Ten Percent Price Drop Next Year?
Posted by JimSo goes the headline in a cheery article in the Union today. The prediction came from a real estate research firm that provides the raw data for the respected Case-Schiller Index. For those of you not familiar with that tool, the CSI measures the price per square foot of residental homes sold over a period of time. The twist is that they follow and report on specific houses so the results are very market accurate.
San Diego prices, using the common median price method and the Case-Schiller appraoch, show about a 10 percent increase this past year measured from July 2009 to July 2010. Now the experts are saying San Diego real estate went up too fast during the boom and therefore has more decline ahead. They explain the recent boomlet as resulting from the various state and federal incentive programs and since they are all but gone, rough times are ahead. Also, the hidden bank inventories are also anothe potential market problem.
Being in the business what I say needs to be evaluated carefully. I am a believer in the Sam Zell school of real estate. The billionaire real estate investor believe the this roughly put mantra: “Look to replacement costs”. There is no way to reproduce, at today’s prices, the real estate being sold in this market. That should tell you something about next year.
