Friday, Jan. 4, 2008 | I appreciate the reference in the recent piece by Rich Toscano — but definitely wanted to correct an apparent misperception that he had.
While I do believe there is the chance that the worst of the housing downturn will be behind us at the end of 2008 — I don’t believe I suggested at any point in my conversation with reporter Kelly Bennett before the holidays that San Diego’s price decline would not continue through 2008 (and perhaps into ’09 in some areas). In fact, price pressure downward will continue as builders work through inventory and the foreclosure story continues to unfold. As Kelly and I discussed, the number of active projects is trending down now, but high levels of units left (relative to sales) will be with us for much of 2008. Inventory levels should get more limited as we move into 2009
When I refer to bottom occurring in ’08, I refer more to inventory levels declining (or at least flattening off), home sales stabilizing and (most important) to home and land price resets that bring buyers of all types (including builders) back to market with an eye to 2009/2010 (and beyond).
We are already starting to see some signs of this as Lennar offloaded land inventory to JP Morgan land fund, Capstone’s year-end purchase of lots in Menifee, Colrich’s December purchase of lots in La Costa Ridge (Carlsbad), and Brandes investment in builders (reported in yesterday’s San Diego Daily Transcript). Lot prices (and home prices) have declined and are bringing long-term players back slowly if they believe a project or location offers potential beyond immediate distress period.
San Diego County is not going anywhere and, at some point, it will make sense to resume residential development (and redevelopment).
We shall see if home buyers also start to buy as ’08 progresses. Much will depend on overall economy and its impact locally. Fingers crossed: I survived a real economic (and housing market) downturn in San Diego in the early 1990s and I hope our community does avoid that widespread pain.
Prices can continue declining and/or stay flat for some years even as sales levels stabilize at a lower level driven by need-driven housing sales/purchases.
There will still be particularly intense pain (i.e. further ’08 price declines) in markets working through past excesses of course (i.e.: Chula Vista) and foreclosure impact remains a wild card (I do not see federal plans doing much).
Housing affordability in relation to regional incomes must be improved (and going forward we will see the projects that do move forward for 2009 and beyond will focus on bringing “affordable” product forward (or at least more affordable).
I am available any time Rich wants to clarify a point with me directly.