State of the La Mesa and East County Real Estate Market April 2009

| | Comments (0)

We were ready for a strong turn in the market, but the strength of what we've gotten in the last six weeks is amazing. It has been, if anything, worse that a few years ago.

What caused it? People with money are scared to leave it anywhere else. The expectation is that inflation will become a large factor in the next several years, so you don't want dollar denominated investments such as bank accounts and bonds just sitting there. With real estate, you have a tangible asset where they can't just go out and print more, diluting your value. The stock market has seen major declines and most people don't think they're over - especially once the inflationary spending of the new administration gets into the system. People are looking for a safe place to put the money where it won't be worth less (or worthless) tomorrow. Even if real estate declines a bit more, there's the limited supply that exists to redeem basic value.

As I said when explaining how the bubble got so big, when you suddenly dump a lot of cash into a market, prices shoot up. And boy how prices have shot up. I was in a model match for a house I was buyer's agent for at just over $330k 12 months ago. There's a bidding war that's gone over $500,000 for the one that just went Pending. Another property, larger and with a view that goes all the way to Mt. Soledad, got an all cash offer for $50,000 over asking price - no bidding war, just jump straight to the nukes. And these are just the East County properties - sedate, older east county, which has always had good value compared to everything else. I closed on two properties in Chula Vista earlier in the year, and there's practically a bidding orgy going on there now. Model matches are going for almost twenty percent higher than those two properties - and that's with a two month difference. I haven't been working north of Clairemont, but what I've heard says that coastal North County is hotter than anything else.

I think we've graduated to a full-on seller's market, so much so that I'd be telling tell people to hold off on buying if I thought it was going to be any better later on. I am telling people that you really need a sharp agent in this kind of market to prevent overpaying. If you have any kind of a decent situation and desire to sell, it may be time to seriously consider it. For the last three years, I've been telling people "Hold off on selling if you can. There are too many distress sales, and not enough buyers" That has emphatically changed. I still think that, considered in isolation, you'll get more for your property if you hold off a while, but no longer so much so as formerly. If you have other considerations, like needing to leave town for a job, selling so you can buy something elsewhere is likely to be better than alternatives.

Six weeks ago we had just over 12000 active listings in San Diego MLS. Today we've dropped to 11,400, with 866 having gone pending in the last 7 days. That's basically a 13 week supply, but 1840 of the actives list are short sales with an accepted offers denoted properly - and I've talked before about how many short sales aren't denoted properly. Assuming short sales take ten weeks on average, that's a nine week supply. Perhaps about where we were last time I wrote one of these articles, but with a difference: Anything priced even vaguely in the right neighborhood is seeing multiple offers if not bidding wars. The attractive properties, priced correctly, that everyone wants are all going "Pending" within about a week, having seen multiple strong offers. They don't have to be beautiful modern properties, either - so long as they are basically okay, they're seeing action and lots of it. If you're not seeing multiple offers, the only real explanation is that your listing agent didn't do his job - he let you price it waaayyy too high. If you're in that situation, fire your agent today and find someone competent.

If you're a buyer, there are alternative strategies to pursue if you don't want to overpay. The easiest is to have a good buyer's agent to help you - but no buyer has the kind of leverage we had just a few short months ago. Making up your mind that you're going to start with a old and unattractive but basically solid property and be the one to upgrade it. Kind of like the flippers (or actually, fixers) we had five or six years ago, except you're buying it for yourself rather than with intent to sell. I'm not certain the current market is ready to support pure flippers yet, but it is getting close.

The one note of caution I must sound is that you've got to pay particularly close attention to the current paranoid lending standards and new appraisal standards. Not all offers are created equal. Lenders loan on the lesser of purchase price or appraised value. This means that, for instance, a VA loan based offer with $50,000 in down payment has the option of making it happen when the appraisal comes in $40k below the purchase price. A 20% down payment conventional loan does not - unless they have even more cash available to them. An all cash offer beats everything, of course.

If you're a seller, having an agent who doesn't understand current lending standards and negotiate in full cognizance of their limitations is a recipe for having the transaction fall through, and having to start over again trying to get people interested even though your property may have sixty days or more on the market. If you're a buyer, it means placing your Good Faith Deposit at risk (or more precisely, at more of a risk than it needs to be). I'm seeing properties sit in escrow with agents who should know better in denial over the fact that this transaction is not going to happen because the necessary loan isn't going to fund. The time is long past when agents - whether they're on the listing side or buyer's side - need to know loans almost as well as loan officers, to avoid wasting client money and client time. There may be no way to tell ahead of time that the loan definitely will fund, but there are all kinds of red flags that tell you it won't if you pay attention.

