I think a 50% haircut is in the works. So I wouldn't rush in with low-ball offers yet. The carnage is yet to come - but it's already happening.
A few buyers, meanwhile, have begun to negotiate good deals. At La Vita, that same condo that sold for a hefty profit changed hands again late last year, but for only $640,000. A 15th-floor unit in Discovery on Cortez Hill purchased for $725,000 in 2004 sold a year later for $681,000.
Downtown “is probably one of the only places in Southern California where you can buy a house for less than you could a year ago,” said Jim Abbott, managing partner of Jim Abbott & Associates Prudential California Realty.
While luxury condos with views are still selling well, Abbott said, “we've got a huge amount of inventory in a segment between $550,000 and $900,000 that is very tough to move.”
One buyer of a penthouse in Horizons downtown offered between $400,000 and $500,000 less than the $2.2 million asking price, said Abbott, the Prudential broker. The property is now in escrow, with the seller still making a hefty profit.
April 03, 2006
San Diego downtown condo implosion underway
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The carnage is yet to come - but it's already happening.
Did Yogi Berra say that?
Nice picture. Is that guppy a fish out of water? Is he gasping for air while trying to flip at the top?
You know what they say about shark, if they don't constantly swim forward, they die.
San Diego is a great place … I love it there.
My “end game”; purchase one of those 500k dollar condos for about 120k in 5 years. Oh … what a great place for my family to get away on the weekends. Gas Lamp Quarter, Sea World, Zoo, Ballgame, Horton Plaza. Can’t Wait!
You won't have to wait 5 years. This is happening every bit as fast as I expected. The dynamics of a declining market assure at least as rapid a decline as rise. With everyone expecting $200k for property currently $500k by the time things are $300k people will be expecting to be "paid" for catching the falling knife.
I too think downtown San Diego will a great place to buy condos at a huge discount in the coming years. The supply and demand economics seem to almost guarantee it.
Predicting when the market will hit a bottom, however, is a lot more tricky because of macro-economic factors (oil prices, recession, inflation, interest rates, etc) that will drive market psychology and subsequent decision-making.
While I respect Robert Cote's theories and opinions, for example, to expect a sudden fall in housing prices is like betting on the 10 to 1 long-shot in a horse race (in my view).
I see this whole thing unfolding like a slow-motion train wreck, not like a speeding Porsche hitting a concrete wall at 100 MPH.
Robert Campbell is correct. I was stating my own opinion. I also respect his posts and when they are different it makes me reconsider. I know past bubbles have taken a very long time. Stock market 1, 12 yrs. Housing bubble 1, 6 yrs. Stock market 2, 5 yrs. I think this will be fast and brutal because so much of the housing market has been liquified. Facing a declining market the note holders will be extraordinarilly impatient. Facing a loss of equity owners will leverage to free up cash leaving no or more often negative equity for the note holder. Institutionals often have little choice about patience, they have to dump non performing assets. Past housing bubbles were stretched out due to the illiquid nature of housing. This time it isn't the housing market but the mortgage backed security market that will drive the correction. It won't take very long at all to correct these portfolios. For simplicity; say a speculator buys a bundle of mortgages at a 50% discount in expectation that half will not perform. When they end up with houses instead of paper paying them interest and principle the last thing they'll want is an actual property with taxes and management issues. They've already zeroed out the cost so as long as they get the transaction costs out of dumping the house they're good. That's extreme, the reality will be somewhere in between but the point is the paper will be priced such that even early foreclosure sales will be phenomenally lower prices. Speed trumps best price. That's the push. The pull is that anyone buying in this environment is by definition a sophisticated and/or well qualified buyer and they are going to insist on rational prices, say rent parity. I just don't see very many people buying on the way down due to a lack of competetion and the new psychology of expected return sans appreciation.
Robert_cote: you have a good point and I agree with you that it will be a faster correction than the past because the runup has been so much faster. If thing would busted a year ago we wouldn't be looking at the calamity we are today.
