San Diego Real Estate: It's a Good Time to Buy.

Veteran industry experts and long-time San Diego residents talk about why buying homes in San Diego, even in this market, still makes total sense.

If you listen to all the doom and gloom tossed out by the local media one might get the feeling that the housing market is on the verge of catastrophic implosion. In reality that could not be further from the truth. Having spent most of my adult life in both local and network television, I can honestly and accurately tell you that the media has always believed that spinning bad news is the way to do business. Watch a local 30-minute newscast on any of the various channels or pick up virtually any newspaper and measure the number of "bad news" stories against the "good news" offerings. The ratio is deploring to say the least.

It is much easier to pick something apart than to research the "positive" aspects of a subject. Slinging mud and making outlandish, sophomoric statements rarely takes any homework at all.

Case in point, our local housing market. It takes no skill whatsoever to look around, see some standing inventory and make the assumption that things must be bleak because we haven't seen this much inventory in years. Reporters only interested in the low hanging fruit, or the easy answer would arrive at a conclusion that says: lots of homes on the market must mean things are terrible.

Gregory J. Smith, San Diego County Assessor, Recorder and Clerk, has analyzed these cycles since the 1960's here in San Diego and says there is no reason for alarm and, in fact, he is confident about this market. "First off, every severe real estate decline in San Diego was preceded by dramatic job losses. In the 1960's, the first major aerospace crisis and its resulting job losses caused a real estate decline in San Diego County, but it came back strong in the late 1960's," claimed Smith. "In the 1970's, Nixon's wage and price controls and the resulting recession caused more job losses, but by mid 1970's the market came back so strong that we had Proposition 13. Then came the early 1980's and Paul Volcker with interest rates hitting 18%, effectively putting a clamp on the housing industry, but again we recovered by the mid 80's. In the early 1990's, the Savings & Loan crisis resulted in massive liquidation of properties by the Resolution Trust Corporation (RTC), coupled with severe job losses as a result of General Dynamics and Convair leaving town threw us into a tailspin," continued Smith.

"From 1990 - 1995, the average home price decreased approximately 20% - 25%. In the Assessor's office, we reassessed over 200,000 properties down in value, for a total reduction of over $16 billion. Despite this, by the mid 90's we came back strong, and from 1995 - 2005, we had unprecedented growth in real estate values and appreciation. This was due primarily to limited supply, strong demand, and low interest rates thanks to Alan Greenspan," Smith added.

"The difference between those cycles and one we're in right now is that the job market and the economy are still very strong in San Diego County." Smith contends the problem is one of perception. "You have to remember we are coming off all time real estate highs in 2004 - 2005 with 20% to 25% increases in real estate values. Resale and new home values were going through the roof, with multiple offers on the same property. It simply couldn't go on like this indefinitely." Smith then states: "What we have now is not a bubble or a collapse... not even close. It is merely a market correction and on that was overdue."

The man who has been San Diego County Assessor since 1983 has refused to rest on his laurels. Maybe that's why 12 years ago voters agreed to add the County Clerk and Recorder functions to his duties as Assessor. And while he downplays the three hats he wears, there is no mistaking the fact that Greg Smith loves what he does, and his constituents like the job he is doing by re-electing him over and over again.

In fact, this past June he was re-elected by an unprecedented 89% of the vote. "San Diego is the greatest place to live in America, and that's why, over the long run, the housing market will always be strong here," said Smith.

Most credible job forecasts predict our region will create anywhere from 30,000 to 50,000 jobs over the next two years and that interest rates will level off at 7% by year end. With those numbers, it is difficult to see a steep decline or collapse of the real estate market in a job-creating economy like we have in San Diego.

Brian Coe, San Diego County Manager for First American Title has been in the real estate industry for 23 years and he has a unique perspective on all of this negativity. "The media perception of what's happening is terribly tainted. Right now the market is sitting at 2002 levels and those were record highs in '02," said Coe. "The escalation in housing prices couldn't go on forever, it had to settle down and that's all this is. With interest rates where they are and the job forecast for our region, I believe the remainder of this year will be a terrific time to buy a house," concluded Coe.

Inventory of new and existing homes would seem to bear out both Smith and Coe's claims. With a healthy amount of available product, a wide array of mortgage products and interest rates still under 7%, it appears it is a much healthier buying market than the media wants us to believe.

National City Mortgage Branch Manager Jon Reed said, "It used to be a 30-year fixed mortgage was the loan program of choice but today, buyers have a vast number of loan options to select from," Reed said. "It has never been easier to qualify for a home loan because the products are tailored to the home buyer like never before. I think the media has a very superficial understanding of all this."

Our present real estate market is nothing more than a natural reaction to the record run-up we experienced over the past several years. We still have favorable interest rates, strong demand and an attractive inventory out there, so... what are you waiting for?

After spending 27 years in television, I think I'll trust the expertise of seasoned real estate veterans over uninformed, superficial reporters bent on disseminating cruddy news. If you're seriously considering making the biggest investment of your life who will you trust?

By Phil Stone

August 2006

Article provided by First American Title Company.