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San Diego foreclosures drive down prices

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Heres a link to a link of a story – Calculated Risk has a post about an article in the Wall St. Journal about foreclosures in San Diego.

A surge of foreclosures over the past year or so has left lenders struggling to sell a growing backlog of homes.
…
At the San Diego sale, houses and condos typically sold for about 30% below the previous sale or appraisal prices. In a few cases, the discounts were around 50%.

… A glut of condominiums also is weighing on the market. Peter Dennehy, a senior vice president at Sullivan Group Real Estate Advisors, a research firm here, estimates that at the current sales rate there are enough condos on the market to last about 29 months.

I’m posting the link to Calculated Risk instead of the WSJ because there are some reader comments attached to the story about BC and Alberta markets that some of you may find interesting.

BC’s #1 industry is forestry which is in serious trouble. Population growth is the slowest in decades. The economy is being kept growing by real estate investment. “Everyone wants to live here” (note contradiction) and “This time it’s different” (2010 Winter Olympics) are religious creeds in BC. I don’t think I have to explain what that portends for the future.

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markx

On the "biofuel" part, the only potential for forestry "biofuel" is in the pulp and paper industry. Certain research is being done to try to use wood waste as fuel in pulp mills, and potentially generate electricity to make mills energy neutral. Again, wood chips and saw dusts are just by-products of lumber. If lumber tanks, forestry tanks. Just like the relationship between gasoline/diesel to crude oil. You can make tar and other nice stuff out of crude, but combustible fuel pays the bill. In case of forestry, construction oriented lumber pay the bill, the rest is just gravy.

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beta

In the weekend Sun, some industry pundit opined that the forestry industry would be saved through re-engineering itself to provide "biofuel" technology. Last I checked, firewood sold for substantially less than cut lumber.

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freako

"As to the title of the thread – foreclosures certainly accelerate falling prices, but they are not responsible for the fall itself."Yup. Foreclosures do nothing in terms of the imbalance between supply and demand. But they do act to clear the market when less motivated sellers are oblivious to this supply-demand imbalance. Without them, the situation would just take longer to unwind, and perhaps with smaller nominal price drops. Death by guillotine, or death by a thousand cuts?Sort of OT: It amuses me how the spin doctors try to isolate causes.Lereah talked about how the recovery was going great when out of the blue came the subprime situation, who could have predicted that. He insinuates that it was an unlucky random event, which of course is complete b*llshit. It was a direct result of the excesses he helped promote.Now I… Read more »

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patriotz

As to the title of the thread – foreclosures certainly accelerate falling prices, but they are not responsible for the fall itself.There were very few foreclosures while prices were still rising for obvious reasons – buyers with cash flow problems could refinance or just sell and get out with money in pocket.Both foreclosures and falling prices are symptoms of the basic problem – lack of affordability.

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markx

The biggest uncertainties for BC economy are forestry and natural gas sector. There's fair bit of natural gas and mining activity going on, due to much higher commodity prices and relatively pro-business government. On the other hand, the forestry sector is in serious trouble, and the long term prospect is no good. Now I'm not even thinking about San Diego. I'm beginning to compare the future of Vancouver to the rust belt. If the economic engine is in big enough trouble, and overbuilding reaches a certain point, home prices can go as low as Detroit. Note that the driving industry of southern California, IT and pharmaceutical research, is in recovery/expansion mode. The economic engine of BC? Well, if you think the Olympics is a real industry, then fine. Other wise, better pray for a miracle in forestry sector. One interesting… Read more »

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Akhen

The slogan, "this time is different", is always touted to support a rise that will go up indefinitely.Cycle may be different, but we never learn.Ahkenaten

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macho slob

Any info from other regions that share our fundamentals is very informative and is always welcome.Unfortunately, Chipman seems to be up to his old tricks by monitoring and disallowing unfavourable comments.

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