2009 Predictions for the San Diego Real Estate Market

When one loses 30% or more home equity in one year, don't buy the old cop-out line of "in the long run the housing prices will return to their old highs." For San Diego residential real estate, this is the worst market since the great depression. Unlike a 'normal' correction or pull-back, this once in a lifetime evaporation of real estate values will not soon be forgotten. Partially because of the trauma inflicted on the public's perception of ever-escalating real estate values, will the San Diego real estate market 'snap back' anytime soon.

First the decline has to bottom and then it will most probably take a few years of base building prior to any return of meaningful appreciation. Naturally, at this New Year period, the glowing forecasts for a real estate recovery have already started. Will these pundits be right this time around? You'll have to draw your own conclusions. Why not see how some of the prior forecasts really paned out:

On July 14, 2008 Barron's magazine said: "Home prices are about to bottom." Well, since than, the decline has only accelerated. In 2005 a local radio/TV commentator said: “If the media would just shut up, housing prices wouldn’t fall.”

"People think the market is down and the market will still go down. That's not the truth. The market is down, but it's not going down anymore," said John Tuccillo, former chief economist for the National Association of Realtors. "I think it's because consumers focus on national news and not enough on local news."

Bob Schwartz, San Diego, Certified Residential Specialist on November 17, 2005 in a published article said: “Yes, we have started on the down leg of the typical 'Bell Curve' and the probability of surpassing our approximate 20 percent drop in San Diego home values experienced from 1990 through 1996, seems assured. Plus, as real estate trends seem to start in the West and then move east, any U.S. real estate market that experienced huge price appreciation the past five years, will experience the same depreciation in real estate residential values”.

Often when real estate values go south, it's typical to hear the industry blame the media for making the situation seem worse than the reality. The truth is, for our current home equity bust, the reality, in many cases, is far worse than the local reporting.

It seems that finally the preponderance of evidence has caused the die-hard San Diego real estate bulls to admit the folly of their over optimism. Now a number of these same misguided forecasters are forecasting a 2009 turnaround. Perhaps that would have a faint possibility if this was a 'regular' correction. However, this huge erosion of San Diego home equity was is far from typical.

Realistically, I feel the best 2009 can bring to the San Diego housing market is some easing in the rate of depreciation with a possible beginning of a bottoming process starting late in the year or early 2010.