California Housing Forecast/Fidelity Pacific Real Estate

We all want to know - when will the bottom hit?  I agree with Lori Staehling, President of the San Diego Assocation of REALTORS, that we don't have a crystal ball.  However, while the SDAR takes that to mean we don't know if this is the bottom, I mean that we don't know how long it will take to get to the bottom.  The bottom will be, in my opinion, the same place it was the last two downturns:  when mortgage payments equal rent, and the median priced home is 6x per capita income (p.c. income was $39K in 2005, the last year of data).

We also need to work off the excess supply of homes and work through the resets and foreclosures.  Prices cannot rise until we have a 4 - 6 month supply of homes, not the current 14!   We also need to first work through a recession, and develop an economy not so dependent on housing and illegitimate finance.  We need a consumer with less debt and some savings. 

If history repeats, house prices will fall until the median home is 6x per capita income.  If wages stay flat, that is a return to 1999 or 2000 prices.

 Click on images to enlarge

 Median home price to per capita income - Home prices are too high for San Diego incomes!  We need more $50K condos, and $100K starter homes!

 Home prices are way out of whack in relation to rents - investors will not buy until this ratio returns to the mean.

How long to hit the return to the mean?  I do not know if this will take 1 year, 2 years, or 5 years.

I am modifying my forecast of a 10 - 15 yr decline, because this is going much faster than I thought.  This could be over in 3 years, but I believe big price drops are still ahead.

If you are priced out, you can use this time to build up a good credit score (over 700), pay off debts, and save a 10% downpayment.  If you can't afford to do that in California, you could consider a move... move in with your family, cut your overhead... 

If you are ready now to buy a home, I'd love to help you find the home of your dreams.  My philosophy is that we look at everything on the market in your price range, until we find the perfect home at the perfect price.  If we look at 200 homes, fine.  If you don't want to see them all, I'll preview them for you.  I like to be thorough.   How do I have the time?  Well, I don't post much lately.  Also, I don't "farm neighborhoods" and other marketing activities, so I can spend my time working for you, instead of recruiting new business.  The business comes to me, leaving me more time to do actual work.  If you like my approach, and you want to meet me, I'd be honored.  Bob and I work as a team, so you get both of us for the price of one.

If you are looking for a rental, I'd love to help you find the rental home of your dreams.  I'll check the property tax records and foreclosure records to make sure the landlord is not near foreclosure, and show you around San Diego if you don't know the area.  My hope is that, if you like my approach, you will refer me to your friends and family, and keep me in mind if you decide to buy a home in the future.