Mid 2009 San Diego Market Predictions for First Time Buyers

Back in January of this year, I wrote 5 Top Market Predictions in 2009 where I attempted to predict what was going to happen in real estate for this year.  Predicting real estate markets is tricky business with lots of moving parts, just look at the expression of the fellow in the photo.

The truth of the matter is, no one really knows when the bottom will hit (or has hit) in San Diego.  Those with the ability to see so clearly into the future might want to spend their time buying Lotto tickets – the payoff would be much better. Market bottoms can be clearly identified months after they have occurred by the reviewing of sales data and median prices by real estate experts.

If you have been reading the media and blogs, you have been hearing some positive news regarding the real estate markets.  There was an article published at Time Magazine today - How the Housing Market is Fighting Back. I believe this is very balanced article regarding the recovery of the real estate markets.  Another local article written by Jen Lebron Kuhney on The Daily Transcript had some positive new regarding detached homes prices being up for the fourth month straight.

In San Diego we are experiencing a bifurcated real estate market.  Buyer’s for homes in San Diego under or around $500,000 are frustrated with the lack of inventory and actual sellers, mostly left to deal with Bank Owned REO sales and Short Sales.  It is not unheard of to have 10 to 20 offers on each new listing that hits the market with FHA and VA buyers usually being beat out by conventional or cash buyers.  Lack of inventory has firmed up asking prices and they are selling at or above asking price.

The upper luxury markets are quite different.  Lots of inventory and softer asking to sold prices.  The biggest challenges the upper markets have are inventory, financing, and appraisal issues.  You can check out my mid year market snapshots for the following luxury markets:

Coronado | La Jolla | Rancho Santa Fe

I am a big believer in market facts over market hype.  Ask many real estate agents and they will give you the Polly Anna always positive answer about how real estate is doing.  The fact is, in every market, there is opportunity for someone.

Right now, the biggest opportunity in our market is for lower priced buyers – it has been a long time since there money would go so far.  Combined with low mortgage rates and the first time home buyer tax credit, the time is now if you have a stable job and want to make a long term investment.

Look at the graph that I prepared this morning for market index in Carlsbad, Chula Vista, Coronado, and Encinitas.  The chart is starting to show signs of uptrending, particularly in the lower priced markets.

The Market Action Index (MAI) illustrates the balance between supply and demand using a statistical function of the current rate of sale versus current inventory. An MAI value greater than 30 typically indicates a “Seller’s Market” (a.k.a. “Hot Market”) because demand is high enough to quickly absorb available supply. A hot market will typically cause prices to rise. MAI values below 30 indicate a “Buyer’s Market” (a.k.a. “Cold Market”) where the inventory of already-listed homes is sufficient to last several months at the current rate of sales. A cold market will typically cause prices to fall. Keep in mind that an MAI value close to “30″ probably means that the local market is balanced or neutral. So if the MAI for your local market is somewhere between 27-33, then it’s likely to be either a buyer’s market or seller’s market based on the individual street or home area that a particular property is in.

In summary, if you are a first time or buyer in the lower price ranges, this may be a great time to buy.  I cannot answer that question in a general blog post because your particular situation, goals, and needs have to be considered.  But overall, if you have steady employment with no chance of being laid off, good credit, and want to invest in a home for the long term, at least 5 years or more, then opportunity is knocking.

While opportunity is knocking, you need to be careful and take your time.  Buy quality and location, check foreclosure rates in the area you’re looking in, and develop trust in the agent helping you.  Also be sure you have a relationship with an agent that only has your interests – see agency category.

Find a real estate agent that you feel good about, go out and look at all the inventory in your price range and locations, and get set up on a market alert from Sandicor MLS.

While looking around on the Internet is a good way to get an idea of prices, most good opportunities sell very quickly.  If you are looking on Trulia, Zillow, or Craigs List, you may or may not even see the listing.  These sites do not have direct feeds from Sandicor MLS and rely on agent or other types of uploads.

If you are looking for a real estate agent please visit my looking for a Realtor category.  Today, you need an advisor over a salesman.

Get to a good lender to determine your Credit Score and what type of loan is best for you.  You can visit my FHA Loan or VA loan blog post for more information.

Next, I am going to write regarding the opportunity for the move-up buyer.