Home Buyers San Diego


San Diego Home Prices

November 2011

Southern California Home Prices Drop 5.2% on Foreclosure Sales (compared to 1 year prior)
- October 13, 2011


All properties in San Diego:

September 2011 3 months prior 1 year prior 5 years prior
$310,000 $315,000 $322,000 $465,000

January 2011

source: Trulia

We see slight correction to the median home prices in San Diego.

Factor to impact home prices:

Interest Rates

How much does it cost (per month) to "own" a home? A decade ago (and before that) people bought a home, paid it of in 30 years and when they were 50-60 years old it was paid off.

Over the last 10 years there has been a huge increase (especially 2003-2007) in ARM loans (and similar) with short-term interest rates with no amortization (just paying interest). Home buyers could get more house with these loans, at the same monthly payment. On a $3000 home loan with amortization you would pay approx. $400 the first month and up to get the loan paid off in 30 years. The 5 years ARM loan with amazing low rates, you can "afford" a$700.000 at 4% when you can afford a $400.000 at 7%.

San Diego Home Prices

Currently in 2010, home prices are still low, even when interest rates are historical low, which is a huge impact on home prices. Common sense tells us that these low homes prices mean that "the economy" is still not doing great. Simplified wages are not going up significantly, jobless rate is still close to 10%, most local government are close to bankrupt, and the US government is still printing a lot of money (no details- but we get the idea). To top it of banks (beside getting pushed by the government to make loans available) take a lot more care: 4% 10 year ARM loan, yes, but only when: 20% cash in home (80% is total of loan), excellent credit needed, 80% loan based on the appraisal (appraisers are currently very tight with their estimates, not like in 2005 when some added just an extra $50K - where you could do fun stuff with).

Now, late 2010 it is relatively very attractive to buy a home for $600.000 (which was worth $780.000 in 2007 (San Diego)) at 4% instead of 6.5% then:
$780.000 x 6.5% = $50.700 annual interest cost
$600.000 x 4% = $24.000 annual interest cost

Why is not everybody buying now?

Inflation Rate

As all products and services become more expensive over time (short periods of deflation not included), it is important to see home price increase/ decrease in relation to inflation rate.

The inflation rate for the USA has been summarized:
Long term regression line goes form 3% in early 90's to 2% in 2010. The inflation rate was close to 4% for most of 2008, in 2009 there was most of the months deflation (approx. - 1%).

See www.inflationdata.com for more details.

When inflation is 2.5% annual for 5 years (13.1% for 5 years), based on this number you can define or your house has performed better or less than the inflation rate.

Cost of Renting

During the real estate bubble 2005 - 2007, the price-to-rent ratio increased to more than 20 times in some areas. The average over the last 15 years is close to 15.

$500.000 house price
Rent $2000 per month x 12 = $24000 per year
Ratio: $500000/$24000 = 20.83

When home prices are lower the rent ratio is lower. A similar rent price with reduced home values (2009-2010) will make it more attractive to buy.

August 2009

Home prices are going up again! Slightly....
Let's have a look at the home prices in Kensington and San Diego County.

March 2009

The Bottom!!!?

We are almost at the bottom. Based on huge correction up to 60% over the last few years (mainly in the "worst" areas), the home prices and condo prices have come down close to the level of renting a home and to higher affordability. (in 2006 less than 10% of San Diego residents could afford a median priced home).

The huge increases in home sales is a sign that the bottom is nearby, homes are sold even to rent out (which did not make any sense 3 years ago when prices for a mortgage were 2 x times the rent after the tax break).




March 2011

Cash Investors

San Diego County homes prices and sales increased slightly in February from January, a market driven heavily by cash investors buying distressed properties, according to DataQuick Information Systems.

Home Prices in San Diego County fell from :
February 2010 - February 2011
$322,000 $308,000 -4.3%

Dataquick: About 55 percent of February's resales, including single-family homes and condos, were distressed properties.

January 2011

Half San Diego Households Can Afford a Home
December 21, San Diego Reader

"As the housing bubble inflated amazingly earlier in the decade (2006-2007), only 7% of San Diego households could afford to buy a median priced home, Now that the bubble has burst, 51% of households can buy a median-priced home. " says Kelly Cunningham
Read more about home price affordability

September 2010

Why is not everybody buying now?

Home price development

In areas like South San Diego County, Phoenix AZ, Las Vegas NV and Miami FL to name a few, 35%down - hit areas, where home prices in mostly "tougher" neighborhoods dropped even 50% plus since the top in 2007.

