As with any emotional issue, there a many opinions.
Some are informed and many are not. Many are from the media. We all
know that they will rarely print good news, they find bad news in the
good, and they love to print bad news,
whether it is right or wrong. Some people even make a crusade on the
bad news.
There has been
a lot of talk about a Bubble in the San Diego Real Estate market and
elsewhere. This talk has been going on since 1999 and prices
have more than doubled in all areas of San Diego since then. Will the
Bubbleists eventually be right? Maybe? Even so, Real Estate will always
be a great long term investment.
Could the "Bubble" burst, flatten or continue to inflate but
at a slower level? The answer is yes!
According to the following experts,
the third option seems to be the most likely.
Since I do not have a "crystal ball", I rely on those people
whose job it is, to study the marketplace.
Here is what some of the real experts are saying.
Should you Buy Now or Wait?
by Dennis Smith
That depends on your cash position and where you think the market is going.
For a full report, see my recent article at:
http://sandiegohomes4u.com/buy_now_or_wait.htm
Foreclosures Are Up
That should come as no surprise. The media has been talking about if
for several years. The real news is that the actual number is still
small, but the percentage increase is large. That always happens when
an unusually low number returns to the norm. That is the case now.
As of this time, foreclosure listings are not any better deal than
you can negotiate with many motivated sellers.
If you, or someone you
know is struggling with making their loan payments, please give me
a call. I do free, pre-foreclosure counseling. I can
usually help them save their house, their equity and/or their credit.
The earlier in the process they contact me, the more options we have.
Time is critical!
If you do not want to have financial problems, please
contact me for my free information about budgeting. For those of
you who do
not like
the constraints of a “budget”, ask for my “spending
plan” information.
Here is a recent article about the foreclosure
statistics:
http://www.signonsandiego.com/news/business/20060515-9999-1n15default.html
Pros see no doom, gloom in slowdown
Bursting of price bubble not in view
by Emmet Pierce,
Union Tribune Staff Writer
December 15, 2005
A panel of economists and real estate professionals meeting at the
University of San Diego said yesterday the county's housing market
was returning to normal growth patterns following the boom that began
in the late 1990s.
"I think the bloom is off the rose, but there is no doom and
gloom," said Alan Nevin, chief economist for the California Building
Industry Association.
The fundamentals of the housing economy remain sound, said Louis A.
Galuppo, director of USD's Burnham-Moores Center for Real Estate. "We
may see a decline in sales but not prices."
Despite "air leaking out of the tire," there are no major
economic triggers, such as massive job losses, to cause the housing
market to crash, said Joe Anfuso, chief financial officer of Shea Homes
San Diego.
Outlook 2006, Burnham-Moores' sixth annual residential real estate
conference, drew about 480 people to USD's Jenny Craig Pavilion. Those
in attendance for the early-morning session heard experts dismiss the
possibility of a bursting real estate price bubble.
Despite rising interest rates, a growing for-sale inventory and a
slowing sales pace, the county's shortage of housing will prevent prices
from dropping steeply, speakers asserted.
"It's Economics 101," said Leslie Appleton-Young, chief
economist for the California Association of Realtors. "It's demand
and supply."
Read the full article here:
http://www.signonsandiego.com/uniontrib/20051215/news_1b15outlook.html
Pouting Pundits of Pessimism
by Brian S Wesbury
December 2, 2005
If you get your economic news from the MSM, you would think the
US is in the throes of a recession. Nothing could be further from
the
truth.
Despite the the hurricanes, despite the spike in oil prices, the
US economy continues to grow at a nearly 4% clip. Compare that
to some
of the "enlightened" EU countries. Unemployment stands at
5%, (France currently has an unemployment rate of 10% and Germany is
also in double digits), and interest rates remain quite low. So where
is all the pessimism coming from?
Brian S. Wesbury looks into this
in his OpinonJournal commentary.
Pouting Pundits of Pessimism
Every bit of good economic news gives them reason for despair.
During a quarter century of analyzing and forecasting the economy,
I have never seen anything like this. No matter what happens, no matter
what data are released, no matter which way markets move, a pall of
pessimism hangs over the economy.
It is amazing. Everything is negative. When bond yields rise, it is
considered bad for the housing market and the consumer. But if bond
yields fall and the yield curve narrows toward inversion, that is bad
too, because an inverted yield curve could signal a recession.
If housing data weaken, as they did on Monday when existing home sales
fell, well that is a sign of a bursting housing bubble. If housing
data strengthen, as they did on Tuesday when new home sales rose, that
is negative because the Fed may raise rates further. If foreigners
buy our bonds, we are not saving for ourselves. If foreigners do not
buy our bonds, interest rates could rise. If wages go up, inflation
is coming. If wages go down, the economy is in trouble.
This onslaught of negative thinking is clearly having an impact. During
the 2004 presidential campaign, when attacks on the economy were
in full force, 36% of Americans thought we were in recession. One year
later, even though unemployment has fallen from 5.5% to 5%, and real
GDP has expanded by 3.7%, the number who think a recession is underway
has climbed to 43%.
