Real Estate / Housing is ultimately just a commodity like any other and perforce follows the basic laws of supply and demand. The following chart shows the momentum scores for San Diego Real Estate, both single family detached (SFD) and single-family attached (SFA), since April 1996. The essence of this chart provides two key pieces of information. First, because the current scores for SFD and SFA are above zero (0), we have a significant buy indicator (which is tempered by the number of foreclosures and other economic weakness). Second, we see the increased demand which will halt the decline in home prices. (Special circumstances notwithstanding - e.g., further financial market crisis.)
Specifically, it is my personal observation that it is the real estate investors who are defining the market bottom. They can buy positive cash flow property (generally unheard of in San Diego) and they have the long term perspective allowing them to effectively ignore / discount the potential for near term decreases in value.
To further increase demand, we could look at the affordability ratings. Home affordability is inversely proportional to home prices and interest rates. With lower prices, home people can afford to buy. With lower interest rates, still more people can afford to buy. So long as interest rates remain low, we are going to see a halting and even reversal of home value changes.
What should we expect for 2009? Under the premise that interest rates remain below 6% with no-points, we should expect to see the continuing decline in home prices grind to a halt. We will probably not lose more than another 5% to 10% around the periphery of San Diego. The inner-core, which has so far avoided most all of rhe foreclosures, will probably drop a full 10-15%. I believe this is likely because so far the inner-areas of the city have been spared from the major declines, mostly holding their own, but they have not been hit hard with foreclosures in the neighborhood. The loans for these properties were more likely Alt-A and the resets are just coming due.
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Robert T. Boyer, Ph.D. San Diego's Finest Real Estate |
Robert T. Boyer, Ph.D. #010791063 Real Estate Investment, Foreclosure, & REO Centrally located in Carmel Valley Serving North County San Diego: La Jolla, Del Mar, Carmel Valley, Rancho Santa Fe, Solana Beach, Cardiff by the Sea, Encinitas, Leucadia, Carlsbad, Oceanside, Vista, San Marcos, Escondido, Rancho Bernardo, Poway, Rancho Penasquitos, Scripps Ranch, Tierra Santa, Mira Mesa, University City |
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Robert T. Boyer, Ph.D., takes an investor's approach to real estate. He analyzes the market for appreciation as well as cash flow. Co-Founder & CMO of FinestExpert.com - The Cashflow Search Engine
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