Making Some Sense Out Of The Chaos
September 17th, 2008 categories: Community Happenings
How many of you out there feel like you’re on a roller coaster? Every day we hear about one disaster after the next. It’s enough to make one ready to crawl into that proverbial cave and hunker down to wait it out. From hurricanes to less natural disasters such as the imploding financial markets in the U.S., it’s hard to find a reason to venture forward into the chaos to try to find the deal that makes it all worthwhile. I know it’s out there and I hate having to subsist in this down cycle without somehow taking advantage of it. So, how to make lemonade from the mountain of lemons raining down?
It seems like the only people making money in Real Estate today are those dealing in REO’s, aka foreclosed properties. Foreclosure market activity in North County San Diego, particularly in the Coastal areas, is very brisk. In fact, I personally have missed out on two opportunities due to acting too slowly. However, the fatal flaw would be getting into a deal that lacks thorough investigation. The risk is high today. We don’t know when the market will turn around. To offset your risk, you need to make sure you are buying right- the right property at the right price. ‘A+’ locations minimize risk and there are many fewer foreclosures in more affluent areas. Of course, the best hedge against your risk is getting a smokin’ deal. Researching comparable properties in the area will give you a good read on what constitutes a great deal and it is also helpful to know what the bank ‘bought’ the property for. This is public information and can be accessed on-line via your favorite Real Estate professional.
Here are some statistics from our local Real Estate Market;
Sold home prices decreased by 2.57% in North San Diego County from July to August creating a new median price for detached and attached homes of $390,000. Detached homes fell 1.64% to $450,000 while attached homes increased in August by 3.45% to a new median price of $261,200. For San Diego County (excluding North County) sold home prices fell 4.38% to a new median price of $360,000 in the detached sector and Non-North County attached homes decreased 5.69% to $232,000. Countywide, the median price of homes sold decreased from $407,500 in July 2008 to $390,000 in August and was down 32.76% from the August 2007 number.
MEDIAN PRICE GRAPH
The current condition of the housing market needs to be kept in historical perspective. Home values rose 88% on a national average-higher in California- over the past decade. Sales continue to be hampered by problems in Real Estate finance. Both tighter underwriting standards and the ongoing effects of the credit/liquidity crunch continue to limit sales. Buyers with secured financing or all cash are not hampered by these constraints. In fact, several North County brokers and agents have experienced significant increases in activity in recent weeks, working with well-qualified buyers who recognize optimum buying conditions with which there are low interest rates and an abundant selection of homes on the market.
Median days on the market for single family detached homes in North County increased from 49 to 54 days between July and August and the Average days on the market rose from 73 in July to 77 in August. The median number relates to an equal number of days (in this instance) above and below the median number where as the average is an average of all the number (of days) needed to sell a home. The number of North County single family homes sold decreased 14.27% in August to 703 from 820 in July but there was a year-over-year increase in sales of 8.49% from the 648 homes sold in August 2007.
The single family detached median price per square foot fell to $228 in August 2008 from $232 in July, down from $304 in August of 2007.
A bit of good news is active listings decreased in August by 217 homes from July and were down by 531 from one year ago. A great sign for better times ahead is affordability is higher today than it has been for years in San Diego County. Due to the recent uptick in mortgage rates, affordability in North County actually decreased by 1% but remains at a high 20%. Overall San Diego County is sporting a 25% affordability ratio. That’s considerable when compared to a few short years ago when the affordability ratio dipped into the single digits.
What’s the outcome of this tale? Our market continues to struggle but it is creating some exciting opportunities for those who can afford to take advantage of them. Those who are less reliant on financing or well qualified are in a position to buy properties from banks today for pennies on the dollar. Often times the more physically distressed a property is, the more likely the bank is to accept the low- lowball offer. Obviously there are fewer buyers who are equipped to deal with rehabilitating properties. Most buyers are still looking for foreclosed homes with as few blemishes as possible. With the help of a General Contractor (such as Pacific Shoreline Home Building, Inc. for instance), home buyers can look for properties with significant cosmetic flaws while being structurally sound and set the stage for tremendous appreciation potential.
It’s easy today to become mired in the depressing information that is constant and relentless. While we do find ourselves in turbulent times, it’s important to remember that without the volatility, the opportunities wouldn’t exist. So put on your positive thinking cap and let’s see if we can’t come up with an opportunity that will serve you well into the future.
Very interesting stats. Chaos can lead to opportunity.
Aloha,
Keahi