Read the full article here:
http://sailorinthedesert.mu.nu/archives/140291.php
Why Sitters Usually Lose
by Carlos Royal
November 16, 2005
The theory is simple enough. Sell high, sit and wait until the market
drops, buy back low. Currently we have a lot of bubble sitters waiting
on the real estate market to burst. The sad part is that some sitters
have been waiting since the housing market started its up turn in 1997.
Others started heavy sitting in 2000, more joined in 2001, 2002, 2003
and 2004 but housing prices have just continued to climb. It is now
almost 2006 and yes, the housing market has slowed but not dropped.
The truth is most sitters have already lost more than they can ever
gain in a bust, when and if it ever comes. It is like I said, “The
formula is simple, but putting it into practice is the hard part.” The
reason most sitters lose is they compare prices today with yesterday’s
values to arrive at the conclusion that prices are too high today and
they should sell. But in truth today’s prices may be cheap compared
to tomorrow’s prices if the right economic conditions exist:
if interest rates remain low, if unemployment remains low and the economy
stays strong. Many bubble sitters that starting sitting in 2000 may
not be able buy back in even if values drop 15 to 25%, especially if
interest rates are up.
Did you know that a 1% increase in interest rates of 4% to 5% is really
a 12.27% increase in payment? That in its self is not too bad but you
now have to make around 36% more money to qualify for the same loan
amount since qualifying ratios run about 3 to 1. Or to make it more
dramatic, if interest rates go from 5% to 9%, that is a 49.89% increase
in payment amount, or you have to make 150% more money to qualify for
the same loan. To put it another way, if the market does not crash
by at least 33%, you have lost by bubble sitting. Hardly ever does
or has the real estate market dropped by more than 25% after a boom
period. Bubble sitting is not and never has been a good idea.
Inventory has stabilized at around 15,800 for the San Diego housing
market with buyers and sellers being about equal. Many feel that the
slower growth rate of 5% to 6% is actually healthy for the real estate
housing market in San Diego because the speculators will get out of
the market. The norm for two income families in San Diego is $100,000
to $125,000 or with 20% down that is a $500,000 home. Looks like we
are close to normal since the median home is around $550,000. Here
is a question for you. Where do the people live that can’t afford
a $550,000 home? Try Mexico. It is estimated that 70,000 a day cross
the border to work in San Diego. San Diego is still under building
by about 5,000 housing units a year.
Typically at this time of year inventory declines as sellers remove
their homes from the market for the holidays. We also see fewer buyers
for the next 45 days and then business picks back up around the second
week of January. Here is what you want to watch for in 2006; the Fed’s
and interest rates. They may take a breather and this would be good
for home sales and should reduce inventory. The price of heating oil
and gasoline may be another factor. Personally I think you are going
to see declines in both because the pressure is on the oil companies
to show that the market works and that they are not the evil villains.
The more they get asked to explain their profits to Congress, the more
prices will fall for the short term. In the long term, gasoline and
natural gas are going to go up and up just like houses.
This morning in USA Today the headlines read, “Home sales set
a record again: prices up almost 15%.” Phoenix, Arizona was up
a whopping 55.2%. The rest of the article was about how the sky was
falling and this has to be the peak. Of course, they said that in 2000,
2001, 2002, 2003, 2004 and now 2005. One thing is for certain, at some
point they will be right, but not when interest rates are low, the
economy is good and unemployment is around 5%. I stepped outside and
checked. The sky did not appear to be falling, just cooling a bit for
winter.
Pending Home Sales Index Hits Record
by National Association of Realtors
October 5, 2005
http://www.realtor.org/PublicAffairsWeb.nsf/Pages/PHSIOct05?OpenDocument
Slower housing market predicted for 2006
Economist: 'Things are getting worse by the day' in state
by Emmet Pierce, Union Tribune Staff Writer
September 22, 2005
Read the headline then see if it matches the article.
http://www.signonsandiego.com/news/business/20050922-9999-1b22car.html
Housing booms don't always lead to busts
by Holden Lewis, Bankrate.com
August 25, 2005
Should
you rent and wait to buy a house after prices fall? Don't get your hopes
up. If history is a reliable guide, home values in your target neighborhood
probably won't fall. But they might stagnate long enough for your income
to
catch up to prices. This year the Federal Deposit Insurance Corp. prepared
a research report titled, "U.S. Home Prices: Does Bust Always Follow Boom?" The
answer to the question in the title is no. Sometimes a housing boom ends
not with a decline in values, but with prices leveling off or rising slowly. http://www.bankrate.com/brm/news/mortgages/ShouldYouWait.asp
Sell high, rent low: The Bubble Sitters
by Holden Lewis, Bankrate.com
August 25, 2005
http://www.bankrate.com/brm/news/mortgages/bubblemain.asp
I am also looking to expand my business.
I would appreciate any referrals you have for buyers or sellers.
