the world and its average home value more than doubled from the early 1980s to 1990.  This sounds just like what happened in San Diego from 2000 to 2005.  Japan’s real estate market hit its top in 1990, and for the past 16

years has stayed in a steady downward trend.  The average 750 foot condominium in Tokyo has dropped over 42% in value from its peak in 1990.

Will San Diego real estate values follow the Japan example? That's very doubtful.  What I am saying, by citing this actual example, is that no one can accurately foresee the bottom of any real estate market except after such a bottom has been in place for at least a couple years.

As for San Diego real estate values, my own simplistic survey done in late 2007, demonstrated that in many areas, the top of the market in 2005 condominium values have decreased well over 20%.  In the areas that I looked at, this drop worked out to just under $100,000 for the period.

So, are today's San Diego condominium buyers picking up exceptional values at close to $100,000 less than the same property sold for just a few short years ago?  The answer is clearly yes. But, the more important question is whether today's San Diego condominium or home prices will be higher in January 2009 or January 2010 as compared to where they are now.

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