In short, this market has suddenly become very lucrative for sellers, but everyone - buyer or seller - needs to be extremely careful about negotiating contracts that have some room to continue if something happens to the appraisal, because there's no longer the ability to get around an appraisal that comes in low. Either you're going to renegotiate that contract, the buyers are going to come up with more cash, or you're spinning your wheels because the loan isn't happening, and the transaction isn't happening without that loan.

To close this article, if you'd like to discuss your particular situation with an top of the line agent who knows the San Diego market, contact me. Whether you're considering buying or selling, I'll tell you to sit tight if you should. If it is time to make your move, I'll help you do all the right things before diving headfirst into the market.

Caveat Emptor


Delicious Bookmark this on Delicious StumbleUpon Toolbar Stumble It!
Please be civil. Avoid profanity - I will delete the vast majority of it, usually by deleting the entire comment. To avoid comment spam, a comments account is required. They are freely available, and you can post comments immediately. Alternatively, you may use your Type Key registration, or sign up for one (They work at most Movable Type sites). All comments made are licensed to the site, but the fact that a comment has been allowed to remain should not be taken as an endorsement from me or the site. There is no point in attempting to foster discussion if only my own viewpoint is to be permitted. If you believe you see something damaging to you or some third party, I will most likely delete it upon request.
Logical failures (straw man, ad hominem, red herring, etcetera) will be pointed out - and I hope you'll point out any such errors I make as well. If there's something you don't understand, ask.
Nonetheless, the idea of comments should be constructive. Aim them at the issue, not the individual. Consider it a challenge to make your criticism constructive. Try to be respectful. Those who make a habit of trollish behavior will be banned.

Leave a comment


Buy My Science Fiction Novels!
Dan Melson Amazon Author Page
Dan Melson Author Page Books2Read

Links to free samples here

The Man From Empire
Man From Empire Cover
Man From Empire Books2Read link

A Guardian From Earth
Guardian From Earth Cover
Guardian From Earth Books2Read link

Empire and Earth
Empire and Earth Cover
Empire and Earth Books2Read link

Working The Trenches
Working The Trenches Cover
Working the Trenches Books2Read link

Rediscovery 4 novel set
Rediscovery set cover
Rediscovery 4 novel set Books2Read link

Preparing The Ground
Preparing The Ground Cover
Preparing the Ground Books2Read link

Building the People
Building the People Cover
Building the People Books2Read link

Setting The Board

Setting The Board Cover
Setting The Board Books2Read link

Moving The Pieces

Moving The Pieces Cover
Moving The Pieces Books2Read link

The Invention of Motherhood
Invention of Motherhood Cover
Invention of Motherhood Books2Read link

The Price of Power
Price of Power Cover
Price of Power Books2Read link

The End Of Childhood
End Of Childhood cover
The End of Childhood Books2Read link

The Fountains of Aescalon
Fountains of Aescalon Cover
The Fountains of Aescalon Books2Read link

The Monad Trap
Monad Trap Cover
The Monad Trap Books2Read link

The Gates To Faerie
Gates To Faerie cover
The Gates To Faerie Books2Read link

Gifts Of The Mother
Gifts Of The Mother cover
Gifts Of The Mother Books2Read link

The Book on Mortgages Everyone Should Have!
What Consumers Need To Know About Mortgages
What Consumers Need To Know About Mortgages Cover
What Consumers Need to Know About Mortgages Books2Read

The Book on Buying Real Estate Everyone Should Have
What Consumers Need To Know About Buying Real Estate
What Consumers Need To Know About Buying Real Estate Cover
What Consumers Need to Know About Buying Real Estate Books2Read

Dan Melson's San Diego Real Estate and Mortgage Website

↑ Grab this Headline Animator

About this Entry

This page contains a single entry by Dan Melson published on April 21, 2009 7:00 AM.

New Consumer Article: Shopping For The Best Loan In The New Lending Environment was the previous entry in this blog.

Real Loans for Real People April 21st, 2009 is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

Powered by Movable Type 4.21-en

Enter your email address:

Delivered by FeedBurner

Copyright 2005-2024 Dan Melson. All Rights Reserved