San Diego housing crystal ball

[Kurt]

A Drop in Home Prices Forecast
Large housing markets face price correction
By Janet Morrissey
From RealEstateJournal.com
Home prices in some of the nation's largest markets are poised for a fall, according to a study that says homes are overvalued in many cities.
The latest PMI U.S. Market Risk Index report named Boston, San Diego, Long Island, N.Y., Santa Ana, Calif., and Oakland, Calif., as the markets facing the biggest risk of a price correction. The index showed these markets have a more than 50 percent chance of experiencing price declines during the next two years. New York City ranked 14th, with a 33 percent chance.
Nationwide, there is a 21.8 percent chance that overall house prices across the 50 largest housing markets will see prices fall, up from 21.3 percent in the previous quarter. The markets with the lowest risk of a correction are Cincinnati, Memphis, Tenn., Indianapolis and Pittsburgh, where the risk is less than 6 percent.
"We believe that over the medium to long term, prices will move into better alignment with local economic factors, in particular income," Mark Milner, chief risk officer with PMI Mortgage Insurance Co., a unit of PMI Group Inc., said in the report.
PMI calculated its Risk Index by tracking and comparing home-price appreciation, labor markets, employment levels, affordability and the percentage of monthly income that a mortgage takes up in each market. The Risk Index estimates the chances of a price correction of any size in the next two years.
The Valuation Index, which the firm just introduced, is based on home-price appreciation, the cost of a 30-year fixed-rate mortgage and the public demand for housing in each market. This index offers a snapshot of how much a home is overpriced or undervalued in each market at this moment.
The markets facing the biggest potential correction are Los Angeles, Sacramento and Riverside, Calif., where prices are estimated to be overvalued by 33.7 percent, 31.3 percent and 30.7 percent respectively, the report said. New York City's prices are 16.3 percent overvalued, according to PMI.
About half of the 50 markets are overvalued by 10 percent or more, the report said. Only 11 markets are undervalued.
Marco van Akkeren, an economist with PMI Mortgage Insurance, said affordability has weakened during the past several quarters as home-price increases didn't reflect market fundamentals. The firm releases its Market Risk report quarterly.

This article is reprinted by permission from RealEstateJournal.com
Copyright © Dow Jones & Co., Inc. All rights reserved.

[SAGE]

So true . Last year there were 600+ foreclosures in SD county around this time..... this year, 900+.

[Weazel]

It doesn't suprise me at all. Housing prices are way out of control.

[dru]

I own in clmt, so I'd hate to see it, but I have to agree it will happen. One thing I heard that seemed to have some credibility, is that San Diego won't crash too hard because once someone in Temecula, who is driving 3.4 hours home on a Friday night, gets a chance to move closer to work - and holy shit are there a lot of people in this situation; they will. And, so that should help. But in 2000-2004 there wasn't a single FOR SALE sign in my hood; now they are everywhere - and they are staying. The lady next to me thinks shes getting $625k for the worst house on the block - still on the market after 5 months.

We will see. But, if anyone does have the subject title in thier possession, I will gladly pay a pretty penny for it

[Kurt]

The closer to the beach you live the better off you are gonna be if it goes kaput.

I'd rather rent an apartment in El Ca-bong than live in a freakin Mansion in Hemet or the likes if I had to do that commute.
And verse visa if I lived here and worked up there. Basically road rage would come toooo easy.

[el Toro]

Bring it on baby! Good for my line of work.

[dru]

Originally Posted by el Toro

Bring it on baby! Good for my line of work.

You are a financial advisor with only $500 in vcash??? totally lame, who's gonna use you. GOtta step it up and invest some of that vcash man...

[Fresh One]

Simple supply and demand at work. The entire SD market is not going to crash, only some areas. Don't buy in those areas. Those high rise tiny condos downtown going for 700 - 1 million, not good.

Stay centrally located, stay by the beach, or stay where there are good schools and your house will always be in demand.

[Stanley]

I think Kurt got it right. What we (in the San Diego area) have over all those other markets is demand. People want to live close to the ocean with a nice climate where they can work closeby. Do any of those other markets mentioned have that? NO WAY! Well, maybe Oakland...but who the fuck would move there?

I've been selling R.E. since 1977. I've heard more of the "market crash", "bottom drop out" bullshit than you can imagine. Has it happened here? NO! Have we had "adjustments" in sales/listing prices? YES! And we'll probably have another one. But the people that will be hurt the most are the ones that bought using the 100% purchase and interest only loans that are popular now, or they over-leaveraged. So, bring on the Short Sales like we had back in the early '90s. Bring on the people that want to sell now so they can use their equity to move to Oregon and buy 20 acres (boy, that was a joke). As long as you don't have to sell, who gives a shit what all these "Chicken Littles" have to say?

There are always going to be doomsayers (look at the recent UCLA study), but as long as we have demand to live here, we're gonna be OK!

But, WTF do I know?

[bertram31]

Originally Posted by Fresh One

Simple supply and demand at work. The entire SD market is not going to crash, only some areas. Don't buy in those areas. Those high rise tiny condos downtown going for 700 - 1 million, not good.

Stay centrally located, stay by the beach, or stay where there are good schools and your house will always be in demand.

So true Brent. the spectulated real estate gains in the more promient ares for 2006 are another 16% increase. Someday this will be bound to stop but damn with real estate fair market value being based on what someone is willing to pay and banks supporting this who knows when and where the market will peak.

Jack

[Ali]

The market HAS already corrected.

We just bought a new place that went from a 780k down to 660k when we bought it.

It would have probably gotten 740k during the spring.

I think things are going to stagnate for a few years, but I don't see much dropping.

My $0.02

[Sluester]

22% It may decrease. 78% chance it won't. If there is a demand they will pay. Where ya going to build here? Can't go N. (camp P) S. (Mex.) E.( nat. forest) W.(ocean) How is buying property a bad investmenrt in San Diego???
I bought my house for 140,000..... I still like that investment.