San Diego Magazine - March 2009
The stumbling economy is producing bad news in many sectors, but for homebuyers there’s good news out there, too. The recession is producing some bargains. Where and how do you find them?
IT’S A BUYER’S MARKET, but finding the best home deal in San Diego still means kissing a lot of frogs before finding your prince. Contrary to popular belief, the market is full of activity, though it’s a market fraught with hurdles that include frenzied short sales, damaged homes and, sometimes, overly aggressive real estate agents.
While median prices in some neighborhoods in Chula Vista and Southeastern San Diego have dropped by more than 40 percent since their 2005 peak, more-affluent markets, like Solana Beach and Kensington, are holding up better. The fact is, good deals vary widely with ZIP codes.
“If San Diego home values have fallen 29 percent, that means some markets are off by 50 percent and some are off 10 percent,” says Norm Miller, a real estate economist at the University of San Diego. “You won’t know that until you look at ZIP codes and neighborhoods.”
With the national recession and rising unemployment, there’s no telling when the turnaround will come. But buyers can leverage that uncertainty.
“What better time is there to be negotiating with a seller than when they fear that if they don’t take the deal today, the next offer will be lower?” says Mark Goldman, a broker with Windsor Capital Mortgage Corporation and lecturer at San Diego State University. “You’re better off negotiating the purchase before the bottom.”
Competition: Today, most home sales are in the $500,000-or-below range. They are typically foreclosures or short sales, where the bank agrees to sell at a price below the loan balance. This range is a tough market for buyers, who find themselves in bidding wars with investors paying cash —as banks deliberately underprice listings to generate a buzz.
Realtors recommend buyers searching among foreclosures and short sales keep shopping after they make an offer.
“Even before I show [a house], I contact the agent to find out the status,” says Gordon Kane, a Poway-based agent. “If he’s got four offers on it already, and they’re over the list price, we’ll move on. There’s no point in adding another offer.”
In more-affluent neighborhoods, there are fewer cash buyers but also fewer financing options. The days of the piggyback second mortgage are over. Federal loan programs requiring low down payments are limited to the Jumbo Conforming Loan limit of $625,500. Anything higher requires at least 20 percent down and mortgage insurance.
Short Sales, Long Wait : Saad and Dunia Dehays waited six months before hearing back about a short sale on Mount Helix, only to be turned down again. “They finally said, ‘Sorry, someone came along with a cash offer,’ ” says Saad. “A lot of people who got good deals put cash down. We put two offers down, and at the last minute, someone came up with a cash offer, and we lost.”
He spent more than a year house-hunting on his own and contacting listing agents directly on properties. “Like everyone else, we were searching for a bargain, but it didn’t show up easily. It’s hard work,” he says. “It’s not as simple as people think. The good deal takes longer and is a lot more complicated.”
Dehays, who wanted to stay near his jewelry business in La Mesa, ended up buying a 2,500-square-foot, five-bedroom house on a quarter-acre lot in Spring Valley. He offered $425,000 —above the $410,000 asking price. It was a short sale but took only two months for approval. He put down 20 percent and closed in November on a 30-year, fixed-rate loan (at 5.75 percent interest). The owner had purchased the house for $600,000 just two years ago, he says.
“It’s a beautiful house,” Saad says. “A couple of years ago, we wouldn’t have dreamt of buying a house because the prices were so high. We were paying $1,700 a month in rent. Now we’re paying $1,900.” (And they’re getting a tax break on loan interest and property taxes.)
