You misinterpreted my advice. Sometimes the best trade is no trade (i.e. just rent) or perhaps buying in a different location where the fundamentals make more sense. Just don’t constantly lament the situation because things didn’t turn out the way you wanted with respect to the foreclosure process and government support.

I didn’t say to buy now or be priced out forever. I left coastal SD in spring 2004 precisely because I realized we were in a bubble. I moved to North Carolina and lived there until just this fall. I didn’t even look back until this whole thing started to implode back in 2008. I was prepared to live in NC forever if the bubble never popped.

I do think prices are going to continue to slide. However, I am not so confident in my opinion as to ignore a serious reduction in available houses for sale as a sign that the price drop may be slowing.

Also, I thought the scarcity argument was out the window in 2005. Instead of “not making anymore land in San Diego” now its “not making anymore land in coastal San Diego”. Pretty soon its going to be “Birdrock”.

No one’s arguing that coastal regions shouldn’t trade at a premium. They do and always have. The question is should they trade at a premium that is out of line with their historical average.

If you want to be a real bear, then you should ask whether historical fundamentals are even a good proxy? High income earners experienced the greatest % wealth deterioration this downturn, will be hit with a much higher tax burden in the coming years and we are beginning to see signs of a net migration out of California by the same group. I wouldn’t be surprised to see Prop 13 on the table as California decides how to fix its budget crisis either. It will be interesting to see how all of this impacts coastal real estate.

I’m not counting on the last part in my buy/rent algorithm. I’d be happy with late 1990’s/2000 fundamentals (when San Diego was still sunny, when La Jolla, Del Mar and Solana Beach were still capacity constrained, and when the Pacific Ocean was still close by).

So I assume you would have advocated to purchase a home in S. Cal in 2005? Hopefully you weren’t investing in dot.com stocks in 1999 either. That’s terrible advice, if you ask me. But to each their own.

Someone once told me that you have to trade the market you have not the market you want. I understand that you would like to see the tax credit, interest rate subsidies, and FHA loans disappear. While we are at it why don’t we eliminate prop. 13 and the mortgage interest deduction. Both of those actions would certainly bring down house prices.

Top quality coastal real estate is not only scarce today but it is going to get more scarce. Ten years ago we didn’t have La Costa Valley, La Costa Oaks, Encinitas Ranch, and the list goes on. At one time all of these developments could have been considered “shadow” inventory. How many weak hands are there today? A La Costa Valley worth? The builders put their houses on the market one phase at a time and the banks are now doing more or less the same thing.

To be clear, I am most certainly not calling a bottom here. Those who have waited this long will get great deals. At some point, waiting will be the wrong move and I don’t think anyone knows when that time will be.

The simplest explanation is that demand is being artificially supported by government policies and that supply is being artificially suppressed by government policies. The “frenzy” and “scarcity” is a mirage, unless you think these policies are sustainable of course. Simple econ 101. Are you really going to fall for these tricks?

pemeliza | December 23rd, 2009 at 5:27 pm
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Then they should have no problem removing the tax credits, interest rate manipulations, low-down/FHA/ultra-high jumbo conforming limits (should be limited to houses under $250K, IMHO)… Oh, and perhaps they could also allow banks to finally kick out all the deadbeats who refuse to make good on their mortgage commitments, right?