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Somewhere, under the rainbow....

Interesting graph and good info again. I'd like to see this graph next month if possible.

I heard this morning on the radio that SD now has a 41% affordability rating. They said it only takes a household income of 74K to buy the median priced home, they used 390K as the number. They must be using at least 20% down in the calculation, allowing 4 times income and assuming there is no other debt.

I am coming up with a minimum of 90K to qualify for the 390K, but I am sure they are being a little more liberal than I am .

Yes, please update this graph for next month. Because right now it looks actually a bit like the market is taking off big time. Yun would say we all better buy right away!

SMC: I wonder where they came up with $390K being the median price. Isn't the median more like $425K right now?

Anyone know of a better metric than median price or price per sqft? Possibly one that includes land/lot size (dunno how condos would fit into such a scheme, but I don't think they should be included with SFRs anyway). Something with qualification (condition of home, extras) would be cool as well, but that would imply the nightmare of ratings agencies. Check the economy to see how well that one played out last time.

Simone,
It depends what median they are talking about, and they didn't say. Are they doing SFR, condos, a combo of the two? Just the City and not the whole County? There are so many variables that come into play you can make the number for "San Diego" look however you want it to.

Genius,
I use the "2001-2002" matrix. I determine what a home I am looking at would have sold for then, pre-easy credit. That is where I think prices will eventually end up. I am starting to see a few homes getting to that level, but there aren’t many yet. Now that foreclosures are taking over the market, they will have to be used as comps and this will help get us to that level sooner than later.

Unlike NAR, I like real life examples. Here is the Sales History for a house in one of my target hoods, it is a bit big for us(3200 sq ft, only the wife and I) on half acre, pool, 3 car garage.

Sale History
12/24/2007: $713,506 *
03/17/2006: $885,000
06/07/2004: $800,000

The 713K is the bank taking it back. It was list about 2 month ago for 780K, drove by last week and it is now listed at 649K. Would have sold for mid 500K in 2002 and may be reduced to that if it continues to sit. In my opinion, the 649K is still 100K too high.

You definitely have to do your “homework” in this market or you will end up overpaying. Just because something is down 40% from what it had sold for at the peak, doesn’t automatically make it a deal………

SMC,

That home on Hamilton went into escrow near the end of April after it was reduced. Should close by the end of June. Looks like a good buy considerng the same model just closed in April for $775k.

Agreed SMC, I think we'll even see some houses at pre-y2k prices before all is said and done. Manias usually swing both ways, like a feedback loop with the gain set too high. I'm using 2001-2002 as my baseline. Once homes fall back to those prices I'll start seriously thinking about making a purchase. Right now house hunting is just a nice way to take a 5 minute break at work.

Annie,
Thanks for the info. I guess they are just leaving it listed in case the deal falls through? I am starting to see more foreclosures in that area, looks like there are about 6 right now. I think there was only 2 or 3 all of last year....

Sorry, I'm not a statistician, so Im not sure of the proper names here, but I think this chart would be even more interesting (but perhaps incredible complicated)as a stacked bar chart. It would show the numbers each month showing "normal sales" stacked with "foreclosed" sales (perhaps in a light and a dark shade of each year's color). I think we'd quickly see that the "recent surge" was due to added foreclosure sales--not any positive way for the seller's home prices.

I'm skeptical that nominal prices will fall to 2001/2002 levels, even considering the irrational tendency of people to overshoot. Why? Because rents have apparently gone up strongly in the San Diego region (by what I've read in the paper, not personal experience) and house prices will rise to reflect that. Even if rents have only more or less matched inflation, say 3% per year, the six years since 2002 would say rents and house prices should be 18% higher now than then.

I would not be at all surprised, though, if inflation adjusted house prices dropped to 2001/2002 levels.

Shoppingaround,

There's no doubt that sales of foreclosures and short sales are leading the recent surge with Oceanside seeing the biggest sales increase on a YOY basis in North County. In order to return to a "normal" market those "must sells" have to be cleared away. Until there are 3 or 4 months of consecutive decreasing NOD's and NOT's we will see more and more "must sell" inventory as a percentage of total inventory. With that said the must sell inventory is also kind of packed into certain neighborhoods. It's unprecedented as to how this plays out in the better areas. As JTR points out there are already investors jumping in as they are seeing cash flow deals in those subprime areas. Will the better areas have to deflate all the way to cash flow levels in order to reach bottom? Probably but I still see the superior properties in desirable areas go for 25% or more over a price that would give you a break even. Rents are also rising in the better areas. At some point they will all come together and a bottom will be reached.

My guess is 2010 assuming this recession is over by the Spring of 2009. Oh, I know we aren't offically in a recession but can anyone seriously say this economy is growing? Inflation numbers are a joke as well. I love how they cut out food and energy. It's not like you need food and energy to survive or anything, but when a new LCD TV goes from $1500 to $1200 it's supposedly great news for the consumer.

Jim,

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Another thought: are all these REOs being counted twice as "solds:" once when the bank buys it back and once when the foreclosed property sells to a person? Certainly that's an effect on the "sales" numbers, too. I think most people, when they think of the number of homes sold each month, don't expect the bank "buying it" back to be included in these figures.

JTR--Do these foreclosed sales actually count in the numbers both times?

The REOs are not in my counts on this blog, and I don't think dataquick counts them either.

SMC,

Is that the foreclosure in Escondido?

If so, we looked at it and wanted to offer $550K. Unfortunately, the listing agent told Jim (our host) that she had a full-price offer on it (that day?).

Nice house. The first one that really bummed me out when it was sold.