Wednesday, January 30, 2008

Why it is OK to Buy Now

Just as the stock market is volatile and subject to emotional whims, so too is our real estate market. By getting beyond the fear, to the basic economics of supply and demand, we will see that it is OK to buy now.

Our supply of homes for resale stands at 18,117. Using 2007 resales volume of 24,013 homes, we have a 9-month supply. But, new construction, condominium conversions, and building permits are down to 1/3 of where they were in 2004. With this reduction, part of 2007’s 6,368 new sales will likely be replaced by resales, chewing down supply.

Although foreclosures increased 3 ½ times since last year, they have only gone from 0.19% to 0.67%, still less than one percent. Without the emotional and media components they would have much less overall effect.

In 2000, average home ownership in the US was 67.5%. Current San Diego home ownership is 49.5%. Demand exists, we need affordability – our other housing crisis.

The median home price dropped to $430,000, just below April 2004 prices. Interest rates just reported by Freddie Mac are the lowest since March 2004. Simultaneously, family household income is estimated to have increased by over 5%. The net result is that housing affordability has come off its 9% and is estimated to be where it was in late 2003, early 2004 – somewhere north of 24% (according to the California Association of Realtors as of the third quarter 2007).

Finally, it comes down to relative cost. Buyers priced out of the market were forced to rent. Vacancy rates are down nearly half, to the 2.5% range. Rents are increasing 3-5% / year.

With prices and interest rates coming down and income and rents increasing, a tipping point is reached where for more and more people, it makes more sense to own. And, buyers have negotiation room now.

Despite fears of recession, our basic economy appears relatively stable. Unemployment rates have dropped for the fourth consecutive week. If the Federal Reserve Board drops interest rates another ½ point as expected, mortgage interest rates are likely to drop further. These things are helping to stabilize our real estate market. A $150 billion national economic stimulus package can’t hurt either.

The average homeowner in California lives in their home for seven years. This time horizon is long enough that small price declines will be wiped out. These people have the green light to buy now.

Monday, January 28, 2008

Guest on KUSI's News - Inside San Diego

Dave Davis and Bridget Naso interview on KUSI News - Inside San Diego segment.

Click for Video

Thursday, January 24, 2008

Interest Rates at four-year lows (per Freddie Mac)

It's "official". Mortgage rates have hit four-year lows (since March 2004).

"The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 5.48% in the week ending Thursday," wrote Michelle Donley of MarketWatch on January 24, 2008, citing Freddie Mac's survey released Thursday.

In CA, today we would be able to get our clients a 5.125%, 30 year fixed, no point conforming loan. Last week we found a just over 6%, 7/1 ARM, no point jumbo loan. [Rates change daily.]

Mortgage rates have been trending down of late. With a January 29th FED meeting and a market expectation of another 1/2% drop, I expect we will see interest rates drop a bit more in the next few weeks.

If you have a variable rate loan that is set to reset in the next, say year, then I would seriously consider grabbing this fixed rate NOW. Annecdotally, I'm told, election years always create temporary fear of the unknown and interest rates (not necessarily the FED rate) typically go up prior to an election.

If you are in CA and think now would be a good time for you to refinance, feel free to write us at

Tuesday, January 22, 2008


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Friday, January 18, 2008

What are the Expectations for the San Diego Housing Market in 2008?

Watch the live interview

Robert T. Boyer, Ph.D.
interviewed by
Chrissy Russo
Fox 6
San Diego Living

The "script" below contains the essential talking points prepared for the live interview, held January 15, 2008, on Fox 6's San Diego Living show with Chrissy Russo and Joe Bauer.

      We are all aware the dour headlines and news reports tell us that the real estate market is going to continue to tank for another year or two – that 2008 will be another miserable year for the real estate market.

      As a real estate financial planner for San Diego’s Finest Real Estate, I have to disagree. As a Ph.D., I’ve learned to do lots of research and synthesize lots of data and look at things just a little differently; here’s my read...
      First, you can’t compare any local real estate market to the national real estate market directly. They’re not the same – there are very different dynamics. In fact, San Diego was at the leading edge of the price run-up, the downturn, and again now that we’re looking at recovery.

2008 isn’t going be an easy year, but it’s going to be a much better home buying year than anticipated.

      When you put aside all the emotional baggage, you ultimately get to supply & demand. There are a lot more factors than we have time for, so I’ll just touch on the highlights.

On the supply side:
     The builders have cut back drastically - new home construction, condo conversions, and building permits are all down to less than ½ of where they were in 2005
     Just 3-months ago, we had the 2007 fires which claimed nearly 1400 homes
All this takes a bite out of supply.

We have plenty of demand – people who were previously priced out of the market. The key on the demand side then is housing affordability which breaks down to
     Pricing
     Interest Rates
     Relative Cost

     Home prices have come down substantially
        o By way of example - Homes in one condo complex in Carmel Valley, were over $500K; now the exact same unit is in the low $400s.
        o We’ve seen this correction behavior all over the county.
        o We’re at pre-bubble prices in most areas
     Interest rates are still amazingly low. At San Diego’s Finest Real Estate, we can get people a jumbo loan, 7/1 ARM for just over 6% with no points – which is truly an awesome rate!
     The kicker is rent. Because so many people have stayed out of the housing market, rents have increased by nearly 6% just last year.
With prices coming down and rents going up, there is a tipping point where it makes more sense for some people to own. We see this in the affordability index which has increased by 20% of what it was last year.

      Our market has made its major correction. We are already starting to see positive activity. We think it is an ok time to buy. By way of contrast, in 2005, at San Diego’s Finest Real Estate we started advising clients to not buy in San Diego if they could avoid it. We believe now is the time to buy.

      And of course some of the best deals are going to be the foreclosures – which are historically available at 20% below market because the banks want these properties off their books.
     The challenge with foreclosures is finding them, most are not listed like regular resales.
     So, what we are doing is offering bus tours of these foreclosures in January and February, called our American Dream Tours, which people can sign-up for on our website at (Promotion Code: blog)

To summarize my expectations for 2008
     It is not going to be an easy year. We still have to get beyond the fear mongering. We’re going to see:
        o more foreclosures
        o more aggressive prices from sellers
        o but there are going to be some great deals
     I think overall sales will be up. And if that is the case, it will demonstrate that the market has stabilized.
     For our clients planning to stay awhile, we are now giving you the green light to buy.

The live interview may be found at Where is the Housing Market in 2008? Robert T. Boyer, Ph.D. interviewed by Chrissy Russo of Fox 6 for San Diego Live

Saturday, January 5, 2008

How Everyone Benefits From Mortgage Rescue

On December 19, 2007, the San Diego Union Tribune (daily paper) published my opinion piece titled "How Everyone Benefits From Mortgage Rescue" which addresses the issue of lenders freezing the teaser rates. The full article can be viewed at (pdf) and of course you can find out more about us at San Diego's Finest Real Estate