Simplified: In San Diego County, median home prices were at the top in 2007 peaking at $510.000, and bottomed in early 2009, and is going up slightly.

Other areas still drop further.
October 2010: Las Vegas region September home sales fell 15 percent from a year ago.


Going up slightly? The lowest dip has a significant correlation with the amount of foreclosures/ bank owned s sold homes in that period. There were significant more lower priced homes sold than high-end properties. Currently it looks, for most people, that the price is rebounding. At least on paper it does: median home prices in San Diego are roughly up 10% over the last 12 months. The big question is: Is your house worth 10% more, or are there less very "bottom-priced" homes/condos sold and relative more "average" and higher priced homes....?

Buying time

As home prices are pretty well corrected and interest rates are as low as 3.125% for 5 year and 4% for 10 year home loans (excellent credit and 20% cash in the house) buying now should be a pretty good deal. Compared with 3-5 years ago it can be defined as an excellent time!!! However there is no reason why home prices should go up significantly in the next few years as the economy, jobless rates, bankrupt local governments and less money available at the bank (the banks have money but are more care full with giving it to you). Other consideration is: How important is the peak home price of 2007, was that realistic? less than 6% of people in San Diego could afford a median priced home than (common sense?), is the home price realistic now?. Also buying has become more attractive compared to renting, as the cost is getting pretty similar but of course you can top it of with the tax break!

Now, late 2010 it is relatively very attractive to buy a home for $600.000 (which was worth $780.000 in 2007 (San Diego)) at 4% instead of 6.5% then:
$780.000 x 6.5% = $50.700 a nu al interest cost
$600.000 x 4% = $24.000 annual interest cost

Getting a 15 year fixed might make an investment more solid: when interest rates go up in 5 years - which is not unrealistic - you have to able to carry 6% instead of 3.5% which is a 75%+ increase in monthly cost. Paying of 20-30% over 5 years will make this hit more reasonable. The property should be still a "reasonable" deal at 6% interest cost. Everything lower now should mean saving money...


Relatively homes are moving, at a reasonable rate. Home prices are pretty attractive, home loans are great, so why not a huge increase in home buyers?

1. Lots of people have no money in their house (bought for $500.000 and it is worth $380.000, and no savings), the bank will not let you sell your home and but another one. These people are stuck: why are the words loan modification or bankrupt pretty popular nowadays?

2. Compared with 5 - 8 years ago, when lots of home owners home went up in "value" with 50-100% (rough number), on a $400.000 home that means home owner had $200K - $400K in equity, when the same banks whom are dealing now with lots of crappy home owners, where suggestion you then to get a new car or so to use that equity, remember? Based on having equity, banks are a lot more willing to give you a loan for a new home, it minimized the risk for them. Equity also means buying power. Home buyers could sell easily their $400.000 home (which was worth only $200.000 a few years earlier) and buy a $600.000 putting their equity into that new house. This also helps to get home prices up. When people have money laying around they are more willing top pay $620.000 for a $600.000, why not. You know why not now!

March 2009

Southern California home prices down 39%!
San Diego has a 31% decline: median to $285,000.

Source: LA Times, March 17, 2009:
Southern California median home price falls to $250,000
February prices were down 39% from the same month a year prior. Low prices boost homes sales 41%.

Foreclosed homes comprised 56% of properties sold!


Trulia shows trends in median home prices in San Diego: Areas like Kensington beat the trends:

  march 09 1 year ago 5 years ago
San Diego $270,000 $365,000 $403,500
Kensington $645,000 $665,000 $655,500
Normal Heights $159,530 $300,000 $306,000

San Diego Home Prices August 2009

Elements which effect the Home Price :

Interest Rates

November 2010

  Loan/ Value home   Rate APR
ING 5/1 Orange Mortgage Years 1-5
Fixed Rate - 0 points
80% or less < 500K 3.125% 3.269%
Wellsfargo 5-Year ARM - 1 point 80% or less < 417K 2.875% 3.126%
Wellsfargo 30-Year Fixed - Jumbo 80% or less > 625.500 4.875% 5.012%

August 2009

  Loan/ Value home   Rate APR
ING 5/1 Orange Mortgage - no points 75% or less < $500K 4.500% 4.098%
    > 500K 5.000% 4.284%
Wellsfargo 5-Year ARM - 1 point 75% or less < 697.500 4.50% 4.071%
    > 697.500 5.250% 4.353%

Rates are based on Excellent Credit Score



Jobless Rate:

Read more about Employment Statistics at:


Tax Credit up to $8000 (10% of purchase price) for first time home buyers

This tax credit might expire later in 2009.