The 2009 San Diego Real Estate Bust

San Diego homes in the $500,000 to $1,000,000 range are getting clipped:

Point Loma, Solana Beach and Rancho Santa Fe and other expensive areas reported numbers several times the level seen a year ago, a sign that the trend may continue upward.

For example, in Carmel Valley, where the median sale price this year is $676,500, there were 44 default notices in May, up from 14 in May 2008. May sales in the coastal community east of Del Mar totaled 54.

“There's more distress in the high end, and we'll just have to watch to see if it continues to build,” DataQuick analyst Andrew LePage said.

He and other observers said high-end owners once had the resources to resist defaults and foreclosures, but the recession is reducing their income and investments.

I'm not going to say "I told you so" BUT...I told you this was gonna happen:

The cautious real estate buyer will avoid the mid-range priced homes ($500,000-$1,000,000) in San Diego throughout 2009. As more folks in mid-priced homes lose jobs, foreclosure activity will rise.  The problem with that price range is that there will be little or no financing available for buyers due to the loan limit of $625,000.  This means that if the mortgage payment on your Carmel Valley home, worth $1.1 million, is causing you financial discomfort, you'll be selling that home into a market where a willing (and well-heeled) home buyer can't get mortgage financing unless he puts a minimum of a half a million bucks down.

Here's what you need to know:

No Financing = No Sale
No Jobs = No Financing

We started seeing white collar unemployment spike last December, in New York.  Stockbrokers and their assistants were out pounding the pavement as a result of the Fall meltdown in securities markets.  It was only a matter of time before that virus infected Southern California.  White collar unemployment is working its way through the system and the mid-priced property market is going to be a huge casualty.

Investors should clamor to the lower end of the market.  Properties cash flow, prices are down, and when this stoopid foreclosure stay is lifted, there will be a plethora of bargains to pick off.  Stay away from the over $500,000 market...

...until it drops to below $500,000, of course.  Prime your pump for October, 2009.  (That means making sure that your financing is in order).