I too agree with robert cote. The IOs and ARM resets are a major part of the runup. As these loans reset and people are not able to dump their properties there will be a tremendous glut of properties listed and foreclosed upon. I think it will be in motion by years end and in full swing by summer 2007.
In defense of Robert cote the following article is currently on the front page of Yahoo.
"Homeowners struggling to keep up with ARMs"
http://news.yahoo.com/s/usatoday/20060403/bs_usatoday/somehomeownersstruggletokeepupwithadjustablerates
THAT shark looks like he's LQQKING for Fippers or Steals on wrecked housing boards.
Is that fish the new posterchild for the Association of American Repo men ?
brokersleaveyoubroke,
In that article they stated.
"Within the last year, I would say 60% to 70% of calls to our hotlines are issues related to ARM (adjustable-rate mortgage) loans," says Chris Krehmeyer, executive director of Beyond Housing, a non-profit group that offers homeownership support services in St. Louis. "That's significantly higher than in years past, because the ARMs are coming home to roost.".........
In the Atlanta area, credit counselors for The Impact Group say 85% of their calls are now related to ARM or interest-only loans. The calls start "when the statement hits them with the new monthly payment," says Marina Peed, executive director for the non-profit group, which offers homeownership education, counseling and financial services. "They are calling and asking, 'What can we do?' "
The call volume jumped after January, as holiday credit card bills, higher gas bills and rising mortgage payments hit some borrowers at the same time........
Just as predicted the pinch is on for these borrowers using exotic loans.
The HB's were able to scam stupid people into paying more for houses because the monthly payments were lower. Little did the suckers know that the payments would soon double. I put equal blame on both parties.
The HB's get their money and the banks and borrowers get screwed along with the taxpayers.
I'm San Diego born and bred and I hope people aren't hurt but greediness got them there (huge ponzi scheme) now the chickens have come to roost and people are scrambling(pun?). I'm hoping to be able to catch something small, nice and cheap. On the other hand this pop will cause a huge economic downturn for everyone. Good luck to everyone.
I agree with Miguel in that the bubble burst will cause economic hardship for everyone.
I was over at patrick.net earlier and the topic was how they are all renting, and most of the posters were smug about how they all are somehow insulated and sheltered from any coming recession that may ensue.
Sorry, but the oncoming recession will not spare you merely because you are renting. There will still be rising unemployment, stagnating wages, higher cost of oil, and mounting foreign socioeconomic pressures to deal with.
In the end I would think most of us would like to own a home at a reasonable price, watch the flippers get fried, and see all those sh*tbag (not the truly ethical and honest ones) realtors taking our order at Taco Bell.
Grinch,
You've confused your vision for the future with current reality. There is certainly potential for large job losses related to the collapse of housing bubbles. In fact, I think it's fairly likely. However, our unemployment rate today is quite low (perhaps too low).
The personal and national debt issues are very real though. Add in the current account deficit and our ill conceived foreign wars. Not to mention the very obvious implications of the aging of the baby boomers (health care, retirement, etc).
But really, those are more surface matters. Not to sound like a conservative nutjob, but the deeper issues I see are a decline in our ethics and values as a nation. The immigrants so lambasted in this blog seem to have much stronger family values and work ethic than the citizens. If we weren't all so busy chasing the fast/easy buck through speculation, asset bubbles wouldn't be such widespread secular events.
p.s. Joe Logic, Miguel, et al - Recessions nearly always tend to hurt those with the least. Most renters aren't particularly well off and if there is a recession, they will likely suffer more than most homeowners.
My real estate blog
Your hard-working illegal alien immigrants make up 29% of the federal prison population even though they are only 5% of the overall population. The illegals populate 40% of the California state prison population even though they only make up 12% of the state population. Apparently, a large portion of those illegals are coming here for something other than hard work.
We are talking about illegal aliens, not people who follow the law, apply for a greencard, go thru a background check, and come here legally. Stop trying to confuse the issue with lies.
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