Home Buying in 92109>Question Details

M, Home Buyer in 94114

Do you think that it is a good time to buy a 2 bdrm condo in San Diego or has it not reached the bottom yet?

Asked by M, 94114 Sun Mar 2, 2008

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It is subject to the area, I recommend you watch the market in that particular zip code. Some areas in south bay San Diego are decreasing. As demand decreases (and it has per the San Diego Association of Realtors & Mortgage News Daily reports) and inventory increases, those buyers willing to "stick-it-out" could benefit from a dip in sales price. Rates are still super low, therefore a WIN-WIN for buyers!

Buyers you have the potential to get more for your dollar! A decrease in listing price(s) started over two months ago in certain areas of San Diego; be ready to "pull the trigger" and have your loan conditionally approved with a direct lender!

Now that gasoline is $4.00+ per gallon, it will be interesting to see what will happen this spring/summer when sales & demand typically increase. If you are serious about buying plan ahead and have your financing ready for this summer! Good luck. I'm here to help.

Lucia Islas-Villanueva
Sr. Mortgage Banker
Point Mortgage Corp.
(619) 993-1067
3 votes Thank Flag Link Sat Mar 12, 2011
I would suggest you strongly consider alternatives before buying in this real estate bubble.

Although the realtors on this site will attack me for the following comment, in my opinion this would be a terrible time to buy, unless you must buy now (because of a 1031 exchange, for example). Inventory has increased, sales transaction volume has slowed dramatically, prices are falling, lending standards have tightened (pulling thousands of non-qualified buyers from the market), notices of defaults and foreclosures are increasing substantially, the economy is slowing (looking more and more like a recession) and literally thousands of high paying financial sector, mortgage and other real estate related jobs have been lost in Southern California over the past year. All of these things will put downward pressure on pricing for some time to come.

The reality is that prices will almost certainly be lower next year, likely lower in 2009 and possibly even lower in 2010. Real estate cycles take many years to play out and we are at the very beginning of a down cycle. I disagree with many realtors who say that it does not matter what price you pay if you are looking to hold on for the property for 5 to 10 to 15 years. Let's say you buy now for $1,000,000 and prices drop 20% (actually, Forbes in a recent article estimated a 26% anticipated decrease from June '07 prices by 2010 for Los Angeles and Orange counties) over the next couple of years. You would have lost $200K in future equity by having not waited. Additionally, you would have to service the $200K by paying property taxes and interest on the $200K. Unlike a stock, when you buy at the wrong time, you need to service your hasty decision through increased property taxes and interest.

I have an MA in Economics from USC and have been in the real estate business for 15 years. In my opinion, this real estate bubble will take many years to play out. The previous down cycle was from 1990-1996 and values dropped approximately 20 - 25% in nominal pricing (40 - 45% in real numbers when factoring inflation). The 82 -85 down cycle was a bit shorter. However, that was a period of higher inflation which masked much of the decrease in real prices.

With savings, time is your ally. Unlike stocks which are very subject to dramatic short term fluctuations, real estate is illiquid and cycles move slowly. If you are paying attention, you likely will not miss the change as prices tend to remain flat for an extended period flowing stability in the home market. Clues will be increasing transaction volume and a closer cost ratio in comparing the costs of renting versus owning. Simply stated, following a down cycle, people are generally more conservative in real estate purchases so prices will not likely rebound quickly.

Despite what the spin doctors at the NAR and realtors would like the public to believe – it is NOT always a good time to buy.

With that said, if you have sufficient assets, you may not care about whether your home decreases substantially in value and there are benefits from home ownership. But, in my opinion, there are ample rental opportunities to wait out the deflating real estate bubble.

Best of luck, and if you want an objective opinion, don't waste your time listening to cheerleading realtors, who have a self interest in being overly optimistic about the real estate market. Simply stated, most realtors care more about their commission than having you make the right decision.

3 votes Thank Flag Link Fri Mar 7, 2008
Dear M, It really depends on WHERE in San Diego you are looking to buy. Just as when you watch the nightly news and see them talk about "microclimates" with our weather, we definately have microclimates in the Real Estate market in San Diego. For instance, the 92011 zip code actually went up in value the past 2 years, while many areas nearby went down in value. That being said, it would depend on the zip code, the development and what is around it. Also- whether or not this was originally a condo or if it is a condo conversion could make a big difference.

