July 2007

State of the Local Real Estate Market
The news of sub-prime mortgages continues to make waves. The DOW reached an all-time high of 14,000 this month, and shed 700 points the last week of July due to concerns with the housing market. Why? Partially, because some of today’s mortgages are bundled into collateralized debt obligations or residential mortgage-backed securities and sold to investors around the world. Subprime loans and no document loans and piggyback loans brought credit to people who otherwise wouldn’t have gotten it. And these very same loan products would never have become so popular if they were not packaged into securities and sold widely to investors. The investors are starting to doubt their portfolios because a small percentage of US homeowners default on their loan payments which begins the foreclosure process.

The reality is what happens on Wall Street is quite a different world than what is happening on Main Street. Today’s real estate market is a market-fed downturn – high flying and passionate for a stretch of 5 years. Low interest rates, creative financing options, 100% loans and the impression that if you didn’t buy now you would forever be locked out of the market. Typically a real estate downturn is associated with a downturn in the economy. Harvard University’s Joint Center for Housing Studies recent annual report stated the market downturn “has been driven largely by the market’s own excesses,” including an oversupply of new homes that was artificially inflated by activity among investors and speculative buyers.

David Shulman, of the Anderson Forecast at UCLA, expects a 10% peak-to-trough home price decline into 2008. (For the most part, prices peaked in the Fall of 2005). Today we have favorable interest rates, moderate growth in gross domestic product and foreign demand for US equities. The consumer and the investor views today’s real estate market highlighted by tightening credit, weak U.S. housing data and poor results from publicly-traded homebuilders.

A July 18 roundtable of local economists and analysts set their sights on the health of the San Diego economy. The high-tech and tourism sectors are both strong and experiencing significant job growth. There has been a loss of jobs in construction and real estate, which is no surprise considering the slowdown in new home and condo construction, and with it jobs in lending, escrow services and real estate sales. Despite the current slowdown, the analysts suggested that limited land to build new homes creates sustained property values.

Our local market in San Diego County has experienced a 4% increase in the average sales price for the 2nd quarter of 2007. The average sold price for new homes and condos is $565,569. In the end, it is all relative: our current market means that sellers of property will sell for current value and buy for current value – suppressed but not deflated.

Please feel free to contact me anytime for all your real estate questions, needs and referrals

Average Sale Price by Zip Code (San Diego Association of REALTORS).
(If there is a neighborhood or zip code you would like to see tracked just let me know. Call me at 619-248-4200 or email me at kenbaer@willisallen.com)

Neighborhood	Zip Code	June 2007	June 2006	June 2005
Downtown	92101	$566,201	$810,543	$590,676
Golden Hill	92102	$369,375	$457,600	$514,846
Mission Hills	92103	$1,475,443	$1,008,890	$917,997
North Park	92104	$566,840	$608,866	$599,071
Point Loma	92106	$1,218,000	$1,155,006	$1,146,285
Ocean Beach	92107	$916,041	$813,436	$1,001,857
Mission Valley	92108	$323,707	$337,259	$389,653
Pacific Beach	92109	$1,438,900	$1,061,930	$1,263,276
Linda Vista	92111	$538,928	$883,857	$516,463
College	92115	$552,416	$492,427	$516,134
Kensington	92116	$633,774	$738,447	$689,722
Clairemont	92117	$579,039	$590,612	$591,170
Coronado	92118	$2,133,900	$1,997,193	$1,673,500
Del Cerro	92120	$589,661	$628,354	$613,060
University City	92122	$710,386	$796,500	$733,666
Mira Mesa	92126	$488,754	$516,262	$534,914
Santaluz	92127	$923,597	$1,003,028	$895,225
Rancho Penasquitos	92129	$710,648	$820,686	$713,569
Carmel Valley	92130	$1,417,519	$1,155,935	$1,338,000
Scripps Ranch	92131	$814,778	$790,201	$788,583
Chula Vista	91910	$499,214	$587,875	$563,220
Imperial Beach	91932	$477,250	$482,312	$544,277
La Mesa	91941	$577,230	$560,916	$630,426
Spring Valley	91978	$482,333	$548,500	$547,115
Cardiff	92007	$828,750	$1,774,125	$1,337,714
Carlsbad	92008	$880,090	$1,201,926	$701,500
Del Mar	92014	$1,965,638	$2,162,250	$1,757,181
El Cajon	92020	$537,072	$518,144	$543,509
Encinitas	92024	$1,317,183	$1,015,397	$1,151,709
Escondido	92026	$577,335	$567,435	$555,586
La Jolla	92037	$2,518,771	$2,946,034	$2,213,600
Oceanside	92054	$557,053	$619,914	$589,197
Poway	92064	$776,319	$1,035,137	$1,017,281
Rancho Santa Fe	92067	$2,932,026	$3,206,159	$3,521,923
Santee	92071	$450,204	$497,503	$484,260
Solana Beach	92075	$1,115,362	$1,241,519	$1,160,166
Vista	92084	$581,472	$592,633	$619,742