San Diego Housing
Economists miss on California housing forecast
I’d like to explain why economists are wrong to pronounce a bottom in housing.
Their approach is reasonable. They measure the price/income ratio of California houses. In essence, they measure whether house prices are affordable to the average family in an area. They look at house prices, and they look at household income. In past real estate cycles, where sales were proportionately affected across all price ranges, this method worked. Now, it does not. I’ll explain.
The analysis begins with California house prices:
Then, it looks at California household income, and the price/income ratio:
The chart shows the California median house price/median income grew from its historical ratio of 6, to a ratio of 10 during the bubble years, and is again a ratio of 6. The conclusion: the market is healthy.
That analysis would work, except for one problem: the median price reflects the mix of homes sold, not the prices of homes! Keep an eye on the changing buyer pool, or the market share of price ranges sold!!
In San Diego, homes under $400k were 1/3 of sales in 2007, and are 2/3 of sales in 2011. As the cheaper homes make up more of the sales, naturally the median declines.
The falling median is a result of a sick market. If we lose even more of the mid-tier and high-tier buyers, the median will fall even further!
We are losing these higher-priced buyers because of the broken chain in housing. The chain is supposed to start with a homeowner with equity in her first home, moving up. That buyer is gone. Without equity move-up buyers, how will the rest of the market regain any market share?
Bob Casagrand and I look inside the numbers to get the real story. Look for Bob’s interview soon in a local newspaper, where he explains how banks are managing foreclosing to prevent further price drops.
Watch me explain two myths about the San Diego housing market.
My daughter took the video on her phone, and we messed around for an hour trying to change the orientation prior to upload. I have to work on the technology so I can make more videos.
Right to rent your home SB 150
Here are some of the new regulations affecting real estate:
SB 150 (Correa) CID Right-to-Rent – There has been a trend among some homeowner associations to adopt restrictions that limit the ability of unit owners to rent their dwellings in Common Interest Developments (CIDs). The imposition of these rental restrictions diminishes an owner’s property rights by removing options that were available when the unit was purchased. C.A.R. sponsored SB 150, a re-introduction of C.A.R.’s AB 2259 (Mullin) of 2008, to protect the right of a CID owner to rent his or her unit, if that right existed at the time the owner purchased the unit.
Status: Signed by the Governor on July 8, 2011 (Chapter 62, 2011 Statutes)
SB 837 (Blakeslee) Transfer Disclosure Statement Update – SB 407 (Padilla), signed into law by the Governor in 2009, requires that all residential properties be retrofitted with low-flow toilets, shower heads and faucets starting with remodels in 2014, all remaining homes by 2017. Additionally, all commercial properties and multi-family homes will need to be retrofitted by 2019. C.A.R. sponsored SB 837 to add language to the Transfer Disclosure Statement (TDS) notifying the purchaser of a property of these impending requirements. The inclusion of this information in the TDS will ensure that sellers and buyers are aware of these water efficiency retrofit requirements and provide disclosure liability protection to REALTORS®.
Lenders still resisting short sales
Obviously! Why would they willingly take real estate losses?
Watch this video to learn the depth of the problem.