Housing: SD beats other metro areas

Home values sink in October, but not in San Diego

Standard & Poor's/Case-Shiller housing data, released this morning (Dec. 26), show housing values dipping 0.1% for the 20 major metro areas in October. San Diego, however, was up 1.3%, topping all but two of the cities. In October, San Diego County values were up 6% from a year ago, topping the 4.3% composite of the 20 largest metro areas. Local home values are down 35.2% from the peak in November of 2005.


The real question is whether this means that local housing prices have bottomed and are now firmly on the rebound, or it they will slide again and drop below previous lows. I recently saw a nearby home that had not changed hands since 1975 sell for what I thought to be a nice price (from the seller's standpoint.) Zillow and Trulia soon adjusted their estimates of values in the area upward, including my home. While I know that employment here is on the uptrend, it will take years to get back to where it was on the eve of the disasters of late 2008, and if the incomes are not there, home prices will not climb much. Or is this land of "la vida loca" an exception?

Visduh: Values are rising greatly for dubious reasons -- the Fed artificially keeping long rates low, speculators flooding into the market to take advantage of those low rates, etc. I agree that a correction with some substance is going to take a long time. San Diego values are still 35% lower than the bubble peak of late 2005. Best, Don Bauder

A lot of foreclosed properties are being bought by hedge funds at 20% above fair market value. These properties remain in the name of the original lender but are managed by contractors the hedge funds hire. Since hedge funds don't actually take title to properties, nobody knows for sure how many houses hedge funds own in the San Diego area. You have to be politically connected to get in on these deals. Hedge funds don't actually pay cash for the properties, but agree to pay the lender back when the properties are acutally sold, plus a share of any profit. Through this technique lenders reduce write-offs and avoid insolvency. Lenders also transfer the burden of managing foreclosed properties to hedge funds. Through this "hidden hand" the current price of real estate exceeds actual fair market value by 20% or more.

Burwell: That is a very interesting analysis that I hadn't taken into account. Best, Don Bauder

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