Solana beach is one of the best performing markets in San Diego. The prices have held firm and there has been very little foreclosure activity. At least for the time being. Seth does have a point about ARMs that have still to reset and we may see some foreclosure activity in the area. I would say that it is a good time to sell if you are on the fence. Houses tend to move quickly if priced right.
All told, I do not see a remarkable softening of the market in Solana Beach. I live in SB so I may be a tad. biast.
But the bulk of the ARM loans have not re-set yet. They will. A substantial percentage of North County homeowners have ARM loans. It is true that the upper scale neighborhoods (i.e. $750k - $1.9m) are inhabited by folks who are a little more insulated than other neighborhoods... but only while their insulation lasts. I mean mortgages as an investment vehicle were safeâ€¦ until they werenâ€™t, right? Fannie/Freddie were AA ratedâ€¦ until they werenâ€™t right?
Some marginal folks in the areas that haven't gotten hit yet will need to sell. And when they do, we will see the beginning of the same downward moving spiral we just saw play out in sub-prime. It is not a social-demographic thing, but rather a math thing. I see a big pricing correction coming our way.
I am not attached to being right about this. In fact, I hope I am wrong. But I was not wrong about the first wave of re-sets. And anyone now claiming how obvious this "sub-prime debacle" was should also see this next wave coming in neon lights. From a 10 year outlook perspective, I bet my career we'll see higher prices than peak. In the next 2-3 years... we're going to get hammered.
My take: if you own and can hold out, then do so. If you are not sure about your staying power, sell now. If you are looking for a place to shelter or reallocate paper based assetsâ€¦ then consider the smart money quietly flowing into lower-end rental properties.
Look at a simple Rent vs Buy comparison:
1005 Santa Queta, Solana Beach, CA 92075
20% down, at 7% fixed
Monthly payment is 7000$ (P&I, Tax, Insur). No upkeep, expenses included.
Insurance rates are going to rise very shortly.
The SD/South OC markets are still largely inflated. The tax benefit for buying does not come close the additional 40,000$ anually you need to pay in home payments. At best you would get a 10K tax benefit, which in itself is an extremely liberal estimate.
Additionally, with rising rates, you are taking substantial risk in the loss of the 220,000$ of equity which you used as a down payment.
My advice, rent minimum 24 months. Bottom is still 24 months away, with a recovery 48 months if the economy stabilizes.