Monday, July 17, 2006

Slowdown In San Diego

Suicide loans. Ha! Hadn't heard that one before. Fits pretty well though. LATimes (07.17.06):
"For a long time, this was a cruel place for any would-be homeowner who didn't have a wad of bucks or a tolerance for the high-risk, short-term mortgages that some call suicide loans.

Finally, the seemingly unstoppable ascent of real estate here has stopped. Last week, reports showed that the city's median home price dropped 1% in June from a year earlier, the first decline in a decade."

For San Diego Real Estate, the Skies Are Not So Sunny

"San Diego had the wildest run-up among major California cities, with prices tripling since the mid-1990s. The boom was stoked by cheap loans, changes in tax law, creative financing and a generalized mania that fed upon itself."

"The craziness seemed to peak about two years ago, when bidders routinely submitted letters saying that they and their children would be forever honored if the seller would consent to choose them."

Not any more. "Sellers are chopping prices to get deals done. Buyers worry that values will continue to fall, putting their investment at risk. There's widespread uncertainty, and some anxiety, about what happens next."

What'll happen next is buyers will wait longer before making an offer. This will cause nervous sellers to cut prices even further. Which in turn will convince more buyers to wait, which will make more sellers nervous, and so on. All the way down. You get the picture.

"Whatever happens here, optimists and pessimists agree, will happen later in the rest of the state." Rest of the country, too.

And it's not a question of if the bust is coming. "That's about the only thing everyone agrees on."

It's when and how severe it'll be. "The size of the coming hangover is a particularly contentious matter."


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