We must take into consideration your reasons for buying. Are you a first time buyer? If so, it may make more sense than for some other cases. If you are, think about the amount you will pay in rent over, say the next 3 years. When you add up the amount it is usually phenomenal. Then add to it the possible write offs you will have as a homeowner that you don't have now. Don't forget to take into account not only mortgage insurance, etc. but if you work from your home you may have a home office deduction.

After considering all of the above, you may find that even if property values should soften a bit more- will they soften as much as the figures you come up with as a renter? I personally think it is a very good time to buy!

You may even want to explore whether you could buy a detached home at this time. I came across a few 2 year old, 4 bedroom homes that could be picked up under 300K! Detached homes generally appreciate faster than a condo- that is another option to explore!

Patti Phillips
3 votes Thank Flag Link Tue Mar 4, 2008
Hi M,
Here is what you have to look at. What are you looking to do with the condo. Do you need a home for you and your family or are you looking for an investment?

If you are looking to meet an immediate need for housing for your family their are a lot of great deals out there. Are they going to get better? All indication are that prices will come down IN SOME AREAS another 5-10%. The bottom line we do not know, they could go down - they could go up.
Here is some food for thought -
when you look at the last 50 years of the real estate market anyone with two functional brain cells saw this coming. Real Estate, just like EVERYTHING else goes in cycles.
Call it the Darwinian theory. What goes up must come down. When you compare the numbers of today to what took place in the late 70's early 80's (who remembers the saving and loans that went out of business? kinda sounds familiar), the early 90's and now what should have happened in the early 2000's (but was pushed back to the late 2000's) it is a natural cycle.
Over the last 100 years home values have done something like a 9% return on average. Not bad. North County San Diego has doubled its home values about every 10 years, depending on the area they drop about 30% or so, look at San Marcos in the early 90's a 2/2 single family detached was going for about $130,000 - $140,000 by the mid 90's you could pick up the same house for right around $100,000. Now you look at it, just a few years ago - same story, early 2000's 2/2 in San Marcos was coming in the low $300 and now you can pick one up for the low $200 same % of a drop just a bigger number.
People are ALWAYS going to need a place to live and what we ran in to the early to mid 2000's was home price got out of line from what people could afford so instead of the correction happening. Neg Am loans appeared, and creative financing happened. The yin and the yang are coming back in to balance. As you see and we are seeing - as the median home price comes back to the place were a median house hold income can buy a home, you will know that we are on our way out and prices will level out and start the appreciation again.

As an investor- what are we ALWAYS told? Buy low and sell high. To many people get the heard mentality and when price are going up they go buy buy buy and when they start to drop they go
sell sell sell. By then it is too late. You talk to ANY real estate guru they are all going to tell you now is the time to buy. They buy when every one else is in a panic sell. And they sell when there is a feeding frenzy. The rich make most of their money in markets just like this because of people that do not understand what is going on.

If you are looking to buy right at the bottom of the market - good luck! the ONLY way we know when we hit bottom is when it starts to move up again, and by then you missed it - IT WILL BE TO LATE.
Smart Investors buy when it has been discounted when it is on its way down. They sell when it has gone/ goes up. Buy low, sell high.

I hope this helps and good luck!
Web Reference: http://www.rescg.com
2 votes Thank Flag Link Tue Aug 12, 2008
The only person I would ask this question of is Mark Shea.
His web site is http://www.shea-realestate.com
Please tell him that Terry Molnar from Chicago referred you. He is a honest and good man.
The Schaffer Realty Group
1 vote Thank Flag Link Fri Mar 7, 2008
Don't be as concerned about the bubble as the deal. Is it the property you want? Did you negotiate the price to the lowest possible? Start 20% below asking. Please make sure you have substantial down payment and can qualify for a favorable mortagage. Read my articles at my website. Fjellestad,Barrett & Short is the most experienced property management company in San Diego.
Web Reference: http://www.FBS-PM.com
1 vote Thank Flag Link Fri Mar 7, 2008
This is easy to analyze. Ask yourself if jobs are increasing or decreasing in San Diego. Our economy has only now begun to shed jobs. This is very early in the process and we are likely to see at least 8% unemployment. The borrow and spend economy is toast.

