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Home arrow News arrow Not a Sunny Day for San Diego Real Estate
Not a Sunny Day for San Diego Real Estate Print E-mail
Monday, 17 July 2006
For a long time, San Diego 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. Homes were more in reach a year ago.

Prices might have been a bit higher back then but interest rates were a whole lot lower. Sellers are chopping prices to get deals done. 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 market also began to fade first in San Diego. The housing bears say the bulls are either misguided, uninformed or shills. At a Century 21 sales office in the Ocean Beach neighborhood, broker David Davis said the market had already bottomed out. The last San Diego real estate collapse, which hit in the early 1990s, was triggered by convulsions in the aerospace industry. High interest rates contributed to the misery.

A two-bedroom town home has its price of $324,900 crossed out with a marking pen, replaced by $309,900. Another house, a four-bedroom in suburban La Mesa, has a printed price of $575,000. What helped supercharge the San Diego boom was the spread of unconventional financing methods.

Some adjustable-rate loans allowed buyers to postpone payments on the principal. Sometimes the loans allow the buyer to pay only part of the interest, tacking the remainder onto the loan itself.

Tom Scott, executive director of the San Diego Housing Federation, a coalition of nonprofit and advocacy groups, said that the advantage of these loans is that buyers can afford much more house. Houses really need to fall by 50% to become affordable again.

To illustrate his point, he offered a tour of downtown in his silver Miata convertible. There's Vantage Pointe, Smart Corner, the Alta, Nexus, the Legend, the Mark. The housing category dropping the most in value here, DataQuick says, are newly built single-family homes and new condos. Median prices of these are down 8% since June 2005.

Condos for resale are down much less - 2.1% - but sales volume has slumped by about a third. The record low interest rates, unconventional financing techniques and tax revisions allowing home sellers to keep the first $250,000 of profit tax-free were present in Nebraska as well as California, but Nebraska didn't get crazy.

By M. Sese

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