San Diego now 'Enron by the Sea'

[Quetzal]

San Diego now 'Enron by the Sea'

This laid-back city seems to have it all - stunning beaches, best weather this side of Honolulu, a national image as a vacation playground and top convention destination.

A new ballpark and condo towers in the trendy Gaslamp Quarter, a Skid-Row section turned upscale shopping and dining, gives "America's Finest City" a lively, urban feel.

San Diego is also known as a tightwad. City Hall's Web site proclaims it "the most efficiently run big city in California." Howard Jarvis, architect of Proposition 13, California's landmark 1978 ballot measure capping property taxes, once said that if all cities were as financially prudent as San Diego, there'd be no need for a tax revolt.

That was then. This is now: a financial mess dragging the nation's seventh-largest city toward insolvency, federal investigators looking for evidence of corruption, a $1.7 billion gap in city workers' pension fund and retiree medical benefits brought on by years of mismanagement and alleged sweetheart deals.

more...

http://story.news.yahoo.com/news?tmpl=story&cid=676&e=23&u=/usatoday/20041025/ts_usatoday/sandiegonowenronbythesea

And to imagine I was going to move to San Diego this month. Ha!

[Spinzonner]

1. What do you expect from a Republican bastion ?

[Quetzal]

3. My boyfriend

n/t

[Carla in Ca]

8. Yes, there is a pattern here no one talks about.

Orange County bankruptcy of 1994...remember that? And now San Diego. Both run by the Nazis. A pattern of repug corruption but the voters keep them. Go figure.

[kokomo]

2. Who can afford to live in San Diego?

I lived there in the early 70's when most tract houses were in the $20,000 to $50,000 price range. Now the same tract builders are selling 2000-3000 sq.ft. homes for $700,000 on UP to ONE MILLION! 1000 sq. ft. old "fixer-uppers" in Hillcrest go for $400,000 and they are advertised as "investment properties" to rent, or for young "first-time" buyers. Comparable homes in the Midwest still go for less than $100,000. Of course we don't have San Diego's climate but what a premium for having only one season. Personally, I like to experience 4 seasons, and no worry about fires or earthquakes. We do have tornadoes, ice, sleet, and snow, however.

[slackmaster]

4. It would be very hard for someone just starting out

I bought my upgraded 1960s tract home in 1994 when I was married. I'm now a divorced empty-nester with the discipline not to extend myself on credit cards or fancy cars or otherwise live beyond my means.

The market value of my home has more than tripled in 10 years. I refinanced it in May 2003 and now enjoy a comfortable mortgage payment of a little over $1,000 per month, with just over 13 years left to pay it off. If my health and ability to work hold out, I should be debt-free by age 60.

I can maintain a good standard of living on my salary as an experienced professional techie, but it wouldn't be enough to support a family who didn't already own property. If I was 30, made my present wages, had a wife and two young children, we'd be permanently stuck in a cycle of renting and high-interest, non-deductible debt.

[rinsd]

5. Tell me about it.....

I moved here 6 1/2 years ago. In that time my boss's house has doubled its market price.

A 600sq ft place near me in OB just went for $550,000.

Even condos are going fro $300,000+

At this rate, I will HAVE to win the lottery in order to buy a home in San Diego.

[Dem2theMax]

6. No, because I'M winning the lottery. :)

My elderly parents live in SD county so I'm here too, keeping an eye on them. I'd never be able to afford to buy here. Parents moved here back in 1982. They wouldn't be able to afford it today either. Absolutely nuts for housing prices. I don't know how anyone does it these days.

(If I win the lottery, if you pick something NOT TOO VERY expensive, maybe I'll splurge just once and buy it for you. That way you won't be mad at me for winning your money! :) )

[rinsd]

7. LOL....why thank you, such generosity! (nt)

[Carla in Ca]

9. You may not have long to wait

We are about to burst our bubble. Lenders, to keep Wall Street happy, have over-used creative financing called '100% financing' program. No money down but...no equity and high, high payments.
When it isn't affordable, the owners just walk away.
Foreclosures/bankruptcies are up and expensive houses are sitting on the market longer.
For anyone planning to move from here, don't wait long, prices will come down to earth soon.

[Capn Sunshine]

10. don't hold your breath

While it is inevitable that rates go up, only the 100% purchases that closed in the past six months will be problematic. Now while this scenario precludes a wholesale meltdown related to exterraneous factors such as a crash of the dollar to remarkable low levels and subsequent trashing of bonds and ergo rates (they would spike up)the property values are being driven less by speculative fervor ( the case last time) than demand issues. For a bubble to pop you need a confluence of events that the blowers of the bubble did not consider likely, like a major shift in employment patterns, such as ocurred with the exit of the aerospace and automotive manufacturing base industries from So Cal in the late 80s.

I don't see such a major shift affecting the pattern here, once again the disclaimer being extant situations such as an actual deflationary spiral/depression brought on by insane neocons in control nationally. Or detonation of a nuclear device that contaminates a large portion of the landscape,caused by actions of insane neocons in control nationally.

This does not mean prices will continue upwards unabated, only that they will not crash. 75% of the people who were "upside down" in their properties during the bust did not "walk away" from their properties for lack of equity. They continued to make the "high payment", which in the scheme of things was less disruptive to their lives than doing a give back to the lender and spending hard money to move to a rental. They were rewarded for this approach.

What I see happening is actual continued activity as the stock market provides zero returns. These large fund guys are desperate for yield, and will continue to concoct computer risk models that allow scenarios of finance unheard of only 10 years ago. To give you an idea, this is a real transaction we are in : sale of bundled low credit borrowers notes(mortgages) with the following parameters: credit score 580 and up (this is unbeliveably low) no lates on credit, ignore mortgage rating, 30% appraised equity in proerty (by todays market standard) note rate 6.5 - 7.125 for 24 months. That means the borrower can have like over two years of late payments on his mortgage, yet get those rates which used to be reserved for "A" paper people. And the institutionals are buying these faster than we can generate them.

In a direct sense, this reinforces property values as someone who might have walked away or given a deed in lieu previously will refinance. Couple this with demand that never was sated and there's really no clear path that says prices are going down.

Conversely, appraisals seem to have hit a wall as have asking prices in the market in So Cal. So the upward climb has slowed and may actually reverse, but we're talking about a loss of five percent over the next 12-18 months, not the negative 30% in two quarters we saw during the bust. I can guarantee you one thing about So Cal Real Estate though, the rich will get richer, the overleveraged will lose out and the cycle will begin anew. Demographics. If you're wondering what will happen to the entryt level, I think they might start looking at 40 year terms in the future. Much like the xpansion of car credit from 36 months to 48 to 60 to 72, this will provide a monthly payment structure that keeps enrty level "affordable". Happy trails.

[slackmaster]

11. Yes, a correction is already happening

A wave of bankruptcies and foreclosures is inevitable.

For anyone planning to move from here, don't wait long, prices will come down to earth soon.

The adjustment has already begun at the top tiers of the market. Prices have eased on multi-million dollar homes. As the grief trickles down, houses for normal people are affected.

"This corresponds with the expected maturing sales cycle in the overall real estate market. When the market took off in the late 1990s, it took off first in the prestige home category. Sales increases and appreciation then moved step by step to lower cost parts of the market. Right now sales and price increases are particularly strong in lower-cost areas," said Marshall Prentice, DataQuick president....

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