I would wait at least 2 years before buying any real estate. The market will be declining for a long time to come.
1 vote Thank Flag Link Thu Mar 6, 2008
Buying a home to live in and possibly even for an investment, makes sense now, particularly if you ask for the seller to buy down (pay points) to lower your interest rate and help with closing. Interest rate buydowns lower your mothly payment and make it easier to qualify for a loan (this is the most difficult part of buying now). Please see my article on Contrarian Investing at this link... http://www.chicagotitlesd.com/december07/MFNewsContrarianInv…
With lots of homes for sale and with sellers and banks eager to sell, you are in the drivers seat. See our site for more information on buying.
1 vote Thank Flag Link Sun Mar 2, 2008
Here is a blog post I did a while back, but the fundamentals are the same, rates vs. prices


Frank Diaz, (RA), MBA, e-PRO
0 votes Thank Flag Link Fri Nov 26, 2010
Timing the "bottom" is impossible since we dont have crystal balls.
But you need to look at other things that factor in to your purchase...will you need a loan? or are you paying all cash.
Well if you need a loan rates are ridiculously low at under 5%, so you buy now. If you are all cash have your buyers agent look at the comps and trends in the particular area you wish to buy then they can help you with your pricing forecast.
0 votes Thank Flag Link Mon Oct 4, 2010
If your decision hinges on whether the market in general is at the bottom, probably not. But the latest Case-Shiller report says San Diego is up 9.3 percent in price. There is still a lag in inventory. Is an investment in real estate good for you personally depends upon your situation. Are you renting now? or is this for an investment/rental property?
Web Reference: http://www.lchometeamsd.com
0 votes Thank Flag Link Sat Oct 2, 2010
No. Do not buy now. Prices are still 2X what they should be. The bubble started in 2000 and we're only back to the 2003-2004 prices. You'd be buying a declining asset if you were to purchase now. Go to the Case-Shiller home prices chart to understand where I'm coming from. Of course you're going to have a ton of realtors saying "it's always a GRRRRRRRRRREAT time to buy!" in this thread. It's their job to get people to buy homes. These aren't "deals" right now.

We still have a TON of foreclosures that are going to happen. Google "Mortgage Reset Chart" and you'll see the foreclosures that caused this mess. They aren't going to stop defaulting until 2012, as someone below recommended you wait until. I second that recommendation. That's when you can think of buying, and the current "deals" on the 2 bedroom condos will be available for half the cost.
0 votes Thank Flag Link Sat Feb 21, 2009
"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors."
-Warren Buffet.
0 votes Thank Flag Link Tue Feb 17, 2009

My apologies for leaving this out. When buying a condo or a townhome, many HOA's have too many delinquent owners to be able to get a loan on the property. Most lenders want HOA Fee delinquencies at 10% or below. Many are over 10% today.


Mark & Kari
0 votes Thank Flag Link Wed Feb 11, 2009
Hi M,

Regardless of what people are saying, it will most likely be at least a year before prices here bottom out, most likely more. Also regardless of what people are saying, a total of 19,926 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in December 2008. That was up 19.2 percent from 16,720 for November, and up 50.5 percent from 13,240 for December 2007.

This is all driven by the fact that the affordability index is up and it has motivated people to buy. Everyone has a different reason to buy or wait right now. What people elude to, but do not say, is it depends on 3 things:

1. Are you planning to stay in the property 7 to 10 years?
2. If you qualify as a first time buyer, the interest rates favor you.
3. Do you need a tax write off now or can you wait?


Mark and Kari Shea
San Diego Real Estate Experts
REO, Short Sale & Investment Properties,
Development Sales & Traditional Real Estate
0 votes Thank Flag Link Wed Feb 11, 2009
Wait to buy until 2012. Then you should be able to get a house for the price of a condo.
0 votes Thank Flag Link Tue Aug 12, 2008
Yes, I think it is a good time to buy a 2-bedroom condo in San Diego only if you intend to hold it for at least 3 years. This will allow you to hold the condo and see some appreciation on your investment. As far as whether we have reached botttom, as mentioned, no one can predict the future of the markets (stock or real estate). But based on the current information that is provided by the National Association of Realtors and other sources of RE market information, 2008 may be the year that ends the downturn in the RE market. One of my clients attending the San Diego foreclosure tour and thought that it was very informative and not pushy.
Web Reference: http://www.KrisBenham.com
0 votes Thank Flag Link Sun Mar 2, 2008
Across the country the real estate market is positions ideally for anyone with patience, time and cash. We tell our clients that no one can predict when you are at the bottom, but we estimate that we are very close. We believe that the market we continue to be soft for another 8-16 months. If you have the time and patience, you really should be able to find a great deal. I'd more than glad to discuss this with you as a favor.
The Schaffer Realty Group
Marian Schaffer
0 votes Thank Flag Link Sun Mar 2, 2008
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