This article was written circa 2007, when the San Diego real estate market had started with a decline in home prices. Little did we know how serious the problem would become. The Encinitas Ranch home referenced eventually closed at a price near $800,000.
Yesterday’s Union Tribune headlined a story about San Diego home prices tumbling, and again I had to read below the headline and between the lines.
Last month, they report, San Diego median home prices dropped 15 percent from their all-time high in 2005. This two-year drop is larger and more precipitous than the 11.8 percent drop in San Diego prices that occurred in the four years between June, 1992 and November, 1996.
In those earlier years, the San Diego economy was in the tank, and home prices followed suit.
This time, San Diegos economy remains strong, but home prices in certain neighborhoods and communities are falling at an even heavier rate than this UT story describes. We have seen 30 to 40 percent price drops in certain South Bay neighborhoods.
Homes that sold in the mid $900s in 2005 are now on the market in the $500s as short sales or foreclosures.
A home on Agate Creek in Chula Vistas Eastlake sold for $900,000 in early 2005 now offers a starting price of $600,000 on short sale terms. Another Chula Vista home on Hunters Pointe that sold for $725,000 in mid 2006 is now listed as a foreclosure at $469,000 and may close at an even lower price than that. And then theres the beautiful home on Chula Vistas Silver Hawk that sold for $1,057,000 in December, 2005 that is now offered as a short sale at $579,000-$595,900.
I could go one and on, because there are dozens and dozens of offerings like this and most of them are coming from newer inland San Diego tract subdivisions that lured unwitting buyers with easy money and the promise of real estate riches. And the plethora of so-called bargains are what skews the stats for San Diego real estate. Trust me, you will not find bargains or price slashes like these in San Diegos coastal neighborhoods. Prices there, while not really rising, currently remain relatively stable.
For example, we have a seemingly impossible listing in Encinitas Ranch. It was likely a fraudulent sale that occurred late last year when the home sold at $1.2 million (with 100 percent financing), and had a value of something less than $900,000 (because the listing had gone off market with that price). Today, we have a tenant that will not allow the home to be shown and yet we still have multiple offers from highly qualified buyers in the mid to high 800s. With cooperative showing ability, would this home sell for $900,000 today?
In a flash.
Why? Because it is in a prime coastal Encinitas neighborhood that has suffered nothing near the 15 percent drop reported in the newspaper. But just as babies proverbially get thrown out with dirty bath water, so do certain prime neighborhoods (at least with bubble bloggers and the news media). Anyone familiar with San Diego real estate knows you cant lump Chula Vista and Encinitas together, anymore than Otay Mesa could be compared to La Jolla or Del Mar.
Euros are competing with Yen and Loonies to buy pieces of paradise West of 5 in San Diego County, and that is just one reason why San Diego’s coastal real estate market is as close to blue chip real estate investing as one can get.
It is also the reason that in these times of real estate uncertainty we encourage our clients and investors to stay as close to the coast as possible. That is where you will find the greatest shelter from the economic storm that is pelting the San Diego real estate market today.
San Diego’s typical sunny skies are predicted to return late next year. Doesn’t that make you wonder what smart money is doing (like those who buy fur coats in August, and bikinis in winter)?